UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the fiscal year ended December 31, 2004
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) |
For the transition period from to
Commission file number: 0-13857
NOBLE CORPORATION
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No o
Aggregate market value of Ordinary Shares held by nonaffiliates as of June 30, 2004: $4,990,000,000
Number of Ordinary Shares outstanding as of March 3, 2005: 135,569,061
DOCUMENTS INCORPORATED BY REFERENCE
Listed below are documents parts of which are incorporated herein by reference and the part of this report into which the document is incorporated:
(1) Proxy statement for the 2005 annual general meeting of members - Part III
TABLE OF CONTENTS
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Amend. #2 to Equity Compensation Plan for Non-Employee Directors | ||||||||
Amended 1992 Nonqualified Stock Option & Restricted Share Plan | ||||||||
Subsidiaries of the Registrant | ||||||||
Consent of PricewaterhouseCoopers LLP | ||||||||
Certification of James C. Day pursuant to Rule 13a-14(a) | ||||||||
Certification of Mark A. Jackson pursuant to Rule 13a-14(a) | ||||||||
Certification of James C. Day pursuant to 18 U.S.C. Section 1350 | ||||||||
Certification of Mark A. Jackson pursuant to 18 U.S.C. Section 1350 |
FORM 10-K
This report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this Form 10-K, including, without limitation, statements contained in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations, regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance, are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot assure you that such expectations will prove to have been correct. We have identified factors that could cause actual plans or results to differ materially from those included in any forward-looking statements. These factors include, but are not limited to, the following:
| volatility in crude oil and natural gas prices; | |||
| changes in our customers drilling programs or budgets due to their own internal corporate events, changes in the markets and prices for oil and gas, or shifts in the relative strengths of various geographic drilling markets brought on by things such as a general economic slowdown, or regional or worldwide recession, any of which could result in deterioration in demand for our drilling services; | |||
| our inability to execute any of our business strategies; | |||
| cost overruns or delays in shipyard repair, maintenance, conversion or upgrade projects; | |||
| changes in tax laws, tax treaties or tax regulations or the interpretation or enforcement thereof, including taxing authorities not agreeing with our assessment of the effects of such laws, treaties and regulations; | |||
| cancellation by our customers of drilling contracts or letter agreements or letters of intent for drilling contracts or their exercise of early termination provisions generally found in our drilling contracts; | |||
| intense competition in the drilling industry; | |||
| changes in the rate of economic growth in the U.S. or in other major international economies; | |||
| political and economic conditions in markets where we from time to time operate; | |||
| adverse weather (such as hurricanes and monsoons) and seas; | |||
| operational risks (such as blowouts, fires and loss of production); | |||
| changes in oil and gas drilling technology or in our competitors drilling rig fleets that could make our drilling rigs less competitive or require major capital investment to keep them competitive; | |||
| costs and effects of unanticipated legal and administrative proceedings; | |||
| limitations on our insurance coverage or our inability to obtain or maintain insurance coverage at rates and with deductible amounts that we believe are commercially reasonable; | |||
| the discovery of significant additional oil and/or gas reserves or the construction of significant oil and/or gas delivery or storage systems that impact regional or worldwide energy markets; | |||
| requirements and potential liability imposed by governmental regulation of the drilling industry (including environmental regulation); | |||
| acts of war or terrorism; |
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| significant changes in trade, monetary or fiscal policies worldwide, including changes in interest rates; and | |||
| currency fluctuations between the U.S. dollar and other currencies. |
All of the foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements. When used in this Form 10-K , the words believes, anticipates, expects, plans and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.
PART I
ITEM 1. BUSINESS.
GENERAL
We are a leading provider of diversified services for the oil and gas industry. We perform contract drilling services with our fleet of 60 offshore drilling units located in key markets worldwide. This fleet consists of 13 semisubmersibles (including five Noble EVA-4000 TM semisubmersibles and four ultra-deepwater hulls), three dynamically positioned drillships, 41 jackup rigs and three submersibles. For additional information on the specifications of the fleet, see Item 2. Properties-Drilling Fleet. Approximately 80 percent of the fleet is currently deployed in international markets, principally including the Middle East, Mexico, the North Sea, Brazil, West Africa, India and the Mediterranean Sea. We provide technologically advanced drilling-related products and services designed to create value for our customers. We also provide labor contract drilling services, well site and project management services, and engineering services.
Noble Corporation, a Cayman Islands exempted company limited by shares (which we sometimes refer to in this report as Noble), became the successor to Noble Drilling Corporation, a Delaware corporation (which we sometimes refer to as Noble Drilling) that was organized in 1939, as part of the internal corporate restructuring of Noble Drilling and its subsidiaries effective April 30, 2002. For more information on this restructuring, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations-Corporate Restructuring. Noble and its predecessors have been engaged in the contract drilling of oil and gas wells for others domestically since 1921 and internationally during various periods since 1939. As used herein, unless otherwise required by the context, the term Noble refers to Noble Corporation and the terms Company, we, our and words of similar import refer to Noble and its consolidated subsidiaries. The use herein of such terms as group, organization, we, us, our and its, or references to specific entities, is not intended to be a precise description of corporate relationships.
BUSINESS STRATEGY
Our long-standing business strategy continues to be the active expansion of our international offshore drilling and deepwater capabilities through acquisitions, rig upgrades and modifications, and the deployment of assets in important geological areas.
Since the beginning of 2000, we have mobilized nine jackup rigs and one semisubmersible from the U.S. Gulf of Mexico to international markets. In addition, since the beginning of 2000 we have added nine jackups to our international fleet through acquisitions. We continue to evaluate other opportunities to deploy units in our fleet, including certain deepwater units, in important geological areas worldwide.
Both the level of drilling activity and the number of announced discoveries and related development programs in water depths greater than 5,000 feet have increased substantially in recent years, thus increasing the demand for rigs capable of drilling in these water depths. As such, in recent years we have focused on increasing the number of rigs in our fleet capable of ultra-deepwater offshore drilling. Since the beginning of 2000, we have
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added two deepwater semisubmersibles to our fleet and have acquired two additional semisubmersible baredeck hulls.
The offshore contract drilling industry has, in recent years, experienced a series of asset sales and consolidations among drilling contractors, and we expect this trend to continue as drilling contractors position themselves strategically in the market. From time to time, we discuss asset transactions or business combinations with others, and we intend to continue to consider business opportunities that we believe promote our business strategy. As noted above, since the beginning of 2000 we have added 13 units to our fleet through acquisitions and joint ventures (see -Business Development During 2004 below).
In addition, as part of our strategy, we have focused on the continued development of technological applications for the drilling industry. We believe these applications differentiate our fleet by incorporating new technology, enhancing our reputation with our customers, and providing a mechanism to grow our earnings with lower capital investment requirements than required for our fleet of drilling rigs. Our Noble Drilling Technology Division is engaged in this activity.
BUSINESS DEVELOPMENT DURING 2004
As part of our strategy to expand our international operations, we acquired three jackup rigs, which are currently in the Middle East, and we mobilized the Noble Homer Ferrington semisubmersible to Nigeria from the U.S. Gulf of Mexico for a long-term contract that commenced in November 2004. In December 2003, we mobilized the Noble Carl Norberg jackup rig to the Mediterranean Sea from the U.S. Gulf of Mexico for a 14-month contact, which commenced in January 2004. Also in December 2003, we mobilized the Noble Dick Favor jackup rig from Brazil to the Middle East. Following an upgrade project, the unit commenced operations in August 2004. In addition, since September 2002 we have mobilized a total of seven jackup rigs to Mexico from the U.S. Gulf of Mexico for long-term contracts with Petroleos Mexicanos (Pemex).
In December 2004, we received a commitment from Shell Exploration & Production Company for a two-year contract on the Noble Clyde Boudreaux ultra-deepwater semisubmersible . The unit began a capital upgrade program in January 2005, which upon completion will enable the unit to drill in water depths of 10,000 feet. This upgrade is expected to be completed and the unit to commence operations in the third quarter of 2006. For additional information regarding the estimated costs of this upgrade, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Capital Expenditures.
In October 2004, we exercised our option to purchase the Noble David Tinsley (formerly Maersk Valiant ), a MODEC 300C, independent leg, cantilever jackup rig, for an exercise price of $28,400,000. In June 2003, we paid an option fee of $13,200,000 for the right to acquire the unit. Our aggregate purchase price for the rig was therefore $41,600,000. After undergoing a refurbishment and upgrade program, the unit commenced a 500-day contract in Qatar in February 2005.
In July 2004, we exercised our option to purchase the Noble Cees van Diemen (formerly Maersk Viking ), a MODEC 300C, independent leg, cantilever jackup rig, for an exercise price of $32,900,000. In June 2003, we paid an option fee of $15,000,000 for the right to acquire the unit. Our aggregate purchase price for the rig was therefore $47,900,000. After undergoing a refurbishment and upgrade program, the unit commenced an 880-day contract in Qatar in September 2004.
In June 2004, we purchased the Noble Mark Burns (formerly Okhi ), a Levingston 111-S designed independent leg jackup rig, for $29,500,000 in cash. After undergoing initial refurbishments and upgrades in the Dalian New Shipyard in Dalian, China, in December 2004 we mobilized the unit to the Middle East, where additional upgrade work is currently ongoing to include leg extension to 300 feet water depth capability, a 65 foot cantilever, a third mud pump and quarters expansion for 160 personnel. The unit has a letter of intent for a 475-day contract in Qatar following completion of its upgrade scheduled for the third quarter of 2005.
We continued the development of our technology initiatives in 2004. We installed aluminum alloy riser on the Noble Roger Eason drillship in Brazil during its upgrade in 2004. We had previously successfully installed
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aluminum alloy riser on the Noble Leo Segerius drillship in Brazil and the Noble Therald Martin semisubmersible in the U.S. Gulf of Mexico, with further installation planned on the Noble Lorris Bouzigard semisubmersible. During 2004, we continued to test various components of our Well Director TM automatic rotary steerable system to ensure its robustness and reliability prior to its full commercialization. We drilled additional test wells for customers using the system in 2004 and anticipate it will become fully commercial during 2005. We also continue to seek additional opportunities to utilize or license our drilling products and software designed to increase drilling efficiency. These efforts may be done solely by Noble or through joint ventures with industry partners. In addition, we continued to expand our project management and engineering services to international markets during 2004.
DRILLING CONTRACTS
We typically employ each drilling unit under an individual contract. Although the final terms of the contracts are the result of our negotiations with our customers, many contracts are awarded based upon competitive bidding. Our drilling contracts generally contain the following terms:
| contract duration extending over a specific period of time or a period necessary to drill one or more wells (in general, we seek to have a reasonable balance of short- and long-term contracts to minimize the impact of a decline in the market, while obtaining the upside of increasing market prices in a rising market); | |||
| provisions permitting early termination of the contract by the customer (i) if the unit is lost or destroyed or (ii) if operations are suspended for a specified period of time due to either breakdown of major equipment or force majeure events beyond our control and the control of the customer; | |||
| options in favor of the customer to drill one or more additional wells, generally upon advance notice to us; | |||
| payment of compensation to us (generally in U.S. dollars) on a daywork basis, so that we receive a fixed amount for each day (dayrate) that the drilling unit is operating under contract (lower rates or no compensation is payable during periods of equipment breakdown and repair or adverse weather or in the event operations are interrupted by other conditions, some of which may be beyond our control); | |||
| payment by us of the operating expenses of the drilling unit, including labor costs and the cost of incidental supplies; and | |||
| reimbursement to us by the customer of certain out-of-pocket expenses paid by us for the account of the customer. |
The terms of some of our drilling contracts permit early termination of the contract by the customer, without cause, generally exercisable upon advance notice to us. The terms may also require an early termination payment by the customer. The drilling contracts for seven of our jackups contracted to Pemex as of February 28, 2005 contain provisions that allow early cancellation on five days or less notice to us without Pemex making an early termination payment.
During times of depressed market conditions, our customers may seek to avoid or reduce their obligations under term drilling contracts or letter agreements or letters of intent for drilling contracts. A customer may no longer need a rig, due to a reduction in its exploration, development or production program, or it may seek to obtain a comparable rig at a lower dayrate.
As of February 28, 2005, 23 of our rigs were contracted for the remainder of 2005. We anticipate that the primary terms of the current contracts on 31 of our rigs will expire at varying times in 2005, subject to options to extend in the case of 27 contracts. Our remaining rigs (excluding our three ultra-deepwater hulls in inventory, ready for upgrade) were in a shipyard for repair, refurbishment or upgrade as of February 28, 2005.
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Many contracts allow us to recover our mobilization and demobilization costs associated with moving a drilling unit from one location to another. When market conditions require us to bear these costs, our operating margins are accordingly reduced. We cannot predict our ability to recover these costs in the future. For shorter moves such as field moves, our customers have generally agreed to bear the costs of moving the unit by paying us a reduced dayrate or move rate while the unit is being moved.
OFFSHORE DRILLING OPERATIONS
Our offshore contract drilling operations, which accounted for approximately 91 percent, 94 percent and 95 percent of operating revenues for the years ended December 31, 2004, 2003 and 2002, respectively, are conducted worldwide. Our offshore drilling fleet consists of 60 units. For additional information on the specifications of the fleet, see Item 2. Properties-Drilling Fleet. Our principal regions of contract drilling operations include the Middle East, Gulf of Mexico, Mexico, the North Sea, Brazil, West Africa, India and the Mediterranean Sea. In 2004, Pemex and Petroleo Brasiliero S.A. (Petrobras) accounted for approximately 14 percent and 10 percent, respectively, of our total operating revenues. No other single customer accounted for more than 10 percent of our total operating revenues in 2004.
International Contract Drilling
Our contract drilling services revenues from international sources accounted for approximately 74 percent, 73 percent and 68 percent of our total contract drilling services revenues for 2004, 2003 and 2002, respectively. In 2004, approximately 47 percent of our international contract drilling services revenues was derived from contracts with government-owned companies, 43 percent was derived from contracts with companies having equity market capitalization greater than $4 billion (large cap companies), and the remaining 10 percent was derived from other independent operators.
Domestic Contract Drilling
Contract drilling services revenues generated in the U.S. accounted for approximately 26 percent, 27 percent and 32 percent of our total contract drilling services revenues for 2004, 2003 and 2002, respectively. In 2004, approximately 72 percent of our domestic contract drilling revenues was derived from contracts with large cap companies and the remaining 28 percent was derived from contracts with other independent operators.
Labor Contracts
Our offshore operations also include services we perform under labor contracts for drilling and workover activities covering 13 rigs operating in the U.K. North Sea and two rigs under a labor contract (the Hibernia Project) off the east coast of Canada. These rigs are not owned or leased by us. During 2004, we commenced a three-year contract with Apache North Sea Limited to take over the provision of drilling and maintenance services on its Forties Field covering five platforms and a labor contract for the BP Clair Platform in the North Sea.
Under our labor contracts, we provide the personnel necessary to manage and perform the drilling operations from drilling platforms owned by the operator. With the exception of the Hibernia Project, which is operated under a five-year agreement that expires in 2007, our labor contracts are generally renewable on an annual basis.
TECHNOLOGY, ENGINEERING SERVICES AND PROJECT MANAGEMENT
Our technology initiative focuses on the design and development of drilling products, drilling-related software programs, technical solutions to enhance drilling efficiency, and applications that allow us to drill in deeper water depths with less capital investment. In addition, we provide well site management, project management and engineering services.
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COMPETITION AND RISKS
The contract drilling industry is a highly competitive and cyclical business characterized by high capital and maintenance costs. Although demand for our services improved throughout 2004, we believe that competition for drilling contracts will continue to be highly competitive for the foreseeable future. Certain competitors may have access to greater financial resources than we do.
