Good morning ladies and gentlemen. Thank you for standing by and welcome to the Nabors Industries fourth quarter 2009 earnings conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today February 17, 2010. I would now like to turn the conference over to Dennis Smith, Director of Corporate Development. Please go ahead sir.

Good morning everyone and thank you for joining us again for our fourth quarter and year end 2009 conference call. In addition to Eugene Isenberg our Chairman and CEO who will do most of the speaking today and myself with us today are Tony Petrello our President and Chief Operating Officer; Laura Doerre, our General Counsel; Clark Wood, our Chief Accounting Officer as well as the Presidents of most of our sizable business unit. The same format that we always follow; we [hold] the call to about one hour. Gene will do some initial remarks and overview of the quarter, the year and more importantly how we see the future playing out and we will open up to question-and-answer as soon as possible. Just want to remind everybody that a lot of the discussion constitutes forward-looking statements under the SEC rules, and as such we encourage everybody to acknowledge of the risk factors and the unpredictability of parts of our business and refer to our various filings in our 10-Qs and 10-Ks and the risk factors particularly. And with that all I'll turn it over to Gene.

Thanks, again welcome everybody to the conference call for the fourth quarter calendar year. I want to thank you again for participating this morning. As usual we have posted to the Nabors website a series of slides that contain details about the performance of the various segments of the company. Please refer to these as we proceed because I'm not going to get into the specific detail, what I'd like to do is to briefly comment on the quarter. I mentioned several important developments worth summarizing that occurred during the year. Then briefly review from probably 10,000 feet each business unit where's that and where it's likely to go. All of my comments will be focused on non-GAAP results and frankly I expect my comment this morning to be reasonably shorter than we've had in the past. First quarter, as we suggested in our prerelease, our fourth quarter results came in a little better than estimates we had projected at something better than 16 and came in 18 excluding non-cash charges. Operating income for the quarter was $133 million which was remarkable considering we had a significant decline in our international operation which more than offset by sequential increases in all our other units including seasonal increases in Canada and Alaska. These results mark the first sequential improvement we have witnessed in the third quarter of '08. This probably confirms almost definitely confirms that third quarter of '09 was the bottom in this cycle. Our rig business other than international all saw improvements during the quarter and we think international will stabilize in the first quarter. And improve significantly as the year progresses which we'll elaborate on a little latter. Let me mention a couple of 2009 items that I think are worth recapping. First, we did our financing early…

Alicia that concludes Eugene's remarks we are ready to start the question and answer session please.

Thank you sir we will now begin the question and answer session. (Operator Instructions). And our first question comes from the line of Dan Boyd with Goldman Sachs please go ahead.

Eugene, I'd like to start off with the E&P portfolio since you spent so much time going through it. I agree that the stock doesn't get credit for that, and you're clearly frustrated with that. How should we think about your strategy of monetizing those and how much say do you have in the timeline of that monetization given the relationship with your partner?

I think the relationship with the partner is first place good, and secondly they by the very nature of the business they have an excellent strategy that they come in the deal so I think they won't be an impediment to sell. So I think frankly as long as we get a return incremental return by waiting, they'll wait I think the first one likely use to be monetized is going to be Columbia. And the other issue for a lot of your sales side guys is whether we take it as a capital gain may be even a tax free or a tax deferred or cap tax free capital gain or whether we take it as ordinary and be my guest do what you like, but we look at it the same thing whether we make money by producing it or we make more money we think we are in the stages to sell it all at once they are interchangeable from our view point and you guys might consider them on non-recurring, the other recurring, but I think Columbia would be first. I think NFR which is the big one. As I mentioned, we entered the high yield market frankly I personally bought some of the debt and I think within some finite period of time whether its five months, a year or what depending on a variety of circumstances we'll go public with that, so that will give us both an opportunity to monetize or at a minimum to value it. I think the next likely factor is going to be our Canadian stuff which as I say is probably the sexiest of this pattern. There are foreign buyers in there, at least one LNG export plant underway. There are two or anymore trained and more capacity being discussed as we speak. There are rumors of some of the big buyers and some of the big importers like coal gas actually buying reserves to do that. So I think that might come but we are going to wait till they come to us on that.

