Welcome to the Nabors Industries third quarter 2009 earnings conference call on the 21 of October, 2009. Throughout today’s recorded presentation all participants will be in a listen-only mode. After presentation there will be an opportunity to ask questions. (Operator Instructions) I will now hand the conference over to Dennis Smith. Please go ahead, sir.

Thank you, Kevin and good morning everyone. Thank you for joining our call this morning. As usual we will start out with 20 minutes or 30 minutes of review of the quarters results and the outlook by Eugene and then open it up to Q-and-A and hold the call to about one hour timeframe. In addition to Eugene and myself this morning is Tony Petrello our President and COO; Laura Doerre our General Counsel; Clark Wood our Principal Accounting Officer; Larry Heidt, Nabors Well Services Business; Jerry Shanklin, Offshore Business; Ziggy is out of the country today, so he is not with us and Joe is out as well, but Joe has Brice McConnell and Jimmy Vice President of Operations and CFO sitting in for him. Just want to remind everybody that lot of what we are going to be discussing in this qualifies as forward-looking statements under the SEC and we encourage to you look at our filings for all of the risk factors and variables that go around with that. With that, I will get the call started with Gene.

Thanks, again welcome to our conference call for the third quarter. I want to thank you again for participating this morning. As usual we have posted to our website a series of slides that contain details about the performance of the various segments of the company and you might want to refer to those as we proceed. Let me first say that the probably the most significant number in our financials is the operating income, which was you $113 million which is right inline with the first call estimates although we got there in a somewhat rounds about fashion. There is a mixture of positives and negatives. The positive is being that we did better in U.S. and Alaska than we guided folks to a quarter ago and this was offset by reduces results and international Canada, Nabors offshore and well servicing. One could view non-GAAP results to be $0.18 per share, but we put the facts down and this is a subjective thing and you folks in the market will decide how to interpret that the actual facts. However, there were a multitude of factors that caused net income and earnings per share to be obscured. These include a foreign exchange credit of $0.03 per share and a $0.01 per share a loss due to value of our holdings in rock and our Chinese rig manufacturing company. These were partially offset by a $0.01 per share tax benefit that resulted from a catch up in our adjustment to our estimated full year tax rate, which is now estimated to be 10% on a non-GAAP basis and we had previously accrued 15% in the first two quarters and the rules are have to catch up in the third quarter. Despite these less than ideal even frankly, let’s than expected results…

Kevin we are ready for the question-and-answer portion of the call, please.

(Operator Instructions) Your first question comes from Jim Rollyson - Raymond James.

Wide range of margins on spot rigs depending on the different, categories of rigs, when you think about where your fleet matches up in the different categories of rigs you guys tends to breakout. How do you think about that weighted-average if the spot today ignoring the term contracts you have? Is that more in the mid to upper single digits as opposed to the 1500 or just kind of how do you think about that?

No, it certainly not single digits. I would say for the rigs we consider the quality rigs it’s in the mid teens and for the low end rigs it’s marginally above the costs or dayrates are marginally above our costs. It would be but we have on the low end I don’t think the averages the way we look at it anyway is that we have these rigs that are essentially paid for, the low end rigs. We have the infrastructure to put them to work and some of our customers require those as well as the better rigs and if we can make some money compare to no money why not do it even though it adversely affects the average.

I’m just thinking from kind of near term earnings standpoint do you think that fleet averages kind of the middle.

Most of the earnings don’t come from that something. I would say the most encouraging single indication is, number one, the rig counts is increased, number two there’s actually been an up tick in the leading edge rates for the leading for the high end rigs. Major and not anywhere near where the term contracts were put but there’s been an up ticks. So the direction is right in both those things.Net we are going to be down next year in operating income.

If you look at the strips for next year, which you talked about earlier, what’s your gut feel, where is the rig count looks likely goes?

I don’t know the rig count, I think we’ll do better and I think we’ll gain market position. I think there’s going to be sooner or later and I think it’s going to be sooner rather than super later that this strip comes to pass. There’s not going to be a super surplus of the high end rigs.