Competition in contract drilling involves numerous factors, including price, rig availability and suitability, experience of the workforce, efficiency, condition of equipment, operating integrity, reputation, industry standing and customer relations. We believe that we compete favorably with respect to all of these factors. Competition is primarily on a regional basis and may vary significantly by region at a particular time. Demand for offshore drilling equipment also depends on the exploration and development programs of oil and gas producers, which in turn are influenced by the financial condition of such producers, by general economic conditions and prices of oil and gas, and, from time to time, by political considerations and policies.
We follow a policy of keeping our equipment well maintained and technologically competitive. However, our equipment could be made obsolete by the development of new techniques and equipment. In addition, industry-wide shortages of supplies, services, skilled personnel and equipment necessary to conduct our business occur from time to time. We cannot assure you that any such shortages experienced in the past would not occur again or that any shortages, to the extent currently existing, will not continue or worsen in the future.
Our results of operations depend on the levels of activity in offshore oil and gas exploration, development and production in markets worldwide. Historically, oil and gas prices and market expectations of potential changes in these prices have significantly affected that level of activity. Generally speaking, higher oil and natural gas prices or our customers expectations of higher prices result in a greater demand for our services. These prices are extremely volatile. Despite favorable oil prices in 2004, drilling activity in certain international markets, which are influenced more by oil prices than natural gas prices, was generally weaker in 2004 as compared to 2003 and 2002. We believe that operators in these international markets have been reluctant to increase drilling activity due to the uncertainty surrounding the worldwide economy, the political unrest in the Middle East (including the military action in Iraq), Nigeria and Venezuela, and difficulties in obtaining funding from government-affiliated oil companies. However, drilling activity in the North Sea and West Africa began to improve in the latter part of 2004, while remaining strong in other international markets in which we operate, including the Middle East, Mexico and Brazil.
Natural gas prices during 2004 averaged $6.13 per thousand cubic feet (source: average Henry Hub closing bidweek price). Although natural gas prices in 2004 were 12 percent higher than 2003, and significantly higher than historical prices, operators generally did not significantly increase drilling activities in the U.S. Gulf of Mexico in water depths applicable to jackups and submersibles until the second half of 2004 due principally to a lack of economically viable drilling prospects and uncertainty surrounding the worldwide economy. Drilling activity levels in water depths applicable to semisubmersibles also began to improve during the second half of 2004.
Demand for drilling services depends on a variety of economic and political factors, including worldwide demand for oil and gas, the ability of the Organization of Petroleum Exporting Countries (OPEC) to set and maintain production levels and pricing, the level of production of non-OPEC countries and the policies of the various governments regarding exploration and development of their oil and gas reserves. We believe that a significant decrease from recent historical average oil and gas prices could depress the level of exploration and production activity and result in a corresponding decline in demand for our services.
For the foregoing reasons, we cannot predict the future level of demand for our drilling services or future conditions in the offshore contract drilling industry.
Our operations are subject to the many hazards inherent in the drilling business, including blowouts, cratering, fires and collisions or groundings of offshore equipment. In addition, our operations are subject to damage or loss from adverse weather and seas. These hazards could cause personal injury and loss of life, suspend drilling operations or seriously damage or destroy the property and equipment involved and, in addition to causing environmental damage, could cause substantial damage to oil and natural gas producing formations. Although we
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maintain insurance against many of these hazards, our insurance is subject to deductibles. It also excludes certain matters from coverage, such as loss of earnings on certain rigs. Also, we generally obtain indemnification from our customers for environmental damage with respect to offshore drilling.
Our international operations are also subject to certain political, economic and other uncertainties including, among others, risks of war, terrorism and civil disturbances, expropriation, nationalization, renegotiation or modification of existing contracts, taxation policies, foreign exchange restrictions, international monetary fluctuations and other hazards arising out of foreign governmental sovereignty over certain areas in which we conduct operations. We have sought to obtain, where economical, insurance against certain political risks. However, we cannot assure you that this insurance will always be available to us or, if available, will cover all losses that we may incur in respect of foreign operations.
GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS
Many aspects of our operations are affected by domestic and foreign political developments and are subject to numerous governmental regulations that may relate directly or indirectly to the contract drilling industry. The regulations applicable to our operations include provisions that regulate the discharge of materials into the environment or require remediation of contamination under certain circumstances. Generally, these environmental laws and regulations impose strict liability. This means that we could be liable without regard to our negligence or fault. Such environmental laws and regulations may expose us to liability for the conduct of, or conditions caused by, others, or for any of our acts, even if they complied with all applicable laws in effect at the time we acted.
The U.S. Oil Pollution Act of 1990 (OPA `90) and regulations thereunder impose certain additional operational requirements on our domestic offshore rigs and govern liability for leaks, spills and blowouts involving pollutants. Regulations under OPA `90 require owners and operators of rigs in United States waters to maintain certain levels of financial responsibility. We monitor these regulations and do not believe that they are likely to have a material adverse effect on our financial condition or results of operations. We have made and will continue to make expenditures to comply with environmental requirements. To date we have not expended material amounts in order to comply and we do not believe that our compliance with such requirements will have a material adverse effect upon our results of operations or competitive position or materially increase our capital expenditures. Although these requirements impact the energy and energy services industries, generally they do not appear to affect us any differently or to any greater or lesser extent than other companies in the energy services industry.
The modification of existing laws or regulations or the adoption of new laws or regulations curtailing exploratory or developmental drilling for oil and gas for economic, environmental or other reasons could materially and adversely affect our operations by limiting drilling opportunities.
EMPLOYEES
At December 31, 2004, the Company employed approximately 5,300 persons, including persons engaged through labor contractors or agencies. Of the 5,300 persons, approximately 80 percent were engaged in international operations and approximately 20 percent were engaged in domestic operations. We are not a party to any collective bargaining agreements that are material. We consider our employee relations to be satisfactory.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Information regarding our operating revenues and identifiable assets attributable to each of our geographic areas of operations for the last three fiscal years is presented in Note 16 to our consolidated financial statements included in this Annual Report on Form 10-K.
AVAILABLE INFORMATION
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at our internet website at http://www.noblecorp.com. These filings are also available to the public at the Securities and Exchange Commissions (SEC) Public Reference Room at 450 Fifth
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Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Electronic filings with the SEC are also available on the SEC internet website at http://www.sec.gov.
We also make available on our website the following:
| Charters for the Audit, Compensation, Nominating and Corporate Governance, and Finance Committees of our board of directors; | |||
| Our code of business conduct and ethics; | |||
| Our Memorandum and Articles of Association; and | |||
| Methods for contacting members of our board of directors. |
Printed copies of our committee charters and code of business conduct and ethics are available in print to any member who requests them.
ITEM 2. PROPERTIES.
DRILLING FLEET
Our offshore drilling rig fleet consists of 60 units composed of 13 semisubmersibles (including five Noble EVA-4000 semisubmersibles and four ultra-deepwater hulls), three drillships, 41 jackup rigs and three submersibles. The rig count includes one drillship and one jackup unit in which we have partial ownership interests through joint ventures and one jackup rig operated pursuant to a lease (bareboat charter) agreement. Each type of rig is described further below. There are several factors that determine the type of rig most suitable for a particular job, the most significant of which include the water depth and bottom conditions at the proposed drilling location, whether the drilling is being done over a platform or other structure, and the intended well depth.
Semisubmersibles
Our semisubmersible fleet consists of 13 units. Among the 13 are five units that have been converted to Noble EVA-4000 semisubmersibles and three Friede & Goldman 9500 Enhanced Pacesetter semisubmersibles (two of which require substantial capital expenditure upgrades to place in operational condition). Also included in this fleet are two Pentagone 85 semisubmersibles, two Bingo 9000 baredeck hulls, and one semisubmersible capable of operating in harsh environments. Semisubmersibles are floating platforms which, by means of a water ballasting system, can be submerged to a predetermined depth so that a substantial portion of the hull is below the water surface during drilling operations. These units maintain their position over the well through the use of either a fixed mooring system or a dynamic positioning system and can drill in many areas where jackup rigs can also drill. However, semisubmersibles normally require water depth of at least 200 feet in order to conduct operations. Our semisubmersibles are designed to work in water depths of up to 10,000 feet, depending on the unit. Semisubmersibles are typically more expensive to construct and operate than jackup rigs. One of our Friede & Goldman 9500 Enhanced Pacesetter semisubmersibles, the Noble Clyde Boudreaux, received a commitment in December 2004 from Shell Exploration & Production Company for a two-year contract. Upon completion of capital upgrades, which are estimated to be completed in the third quarter of 2006, the unit will be capable of drilling in water depths up to 10,000 feet.
We have extended the water depth capability of certain of our semisubmersibles and dynamically positioned drillships discussed below by the deployment of our proprietary aluminum alloy riser (see Item 1. Business-Business Development During 2004).
Dynamically Positioned Drillships
We have three dynamically positioned drillships in the fleet. Drillships are ships that are equipped for drilling and are typically self-propelled. Our drillships are positioned over the well through the use of a computer controlled dynamic positioning system. Our two wholly-owned drillships, the Noble Leo Segerius and Noble Roger Eason , are capable of drilling in water depths up to 5,900 feet and 7,200 feet, respectively. The Noble Muravlenko ,
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in which we own an 82 percent interest through a joint venture, is capable of drilling in water depths up to 4,800 feet.
Jackup Rigs
We have 41 jackup rigs in the fleet, including one in which we own a 50 percent interest through a joint venture and one that we operate pursuant to a bareboat charter agreement. Jackup rigs are mobile, self-elevating drilling platforms equipped with legs which can be lowered to the ocean floor until a foundation is established to support the drilling platform. The rig hull includes the drilling rig, jacking system, crew quarters, loading and unloading facilities, storage areas for bulk and liquid materials, helicopter landing deck and other related equipment. All of our jackup rigs are independent leg (i.e., the legs can be raised or lowered independently of each other), cantilevered rigs, and the Noble Mark Burns is under conversion . We acquired the Noble Mark Burns in June 2004 and are upgrading the unit to 300 feet water depth capability, a 65 foot cantilever, a third mud pump, and quarters expansion for 160 personnel. A cantilevered jackup has a feature that permits the drilling platform to be extended out from the hull, allowing it to perform drilling or workover operations over pre-existing platforms or structures. Moving a rig to the drill site involves jacking up its legs until the hull is floating on the surface of the water. The hull is then towed to the drill site by tugs and the legs are jacked down to the ocean floor. The jacking operation continues until the hull is raised out of the water and drilling operations are conducted with the hull in its raised position. Our jackup rigs are capable of drilling to a maximum depth of 25,000 feet in water depths ranging between eight and 390 feet, depending on the jackup rig.
Submersibles
We have three submersibles in the fleet. Submersibles are mobile drilling platforms which are towed to the drill site and submerged to drilling position by flooding the lower hull until it rests on the sea floor, with the upper deck above the water surface. Our submersibles are capable of drilling to a maximum depth of 25,000 feet in water depths ranging between 12 and 85 feet, depending on the submersible.
The following table sets forth certain information concerning our drilling rig fleet at February 28, 2005. The table does not include any rigs owned by operators for which we had labor contracts or letters of intent as of February 28, 2005. We operate and, unless otherwise indicated, own all of the rigs included in the table. All of our rigs are equipped with top drives.
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Drilling Fleet
Water | Drilling | ||||||||||||||||
Depth | Depth | ||||||||||||||||
Year Built | Rating | Capacity | |||||||||||||||
Name | Make | or Rebuilt (1) | (feet) | (feet) | Location | Status (2) | |||||||||||
Semisubmersibles - 13
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Noble Paul Wolff
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Noble EVA-4000- DP | 1999 R | 8,900 | 30,000 | Brazil | Active | |||||||||||
Noble Paul Romano
|
Noble EVA-4000 | 1998 R | 6,000 | 30,000 | U.S. Gulf of Mexico | Shipyard/Contracted | |||||||||||
Noble Amos Runner
|
Noble EVA-4000 | 1999 R | 6,600 | 30,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Jim Thompson
|
Noble EVA-4000 | 1999 R | 6,000 | 30,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Max Smith
|
Noble EVA-4000 | 1999 R | 6,000 | 30,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Homer Ferrington
|
Friede & Goldman 9500 | ||||||||||||||||
|
Enhanced Pacesetter | 2000 R | 6,000 | 30,000 | Nigeria | Active | |||||||||||
Noble Lorris Bouzigard
(3)
|
Pentagone 85 | 2003 R | 4,000 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Therald Martin
(3)
|
Pentagone 85 | 2003 R | 4,000 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Ton van Langeveld
(4)
|
Offshore Co. SCP III | 2000 R | 1,500 | 20,000 | U.K. | Active | |||||||||||
Noble Clyde Boudreaux
(5)
|
Friede & Goldman 9500 | ||||||||||||||||
|
Enhanced Pacesetter | 2006 R | 10,000 | 35,000 | U.S. Gulf of Mexico | Shipyard/Contracted | |||||||||||
Noble Dave Beard
(5)
|
Friede & Goldman 9500 | ||||||||||||||||
|
Enhanced Pacesetter | 1986 | 10,000 | 35,000 | China | Shipyard | |||||||||||
Bingo 9000 Rig 3
(5)
|
Trosvik Bingo 9000 | 1999 | 10,000 | 35,000 | China | Shipyard | |||||||||||
Bingo 9000 Rig 4
(5)
|
Trosvik Bingo 9000 | 1999 | 10,000 | 35,000 | China | Shipyard | |||||||||||
Dynamically Positioned Drillships - 3
|
|||||||||||||||||
Noble Roger Eason
(3)
|
Nedlloyd | 2005 R | 7,200 | 25,000 | Brazil | Shipyard/Contracted | |||||||||||
Noble Leo Segerius
(3)
|
Gusto Engineering Pelican Class | 1996 R | 5,900 | 20,000 | Brazil | Active | |||||||||||
Noble Muravlenko
(6)
|
Gusto Engineering Pelican Class | 1997 R | 4,800 | 21,000 | Brazil | Active | |||||||||||
Independent Leg Cantilevered Jackups - 41
|
|||||||||||||||||
Noble Bill Jennings
|
MLT 84 - E.R.C. | 1997 R | 390 | 25,000 | Mexico | Active | |||||||||||
Noble Eddie Paul
|
MLT 84 - E.R.C. | 1995 R | 390 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Leonard Jones
|
MLT 53 - E.R.C. | 1998 R | 390 | 25,000 | Mexico | Active | |||||||||||
Noble Julie Robertson
(4) (7)
|
Baker Marine Europe Class | 2000 R | 390 | 25,000 | U.K. | Active | |||||||||||
Noble Al White
(4)
|
CFEM T-2005C | 1997 R | 360 | 25,000 | The Netherlands | Active | |||||||||||
Noble Kolskaya
(4) (8)
|
Gusto Engineering-C | 1997 R | 330 | 25,000 | The Netherlands | Active | |||||||||||
Noble Byron Welliver
(4)
|
CFEM T-2005C | 1982 | 300 | 25,000 | Denmark | Active | |||||||||||
Noble Johnnie Hoffman
|
Baker Marine BMC 300 | 1993 R | 300 | 25,000 | Mexico | Active | |||||||||||
Noble Roy Butler
(9)
|
F&G L-780 MOD II | 1996 R | 300 | 25,000 | Nigeria | Active | |||||||||||
Noble Tommy Craighead
|
F&G L-780 MOD II | 2003 R | 300 | 25,000 | Nigeria | Active | |||||||||||
Noble Kenneth Delaney
|
F&G L-780 MOD II | 1998 R | 300 | 25,000 | U.A.E. | Active | |||||||||||
Noble Percy Johns
|
F&G L-780 MOD II | 1995 R | 300 | 25,000 | Nigeria | Active | |||||||||||
Noble George McLeod
|
F&G L-780 MOD II | 1995 R | 300 | 25,000 | U.A.E. | Active | |||||||||||
Noble Jimmy Puckett
|
F&G L-780 MOD II | 2002 R | 300 | 25,000 | Qatar | Active | |||||||||||
Noble Gus Androes
|
Levingston 111-C | 1996 R | 300 | 25,000 | U.A.E. | Active | |||||||||||
Noble Lewis Dugger
|
Levingston 111-C | 1997 R | 300 | 20,000 | U.S. Gulf of Mexico | Shipyard | |||||||||||
Noble Ed Holt
|
Levingston 111-C | 1994 R | 300 | 25,000 | India | Active | |||||||||||
Noble Sam Noble
|
Levingston 111-C | 1982 | 300 | 25,000 | Mexico | Active | |||||||||||
Noble Gene Rosser
|
Levingston 111-C | 1996 R | 300 | 20,000 | Mexico | Active | |||||||||||
Noble John Sandifer
|
Levingston 111-C | 1995 R | 300 | 20,000 | Mexico | Active | |||||||||||
Panon
(10)
|
Levingston 111-C | 2001 R | 300 | 20,000 | Qatar | Active | |||||||||||
Noble Mark Burns
|
Levingston 111-C | 2005 R | 300 | 25,000 | U.A.E. | Shipyard/Contracted | |||||||||||
Noble Cees van Diemen
|
MODEC 300C | 1981 | 300 | 25,000 | Qatar | Active | |||||||||||
Noble David Tinsley
|
MODEC 300C | 2004 R | 300 | 25,000 | U.A.E. | Active | |||||||||||
Noble Gene House
|
MODEC 300C-38 | 1981 | 300 | 25,000 | Qatar | Active | |||||||||||
Noble Charlie Yester
|
MLT Class 116-C | 1980 | 300 | 25,000 | India | Active | |||||||||||
Noble Roy Rhodes
(11)
|
MLT Class 116-C | 1979 | 300 | 25,000 | U.A.E. | Active | |||||||||||
Noble Charles Copeland
|
MLT Class 82-SD-C | 2001 R | 250 | 20,000 | Qatar | Active | |||||||||||
Noble Earl Frederickson
|
MLT Class 82-SD-C | 1979 | 250 | 20,000 | Mexico | Active | |||||||||||
Noble Tom Jobe
|
MLT Class 82-SD-C | 1982 | 250 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Ed Noble
|
MLT Class 82-SD-C | 1990 R | 250 | 20,000 | Nigeria | Active | |||||||||||
Noble Lloyd Noble
|
MLT Class 82-SD-C | 1990 R | 250 | 20,000 | Nigeria | Active | |||||||||||
Noble Carl Norberg
|
MLT Class 82-C | 2003 R | 250 | 20,000 | Mediterranean Sea | Active | |||||||||||
Noble Chuck Syring
|
MLT Class 82-C | 1996 R | 250 | 20,000 | U.A.E. | Active | |||||||||||
Noble George Sauvageau
(4)
|
NAM Nedlloyd-C | 1981 | 250 | 20,000 | The Netherlands | Active | |||||||||||
Noble Ronald Hoope
(4)
|
Marine Structure CJ-46 | 1982 | 250 | 25,000 | The Netherlands | Active | |||||||||||
Noble Lynda Bossler
(4)
|
Marine Structure CJ-46 | 1982 | 250 | 25,000 | The Netherlands | Active | |||||||||||
Noble Piet van Ede
(4)
|
Marine Structure CJ-46 | 1982 | 250 | 25,000 | The Netherlands | Active | |||||||||||
Noble Dick Favor
|
Baker Marine BMC 150 | 2004 R | 150 | 20,000 | Qatar | Active | |||||||||||
Noble Don Walker
|
Baker Marine BMC 150 | 1992 R | 150 | 20,000 | Nigeria | Active | |||||||||||
Dhabi II
|
Baker Marine BMC 150 | 1981 | 150 | 20,000 | U.A.E. | Active | |||||||||||
Submersibles - 3
|
|||||||||||||||||
Noble Joe Alford
|
Pace Marine 85G | 1997 R | 85 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Lester Pettus
|
Pace Marine 85G | 1997 R | 85 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
Noble Fri Rodli
|
Transworld | 1998 R | 70 | 25,000 | U.S. Gulf of Mexico | Active | |||||||||||
See footnotes on the following page.