Yes, it does seem like there are plenty of buyers out there in the market and your stock clearly gets I would almost zero or if not negative value for these given the noise you get every quarter.

I think they do, but we still have to do what we think is better long term and we do.

Okay then just one follow-up on the North American market. What are you seeing in terms of demand for your mechanical rigs? Are we at a point where we're out of all the high spec or good rigs and you're going to see more the mechanical rigs going back to work potentially drilling the vertical leg and then bringing in the bigger rig to drill the horizontal rig? Are we there yet and what are your expectations there over the next couple of months?

PACE rigs are all utilized. We are getting increasingly utilized so I mean there is several categories of electric rigs that aren't PACE rigs. And they are doing much better. I don't know if we, I think there are one or two mechanics. Some mechanicals, high quality mechanical demand particularly in the Bakken, right? Can you put, can you (inaudible) down

Certainly.

(inaudible).

To answer the question yes there are some mechanical rig that are going to work in the market area. Then there are few of the mechanical rigs working in [West Texas]. It's not remarkably where we want to look to increase in rig count in the [West Texas], but the Bakken definitely is very far place to report.

I'll leave it there and follow-up with Dennis after the call.

And our next question comes from the line of Jim Crandell with Barclays.

Eugene, you mentioned I think that new bills, four new bills that you had recently, can you talk about the length of the contracts or terms you're getting on new bills?

Pretty good times in five years.

Five year contract

Our guys are good [this time].

And can you comment also on what you are seeing in day rates for the PACE rigs and what you are seeing for some of your high-end electrical rigs in the Shale place today and what's going on there?

They are going on, I think we can fax you table showing how they dropped pretty dramatically generally, dropped pretty dramatically over than a year now, now they are up. I think the redeployment of PACE rig is very good and the rigs generally on average have gone up, both quarter-by-quarter analysis, the SCRs have gone up more than the mechanical rigs and less than the PACE rigs and that's all below the new build rates but they are all moving in the right direction and I would say some of rigs will never work, some of the old entire mechanical rigs will never work. There will be demand, because we see the evolution of the shale place for more new builds or upgraded SER rigs

Eugene, off the bottom roughly would you say how far up are we in percentage terms for your high-end rigs?

Anybody got a percentage?

No its, that was 13.5 up to 18 point or even lower than 13 here.

Again a piece of paper I misplaced it somewhere, do you get it?

From the (inaudible) on the PACE of around 13 or (inaudible). Yes my apologies I'm being told we are not seeing high- enough.

No more than that, some of the products, 13 products, 14 we are seeing dry end numbers 18 (inaudible).

After this, what about the other ones?

We have seeing some long mechanical wins maybe 5 to 9, (inaudible) 10 to 11, the SCRs were using, not use, that's not the right terminology where the PACE rigs actually are beginning to pull some of the higher SER rigs up into the 16 - 17 range.

One final question, Gene. If you took your most conservative or most negative view towards natural gas, let's say a $4 to $4.50 price and the forward curve came down below five and let's just for argument sake say it stayed there for some time, what's your sense about how shale drilling, horizontal rig count would be affected by that level of gas prices?

Fairly wouldn't help it. There are a couple of issues; one is a lot of people figure out there are a lot of (inaudible) costs when they brought the leases and take the leases and there's going to be drilling, less drilling but still drilling to preserve leases but otherwise it will be cut to the absolute bone and for folks like us who just look at the economics, even if we had a producing well, we'd shut it in. So basically it would be even the shales wouldn't exactly, and you know from my personal view point, I think they should get impacted even more because if it gets the $4 it's not going to stay $4. So there is going to be an upward opening pretty heavy angled forward curve so if you get a big chunk of your production in the first year, in other words you go from 100% IP down to 30% in the second or third year, why wouldn't you wait for higher price for that big chunk of production. So anyway, it would hurt it.