Given all the moving parts, the pluses and minuses you generally feel comfortable where consensus is right now products you’re the bug?

I hate to say I’m comfortable with any projection but, yeah, I would say I am.

Your next question comes from Jim Crandell - Barclays.

The first part was really pricing you thought said you done great paying per shareholders with acquisitions in the past. Where are the opportunities and where are you focused?

I think there are two things to say about that compared to six months ago I think we now have the fire power to do anything we find attractive to do in terms of other than using equity to do something and we are looking at stuff, but I think it would have to be either increasing the range of opportunities that we present i.e. something that would broaden the scope beyond pure drilling or would have to provide an entree to a market that enable us to put the totality of everything that’s in Nabors into that market. There’s nothing really on the front burner right now, but we are much more actively looking at this, because we have the capability and willingness to do it compared to a quarter or two ago.

Gene, does your acquisition strategy play into your whole strategic study of what to do in the IPM integrated project management market?

We are keenly aware of where we’re at and where we are not at in that particular area and that’s under pretty intense scrutiny, for a variety of possibilities including acquisition, joint ventures, whatever.

Second question, Gene, where do you see, where are you most optimistic internationally about activities in 2010 other than Mexico and I think Saudi, which you mentioned and where do you see potential IPM opportunities for Nabors within that?

I see activity possibilities elsewhere in the Middle East, where we’re not particularly big or not at all at the moment. In North Africa and I still see increasing opportunities in Mexico. I would say the biggest once right now, I would say are other Middle East other than Saudi and Yemen, which is where we’re pretty big and North Africa, they were big, but Japanese they’re could be even bigger. So I think that a long way to go and we’ll participate.

If I could just ask one more question, what do you think of the chances maybe involving Nabors maybe not, but the chains of more, but the broad scale consolidation in the well service, rig business among the larger companies?

I think particularly in the well service business, I think it’s excluding Nabors with the short to intermediate term, I think it’s possible. A number of people have expressed an interest and desire to do that and the drilling, I think I’ve said this a lot of times, it’s in terms of what the quality of the rigs are and what the quality is going to be needed year two, three, four years from now and if an opportunity arises we’ll take advantage of it, but I can’t really see us participating in much.

Your next question comes from Ole Slorer - Morgan Stanley.

You mentioned I mean any size investment opportunity, I mean you clearly got a very strong balance now, but…?

I’m saying before we were worried about $200 million. I’m not saying, we keep a half an eye on our credit rating and all that stuff and as you know we raised $1.1 billion in January. We used almost all of that to buyback pay down debt and now with the credit markets really wide open, including unbelievably attractive convertible markets, which we are not going to be tempted by. The non-equity opportunities raised capital at pretty big service. If we have something that is kind of bigger than anything we had looked before, we’re open to it. I don’t have anything specifically in mind except make the point that we have the fire power now that we didn’t have before.

Could you just talk a little bit about how the debt market has changed for you by comparing sort of…?

We were concerned in the fourth quarter of last year with the big maturity coming two years from that and if the fourth quarter ‘08 conditions have existed we wouldn’t be happy campers now. So we deliberately paid up to get not as much as expected, but we paid up to $1.1 trillion at nine and a quarter, that current market, I don’t know what it is exactly, but I think it’s more like $6.5 million, we could do it now. So, we paid for insurance, but as I’ve said before if you high life insurance and you don’t die you don’t feel terrible about it and also we recouped a chunk of that by buying back our debt at discounts. The market right now is that every single banks coming in and saying we could do more straight debt and we could do convertibles that are really surprising, low interest rates and high conversion prices, which we are not, we’ve had our fill of convertibles for a bit and also we’ve never had a revolver until recently and I think we can do 400, 500 rig I think we can do that and I think the only thing that’s keeping us from doing that quicker is the market is moving in our favor and we don’t need the money now. What that is pay a little bit of money or some money upfront and so much annually for insurance for a call on the cash on the borrowing if you need it. We’ve also I think you mentioned this before we also found that we can borrowing places like Saudi Arabia which is through our joint venture at actually rates below 2% so, we have a bunch more firepower available we’ve had before.