10
Footnotes to Drilling Fleet
(1) | Rigs designated with an R were modified, refurbished or otherwise upgraded in the year indicated by capital expenditures in an amount deemed material by management. | |
(2) | Rigs listed as active were operating under contract; rigs listed as available were available for bidding; rigs listed as contracted have signed contracts or have letters of intent with operators but have not begun operations; rigs listed as shipyard are in a shipyard for repair, refurbishment or upgrade. | |
(3) | Water depth rating is pursuant to the use of Nobles proprietary aluminum alloy riser. For additional information regarding units on which the aluminum alloy riser is or will be deployed, see Item 1.Business-Business Developments During 2004. | |
(4) | Harsh environment capability. | |
(5) | Water depth rating is subsequent to the rigs planned upgrade. The Noble Bingo 9000 Rig 3 and Noble Bingo 9000 Rig 4 are baredeck hulls. | |
(6) | We operate the unit and own an 82 percent interest in the unit through a joint venture. | |
(7) | Although designed for a water depth rating of 390 feet of water in a non-harsh environment, the rig is currently equipped with legs adequate to drill in approximately 180 feet of water. We own the additional legs required to extend the drilling depth capability to 390 feet of water. | |
(8) | We operate the unit pursuant to a bareboat charter agreement. | |
(9) | Although designed for a water depth rating of 300 feet of water, the rig is currently equipped with legs adequate to drill in approximately 250 feet of water. We own the additional legs required to extend the drilling depth capability to 300 feet of water. | |
(10) | We own a 50 percent interest in the unit through a joint venture. | |
(11) | Although designed for a water depth rating of 300 feet of water, the rig is currently equipped with legs adequate to drill in approximately 250 feet of water. The estimated cost of adding the additional leg capacity is $2,500,000. |
11
FACILITIES
Our principal executive offices are located in Sugar Land, Texas, and are leased through June 2011. We also lease administrative and marketing offices, and sites used primarily for storage, maintenance and repairs for drilling rigs and equipment, in Zug, Switzerland; Sugar Land, Texas; New Orleans, Louisiana; Leduc, Alberta and St. Johns, Newfoundland, Canada; Lagos and Port Harcourt, Nigeria; Aberdeen, Scotland; Stavanger, Norway; Ciudad Ojeda, Venezuela; Del Carmen, Mexico; Doha, Qatar; Abu Dhabi and Dubai, U.A.E.; Beverwijk and Den Helder, The Netherlands; Macae, Brazil; Celle, Germany; Moscow, Russia; and Esjberg, Denmark. We own certain tracts of land, including office and administrative buildings and warehouse facilities in Bayou Black, Louisiana and Aberdeen, Scotland.
ITEM 3. LEGAL PROCEEDINGS.
In August 2004, an indirect, wholly-owned subsidiary of Noble was served as a named defendant in two lawsuits filed in the Circuit Courts of the State of Mississippi involving numerous other companies (not affiliated with Noble) as co-defendants. In December 2004, such subsidiary was served as a named defendant in a third lawsuit filed in Mississippi Circuit Court. The lawsuits seek an unspecified amount of monetary damages on behalf of approximately 130 named individuals alleging personal injury or death, including claims under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986. The lawsuits are in preliminary stages and we have not confirmed the number of plaintiffs, if any, that were employed by our subsidiary or otherwise associated with our drilling operations during the relevant period. We intend to defend vigorously against the litigation, and based on information currently available, we do not believe the resolution of these lawsuits will have a material adverse effect on our financial position, results of operations or cash flows.
Noble Asset Company Limited (NACL), a wholly-owned, indirect subsidiary of Noble, was named one of 21 parties served a Show Cause Notice issued by the Commissioner of Customs (Prev.), Mumbai, India in August 2003. The Show Cause Notice concerns alleged violations of Indian Customs laws and regulations regarding one of our jackup drilling rigs. The Commissioner alleges certain violations to have occurred before, at the time of, and after NACL acquired the rig from the rigs previous owner. We maintain that NACL has acted in accordance with all Indian Customs laws and regulations and believe the Show Cause Notice is without merit as against NACL. In the purchase agreement for the rig, NACL received contractual indemnification against liability for Indian customs duty from the rigs previous owner. In connection with the export of the rig from India in 2001, NACL posted a bank guarantee in the amount of $3,300,000 and a customs bond in the amount of $21,340,000, both of which remain in place. NACL filed its initial replies to the Show Cause Notice in December 2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral arguments and written submissions. The Commissioner has not ruled to date. We do not believe the resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows.
We are a defendant in certain claims and litigation arising out of operations in the normal course of business. In the opinion of management, uninsured losses, if any, will not be material to our financial position, results of operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
12
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 1, 2005 with respect to our executive officers:
Name | Age | Position | ||||
James C. Day
|
61 | Chairman of the Board, Chief Executive Officer and President and Director | ||||
|
||||||
Mark A. Jackson
|
49 | Chief Operating Officer, Senior Vice President, Chief Financial Officer, | ||||
|
Treasurer, Controller and Assistant Secretary | |||||
|
||||||
Danny W. Adkins
|
54 | Senior Vice President Operations, Noble Drilling Corporation | ||||
|
||||||
Julie J. Robertson
|
49 | Senior Vice President Administration and Corporate Secretary |
James C. Day has served as Chairman of the Board of Noble since October 22, 1992 and as Chief Executive Officer since January 1, 1984. He served as President of Noble Drilling from January 1, 1984 to January 1, 1999 before reassuming the office of President of Noble effective March 1, 2005. From January 1983 until his election as President and Chief Executive Officer, Mr. Day served as Vice President of Noble Drilling. Prior to 1983, Mr. Day served as Vice President and Assistant Secretary of Noble Affiliates, Inc. He has been a director of Noble since 1984. Mr. Day is also a director of two public companies, Global Industries, Ltd. and ONEOK, Inc., and a trustee of The Samuel Roberts Noble Foundation, Inc., a not-for-profit corporation.
Mark A. Jackson has served as Senior Vice President, Chief Financial Officer, Treasurer and Controller of Noble since September 1, 2000. Mr. Jackson was named Chief Operating Officer effective March 1, 2005. From May 1999 to August 2000, Mr. Jackson served as Executive Vice President and Chief Financial Officer for Santa Fe Snyder Corporation, an oil and gas exploration and production company. From August 1997 to May 1999, he served as Senior Vice President and Chief Financial Officer of Snyder Oil Corporation, an oil and gas exploration and production company. Prior to August 1997, Mr. Jackson served consecutively in the positions of Vice President & Controller, Vice President - Finance and Vice President & Chief Financial Officer of Apache Corporation, an oil and gas exploration and production company, beginning in 1988.
Danny W. Adkins has served as Senior Vice President Operations of Noble Drilling since November 1, 2003. Prior to that, he held the same position with Noble Drilling International (Cayman) Ltd. since August 2000. From March 1997 to August 2000, Mr. Adkins served consecutively as Vice President Engineering and Senior Vice President Engineering for Noble Drilling Services Inc. From September 1994 to March 1997, he served as Vice President Operations for Noble Drilling Services Inc. Prior to September 1994, Mr. Adkins served consecutively in the positions of Manager of Engineering and Vice President Operations for a predecessor subsidiary of Noble, beginning in December 1990.
Julie J. Robertson has served as Senior Vice President Administration of Noble since July 2001 and as Corporate Secretary of Noble since December 1993. Ms. Robertson served as Vice President Administration of Noble Drilling from April 1996 to July 2001. In September 1994, Ms. Robertson became Vice President Administration of Noble Drilling Services Inc. From January 1989 to September 1994, Ms. Robertson served consecutively as Manager of Benefits and Director of Human Resources for Noble Drilling Services Inc. Prior to 1989, Ms. Robertson served consecutively in the positions of Risk and Benefits Manager and Marketing Services Coordinator for a predecessor subsidiary of Noble, beginning in 1979.
13
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
Nobles ordinary shares are listed and traded on the New York Stock Exchange under the symbol
NE. The following table sets forth for the periods indicated the high and low sales prices of our
ordinary shares:
As previously reported on Form 8-K, in October 2004, Nobles board of directors took action to
modify our then existing dividend policy and institute a new policy in the first quarter of 2005
for the payment of a quarterly cash dividend. On February 4, 2005, Nobles board of directors
declared a quarterly cash dividend of $0.02 per ordinary share. This dividend was paid on March 1,
2005 to members (shareholders) of record on February 16, 2005. Prior thereto, the Company had not
paid cash dividends on its equity securities since becoming a publicly held corporation in October
1985. The declaration and payment of dividends in the future are at the discretion of Nobles
board of directors and the amount thereof will depend on the Companys results of operations,
financial condition, cash requirements, future business prospects, contractual restrictions and
other factors deemed relevant by Nobles board of directors.
At March 3, 2005, there were 1,467 record holders of ordinary shares.
14
ITEM 6. SELECTED FINANCIAL DATA.
15
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion is intended to assist you in understanding our financial position as
of
December 31, 2004 and 2003, and our results of operations for each of the three years in the
period ended
December 31, 2004. You should read the accompanying consolidated financial statements and
their notes in conjunction with this discussion.
EXECUTIVE OVERVIEW
Demand for drilling services depends on a variety of economic and political factors, including
worldwide demand for oil and gas, the ability of OPEC to set and maintain production levels and
pricing, the level of production of non-OPEC countries and the policies of the various governments
regarding exploration and development of their oil and gas reserves.
Our results of operations depend on the levels of activity in offshore oil and gas
exploration, development and production in markets worldwide. Historically, oil and gas prices and
market expectations of potential changes in these prices have significantly affected that level of
activity. Generally speaking, higher oil and natural gas prices or our customers expectations of
higher prices result in a greater demand for our services. These prices are extremely volatile.
Despite favorable oil prices in 2004, drilling activity in certain international markets, which are
influenced more by oil prices than natural gas prices, was generally weaker in 2004 as compared to
2003 and 2002. We believe that operators in these international markets have been reluctant to
increase drilling activity due to the uncertainty surrounding the worldwide economy, the political
unrest in the Middle East (including the military action in Iraq), Nigeria and Venezuela, and
difficulties in obtaining funding from government-affiliated oil companies. However, drilling
activity in the North Sea and West Africa began to improve in the latter part of 2004, while
remaining strong in other international markets in which we operate, including the Middle East,
Mexico and Brazil.
Natural gas prices during 2004 averaged $6.13 per thousand cubic feet (source: average Henry
Hub closing bidweek price). Although natural gas prices in 2004 were 12 percent higher than 2003,
and significantly higher than historical prices, operators generally did not significantly increase
drilling activities in the U.S. Gulf of Mexico in water depths applicable to jackups and
submersibles until the second half of 2004 due principally to a lack of economically viable
drilling prospects and uncertainty surrounding the worldwide economy. Drilling activity levels in
water depths applicable to semisubmersibles also began to improve during the second half of 2004.
We cannot predict the future level of demand for our drilling services or future conditions in
the offshore contract drilling industry. Decreases in the level of demand for our drilling
services have an adverse effect on our results of operations.
In recent years, we have focused on increasing the number of rigs in our fleet capable of
ultra-deepwater offshore drilling. We have incorporated this focus into our broader, long-standing
business strategy to actively expand our international and offshore deepwater capabilities through
acquisitions, rig upgrades and modifications and to deploy assets in important geological areas.
We have also increased the number of jackups in key international markets. Since the beginning of
2000, we have mobilized nine jackup rigs and one semisubmersible from the U.S. Gulf of Mexico to
international markets. We have also added nine jackups to our international fleet through rig
acquisitions during this same period. In addition, we have added two deepwater semisubmersibles to
our fleet and have acquired two additional semisubmersible baredeck hulls since the beginning of
2000.
16
RESULTS OF OPERATIONS
2004 Compared to 2003
General
Net income for 2004 was $146,086,000, or $1.09 per diluted share, on operating revenues of
$1,066,231,000, compared to net income of $166,416,000, or $1.25 per diluted share, on operating
revenues of $987,380,000 for 2003.