Thank you. Our next question comes from the line of Ole Slorer with Morgan Stanley. Please go ahead.

What are you going to do with all of that money that you'll realize from this E&P assets?

That's a high class problem.

Would be a vacation there, did I hear that?

Let me be able to cope with it where easily it's the last question.

to If you look at what you talked to us through, it sounds on the back of the envelope, if you're talking about something substantially maybe north of $2 billion or something along those lines,

Yes. I think it is.

You're talking about the tax implications realizing that how much actually cash, how much cash would accrue net to Nabors that you could either use for buybacks or debt reduction or anything else?

I think the stuff that's basically international. We own internationally and probably could end up with a pretty favorable tax result. The money would be outside the States, but that could be used to buyback stock too The Alaskan and the NFR stuff we're going to go public, well it's going to be under US tax regimes as well as Alaska, while the first one probably would be a Colombia and that would be probably tax free. I mean it would be international and that's probably through with Canada unless as we decide it's better to produce and pay taxes and sell it on some net of taxes which is unlikely. The thing that you and I discussed, if we use that to buyback stock it would be a pretty significant if we had. No. Whatever else, it would be a super high class problem.

And again the timeline, we are looking to realize some of this in 2010?

Frankly, we're going to be probably looking at the valuations realizable in Colombia by the end of the summer and the tactic in British Columbia is wait till one of these British Gas or co-gas or some other big consumer in India or China, and then if I were just go public as soon as the economical view so its just probably maybe even this calendar year, probably this calendar year

If it changed a little bit to the international performance, suppose the area that came through maybe a little bit below what we were looking for, you suggest that the trough I think should be here in the first quarter but can you take us through your level of visibility and certainty with respect to the recovery? I mean what areas? Can you just outline a little with it more clarity exactly what you're seeing into this trough and what you're seeing on the recovery side?

I think the recovery that we see first of all Eugene mentioned already Mexico, we will go back on the offshore side not on the land side they had some reshuffling to do, looking at reservoir and had this funding issue so they are going to come back obviously we have Iraq on the horizon for us on the radar screen so that's going to play a role for us later on in the year and I also see that in our landfall in the middle east that there will be more gas drilling more exploration drilling performed and we will have part of it so I think those are the big pieces. In Columbia as I mentioned in our report Columbia we got an eight rig six incremental award three year contract and eventually Algeria will come back I mean there is some clean up in house and so they would come back to full operations so I think the second year you will see us in a better life in the second half of the year.

Yes, so second half so the first quarter is a trough you start benefiting from some other trends. When, for example, does Columbia start up?

The Columbia rigs all will be working by the end of May.

End of May. Okay. So this will be a gradual step up as slight in the second quarter and then more meaningful into the third and fourth quarter?

First quarter, second quarter, third quarter yes.

Thank you. Our next question comes from the line of Kevin Simpson with Miller Tabak. Please go ahead.

Thanks. I wanted to get some a little better sense of the new build contract in the US, Gene, or Joe. Was that a kind of up for bid and if so was it widespread or was it a….

We split the results with H&P. We had a couple working there already which gave us a little bit of leverage. I would guess you can find out, back and tell us whether our deal is better than H&Ps?

So is it negotiated deal, then?

There were bids but they always negotiate before they sign.

So somewhere in between? I am just wondering if some of the other --

It's almost nothing except may be in Mexico or some place where the bid and that's the end of it and they award there usually or was it on discussion negotiation whatever.

I was just wondering if the others, P-10 and some of your other competitors were bidding into that contract.

I don't think they were allowed to bid.

Then there was technical specific?

I think its I don't know what I mean For example, BP generally will only take us from H&P domestically and then Exxon will take H&P and may be domestically.