Do you find that in discussions that our companies out of there willing to sell for cash at this stage of the cycle? I just think you would have to use a large amount of shares if you were to make lets they medium-size acquisitions?

I would think, we could do a deal for shares from the viewpoint of the selling company and we can buyback the shares in the markets so, it can be a share deal from their view point and the cash deal from our view point. So if I, apart of the sales that would be that we are depressed and they are depressed and they take our shares, they will have a recovery that they would have had with their own shares. That hasn’t actually come up yet that’s theoretical. The important thing is from our view point the tax laws, etc that we can do a deal that’s a stock deal from their view point that we can make the cash or as much cash as we want by buying stock.

You didn’t mentioned Russia, you mentioned Middle East is there saying if you looking at national way you can by a sizeable market position?

As you probably no there’re stories about things like NKBP about and we are obviously interested.

You would be interested in something like that at the right price?

Yes, sir.

So, if we look at the market that seeing shales everybody accepts that it’s going to be an important play going forward, but what does it take to turn the dial for all of the let’s say the Army of smaller private EMPs that we don’t maybe at Wall Street have such a good handle on? Is there a level at which they would a gain become interested in doing some more drilling?

I think number one the futures curve is pretty decent and I understand that’s not guarantee that that would be the price at that time, but especially this small guys they can hedge it, they can sell it forward take crude price is really solid, again if you look at the futures curve you can actually sell crude in the futures at close to $90 per barrel; if you want, and I think a lot of these smaller guys are cash book drillers, they get the cash and they go. We are marketing a little bit more intensively to those guys. First reaction frankly is in the low quality rigs that work the shallow oil plays, which we don’t do a ton; we do some but don’t do a ton of that. The dayrates there could be $7,000, $8,000, $9,000 a day and a lot of that tends to be footage and all that stuff. We do some of that, but that was the first positive impact and small guys and some bigger guys on the recovery and we got it on the high end and the Bakken say for oil or in some of the more attractive shales for the higher 10 rigs.

So if you’re talking about the credit markets is it coming back, people can borrow money again on the private EMP side is it…

I don’t know how it works for those guys because those guys typically went to banks compared to the public market and the public market is still way better than the bank market. Banks just don’t want to lend right now.

Is it a combination of the banks becoming active again or and if that happens what’s the gas price, is it $6 or is it $7, at what point do you expect kind of the market…?

The futures curve for ‘11, we checked is knocked to seven, ff that happens or comes close to it, I think we’ll be a lot healthier and as I mentioned that a lot of people can act now based on the $7 that works, for example, even in the British Columbia shales and if somebody wants to produce now and sell the $7 a 11 stuff that probably works.

If this works, do you think that you can take out your 2007 EPS number over the next two to three years or is that just wishful dreaming?

I think eventually, we can whether it’s, I’ve said this for awhile, I think whether it’s a year and a half or it’s three years, I think we’ll do better than we ever have in the past. I think the Canrig is probably an example, because it’s doing absolutely horribly. We’re losing money there and yet, if you look at off week compared to what the drilling requirements are going to be two, three, years from now. In other words, the shallow single drilling is virtually dead or much, much less important down the road than it is now. We not only have the rigs that work in British Columbia shales, but we’ve actually worked 50% of them to raise working and we’ll do better than that this year for every major operator expects our good friends at Apache and we own a ton of acreage there. The company is doing the worse now, I think has probably the best characteristics for benefiting from what’s going to happen in drilling requirements two, three years from that. I think that applies to the lower 48, probably it applies in Eastern Europe too, but when we’re involved minute share in shale drilling in Europe. The big problem is the gas price and right now we have a surplus of gas and we have a surplus of domestic gas, we have the surplus of LNG, we have the surplus in Europe, etc., but I think longer term, we have a shortage of good hydrocarbons and longer term isn’t forever down the road.

You don’t think this is the downgrade Nabors yet on.

No, you can downgrade us, what do you have us at 40?

Something like that.