The following table sets forth operating revenues and operating costs and expenses for each of
our reportable segments (for additional information regarding our reportable segments, see Note 16
of our accompanying consolidated financial statements) for the periods indicated:
17
Rig Utilization, Operating Days and Average Dayrates
The following table sets forth the average rig utilization, operating days and average
dayrates for our rig fleet for 2004 and 2003:
18
International Contract Drilling Services
The following table sets forth the operating revenues and the operating costs and expenses
for our international contract drilling services segment for 2004 and 2003:
Operating Revenues
.
International contract drilling services revenues increased $50,909,000
as additional operating days in our Middle East, Mexico and West Africa divisions were partially
offset by weaker market conditions in the North Sea, and a shipyard project on the
Noble Roger
Eason
drillship in Brazil. We had 1,392 additional operating days in our Middle East division due
primarily to the acquisition of the
Noble Gene House, Noble Charlie Yester
and
Noble Cees van
Diemen
premium jackups in July 2003, September 2003, and July 2004, respectively, the mobilization
of the
Noble Carl Norberg
premium jackup to the Mediterranean Sea from the U.S. Gulf of Mexico in
December 2003, and additional operating days on the
Noble Dick Favor
. The additional operating
days in our Middle East division resulted in additional revenues of approximately $68,000,000. In
Mexico, we experienced an additional 373 operating days due to the mobilization of three premium
jackups from the U.S. Gulf of Mexico since the beginning of 2003 for long-term contracts with
Pemex, which resulted in additional international contract drilling services revenues of
approximately $19,000,000. An increase in activity in West Africa over the latter part of 2004
resulted in an additional 256 operating days on our jackups in the region as compared to 2003. In
addition, we transferred the
Noble Homer Ferrington
semisubmersible to our West Africa division in
July 2004 from the U.S. Gulf of Mexico for a two-year contract that commenced in November 2004.
The additional operating days in West Africa resulted in additional revenues of approximately
$13,000,000. The generally weaker market conditions in the North Sea resulted in lower utilization
and average dayrates in 2004 for this region. Utilization in the North Sea during 2004 decreased
to 91 percent from 97 percent in 2003, while our average dayrate decreased 10 percent to $52,090.
The weaker market conditions in the North Sea and the shipyard project on the
Noble Roger Eason
decreased revenues by approximately $28,000,000 and $21,000,000, respectively. The increase in
engineering, consulting and other revenue of $1,696,000 was attributable primarily to an equipment
inspection fee earned on a per day basis by the
Noble Homer Ferrington
as part of the rigs
preparations for its long-term contract in Nigeria.
Since September 2002, we have mobilized a total of seven jackups from the U.S. Gulf of Mexico
to Mexico for long-term contracts with Petroleos Mexicanos (Pemex), including three since the
beginning of 2003. The mobilization of these jackup rigs was pursuant to our long-standing
business strategy of deploying our assets in important geological regions. We believe the
long-term financial returns for our jackup rigs will be higher in international regions due to
relatively fewer quality drilling prospects in the U.S. Gulf of Mexico at water depths applicable
to these units. As a result, we made the strategic decision to mobilize these units to Mexico for
long-term contracts. Following the completion of its contract in early January 2005, we mobilized
the
Noble Lewis Dugger
from Mexico to the U.S. Gulf of Mexico for upgrades and refurbishments.
Following this shipyard work, we plan to mobilize the rig back to Mexico if successful on a recent
bid to Pemex for a one-year contract that is expected to commence in May 2005.
19
Nigeria traditionally has had the largest concentration of drilling rigs in West Africa.
Demand in Nigeria began to decline in the latter part of 2002 due to political unrest attributable
to elections and strikes. Although this unrest declined towards the end of 2003, demand did not
improve as our customers were in the process of obtaining approval for projects from the
government-affiliated oil companies. Due to geology which is favorable for offshore exploration
and production, we believe the prospects for drilling activity in West Africa are good and that our
operations in the region will provide financial returns over time which are comparable to other key
international regions, and as a result, we have kept our six jackups in this market. Utilization
on our six jackups in West Africa improved during 2004, especially over the second half of the
year. By the middle of the fourth quarter of 2004, all six of our jackups were under contract,
with five contracted through 2005. In November 2004, the
Noble Homer Ferrington
semisubmersible
commenced a two-year contract with ExxonMobil in Nigeria. This unit previously operated in the
U.S. Gulf of Mexico. We believe that the long-term contracts initiated during 2004 for our jackups
and the
Noble Homer Ferrington
semisubmersible support our favorable outlook for this region.
We believe that the weaker market conditions in the North Sea during 2004 were attributable to
the gradual maturing of the North Sea basin. We also believe that improvement in dayrates in this
region will be driven by the independent operators, who historically have been more aggressive than
major oil and gas companies in developing smaller reserve targets. Market conditions in the North
Sea improved during the second half of 2004, as the supply and demand of rigs in the region came
closer into balance. All of our units in the region are currently operating and dayrates have
continued to strengthen on recent contracts. In Brazil, the
Noble Roger Eason
drillship was in the
shipyard for all of 2004. We performed regulatory maintenance and upgrades to the unit, including
water depth increase to 7,200 feet, which we recently completed. The unit has a 700-day contract
with Petrobras at a dayrate of $96,250, plus the opportunity for a performance bonus, which we
anticipate will commence in March 2005.
Operating Costs and Expenses.
International contract drilling services expenses increased
$56,866,000 due to the additional operating days in our Middle East, Mexico and West Africa
divisions following the acquisition of five international jackups since July 2003, the
mobilization of four premium jackups out of the U.S. Gulf of Mexico to international locations
since the beginning of 2003, and the transfer of the
Noble Homer Ferrington
semisubmersible to our
West Africa division in July 2004 for a contract that commenced in November 2004. In addition, we
performed maintenance projects on our three drillships in Brazil, including the
Noble Roger Eason
upgrade project that we recently completed, and we experienced higher labor costs in all
our international regions. Approximately two-thirds of the increase in our international contract
drilling services expenses was attributable to the additional operating days. Engineering,
consulting and other expenses in our international contract drilling services segment decreased
$1,636,000 due to a lower minority interest amount related to our
Noble Muravlenko
drillship. The
Noble Muravlenko
, in which we own an 82 percent interest, incurred additional downtime in 2004, as
well as the rigs drydocking in late July 2004, resulting in a reduced minority interest amount.
Depreciation expense increased $22,024,000 due to the rig acquisitions, mobilization of jackup
rigs to international locations, and transfer of the
Noble Homer Ferrington
to our West Africa
division discussed above. See the discussion below under Other Items regarding selling, general
and administrative expenses.
20
Domestic Contract Drilling Services
The following table sets forth the operating revenues and the operating costs and expenses
for our domestic contract drilling services segment for 2004 and 2003:
Operating Revenues
.
Domestic contract drilling services revenues decreased $3,098,000 due to
a lower average dayrate on our semisubmersibles and fewer operating days on our jackups following
the mobilization of four premium jackups out of the U.S. Gulf of Mexico to international locations
since the beginning of 2003. These items were mostly offset by a higher average dayrate on our
jackups, higher utilization and average dayrates on our submersibles, and additional operating
days on our semisubmersibles. Market conditions for jackups and submersibles in the U.S. Gulf of
Mexico improved during 2004 as the supply of such rigs has come closer into balance with demand
following the industrys mobilization of jackup rigs out of this region for international
opportunities and a moderate increase in demand. Utilization of our submersibles increased to 94
percent from 77 percent in 2003, while the average dayrate on these units increased 28 percent to
$25,840. Our submersibles contributed additional revenues of $14,000,000 in 2004. Likewise, the
average dayrate on our jackup rigs increased 51 percent, although the impact on our domestic
contract drilling services revenues was mostly offset by 431 fewer operating days due to the
mobilization of the three premium jackups to Mexico for long-term contracts with Pemex and the
mobilization of another premium jackup to the Mediterranean Sea during 2003. The
Noble Homer
Ferrington
was transferred to our West Africa division in July 2004 and began preparations for a
two-year contract in Nigeria. The average dayrate on our semisubmersibles with water depth
ratings of 6,000 feet or greater decreased 15 percent, which reduced revenues by approximately
$28,000,000, due to certain units operating on the spot-rate market with lower average dayrates
than those earned while under previous long-term contracts. However, additional operating days on
our semisubmersibles, primarily the
Noble Lorris Bouzigard
and
Noble Therald Martin
, resulted in
additional revenues of approximately $13,000,000. The decrease in engineering, consulting and
other revenues of $7,680,000 was attributable to the sale of our interest in certain deepwater oil
and gas properties during the fourth quarter of 2003.
The demand for semisubmersibles in the U.S. Gulf of Mexico began to improve during the latter
part of 2004, with significant dayrate increases and longer terms on contracts for these units as
compared to earlier in the year. This improvement has been the result of increased demand for
deepwater semisubmersibles due to operators increased exploration spending and upcoming
development projects in the region. The supply of these units is currently short of projected
demand for the next two to three years as operators look to obtain the rig capacity necessary to
meet their long-term exploration and development plans. In December 2004, we received a
commitment from Shell Exploration & Production Company for a two-year contract on the
Noble Clyde
Boudreaux
, an ultra-deepwater semisubmersible that upon completion of its upgrade will be capable
of drilling in water depths of 10,000 feet. This upgrade is expected to be completed and the unit
to commence operations in the third quarter of 2006. In addition to the
Noble Clyde Boudreaux
, we
have three ultra-deepwater hulls in inventory, ready for upgrade. Notwithstanding the recent
improvement in both the deepwater and shallow water markets in the U.S.
21
Gulf of Mexico, the mobilization of the
Noble Homer Ferrington
semisubmersible and four
premium jackups from the U.S. Gulf of Mexico to international locations was pursuant to our
long-standing business strategy of deploying our assets in important geological regions as
described earlier.
Operating Costs and Expenses.
Domestic contract drilling services expenses increased
$604,000 due to a $9,000,000 pre-tax charge related to costs incurred in 2004 to repair damage to
three of our semisubmersibles in the U.S. Gulf of Mexico as a result of Hurricane Ivan. Excluding
this charge, domestic contract drilling services expenses decreased $8,396,000 due to the
mobilization of four jackup rigs from the U.S. Gulf of Mexico to international locations and the
transfer of the
Noble Homer Ferrington
semisubmersible to our West Africa division, partially
offset by increased costs attributable to the activation of the
Noble Lorris Bouzigard
and
Noble
Therald Martin
semisubmersibles, which were placed into service in March 2003 and November 2003,
respectively. The mobilization of the four jackup rigs and transfer of the
Noble Homer Ferrington
semisubmersible to international locations reduced domestic contract drilling expenses by
approximately $16,000,000, whereas the activation of the
Noble Lorris Bouzigard
and
Noble Therald
Martin
increased contract drilling expenses by approximately $8,000,000. The lower engineering,
consulting and other expenses of $2,392,000 were due to the sale of our interests in certain
deepwater oil and gas properties during the fourth quarter of 2003. Depreciation expense
decreased $1,907,000 due to the mobilization of four premium jackups out of the U.S. Gulf of
Mexico and transfer of the
Noble Homer Ferrington
to our West Africa division, which reduced
depreciation expense by approximately $7,000,000, partially offset by additional depreciation of
approximately $5,000,000 attributable to the activation of the
Noble Lorris Bouzigard
and
Noble
Therald Martin
semisubmersibles. See the discussion below under Other Items regarding selling,
general and administrative expenses.
Engineering & Consulting Services
The following table sets forth the operating revenues and the operating costs and expenses
for our engineering and consulting services segment for 2004 and 2003:
Operating Revenues
.
Excluding reimbursables, operating revenues for our engineering and
consulting services segment increased $4,277,000 due principally to the sale of a license of our
OptiDrill
TM
drilling efficiency technology during 2004 for $3,000,000 and additional
project management engagements.
Operating Costs and Expenses
.
Excluding reimbursables, operating costs and expenses for our
engineering and consulting services segment decreased $1,379,000 due to fewer joint industry
research projects conducted in 2004 by our Noble Technology Services Division, mostly offset by
additional project management engagements in 2004.
22
Other
The following table sets forth the operating revenues and the operating costs and expenses
for our other services for 2004 and 2003:
Operating Revenues
.
Revenues from our labor contract drilling services increased $22,835,000
due to additional operating days in the North Sea, mostly attributable to the start of a new labor
contract for Apache North Sea Limited under which we commenced operations on three platforms in
the Forties Field during 2004. The additional operating days in the North Sea represented
approximately 90 percent of the increase in our labor contract drilling services revenues in 2004. Foreign
exchange fluctuations related to our operations in Canada on the Hibernia project also resulted in
higher revenues. We are paid for this work in Canadian dollars, and the Canadian dollar was
stronger relative to the U.S. dollar in 2004 than in 2003. In addition, contractual provisions
covering the Hibernia project allowed for increases in the labor, maintenance and administrative
portions of the dayrate on the project during 2004. Engineering, consulting and other revenues
increased $3,892,000 due to increased activity on an engineering services engagement in the North
Sea.
Operating Costs and Expenses
.
Excluding reimbursables, operating costs and expenses for our
other services increased $25,003,000 due to the additional labor contract operating days in the
North Sea, the stronger Canadian dollar, higher labor, maintenance and administrative costs
related to our Hibernia project in Canada, and the increased activity on an engineering services
engagement in the North Sea. The additional operating days on our North Sea labor contracts and
increased activity on the engineering services engagement represented approximately 75 percent and
15 percent, respectively, of the increase in our other services operating costs and expenses.
Other Items
Selling, General and Administrative Expenses
.
Selling, general and administrative (SG&A)
expenses increased $7,080,000 due to additional professional fees associated with compliance under
the requirements of the Sarbanes-Oxley Act of 2002, additional stock-based compensation expense,
higher insurance premiums for corporate-related policies and additional pension expense. The
additional professional fees related to the Sarbanes-Oxley Act of 2002 was the largest individual
factor in our higher SG&A expenses in 2004, representing nearly 30 percent of the increase.
Gain on Sale of Property and Equipment.
In 2003, we sold our interest in a deepwater oil and
gas property in the U.S. Gulf of Mexico to ENI Petroleum for $5,200,000 in cash. We realized a
gain of $3,472,000 upon the sale of our interest in this property. No sales of oil and gas
properties were made in 2004.
23
Interest Expense
.
Interest expense decreased $5,902,000 due to the continued retirement of
debt since the beginning of 2003. Since January 1, 2003, we have made repayments of long-term
debt totaling $158,513,000, including $77,933,000 in 2004.
Other, net.
Other, net increased $2,897,000 due to additional equity in income from our 50
percent equity interest in Noble Crosco Drilling Ltd., a joint venture which owns the
Panon
jackup
rig, and additional interest income earned on our cash and investments in marketable debt
securities due to higher interest rates in 2004 than in 2003. The
Panon
was in the shipyard for
two months in 2003, whereas the rig operated the full year in 2004.
Income Tax Provision
.
Income tax provision decreased $4,837,000 due to lower pretax
earnings and the favorable resolution of income tax audits in 2004, which resulted in a lower
effective tax rate in 2004 than in 2003. Excluding the impact of the favorable resolution of
income tax audits, the effective tax rate was 15 percent in 2004 compared to 11 percent in 2003.
This higher effective tax rate was a result of additional earnings during 2004 from rigs owned by
U.S. subsidiaries which were operating in Mexico, India and the Mediterranean Sea and reduced
earnings from our Brazil and North Sea divisions, which have lower effective tax rates.
24
2003 Compared to 2002
General
Net income for 2003 was $166,416,000, or $1.25 per diluted share, on operating revenues of
$987,380,000, compared to net income of $209,503,000, or $1.57 per diluted share, on operating
revenues of $990,248,000 for 2002.