Okay. And is there anything hot or whatever for additional PACE rig new builds or what would the status be of any potential there? You mentioned it but didn't really follow up on it.

You know as well as we do. The guys who have rig acreage in Shale place actually dig new acreage or dig new investment plans with big new partners with big new money. They are going to beginning rigs appropriate for that flight, and a lot of them, some of them will decide that they need to build for purpose rig that we don't have anything on the front runner and if we did we wouldn't tell you that.

Okay. And then Marcellus, speaking of an area of a lot of capital flow, what's your position is in that market now and do you need kind of a different configured rig to be more competitive in the Marcellus which looks like it is going to get a lot bigger?

We have two working there now, and as far as we can tell that. The problem right now in the Marcellus is Patterson originated in Appalachia, so they have a legacy position which they can expand on pretty readily. And Aubrey got big acreage and big money there and he has his own rigs that really, of these rigs he controls which he sees, so we're in there and we're going to move our work over the stuff up there, but it's an edge free and open. As for example, the Haynesville where we have a predominant position are not super, a dominant position although British Colombia Shales, where we've a dominant position so.

So behind the Marcellus, would not be is not number one or two or three on your hit parade of where you want to put capital?

We would like to. If we have the opportunity we will put where, wherever the opportunity is. Its not that we are against it, its just that Patterson had a flying start there, we should have bought that company when Bear Stearns owned it 20 years ago and our Aubrey has its own rigs and he is just probably the biggest player out there.

Okay. Just one other question, Gene. Well Service did a lot better than I thought it would. It has been some of what a troubled a lot better than low expectations.

Its doing better lately.

Yeah, it's been a troubled operation. How much is in terms of looking forward you feel like have you the right team in place and --

We have some changes that we will be coming pretty soon and that's an important part of it and I think we are more aware of strategy which Larry is implementing better than we had before, and frankly we are much better able to mark it up. state of the art really millennium rigs which are clearly the best we haven't been able to get a nickel more from than anybody else so we haven't done the right job and frankly we are going to move a lot of that internationally so we are addressing it and hopefully results would be manifested in a couple of quarters.

Our next question from the line of Jim Rollyson with Raymond James.

Good morning, gentlemen. Gene, could you going back on Ole's thoughts on the question on the international side you kind of talked about I guess activity and the thoughts of what you're seeing in terms of new activity. Can you maybe spend a minute kind of what you're seeing on the pricing front as things progress going forward or things start to turn back around there from where you have been in the last few months and how do you see that going forward?

I think the pricing what we see the pricing is almost I guess the cap I don't in some areas its very competitive so we have to tighten our expenses but I think overall I think the rates are pretty much the same I don't see that the rates are really changing a lot.

One of the problems is rates can be the same but margins get whacked at some places for example, Saudi Arabia. It is a monopoly basically and they can put whatever capital requirements they want on an expansion on a new bid. The rate stays maybe about the same, but incremental capital if this was true I talked with one of the big great jack up players the same thing the state of the art jack up when it comes to renewing the 10s and $20 million to $30 million to enhance it. So that's more of an issue than price deterioration.

Understood. And Gene, I think last quarter you talked about kind of your preliminary thoughts on capital spending for this year, maybe give us an update on where you stand. It sounds like you still have opportunities possibly for new PACE rigs and other things. What's your thought there?

Yeah, we are basically we can, I mean the critical thing was to be in a position without any lucky strike extras to pay off the debt and that we are in a comfortable position to do right now we had some fortunate things happen basically with respect to that and also with respect to after tax income and we're looking at opportunities a little tougher maybe than before but you come back, come up with four rigs for the Bakken. You come up another ten rigs for the Bakken. You come up with another twenty, and in those terms we will have the money part. So starting low and moving up as projects show up.

Yes. I think we're up a little bit now. I think we're now projecting for in this year probably 750 or something and that number was around 5 when it had to be 5.

Our next question comes from the line of Scott Gruber with Bernstein. Please go ahead.