When we get to 43, 44 you can.

Your next question comes from Kurt Hallead - RBC Capital Markets.

Just wanted to kind of gauge your perspective on how you think the overall the cycle progresses off the low, V, W, U,X, Y, whatever. What kind of recover do you see? Is it more you use the word at moderate and over several quarters in your comments, and I was looking for more color…?

You’re talking about the economy as a whole?

No, your recovery in the...

I see it moderate. I won’t tell you anything different than that. My feeling is I don’t really know the short term. I’m not sure who I think really does know. It’s evolving better than we thought it would domestically and I think longer term, we’re in great position. When is longer term? I don’t know. I don’t think its next year. Next year I think we’ll do better but in terms of marginal rates on incremental non-contracted rigs that our profit is going to be down next year. We’re going to run out of or rundown on high end. We had a whole bunch of rigs at 26,000, 27,000 per day making $15,000 a day, that day isn’t likely to come back very soon. One thing the rigs don’t cost as much to make any more, but I don’t know when, but it will be.

Coming off that 2001, 2002 to the low point it took a couple of years before there was any real significant pricing power in client business. So I guess that’s what I was trying to gauge from your commentary about a moderate…?

I don’t disagree with anything you say. All are I’m saying is there’s at least a bifurcated rig market and I don’t see a super surplus in the high end rigs or not even a surplus compared to what the overall surplus is. We have rigs that in our 274 peak rig count will never work again probably, but I would be astound, if we don’t have new builds in the next couple of three years. We don’t have any today, but we might have. I think we will.

Something you reference early on in your commentary, I think it was related to the international offshore. You said something about up tick being better than you forecast. Did I hear that right?

The domestic, yes. We do reviews periodically and frankly we do the reviews, we used to do them on a liquidity basis every couple of weeks, how do we stand against paying off a couple of billion dollars of debt less than two years from now and frankly, every time we looked at it, every projection was lower. This was the first time. We had higher projections than before for ND USA and probably neighbors offshore. That was the first up tick and it was a bit of a surprise and also everybody has been cautious about overstating projections because most projections by most people not just Nabors haven’t been met. So when they say they think they’re going to do better, they have a higher degree of confidence in that than they used to have. That’s pretty significant; I think.

What would be your guess as the market evolves as you said land rigs are now cheaper to build and they used to be? Maybe you can give us some benchmark as to how much cheaper they are now versus the peak?

We haven’t built too many rigs. We except on older contracts, which don’t reflect the current price, but I would say field prices, everybody knows are down a third to more, yards aren’t as full, shops aren’t as full. My guess is 15% less.

You say something like between 350 to maybe 500 new rigs built over a four year period, three year period. Do you see more progression or my guess maybe…?

I have no idea. I just do think that the high end rigs are not in over supply and it’s entirely possible in my view, probable that the activity for example in the British Colombia shales, if that develops like we think it is, we are way short for scores of rigs for that one thing alone. I think if we get a workable gas price or a good gas price and most people that I respect think gas is going to be six to eight, not crazy high and not $2 again. On that I think all these shales are going to be way more active and they’re going to use the kind of rigs that work. We made the point before and I think everybody agrees by now that some of these low end rigs couldn’t work for zero in these shales. They wouldn’t be economical, because if the state-of-the-art built for purpose rig can do 35 wells a year and something zero does 20 wells a year it doesn’t take.

Your next question comes from Kevin Simpson - Miller Tabak.

So I guess first of all new rate, the new PACE rigs you’re putting to work as have the performance has been relative to expectations. I guess any recurrence of any of the teething issues that you had awhile ago?

No, I would say quite the opposite.

Second, I just wanted to go back to the rates, which you’re putting or margins you’re putting rigs back to work at. I guess the 1500 I can understand, 10,000 sounded on the high side. Is that an outlier or is that…?

I think the other thing you have to consider is our operating costs are at least $1500 per day lower in most of these areas and when you throw in cash M&R, which if you do it that way what’s a $10,000 margin would be an $8,000 margin six months ago kind of thing. Yes, it’s the high end is, and our good customers don’t pay the high end any place, but in general high end is where it gets attractive to drill and they need high end rigs and there aren’t too many of them there.