The following table sets forth operating revenues and operating costs and expenses for each of
our reportable segments (for additional information regarding our reportable segments, see Note 16
of our accompanying consolidated financial statements) for the periods indicated:
25
Rig Utilization, Operating Days and Average Dayrates
The following table sets forth the average rig utilization, operating days and average
dayrates for our rig fleet for 2003 and 2002:
26
International Contract Drilling Services
The following table sets forth the operating revenues and the operating costs and expenses
for our international contract drilling services segment for 2003 and 2002:
Operating Revenues
.
International contract drilling services revenues increased $26,660,000
due to additional operating days for our jackup rigs in Mexico and the Middle East, and a higher
average dayrate in Brazil, partially offset by lower utilization rates on jackup rigs in West
Africa and lower average dayrates in the North Sea. The additional operating days in Mexico, which
resulted in additional international contract drilling services revenues of approximately
$94,000,000, were attributable to the mobilization of seven rigs to Mexico from the U.S. Gulf of
Mexico beginning in September 2002. The increase in operating days in the Middle East provided
additional revenue of approximately $19,000,000 and was attributable primarily to the operations of
the
Noble Roy Rhodes
and
Dhabi II
jackups, which we purchased in December 2002. The average
dayrates on our
Noble Paul Wolff
semisubmersible and three drillships in Brazil increased from 2002
due to the receipt of performance bonuses for reducing operational downtime, which resulted in
higher revenues in this region of approximately $15,000,000. The lower utilization in West Africa
and lower average dayrates in the North Sea impacted revenues by approximately $55,000,000 and
$46,000,000, respectively. Engineering, consulting and other revenues decreased $472,000 due to a
special safety incentive bonus earned in West Africa during 2002.
Operating Costs and Expenses.
International contract drilling services expenses increased
$54,199,000 due to the additional operating days in Mexico and the Middle East, and labor
increases in all regions. In addition, these expenses increased due to stacked costs on two
jackups we acquired in the Middle East during 2003, and the costs to mobilize one jackup rig to
the Middle East from Brazil and one jackup rig to the Mediterranean Sea from the U.S. Gulf of
Mexico. These increases were partially offset by lower insurance costs. Of these factors, the
additional operating days in Mexico had the largest impact on our international contract drilling
expenses, representing an increase of approximately $38,000,000. We did not reduce our operating
expenses in West Africa significantly during 2003 even though we experienced fewer operating days
there, because we maintained a standard crew size on stacked units in order to perform repairs,
maintenance, and asset preservation work. Depreciation expense increased $26,781,000 due to the
mobilization of seven rigs to Mexico from the U.S. Gulf of Mexico beginning in September 2002, the
acquisition of the
Dhabi II
and
Noble Roy Rhodes
jackup rigs in December 2002 and the acquisition
of the
Noble Gene House
and
Noble Charlie Yester
jackups in July 2003 and September 2003,
respectively. See the discussion below under Other Items regarding selling, general and
administrative expenses.
27
Domestic Contract Drilling Services
The following table sets forth the operating revenues and direct operating expenses for our
domestic contract drilling services segment for 2003 and 2002:
Operating Revenues
.
Domestic contract drilling services revenues decreased $47,476,000 due to
fewer operating days on our domestic jackup rigs following the mobilization of seven rigs from the
U.S. Gulf of Mexico to Mexico beginning in September 2002. The fewer operating days on our
domestic jackups resulted in a reduction in our domestic contracting drilling services revenues of
approximately $47,000,000. The mobilization of these jackup rigs was pursuant to our long-standing
business strategy of deploying our assets in important geological regions as described earlier.
Operating days on the
Noble Lorris Bouzigard
, which was activated in March 2003, and higher
utilization on our submersibles were offset by lower utilization on our deepwater semisubmersibles.
Engineering, consulting and other revenues increased $5,308,000 due to additional revenue from
interests in deepwater oil and gas properties, which began producing during the latter part of
2002, and revenue earned by the
Noble Homer Ferrington
semisubmersible while the unit was not
operating, pursuant to its long-term contract.
Operating Costs and Expenses
.
Domestic contract drilling services expenses decreased
$37,790,000 due to the fewer operating days on our domestic jackup rigs, while lower insurance
costs, due to no hull and machinery claims incurred during 2003, offset additional operating
expenses attributable to the activation of the
Noble Lorris Bouzigard
and
Noble Therald Martin
semisubmersibles. Engineering, consulting and other expenses increased $1,782,000 due to
additional operating expenses related to our interests in deepwater oil and gas properties.
Depreciation expense decreased $4,301,000 due to the mobilization of seven rigs from the U.S. Gulf
of Mexico to Mexico beginning in September 2002, partially offset by the activation of the
Noble
Lorris Bouzigard
and
Noble Therald Martin
semisubmersibles in March 2003 and November 2003,
respectively, following each units upgrade. The mobilization of jackup rigs out of the U.S. Gulf
of Mexico reduced domestic depreciation expense by approximately $8,000,000, whereas the
activation of the two semisubmersibles increased depreciation expense by approximately $4,000,000.
See the discussion below under Other Items regarding selling, general and administrative
expenses.
28
Engineering & Consulting Services
The following table sets forth the operating revenues and the operating costs and expenses
for our engineering and consulting services segment for 2003 and 2002:
Operating Revenues
.
Excluding reimbursables, operating revenues for our engineering and
consulting services segment decreased $4,911,000 due to fewer joint industry research projects
undertaken by our Noble Drilling Technology Division, partially offset by additional project
management engagements.
Operating Costs and Expenses
.
Excluding reimbursables, operating costs and expenses for our
engineering and consulting services segment increased $1,262,000 due to additional costs related
to the testing and development of our Well Director
TM
automatic rotary steerable
drilling system, additional project management engagements and higher depreciation and
administrative expenses. These increases were partially offset by fewer joint industry research
projects undertaken and reduced costs on certain drilling optimization software projects.
Other
The following table sets forth the operating revenues and the operating costs and expenses
for our other services for 2003 and 2002:
Operating Revenues
.
Labor contract drilling services revenues increased $2,076,000 as a
result of foreign exchange fluctuation due in large part to our operations in Canada on the
Hibernia project. We are paid for that
29
work in Canadian dollars, and the Canadian dollar was stronger in 2003 as compared to the U.S.
dollar. In addition, contractual provisions covering the Hibernia project allowed for increases in
the labor, maintenance and administrative portions of the dayrate on the Hibernia project during
2003. These increases were partially offset by lower utilization on two of our North Sea labor
contracts. The lower engineering, consulting and other revenues of $2,084,000 were attributable to
reduced activity on an engineering services engagement in the North Sea.
Operating Costs and Expenses
.
Excluding reimbursables, operating costs and expenses for other
services decreased $155,000 as higher labor contract drilling services expenses were mostly offset
by lower engineering, consulting and other expenses. The higher labor contract drilling services
expenses of $1,691,000 were due to the stronger Canadian dollar and higher labor, maintenance and
administrative costs related to our Hibernia project in Canada, partially offset by lower
utilization on two of our North Sea labor contracts. The lower engineering, consulting and other
expenses of $2,042,000 were attributable to reduced activity on an engineering services engagement
in the North Sea.
Other Items
Selling, General and Administrative Expenses
.
Selling, general and administrative expenses
decreased $305,000 due to nonrecurring professional fees and filing fees of approximately
$3,500,000 incurred during the first half of 2002 related to our corporate restructuring. This
decrease was mostly offset by unrealized gains in 2002 on the assets in the Rabbi Trust for the
Noble Drilling Corporation 401(k) Savings Restoration Plan, which increased the related liability
for the plan in 2003, and higher pension expense in 2003 due to a lower discount rate and assumed
long-term rate of return on plan assets for 2003.
Gain on Sale of Property and Equipment.
Gain on sale of property and equipment decreased by
$2,436,000 due to a gain in 2002 of $5,908,000 on the sale of our interest in one of our deepwater
oil and gas properties to Pioneer Natural Resources USA, Inc. for $6,200,000 in cash and the
assumption of liabilities related to our share of drilling and development costs on this property.
In 2003, we sold our interest in another deepwater oil and gas property to ENI Petroleum for
$5,200,000 in cash. We realized a gain of $3,472,000 upon the sale of our interest in this
property.
Interest Expense
.
Interest expense decreased $2,331,000 due to the continued retirement of
higher interest rate debt in 2003. We made payments of long-term debt totaling $80,580,000 in
2003.
Other, net.
Other, net increased $3,747,000 as 2002 included a realized loss of $9,758,000
on an investment in marketable equity securities resulting from a decline in value considered by
management to be other than temporary. The 2002 loss was partially offset by additional interest
income earned on our cash and marketable securities and equity in income of joint ventures in 2002
as compared to 2003. In 2003, interest income on our cash and marketable securities decreased
$2,007,000 due to a lower average balance of these investments and a 30 percent decrease in their
average yield.
Income Tax Provision.
Income tax provision decreased $13,254,000 due to lower pre-tax
earnings and a lower effective tax rate. The effective tax rate was 11 percent in 2003 compared to
14 percent in 2002. The lower effective tax rate in 2003 was a result of our corporate
restructuring in April 2002 and a higher percentage of our pretax earnings being derived from our
international operations, which generally have lower effective tax rates than our domestic
operations
.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal capital resource in 2004 was net cash provided by operating activities of
$332,221,000, which compared to $365,308,000 and $445,364,000 in 2003 and 2002, respectively. At
December 31, 2004, we had cash and cash equivalents of $58,790,000, marketable debt securities
totaling $132,788,000, and approximately $184,279,000 of funds available under our bank credit
facility. We had working capital, including cash, of $211,117,000 and $177,936,000 at December 31,
2004 and 2003, respectively. Total debt as a percentage of total debt plus shareholders equity
was 18 percent at December 31, 2004 and 21 percent at December 31, 2003.
30
During 2004, we repurchased 1,087,000 of our ordinary shares at an average price of $36.54 per
ordinary share for a total cost of $39,714,000. We did not repurchase any of our ordinary shares
during 2003. During 2002, we repurchased 1,055,000 of our ordinary shares at an average price of
$32.20 per ordinary share for a total cost of $33,966,000. Additional repurchases, if any, may be
made on the open market or in private transactions at prices determined by us.
We did not sell any put options covering our ordinary shares during 2004 or 2003. During
2002, we sold put options covering an aggregate of 1,300,000 of our ordinary shares in private
transactions at an average price paid to us of $2.81 per option. Of the 1,300,000 options sold
during 2002, 300,000 expired unexercised and 400,000 were exercised during 2002, which resulted in
600,000 options outstanding at December 31, 2002. All of these options expired unexercised in the
first quarter of 2003. At December 31, 2004 and 2003, we had no purchase requirements with regard
to any put options previously sold by us.
These share repurchases and sales of put options were effected pursuant to the share
repurchase program which our board of directors authorized and adopted and which we announced on
January 31, 2002. The program authorization covers an aggregate of 15,000,000 ordinary shares. As
of March 3, 2005, 9,162,000 shares remained available under this authorization.
In 2004, we made total fundings of $1,389,000 to our domestic and international pension
plans. We made total fundings of $22,155,000 to our domestic and international pension plans in
2003, including a discretionary funding of $17,100,000. This discretionary funding did not have a
material impact on our 2003 selling, general and administrative expenses, but it reduced our
unfunded pension liability. During 2002, we made fundings totaling $5,327,000 to our pension
plans. We expect fundings in 2005 to approximate $1,500,000.
Capital Expenditures
Capital expenditures totaled $261,041,000 and $307,134,000 for 2004 and 2003, respectively.
Capital expenditures for 2004 included the acquisition of the
Noble Mark Burns
(formerly
Okhi),
a
Levingston 111-S designed independent leg jackup unit, for $29,500,000, and the exercise prices of
options to purchase the
Noble Cees van Diemen
(formerly
Maersk Viking)
and the
Noble David Tinsley
(formerly
Maersk Valiant)
premium jackup rigs for $32,900,000 and $28,400,000, respectively.
Capital expenditures during 2003 included capital upgrades to certain semisubmersibles of
$108,100,000, the exercise prices of options to purchase the
Noble Gene House
(formerly
Trident
19
) and
Noble Charlie Yester
(formerly
Trident 18
) jackup rigs for $25,200,000 and $32,900,000,
respectively, and the acquisition of options for $28,200,000 to purchase the
Noble Cees van Diemen
and
Noble David Tinsley
. In addition, deferred repair and maintenance expenditures totaled
$72,948,000 and $36,984,000 for 2004 and 2003, respectively. We expect that our capital
expenditures and deferred repair and maintenance expenditures for 2005 will aggregate
approximately $300,000,000 and $85,000,000, respectively, which includes approximately
$100,000,000 for 2005 for the upgrade of the
Noble Clyde Boudreaux
semisubmersible in preparation
for its commitment for a long-term contract with Shell Exploration & Production Company estimated
to begin in the third quarter of 2006. We estimate our capital expenditures for 2006 to complete
the upgrade of the
Noble Clyde Boudreaux
to approximate $50,000,000. We had no joint venture
fundings in 2004 and anticipate none in 2005. For more information on acquisitions, see Note 3 of
our accompanying consolidated financial statements. For information on deferred repair and
maintenance expenditures and joint venture fundings, see Notes 1 and 6 of our accompanying
consolidated financial statements.
The
Noble Mark Burns
was recently mobilized from China to the Middle East, where additional
upgrade work will include leg extension to 300 feet water depth capability, a 65 foot cantilever,
a third mud pump, and quarters expansion for 160 personnel. We estimate the costs of this upgrade will approximate
$30,000,000.
In connection with several projects, we have entered into agreements with various vendors to
purchase or construct property and equipment that generally have long lead times for delivery. Any
equipment purchased for a project on which we do not proceed would be used, where applicable, as
capital spares for other units in our fleet. As of December 31, 2004, we had approximately
$32,000,000 of outstanding purchase commitments related to these projects, which are included in
the projected 2005 capital expenditure and deferred repair and maintenance amounts above.
31
Certain projects currently under consideration could require, if they materialize, capital
expenditures or other cash requirements not included in the 2005 budget. In addition, we will
continue to evaluate acquisitions of drilling units from time to time. Factors that could cause
actual project capital expenditures to materially exceed the planned capital expenditures include
delays and cost overruns in shipyards, shortages of equipment, latent damage or deterioration to
hull, equipment and machinery in excess of engineering estimates and assumptions, and changes in
design criteria or specifications during repair or construction.
Credit Facilities and Long-Term Debt
Noble Drilling has in place a $300,000,000 bank credit agreement (the Credit Agreement),
which extends through November 30, 2009. In November 2004, we amended the Credit Agreement to
increase the total commitment to $300,000,000 from $200,000,000 and extend the maturity date to
November 30, 2009 from May 30, 2006. In connection with our corporate restructuring in 2002, Noble
Corporation (Noble) and its wholly-owned subsidiary, Noble Holding (U.S.) Corporation, have
unconditionally guaranteed the performance of Noble Drilling under the Credit Agreement. As of
December 31, 2004, we had outstanding borrowings and outstanding letters of credit of $100,000,000
and $15,721,000, respectively, under the Credit Agreement, with $184,279,000 remaining available
thereunder. Additionally, as of December 31, 2004, we had other letters of credit and third-party
guarantees of $35,916,000 and performance and customs bonds totaling $46,949,000 supported by
surety bonds.
At December 31, 2004, our debt had decreased to $511,649,000, including current maturities of
$8,361,000, due to debt repayments during 2004 of $77,933,000, including the repayment of
$25,000,000 of borrowings on our credit facility. At December 31, 2004 and 2003, we had no
off-balance sheet debt. For additional information on long-term debt, see Note 7 to our
accompanying consolidated financial statements.
We believe that our cash and cash equivalents, marketable securities, net cash provided by operating activities,
available borrowings under lines of credit, and access to other financing sources will be adequate
to meet our anticipated short-term and long-term liquidity requirements, including capital
expenditures and scheduled debt repayments.