I wanted to turn back to the U.S. fleet. Gene, you touched on this from various angles but to pin you down, where do you see more opportunity going forward? Is it putting SCR rigs back to work or is it building new PACE rigs?

Hopefully both.

I realize it is going to be a mix.

I don't know which rig now. Right now, it's probably more likely short-term for the SCR rigs. It's the PACE rigs by definition you're going to take [x quarters] to do. But we're doing both. I mean if the customer particularly and a lot of customers think they know precisely what they want and hope the other guy has isn't perfect and I'll say a lot of them are willing to pay for so called built to purpose rigs and they do, and they will in my view. But right now short-term, it's going to be SCR rigs and occasionally even the mechanical rigs that's in the right place at the right time with the right crew.

Understood. As the utilization for the SCR rigs pick up, how far do you think the rate spread to the PACE rigs can be squeezed down?

I don't know. I think there is plenty of competition now for new builds, too. Some of our competitors other than H&P are talking about investing in new builds and LV is talking about sizeable orders for domestic new builds. So there will be competition. It's the performance and also I think we have an edge in technology which has manifested itself. You guys don't know about it and we don't publicize it nearly as well as H&P but if we didn't go from zero incremental to 100 incremental from BP because we took them to lunch.

Okay. Great. Just one last question if I could. Based on the December or January figures, what is the run rate in hourly activity for the U.S. Well Servicing segment? You mentioned it was going up in the press release but I was wondering if you could provide a quarterly run rate.

Yeah basically September was kind of our low point. We have moved up month-over-month since September and we continue to trend upwards. We expect that trend to continue.

Do you have a December over September percent increase offhand?

Its roughly about 9% to 10%.

Thank you. Our next question comes form the line of Jeff Tillery with Tudor Pickering & Holt. Please go ahead.

Just one more question on the lower 48 business. Obviously for the industry many rigs have gone back to work in the last few months. Do you see any signs that the pace of reactivations for the industry abating over the next six to eight weeks?

I think what we are seeing is there are a lot of rigs going to fill very quickly but still a lot of demand start and we are seeing and we are looking at an increase obviously quarter-to-quarter and we haven't seen we will be at the same pace or at the same level. I don't think it will be there but we still see a strong demand, and we've positioned ourselves well with this and our training rigs that are up and so another question in the past that are going between the two rigs and reposition ourselves than any one in the industry would do that so.

And as you think about how Nabors participates going forward, obviously the PACE rigs are pretty fully utilized. Do you think about Nabors activity increases from here as being basically on par with what the overall industry sees better or worse?

We'll be on par.

At least on par.

What answer did you expect sir?

Just hoping not worse.

Absolutely not.

And then just last question, do you think that lower 48 can average for the first quarter kind of where you are today 160 rigs on the payroll?

What did you say.

You have a 150 rigs working today. Do you think that's going to be the average for the first quarter?

Yes it will be close.

Operator, we're getting to close our one hour time limit. We're going to just take one more question and then wrap it up please.

Our final question comes from the line of Robin Shoemaker with Citi. Please go ahead.

I wanted to ask about your forecast of roughly $1200 margin decline in lower 48 in the first quarter. You do show the term contracts at the end of the first quarter roughly similar to the end of the fourth quarter. So is that the case that the new term contracts at lower rates are offsetting old term contracts at higher rates and that's what causes the margin to drop down to the $8000 level?

No. Yes, a combination of a few things. One is the term fee drop off on the rigs and then you also have in the first quarter, you have in the first quarter you have an unemployment tax effects. So there is multiple issues that are affecting this including like you say we're the new build or the old PACE rigs contracts dropping off, so it's a revenue issue, but mainly it is term fee delta and unemployment factors.

On the new build PACE rigs, are you proceeding with new builds of pace rigs without contracts are from the four you mentioned that are have five year contracts?

No. We're in discussion but not right now.

Operator, I'll think I'll wrap up after that. If you want to close up please. Thanks.