So some thing Haynesville potentially related something bigger and….

Say that again.

Haynesville, would that be where we would get upper…

Yes, I would say is more, yes, Haynesville is one of them. The Bakken is probably top of the list, crude, obviously.

You spoke about in cutting cash repair and maintenance so you’re cannibalizing. For the newer rigs you can cannibalize some parts all of those older equipment then and, pretty seamlessly.

In other words, if it’s a new build, we’re not going to take anything, but new build everything, but if it’s a redeployment, in other words, we have drill pipe that we bought that’s new. For a projection of rig activity, higher than it is and we obviously coordinate drill pipe among the business units. So I’m not saying, drill pipe is a good example, because we usually count that as a cost, but anything, fluid ends, almost anything, obviously top drives, but that’s not R&M, but even the R&M which I can’t enumerate for you right now. We can take off rigs and that’s an ideal way of financing it, because safe cash when you need the money and when the activity goes up spend it when you can afford to spending. Fortunately we have plenty of battle rigs to cannibalize.

Yes and based on conversations with your larger customers, would you say that over the next three to six months that you could that the outlook would be for higher activity, I guess one, and then maybe quantifying can you do. Do you think you could do as much incremental in terms of rig activity then you’ve seen off that August bottom in the U.S.?

Guys, what do you think? I think the opportunity is definitely there. All depends on whether that futures gas price holds in there. Some of the bigger guys going and hedge out, I was surprised to hear that Anadarko actually has big as they are they hedge gas. I would guess, my guess is that for example, shale is going to go much stronger both here and in Canada than they are now. Exxon has, they drill and we’re increasingly getting involved with Exxon, regardless of the short term prices and, I don’t know, the guys who are swaying like Anadarko, I don’t know what they are going to do.

I just can’t have a call and not at least touch on international. I know, Siggi is not there to beat up. It sounds like you feel like the Mexican rigs are going to be back to work sometime early next year. I guess that’s the question in terms of confidence level of that, because it’s clearly we’re somewhat negatively surprised, had to be by the, by the shortfall on activity, but I mean...

Let me put it this way, Kevin. We think we’re going to be up next year, but instead of saying we’re going to be up 25% as we did last year incorrectly I think we are 5% to 10% and I think is I’d have a very high degree of confidence of out with a significant hope that we could do better.

That would be EBIT, international EBIT 10 versus what you’re going to report for 2009?

Operator, I think we’ve about run out of time, so why don’t we take one more question, please.

Your final question comes from Jeff Tillery - Tudor Pickering Holt & Co.

I just want to ask on G&A, the fall or decline their sequential pretty significant. I just want some color on how sustainable that is?

Unfortunately for some of us it’s permanent. I would say unless to the extent that activity bottom line to us doesn’t get better it’s going to be sustainable and even when things get better. For example, my compensation is down by 65% times a lower number that it’s multiplied by and Tony is down pretty good and every single executive took a voluntary contract or otherwise notwithstanding took a 10% cut and if it doesn’t look good for next year we are going to ask everybody to do the same thing.

Then on the lower 48 operating costs obviously they are down a lot from where they were as any will we see a pick up in say Q1 or Q2 of next year on the daily operating cost basis as the stand by activity goes away and presumably those rigs start working again. Is that part of the influence of the client costs and if such?

Out of this obviously was the biggest single part was wages. So if the supply demand for rig labor gets tighter we will be competitive and prices will go up and we hope they will.

Just on the international business, could you characterize how pricing is, so the projects that have been delayed, are you giving up price whenever those projects resume or is the pricing more or less staying constant with what you thought it would be?

The pricing has not been impacted volume.

Operator, I guess that’s the wind up of the call for today. We want to thank everybody for participating and if you didn’t get your questions asked, feel free to give us a call. Thank you again.

Thank you. This concludes the Nabors Industries third quarter 2009 earnings conference call. Thank you for participating. You may now disconnect.