Summary of Contractual Cash Obligations and Commitments
The following table summarizes our contractual cash obligations and commitments at December
31, 2004 (dollar amounts are in thousands):
32
CORPORATE RESTRUCTURING
On April 30, 2002, Noble became the successor to Noble Drilling as part of the internal
corporate restructuring of Noble Drilling and its subsidiaries approved by stockholders of Noble
Drilling. The restructuring was accomplished through the merger of an indirect, wholly-owned
subsidiary of Noble Drilling into Noble Drilling. Noble Drilling was the surviving entity in the
merger and is now an indirect, wholly-owned subsidiary of Noble. In addition, as a result of the
merger, all of the outstanding shares of common stock (and the related preferred stock purchase
rights) of Noble Drilling were exchanged for ordinary shares (and related preferred share purchase
rights) of Noble. We accounted for the restructuring as a reorganization of entities under common
control. Consequently, the consolidated amounts of assets, liabilities and shareholders equity
did not change as a result of the restructuring.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are impacted by the accounting policies used and the
estimates and assumptions made by management during their preparation. Critical accounting
policies and estimates that most significantly impact our consolidated financial statements are
those related to our property and equipment, impairment of long-lived assets, insurance reserves,
revenue recognition and income taxes.
Property and Equipment
Property and equipment is stated at cost, reduced by provisions to recognize economic
impairment in value whenever events or changes in circumstances indicate an assets carrying value
may not be recoverable. Major replacements and improvements are capitalized. When assets are
sold, retired or otherwise disposed of, the cost and related accumulated depreciation, if
determinable, are eliminated from the accounts and the gain or loss is recognized. Repair and
maintenance costs are generally charged to expense as incurred; however, overhauls related to
large-scale maintenance projects are deferred when incurred and amortized into contract drilling
expense over a 36-month period. Drilling equipment
and facilities are depreciated using the straight-line method over the estimated useful lives as of
the in-service date or date of major refurbishment. Estimated useful lives of our drilling
equipment range from three to twenty-five years. Other property and equipment is depreciated using
the straight-line method over useful lives ranging from two to twenty years.
Impairment of Long-lived Assets
We evaluate the realization of our long-lived assets, including property and equipment and
goodwill, whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. We evaluate goodwill on at least an annual basis. An impairment loss on
our property and equipment exists when estimated undiscounted cash flows expected to result from
the use of the asset and its eventual disposition are less than its carrying amount. Any
impairment loss recognized represents the excess of the assets carrying value as compared to its
estimated fair value. Prior to an impairment loss being recognized, an independent appraisal would
be performed to determine the assets estimated fair value. An impairment loss on our goodwill
exists when the carrying amount of the goodwill exceeds its implied fair value, as determined
pursuant to Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other
Intangible Assets
. No impairment losses were recorded on our property and equipment or goodwill
balances during the years ended December 31, 2004, 2003 and 2002.
However, on March 31, 2002, we recognized an impairment loss of $9,758,000 on an investment in
equity securities resulting from a decline in value considered by management to be other than
temporary. There were no other impairment losses during the years ended December 31, 2004, 2003
and 2002.
Insurance Reserves
We maintain insurance coverage against certain marine liabilities, including liability for
physical damage to our drilling rigs and personal injury to our drilling crews. Our marine package
policy insures us for physical damage to our drilling rigs up to the fair value of each rig.
During 2004, we retained the first $10,000,000 per occurrence under this policy. Our protection
and indemnity policy insures us for personal injury to our drilling
33
crews. Since February 2004, our protection and indemnity policy has had a standard deductible
of $1,000,000 per occurrence and we retain $5,000,000 of claims in the aggregate beyond the
standard deductible. From January 2002 through January 2004, we had a standard deductible of
$100,000 per occurrence and we retained $7,250,000 of claims in the aggregate beyond the standard
deductible. We accrue for these deductibles during the year and the insurance retention reserve is
adjusted based on our actual claims losses during the year.
Revenue Recognition
Revenues generated from our dayrate-basis drilling contracts, labor contracts, and engineering
services and project management engagements are recognized as services are performed. We may
receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees received
and costs incurred to mobilize an offshore rig from one market to another are recognized over the
term of the related drilling contract. Costs incurred to relocate drilling units to more promising
geographic areas in which a contract has not been secured are expensed as incurred. Lump-sum
payments received from customers relating to specific contracts are deferred and amortized to
income over the term of the drilling contract. We record reimbursements from customers for
out-of-pocket expenses as revenues and the related cost as direct operating expenses.
Income Taxes
Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which operations are conducted, or in which Noble and/or its subsidiaries are
considered resident for income tax purposes. Applicable U.S. and foreign income and withholding
taxes have not been provided on undistributed earnings of Nobles subsidiaries. We do not intend
to repatriate such undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material. In certain circumstances, we
expect that, due to changing demands of the offshore drilling markets and the ability to redeploy
our offshore drilling units, certain of such units will not reside in a location long enough to
give rise to future tax consequences. As a result, no deferred tax liability has been recognized
in these circumstances. Should our expectations change regarding the length of time an offshore
drilling unit will be used in a given location, we will adjust deferred taxes accordingly. Our
recognition of a deferred tax liability in these circumstances would not have had a material effect
on our results of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity
or our cash flows.
For additional information on our accounting policies, see Note 1 to our accompanying
consolidated financial statements.
ACCOUNTING PRONOUNCEMENTS
In December 2004, the FASB issued SFAS 123 (revised 2004),
Share-Based Payment
(SFAS 123
(revised 2004)). SFAS 123 (revised 2004) is a revision to SFAS No. 123,
Accounting for Stock-Based
Compensation
(SFAS 123), and supercedes APB Opinion No. 25,
Accounting for Stock Issued to
Employees
(APB 25)
.
SFAS 123 (revised 2004) establishes standards for accounting for exchanges of
an entitys equity instruments for goods or services, focusing primarily on transactions in which
an entity obtains employee services in share-based payment transactions. The statement requires
that entities measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award and that the cost is recognized over
the period in which the employee services are performed, which is usually the equity instruments
vesting period. SFAS 123 (revised 2004) eliminates the alternative allowed under SFAS 123 in which
equity instruments could be measured at their intrinsic value, as prescribed by APB Opinion 25,
with only pro forma disclosure in the entitys notes to its financial statements of the impact on
net income and earnings per share had the equity instruments been measured at fair value. SFAS 123
(revised 2004) is effective for public entities that do not file as small business issuers as of
the beginning of the first interim or annual reporting period that begins after June 15, 2005. The
impact that the adoption of SFAS 123 (revised 2004) will have on our consolidated results of
operations will be determined primarily by the number of stock options issued to employees in
future periods. Based on recent stock option issuances, we estimate that the adoption of this
statement will reduce annual net income by approximately $3,000,000 to $5,000,000, or $.02 to $.04
per diluted share. We do not expect the adoption of SFAS 123 (revised 2004) to have a material
impact on our consolidated cash flows or financial position.
34
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the potential for loss due to a change in the value of a financial instrument
as a result of fluctuations in interest rates, currency exchange rates or equity prices. We own
investments in both marketable equity and debt securities. To mitigate the risk of losses, these
investments are marked to market and are monitored by management to assure compliance with policies
established by the Company. Under the Noble Drilling Corporation 401(k) Savings Restoration Plan,
certain highly compensated employees may elect to defer compensation into the plan and invest among
several alternatives, primarily mutual funds. Any change in the fair value of these investments
would result in a comparable change in the deferred compensation plan obligation.
We are subject to market risk exposure related to changes in interest rates on our Credit
Agreement. Interest on our Credit Agreement is at an agreed upon percentage point spread from
LIBOR. At December 31, 2004, there were $100,000,000 of outstanding borrowings under our Credit
Agreement. An immediate change of one percent in the interest rate would cause a $1,000,000 change
in interest expense on an annual basis.
Although we conduct business internationally, a substantial majority of the value of our
foreign transactions are denominated in U.S. Dollars. With minor exceptions, we structure our
drilling contracts in U.S. Dollars to mitigate our exposure to fluctuations in foreign currencies.
Other than trade accounts receivable and trade accounts payable, which mostly offset each other, we
do not currently have any significant assets, liability or financial instruments that are sensitive
to foreign currency exchange rates.
We periodically enter into derivative instruments to manage our exposure to fluctuations in
interest rates and foreign currency exchange rates, and we may conduct hedging activities in future
periods to mitigate such exposure. Our North Sea operations have a significant amount of their
cash operating expenses payable in either the Euro or British Pound. To reduce our exposure to
fluctuations in these currencies during 2004, we entered into forward contracts in March and April
2004 to purchase 1,400,000 Euros and 1,200,000 British Pounds, respectively, per month for the
months April 2004 through December 2004. These forward contracts represented approximately 50
percent of our forecasted Euro and British Pound requirements for 2004 after the respective dates
on which we entered into the forward contracts. These forward contracts were accounted for as cash
flow hedges under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
, as
amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging
Activities (an amendment of FASB Statement No. 133),
and SFAS No. 149,
Amendment of Statement 133
on Derivative Instruments and Hedging Activities
. Because all of these forward contracts expired
during 2004, there is no cumulative net unrealized gain or loss on these contracts included in
Accumulated other comprehensive income in our Consolidated Balance Sheet at December 31, 2004.
We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of
Income during 2004 related to these forward contracts. We did not utilize any derivative financial
instruments or undertake any hedging activities in 2003 or 2002.
35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are filed in this Item 8:
36
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
We have completed an integrated audit of Noble Corporations 2004 consolidated financial statements
and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003
and 2002 consolidated financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits, are presented
below.
Consolidated financial statements
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, of cash flows, of shareholders equity and of comprehensive income present
fairly, in all material respects, the financial position of Noble Corporation and its subsidiaries
(the Company) at December 31, 2004 and 2003, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of America. These financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit of
financial statements includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, managements assessment, included in the accompanying Managements Annual
Report on Internal Control Over Financial Reporting under Item 9A, that the Company maintained
effective internal control over financial reporting as of December 31, 2004 based on criteria
established in
Internal Control - Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2004, based on
criteria established in
Internal Control - Integrated Framework
issued by the COSO. The
Companys management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express opinions on managements assessment and on the
effectiveness of the Companys internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting in accordance with the standards
of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an understanding of internal control over
financial reporting, evaluating managements assessment, testing and evaluating the design and
operating effectiveness of internal control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
37
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Houston, Texas
38
NOBLE CORPORATION AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
39
NOBLE CORPORATION AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
40
NOBLE CORPORATION AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
41
NOBLE CORPORATION AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
42
NOBLE CORPORATION AND SUBSIDIARIES
See accompanying notes to the consolidated financial statements.
43
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Noble Corporation (Noble or, together with its consolidated subsidiaries, unless the context
requires otherwise, the Company, we, our and words of similar import) is primarily engaged in
contract drilling services in key markets worldwide. We provide technologically advanced
drilling-related products and services designed to create value for all our customers. We also
provide labor contract drilling services, well site and project management services, and
engineering services. Our operations are conducted in the Middle East, U.S. Gulf of Mexico,
Mexico, the North Sea, Brazil, West Africa, India, the Mediterranean Sea and Canada.
Consolidation
The consolidated financial statements include the accounts of Noble and its wholly- and
majority-owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. The equity method of accounting is used for investments in affiliates
where we have a significant influence but not a controlling interest. (See Note 6.)
In connection with the preparation of the 2004 financial statements, we concluded that it was
appropriate to classify our auction rate securities as marketable debt securities and include such
investments in Investments in marketable securities on our Consolidated Balance Sheets.
Previously, such investments had been classified as cash equivalents and included in Cash and cash
equivalents. Accordingly, we have revised the classification in 2003 to report
$76,900,000 of these securities as Investments in
marketable securities in the Consolidated Balance Sheet at December 31, 2003 and made
corresponding adjustments to the Consolidated Statements of Cash Flows for the years ended December
31, 2003 and 2002 to reflect the beginning of year and end of year balances of cash and cash
equivalents and to reflect the gross purchases and sales of these securities as investing
activities rather than as a component of cash and cash equivalents. For the years ended December
31, 2003 and 2002, net cash provided by (used for) investing activities related to these current
investments of $52,800,000 and $(1,200,000), respectively, was previously included in cash and cash
equivalents in our Consolidated Statements of Cash Flows. This revision in classification does not
affect previously reported net cash provided by operating activities or net cash (used for)
provided by financing activities, or our previously reported Consolidated Statements of Income for
any period.
Certain other reclassifications have been made in prior year consolidated financial statements
to conform to the classifications used in the 2004 consolidated financial statements. These
reclassifications have no impact on net income.
Foreign Currency Translation
We follow a translation policy in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52,
Foreign Currency Translation
. In international locations where the U.S. Dollar
has been designated as the functional currency (based on an evaluation of such factors as the
markets in which the subsidiary operates, inflation, generation of cash flow, financing activities
and intercompany arrangements), local currency transaction gains and losses are included in net
income. In international locations where the local currency is the functional currency, assets and
liabilities are translated at the rates of exchange on the balance sheet date, while income and
expense items are translated at average rates of exchange. The resulting gains or losses arising
from the translation of accounts from the functional currency to the U.S. Dollar are included in
Accumulated other comprehensive income in the Consolidated Balance Sheets. We did not recognize
any material gains or losses on foreign currency transactions or translations during the years
ended December 31, 2004, 2003 and 2002. We use the Canadian Dollar and British Pound, respectively,
as the functional currency for our labor contract drilling services in Canada and the North Sea.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits with banks and all highly
liquid investments with original maturities of three months or less. Our cash, cash equivalents
and short-term investments
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
44
NOBLE CORPORATION AND SUBSIDIARIES
are subject to potential credit risk. Our cash management and investment policies restrict
investments to lower risk, highly liquid securities and we perform periodic evaluations of the
relative credit standing of the financial institutions with which we conduct business.
In accordance with SFAS No. 95,
Statement of Cash Flows
, cash flows from our labor contract
drilling services in Canada and the United Kingdom are calculated based on their respective local
functional currencies. As a result, amounts related to assets and liabilities reported on the
Consolidated Statements of Cash Flows will not necessarily agree with changes in the corresponding
balances on the Consolidated Balance Sheets. The effect of exchange rate changes on cash balances
held in foreign currencies was not material in 2004, 2003 or 2002.
Investments in Marketable Securities
Our investments in marketable debt securities included auction rate securities of $41,400,000
and $76,900,000 at December 31, 2004 and 2003, respectively. These auction rate securities are recorded at
cost, which approximates fair value due to their variable interest rates, which interest rates reset
within a period of less than 60 days. Although these securities have long-term stated contractual maturities, we
have the ability to quickly liquidate these securities. As a result, we classify these securities
as current investments. Because these securities are recorded at cost, which approximates fair
value, we had no realized or unrealized gains or losses related to these securities during the
years ended December 31, 2004, 2003 and 2002. All income related to these current investments was
recorded as interest income.
Derivative Instruments and Hedging Activities
We periodically enter into derivative instruments to manage our exposure to fluctuations in
interest rates and foreign currency exchange rates. We do not use derivative financial instruments
for trading purposes. We designate and assign the financial instruments as hedges of specific
assets, liabilities or anticipated transactions. Cash flows from hedge transactions are classified
in the Consolidated Statements of Cash Flows under the same category as the cash flows from the
underlying assets, liabilities or anticipated transactions.
Our North Sea operations have a significant amount of their cash operating expenses payable in
either the Euro or British Pound. To reduce our exposure to fluctuations in these currencies
during 2004, we entered into forward contracts in March and April 2004 to purchase 1,400,000 Euros
and 1,200,000 British Pounds, respectively, per month for the months April 2004 through December
2004. These forward contracts represented approximately 50 percent of our forecasted Euro and
British Pound requirements for 2004 after the respective dates on which we entered into the forward
contracts. These forward contracts were accounted for as cash flow hedges under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities
, as amended by SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities (an amendment of FASB
Statement No. 133),
and SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities
. Because all of these forward contracts expired during 2004, there is no
cumulative net unrealized gain or loss on these contracts included in Accumulated other
comprehensive income in our Consolidated Balance Sheet at December 31, 2004. We did not recognize
a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during 2004
related to these forward contracts. We did not utilize any derivative financial instruments or
undertake any hedging activities in 2003 or 2002.
Inventories
Inventories consist of spare parts, material and supplies held for consumption and are stated
principally at the lower of average cost or fair value.
Property and Equipment
Property and equipment is stated at cost, reduced by provisions to recognize economic
impairment in value whenever events or changes in circumstances indicate an assets carrying value
may not be recoverable. At December 31, 2004 and 2003, there was $469,623,000 and $361,663,000,
respectively, of construction in progress. Such amounts are included in Drilling equipment and
facilities in the accompanying Consolidated Balance Sheets. Major replacements and improvements
are capitalized. When assets are sold, retired or otherwise disposed of, the
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
45
NOBLE CORPORATION AND SUBSIDIARIES
cost and related accumulated depreciation, if determinable, are eliminated from the accounts
and the gain or loss is recognized.
Scheduled maintenance of equipment and overhauls are performed on the basis of number of hours
operated in accordance with our preventative maintenance program. Repair and maintenance costs are
generally charged to expense as incurred; however, overhauls related to large-scale maintenance
projects are deferred when incurred and amortized into contract drilling services expense over a
36-month period. The deferred portion of these large-scale maintenance projects is included in
Other assets in the Consolidated Balance Sheets. Such amounts totaled $88,621,000 and
$56,575,000 at December 31, 2004 and 2003, respectively. Total maintenance and repair expenses for
the years ended December 31, 2004, 2003 and 2002 were $154,018,000, $122,105,000 and $110,788,000,
respectively. Drilling equipment and facilities are depreciated using the straight-line method
over the estimated remaining useful lives as of the in-service date or date of major refurbishment.
Estimated useful lives of our drilling equipment range from three to twenty-five years. Other
property and equipment is depreciated using the straight-line method over useful lives ranging from
two to twenty years.
We evaluate the realization of property and equipment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment
loss on our property and equipment exists when estimated undiscounted cash flows expected to result
from the use of the asset and its eventual disposition are less than its carrying amount. Any
impairment loss recognized represents the excess of the assets carrying value as compared to its
estimated fair value. Prior to an impairment loss being recognized, an independent appraisal would
be performed to determine the assets estimated fair value. No material impairment losses were
recorded on our property and equipment balances during the years ended December 31, 2004, 2003 and
2002.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
46
NOBLE CORPORATION AND SUBSIDIARIES
Goodwill and Other Assets
We evaluate the realization of our goodwill on at least an annual basis, and on our remaining
long-lived assets whenever events or changes in circumstances indicate the carrying amount of an
asset may not be recoverable. An impairment loss on our goodwill exists when the carrying amount
of the goodwill exceeds its implied fair value, as determined pursuant to SFAS No. 142,
Goodwill
and Other Intangible Assets
. Our goodwill balance was $14,638,000 and $13,138,000 at December 31,
2004 and 2003, respectively. All of our goodwill is attributable to our engineering and consulting
services segment. The increase in goodwill during 2004 of $1,500,000 was attributable to an
earn-out payment for certain operating performance milestones achieved by the Well Director
drilling tools, which we acquired in 2002. See Note 3 to our accompanying consolidated financial
statements for additional information. No impairment losses were recorded on our goodwill balances
during the years ended December 31, 2004, 2003 and 2002.
On March 31, 2002 we recognized an impairment loss of $9,758,000 on an investment in
marketable securities resulting from a decline in value considered by management to be other than
temporary. There were no other impairment losses during the years ended December 31, 2004, 2003
and 2002.
Deferred debt issuance costs, which totaled $2,194,000 and $2,839,000 at December 31, 2004 and
2003, respectively, are being amortized over the life of the debt securities. Amortization related
to debt issuance costs was $645,000, $1,016,000 and $1,664,000 for the years ended December 31,
2004, 2003 and 2002, respectively. Debt issuance costs are amortized using the straight-line
method, which approximates the interest method. The amortization of debt issuance costs is
included in interest expense.
Insurance
We maintain insurance coverage against certain marine liabilities, including liability for
physical damage to our drilling rigs and personal injury to our drilling crews. Our marine package
policy insures us for physical damage to our drilling rigs up to the fair value of each rig.
During 2004 and 2003, we retained the first $10,000,000 per occurrence under this policy. In 2002,
we retained the first $1,000,000 per occurrence and continued to retain a portion of each loss in
excess of $1,000,000 to a maximum of $10,000,000. Our protection and indemnity policy insures us
for personal injury to our drilling crews. Since February 2004, our protection and indemnity
policy has had a standard deductible of $1,000,000 per occurrence and we retain $5,000,000 of
claims in the aggregate beyond the standard deductible. From January 2002 through January 2004, we
had a standard deductible of $100,000 per occurrence and we retained $7,250,000 of claims in the
aggregate beyond the standard deductible. We accrue for these deductibles during the year and the
insurance retention reserve is adjusted based on our actual claims losses during the year. Prepaid
insurance is amortized over the terms of our insurance policies.
Revenue Recognition
Revenues generated from our dayrate-basis drilling contracts, labor contracts, technologically
advanced drilling-related products, engineering services and project management engagements are
recognized as services are performed.
We may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization
fees received and costs incurred to mobilize an offshore rig from one market to another are
recognized over the term of the related drilling contract. Costs incurred to relocate drilling
units to more promising geographic areas in which a contract has not been secured are expensed as
incurred. Lump-sum payments received from customers relating to specific contracts are deferred
and amortized to income over the term of the drilling contract.
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related cost as direct operating expenses.
Income Taxes
Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
47
NOBLE CORPORATION AND SUBSIDIARIES
operations are conducted, or in which Noble and/or its subsidiaries are considered resident
for income tax purposes. Applicable U.S. and foreign income and withholding taxes have not been
provided on undistributed earnings of Nobles subsidiaries. We do not intend to repatriate such
undistributed earnings for the foreseeable future except for distributions upon which incremental
income and withholding taxes would not be material. In certain circumstances, we expect that, due
to changing demands of the offshore drilling markets and the ability to redeploy our offshore
drilling units, certain of such units will not reside in a location long enough to give rise to
future tax consequences. As a result, no deferred tax liability has been recognized in these
circumstances. Should our expectations change regarding the length of time an offshore drilling
unit will be used in a given location, we will adjust deferred taxes accordingly. Our recognition
of a deferred tax liability in these circumstances would not have had a material effect on our
results of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity or our
cash flows.
Concentration of Credit Risk
The market for our services is the offshore oil and gas industry, and our customers consist
primarily of government-owned oil companies, major integrated oil companies and independent oil and
gas producers. We perform ongoing credit evaluations of our customers and generally do not require
material collateral. We maintain reserves for potential credit losses when necessary. Our results
of operations and financial condition should be considered in light of the fluctuations in demand
experienced by drilling contractors as changes in oil and gas producers expenditures and budgets
occur. These fluctuations can impact our results of operations and financial condition as supply
and demand factors directly affect utilization and dayrates, which are the primary determinants of
our net cash provided by operating activities.
In 2004, one customer accounted for $150,017,000 or 14 percent of consolidated operating
revenues, of which all was included in our international contract drilling services segment.
Another customer accounted for $105,405,000 or 10 percent of consolidated operating revenues, of
which all was also included in our international contract drilling services segment. No other
customer accounted for more than 10 percent of consolidated operating revenues in 2004. In 2003,
one customer accounted for $138,254,000 or 14 percent of consolidated operating revenues, of which
all was included in our international contract drilling services segment. Another customer
accounted for $129,473,000 or 13 percent of consolidated operating revenues, of which all was
included in our international contract drilling services segment. No other customer accounted for
more than 10 percent of consolidated operating revenues in 2003. In 2002, one customer accounted
for $149,258,000 or 15 percent of consolidated operating revenues, of which $97,431,000 was
included in our domestic contract drilling services segment, $51,064,000 was included in our
international contract drilling services segment and $763,000 was included in our engineering and
consulting services segment. Another customer accounted for $123,251,000 or 12 percent of
consolidated operating revenues, of which all was included in our international contract drilling
services segment. No other customer accounted for more than 10 percent of consolidated operating
revenues in 2002.
Net Income Per Share
We compute and present earnings per share in accordance with SFAS No. 128,
Earnings Per Share.
Net income per share has been computed on the basis of the weighted average number of ordinary
shares and, where dilutive, ordinary share equivalents outstanding during the indicated periods.
The following table summarizes the basic and diluted earnings per share computations for net
income for the years ended December 31, 2004, 2003 and 2002:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
48
NOBLE CORPORATION AND SUBSIDIARIES
Included in diluted shares are ordinary share equivalents relating primarily to outstanding
stock options covering 1,218,000, 1,059,000 and 1,248,000 shares for the years ended December 31,
2004, 2003 and 2002, respectively. The computation of diluted earnings per share for 2004, 2003
and 2002 did not include options to purchase 100,000, 1,804,000 and 1,913,432 ordinary shares,
respectively, because the options exercise prices were greater than the average market price of
the ordinary shares.
Supplemental Cash Flow Information
Stock-Based Compensation Plans
We have several stock-based compensation plans, which are described below. As permitted by
SFAS No. 123,
Accounting for Stock-Based Compensation
(SFAS 123), and as amended by SFAS No. 148,
Accounting for Stock-Based Compensation Transition and Disclosure
(SFAS 148), we have chosen to
continue using the intrinsic value method of accounting for stock-based compensation awards in
accordance with APB Opinion 25. No compensation expense was recognized in 2004, 2003 and 2002
related to stock option awards. For U.S. federal income tax purposes, we realized a reduction in
income taxes related to the exercises of employee stock options of $11,840,000, $820,000 and
$4,664,000 in the years ended December 31, 2004, 2003 and 2002, respectively.
SFAS 123 was revised in December 2004 and the intrinsic method of valuing stock-based
compensation awards will no longer be allowed effective with the first interim or annual reporting
period that begins after June 15, 2005. See the Accounting Pronouncements section of this Note 1
for additional information related to the revision of SFAS 123.
1991 Stock Option and Restricted Stock Plan
Our 1991 Stock Option and Restricted Stock Plan, as amended (the 1991 Plan), provides for
the granting of options to purchase our ordinary shares, with or without stock appreciation rights,
and the awarding of restricted shares to selected employees. At December 31, 2004, 3,964,803
shares were available for grant or award under the 1991 Plan. In general, all options granted
under the 1991 Plan have a term of 10 years, an exercise price equal to the fair market value of an
ordinary share on the date of grant and vest one-third annually, commencing one year after the
grant date.
1992 Nonqualified Stock Option Plan
Our 1992 Nonqualified Stock Option Plan for Non-Employee Directors (the 1992 Plan) provides
for the granting of nonqualified stock options to non-employee directors of Noble. At December 31,
2004, 234,500 shares were available for grant under the 1992 Plan. We grant options at fair market
value on the grant date. The options are exercisable from time to time over a period commencing
one year from the grant date and ending on the expiration of 10 years from the grant date, unless
terminated sooner as described in the 1992 Plan.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
49
NOBLE CORPORATION AND SUBSIDIARIES
A summary of the status of our stock options under both the 1991 Plan and 1992 Plan as of
December 31, 2004, 2003 and 2002 and the changes during the year ended on those dates is presented
below (actual amounts):
The following table summarizes information about stock options outstanding at December
31, 2004 (actual amounts):
Additional disclosures required by SFAS 123 are as follows:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
50
NOBLE CORPORATION AND SUBSIDIARIES
The following table reflects pro forma net income and earnings per share had we elected to
adopt the fair value approach of SFAS 123:
Other Stock Based Compensation
In January 1998, we awarded selected employees 22,000 restricted (i.e., nonvested) shares that
vested 20 percent per year over a five-year period commencing on the first anniversary date of the
award. In January 1999, we awarded one employee 15,000 restricted shares that vested one-third per
year over a three-year period commencing on the first anniversary date of the award. In February
1999 and October 1999, we awarded selected employees 190,000 restricted shares and 230,000
restricted shares, respectively, that vested 20 percent per year over a five-year period commencing
on the first anniversary date of the award. In September 2000, we awarded one employee 25,000
restricted shares that vest 20 percent per year over a five-year period commencing on the first
anniversary date of the award. In October 2000 and October 2001, we awarded selected employees
227,500 restricted shares and 215,500 restricted shares, respectively, that vest 20 percent per
year over a five-year period commencing on the first anniversary date of the award. No restricted
shares were awarded in 2002 or 2003. In April 2004, we awarded selected employees 95,237
restricted shares that vest one-third per year over a three-year period commencing on the first
anniversary date of the award. In April 2004, we also awarded selected employees performance
restricted shares that have a three-year performance period from the date of award. The actual
number of shares awarded and available for vesting may vary depending on the degree of achievement
of certain specified corporate performance criteria over the three-year performance period. The
number of shares awarded as so determined then vests (subject only to future employment) at the
rate of one-third thereof in April of each succeeding year. The maximum number of shares available
for award is 142,852. Nonvested shares will be forfeited.
A summary of the restricted share awards and the amounts recognized as compensation expense
for the years ended December 31, 2004, 2003 and 2002 is as follows:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
51
NOBLE CORPORATION AND SUBSIDIARIES
Put Options on Ordinary Shares
During 2002, we sold European-style put options covering 1,300,000 of our ordinary shares in
12 separate private transactions (11 transactions of 100,000 put options each and another
transaction of 200,000 put options) at an average price paid to us of $2.81 per option.
European-style options give the holder the right to require us to purchase our ordinary shares
from the holder at their respective exercise prices on their respective expiration dates, whereas
American-style options can be exercised any time up to, and including, the respective exercise
dates. Upon exercise of the options by the holder, we had the option to settle in cash or net
shares of Noble. The strike price under each option represented between 90 and 95 percent of the
spot price of the ordinary shares at the date of the transaction. Of the 1,300,000 options sold
during 2002, 300,000 expired unexercised and 400,000 were exercised during 2002, which resulted in
600,000 options outstanding at December 31, 2002. All of these options expired unexercised in the
first quarter of 2003. At December 31, 2004 and 2003, we had no put options outstanding to
purchase any of our ordinary shares.
Certain Significant Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Accounting Pronouncements
In December 2004, the FASB issued SFAS 123 (revised 2004),
Share-Based Payment
(SFAS 123 (revised
2004)). SFAS 123 (revised 2004) is a revision to SFAS No. 123,
Accounting for Stock-Based
Compensation
(SFAS 123), and supercedes APB Opinion No. 25,
Accounting for Stock Issued to
Employees
(APB 25)
.
SFAS 123 (revised 2004) establishes standards for accounting for exchanges of
an entitys equity instruments for goods or services, focusing primarily on transactions in which
an entity obtains employee services in share-based payment transactions. The statement requires
that entities measure the cost of employee services received in exchange for an award of equity
instruments based on the grant-date fair value of the award and that the cost is recognized over
the period in which the employee services are performed, which is usually the equity instruments
vesting period. SFAS 123 (revised 2004) eliminates the alternative allowed under SFAS 123 in which
equity instruments could be measured at their intrinsic value, as prescribed by APB Opinion 25,
with only pro forma disclosure in the entitys notes to its financial statements of the impact on
net income and earnings per share had the equity instruments been measured at fair value. SFAS 123
(revised 2004) is effective for public entities that do not file as small business issuers as of
the beginning of the first interim or annual reporting period that begins after June 15, 2005. The
impact that the adoption of SFAS 123 (revised 2004) will have on our consolidated results of
operations will be determined primarily by the number of stock options issued to employees in
future periods. Based on recent stock option issuances, we estimate that the adoption of this
statement will reduce annual net income by approximately $3,000,000 to $5,000,000, or $.02 to $.04
per diluted share. We do not expect the adoption of SFAS 123 (revised 2004) to have a material
impact on our consolidated cash flows or financial position.
NOTE 2 CORPORATE RESTRUCTURING
On April 30, 2002, Noble became the successor to Noble Drilling Corporation, a Delaware
corporation (which we sometimes refer to as Noble Drilling), as part of the internal corporate
restructuring of Noble Drilling and its subsidiaries approved by stockholders of Noble Drilling.
The restructuring was accomplished through the merger of an indirect, wholly-owned subsidiary of
Noble Drilling into Noble Drilling. Noble Drilling was the surviving entity in the merger and is
now an indirect, wholly-owned subsidiary of Noble. In addition, as a result of the merger, all of
the outstanding shares of common stock (and the related preferred stock purchase rights) of Noble
Drilling were exchanged for ordinary shares (and related preferred share purchase rights) of Noble.
We accounted for the restructuring as a reorganization of entities under common control.
Consequently, the consolidated amounts of assets, liabilities and shareholders equity did not
change as a result of the restructuring.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
52
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 3 ACQUISITIONS
In October 2004, we exercised our option to purchase the
Noble David Tinsley
(formerly
Maersk
Valiant
) jackup rig for an exercise price of $28,400,000. In June 2003, we paid an option fee of
$13,200,000 for the right to acquire the unit. Our aggregate purchase price for the rig was
therefore $41,600,000.
In July 2004, we exercised our option to purchase the
Noble Cees van Diemen
(formerly
Maersk
Viking
) jackup rig for an exercise price of $32,900,000. In June 2003, we paid an option fee of
$15,000,000 for the right to acquire the unit. Our aggregate purchase price for the rig was
therefore $47,900,000.
In June 2004, we purchased the
Noble Mark Burns
(formerly
Okhi
) jackup rig for $29,500,000 in
cash.
In September 2003, we exercised our option to purchase the
Noble Charlie Yester
(formerly
Trident 18
) jackup rig from a subsidiary of Schlumberger Limited for an exercise price of
$32,900,000 in cash. In December 2002, we had paid an option fee of $14,100,000 in cash for the
right to acquire the unit. Our aggregate purchase price for the rig was therefore $47,000,000. In
July 2003, we exercised our option to purchase the
Noble Gene House
(formerly
Trident 19
) jackup
rig from this subsidiary of Schlumberger for an exercise price of $25,200,000 in cash. In December
2002, we had paid an option fee of $10,800,000 in cash for the right to acquire the unit. Our
aggregate purchase price for this rig was therefore $36,000,000. In December 2002, we purchased
two jackup rigs, the
Dhabi II
and
Noble Roy Rhodes
(formerly
Trident III
), also from this
subsidiary of Schlumberger, for an aggregate purchase price of $95,000,000 in an all cash
transaction.
On May 3, 2002, as part of our strategy to expand our technology initiative, we made several
acquisitions. We acquired all of the shares of WELLDONE Engineering GmbH (WELLDONE) for
$5,750,000 in cash plus an agreement to pay an earn-out amount up to $3,500,000 provided WELLDONEs
tools achieve certain operational and financial milestones during the period through May 3, 2004,
of which $500,000 was paid in 2003. We did not pay any of the remaining $3,000,000, as these
milestones were not achieved. WELLDONEs primary asset is its ownership in the Well Director,
an automatic rotary steerable drilling system, which was designed by and is manufactured and
marketed through DMT WELLDONE Drilling Services GmbH (DMT WELLDONE). As a result of our
acquisition of WELLDONE, we acquired WELLDONEs 50 percent joint venture interest in DMT WELLDONE,
which is further described below. We paid $2,650,000 to Deutsche Montan Technologie GmbH (DMT),
the other joint venturer in DMT WELLDONE, for the remaining 50 percent interest in the joint
venture.
In connection with the above described transaction, we also acquired 24 Well
Director
TM
drilling tools and related assets owned by Phoenix Technology Services, Ltd.
(Phoenix) for $6,000,000 in cash plus an agreement to pay an earn-out amount up to $3,000,000
provided certain operating performance milestones are achieved during the period through May 3,
2005, of which $1,500,000 and $500,000 was paid in 2004 and 2003, respectively. In the transaction
we also acquired from Phoenix its worldwide marketing rights to the Well Director
TM
drilling tools. The aggregate purchase price of $14,400,000 for these related acquisitions was
allocated to goodwill ($7,863,000) and property and equipment ($6,537,000).
Pursuant to a related agreement, we and DMT each committed to fund 2,100,000 Euros to a new
joint venture in which each party has a 50 percent interest. The joint venture was to use such
funds to retain DMT to conduct research and development. This joint venture was terminated in
2003.
On March 27, 2002, we purchased two semisubmersible baredecks, Bingo 9000 Rig 3 and Bingo
9000 Rig 4, from subsidiaries of Ocean Rig ASA (Ocean Rig) for an aggregate purchase price of
$45,000,000 in an all cash transaction.
On March 26, 2002, we purchased two semisubmersible drilling rigs, the
Noble Lorris Bouzigard
(formerly
Transocean 96
) and
Noble Therald Martin
(formerly
Transocean 97
), from subsidiaries of
Transocean Inc. for an aggregate purchase price of $31,000,000 in an all cash transaction. During
2003, we completed upgrades to the living quarters and drilling equipment on both units.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
53
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 4 MARKETABLE SECURITIES
As of December 31, 2004 and 2003, we owned marketable equity securities with a fair market
value of $528,000 and $9,703,000, respectively, of which $9,458,000 of the December 31, 2003
balance was included in a Rabbi Trust for the Noble Drilling Corporation 401(k) Savings Restoration
Plan. This Rabbi Trust was liquidated and terminated in December 2004. The marketable securities
included in the Rabbi Trust were classified as trading securities and were included in Investment
in marketable securities in the Consolidated Balance Sheet at December 31, 2003 at their fair
market value. Upon liquidation of the Rabbi Trust, we recognized in earnings a net realized gain
of $895,000 related to these assets in 2004. The remaining investment in marketable equity
securities at December 31, 2004 is classified as available for sale and is included in Other
assets in the Consolidated Balance Sheet at its fair market value. On March 31, 2002, we
recognized in earnings a realized loss of $9,758,000 on this investment resulting from a decline in
value considered by management to be other than temporary. We recognized in other comprehensive
income an unrealized holding gain of $283,000 on this investment during 2004. Gross unrealized
holding losses on this investment at December 31, 2004 and 2003 were $681,000 and $964,000,
respectively, and are included in Accumulated other comprehensive income in the Consolidated
Balance Sheets.
As of December 31, 2004 and 2003, we owned marketable debt securities with a fair market value
of $132,788,000 and $165,818,000, respectively. These investments are classified as available for
sale and are included in Investment in marketable securities in the Consolidated Balance Sheets
at their fair market value. Our balance of marketable debt securities at December 31, 2004
includes $33,280,000 that mature within one year, $61,008,000 that mature between one and five
years and $38,500,000 that mature beyond five years. We recognized in other comprehensive income a
net unrealized holding loss of $773,000 and in earnings a net realized loss of $129,000 related to
these investments in 2004. In 2003 and 2002, we recognized realized losses on these securities of
$382,000 and $168,000, respectively. Realized gains and losses on sales of marketable securities
are based on the specific identification method. The following table highlights additional
information applicable to our investments in marketable debt securities classified as available for
sale as of December 31, 2004 and 2003:
The credit quality of each of our investments in marketable debt securities is rated no lower
than A or A2 by Standard & Poors and Moodys Investors Service (Moodys), respectively.
NOTE 5 COMPREHENSIVE INCOME
We report and display comprehensive income in accordance with SFAS No. 130,
Reporting
Comprehensive Income
(SFAS 130), which establishes standards for reporting and displaying
comprehensive income and its components. Components of comprehensive income are net income and all
changes in equity during the period except those resulting from transactions with owners. SFAS 130
requires enterprises to display comprehensive income and its components in the enterprises
financial statements, to classify items of comprehensive income by their nature in the financial
statements and display the accumulated balance of other comprehensive income in shareholders
equity separately from retained earnings and additional paid-in capital.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
54
NOBLE CORPORATION AND SUBSIDIARIES
The following table sets forth the components of accumulated other comprehensive income
(loss):
Included in the 2002period change for unrealized (losses) gains on securities above was a
reclassification adjustment of $9,758,000 for an impairment charge on an investment included in net
income resulting from a decline in value considered by management to be other than temporary.
NOTE 6 INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
On June 13, 2000, we formed Noble Crosco Drilling Ltd. (Noble Crosco) with our joint venture
partner. We acquired a 50 percent equity interest in Noble Crosco by investing $14,300,000 in
cash. Our joint venture partner contributed the
Panon,
a Levingston 111-S independent leg designed
jackup, for its 50 percent equity interest. We also agreed to lend Noble Crosco up to $7,000,000
pursuant to a credit agreement (the Noble Crosco Credit Agreement) to finance part of the upgrade
costs of the
Panon
. In 2001, we loaned Noble Crosco $7,000,000 under the Noble Crosco Credit
Agreement. Any funds required for the maintenance and operation of the
Panon
in excess of those
funds generated from operations of the joint venture and available under the Noble Crosco Credit
Agreement would be loaned by us to Noble Crosco. In 2001, we loaned Noble Crosco $4,800,000 of
such funds. At December 31, 2004, the balance due to us from Noble Crosco under the Noble Crosco
Credit Agreement and the additional loan in excess of the Noble Crosco Credit Agreement had been
repaid. We managed the upgrade of the
Panon
from a slot to a cantilever configuration, and we are
managing the operation of the unit. During 2004, we received distributions from Noble Crosco
related to the operations of the
Panon
of $2,700,000. We account for this investment using the
equity method.
Balances related to joint ventures for 2004 and 2003 are reflected in the table below:
NOTE 7 DEBT
In 2002, we borrowed $125,000,000 from our $300,000,000 bank credit facility, of which
$25,000,000 was repaid during 2004 . In November 2004, we amended our bank credit facility to increase the total commitment to
$300,000,000 from $200,000,000 and extend the maturity date to November 30, 2009 from May 30, 2006.
Deferred costs related to this amendment were $475,000, which are being amortized over the
remaining term of the bank
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
55
NOBLE CORPORATION AND SUBSIDIARIES
credit facility. The interest rate on this borrowing from our bank credit facility, which adjusts
periodically with LIBOR, was 3.46 percent at December 31, 2004. (See Note 8 for additional
information.)
On March 16, 1999, we issued $150,000,000 principal amount of our 6.95% Senior Notes due 2009
and $250,000,000 principal amount of our 7.50% Senior Notes due 2019 (together, the Notes).
Interest on the Notes is payable on March 15 and September 15 of each year. The Notes are
redeemable, as a whole or from time to time in part, at our option on any date prior to maturity at
prices equal to 100 percent of the outstanding principal amount of the notes redeemed plus accrued
interest to the redemption date plus a make-whole premium, if any is required to be paid. The
Notes are senior unsecured obligations and the indenture governing the Notes contains covenants
that, among other things, limit our ability to create certain liens, engage in certain sale and
lease-back transactions and merge, consolidate and sell assets, except under certain conditions.
In 2002, we purchased and retired $5,000,000 principal amount of our 7.50% Senior Notes due
2019 for $5,350,000, which resulted in a loss of $400,000. This loss represents the difference
between the acquisition price and the net carrying value of the notes purchased, including
unamortized debt issuance costs, and was included in Other, net in the Consolidated Statement of
Income in 2002. Prior to 2002, we purchased and retired $43,305,000 principal amount of our 7.50%
Senior Notes.
In connection with the acquisition of a majority interest in Arktik Drilling Limited, Inc.
(Arktik) in 1999, we recorded Arktiks indebtedness to a minority equity owner in Arktik in the
amount of $7,900,000 (the Minority Owner Debt). Arktiks principal asset is the
Noble Muravlenko
drillship. We repaid the Minority Owner Debt in full in March 2004.
In December 1998, Noble Drilling (Jim Thompson) Inc., an indirect, wholly-owned subsidiary of
Noble and owner of the
Noble Jim Thompson
, issued $115,000,000 principal amount of its fixed rate
senior secured notes (the Thompson Notes) in four series. The Thompson Notes bear interest at
rates of 5.93 percent to 7.25 percent per annum. The Thompson Notes are secured by a first naval
mortgage on the
Noble Jim Thompson,
are guaranteed by Noble, and can be prepaid, in whole or in
part, at a premium at any time.
In July 1998, Noble Drilling (Paul Wolff) Ltd., an indirect, wholly-owned subsidiary of Noble
and owner of the
Noble Paul Wolff
, issued $145,000,000 principal amount of its fixed rate senior
secured notes (the Wolff Notes) in three series. We repaid the Wolff Notes in full in December
2004.
The following table summarizes our long-term debt:
The fair value of our Senior Notes at December 31, 2004 was $402,891,000, based on the quoted
market prices for similar issues or on the current rates offered to us for debt of similar
remaining maturities. The fair value of the indebtedness outstanding under our floating interest
rate Bank Credit Facility and Project Financings approximates their carrying values.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
56
NOBLE CORPORATION AND SUBSIDIARIES
Aggregate principal repayments of long-term debt for the next five years and thereafter are as
follows:
NOTE 8 CREDIT FACILITIES
We have an unsecured revolving bank credit facility totaling $300,000,000 (the Credit
Agreement), including a letter of credit facility totaling $50,000,000, through November 30, 2009.
In November 2004, we amended the Credit Agreement to increase the total commitment to $300,000,000
from $200,000,000 and extend the maturity date to November 30, 2009 from May 30, 2006. In
connection with our restructuring, Noble and one of its wholly-owned subsidiaries, Noble Holding
(U.S.) Corporation (Noble Holding), have unconditionally guaranteed the performance of Noble
Drilling under the Credit Agreement. We are required to maintain various affirmative and negative
covenants, including two financial covenants relating to interest coverage and debt to capital
ratios. The Credit Agreement contains restrictive covenants, including restrictions on incurring
additional indebtedness, and restrictions on permitting additional liens, payment of dividends,
transactions with affiliates, and mergers or consolidations. As of December 31, 2004, we had
outstanding borrowings and outstanding letters of credit of $100,000,000 and $15,721,000,
respectively, under the Credit Agreement, with $184,279,000 remaining available thereunder.
Additionally, as of December 31, 2004, we had other letters of credit and third-party guarantees of
$35,916,000 and performance and customs bonds totaling $46,949,000 supported by surety bonds.
NOTE 9 INTERESTS IN DEEPWATER OIL AND GAS PROPERTIES
In 2000, we received interests in several deepwater oil and gas properties from Mariner Energy
Inc. and Samedan Oil Corporation pursuant to the settlements of a lawsuit with Mariner Energy and
Samedan over employment of the
Noble Homer Ferrington
semisubmersible and upon entering into a
long-term contract with each of these companies for use of the unit in the U.S. Gulf of Mexico.
Certain of these properties are currently in production. We reported income before income taxes
from such properties of $743,000, $3,246,000 and $2,638,000 in 2004, 2003 and 2002, respectively.
In December 2003, we sold our interest in Mariner Energys Green Canyon property to ENI
Petroleum for $5,200,000 in cash. We realized a gain of $3,472,000 upon this sale.
In March 2002, we sold our interest in Mariner Energys Falcon property to Pioneer Natural
Resources USA, Inc. for $6,200,000 in cash and the assumption of liabilities related to our share
of drilling and development costs subsequent to June 30, 2001. We realized a gain of $5,908,000
upon this sale.
NOTE 10 SHAREHOLDERS EQUITY
In June 1995, we adopted a stockholder rights plan designed to assure that our stockholders
receive fair and equal treatment in the event of any proposed takeover of Noble Drilling and to
guard against partial tender offers and other abusive takeover tactics to gain control of Noble
Drilling without paying all stockholders a fair price. The rights plan was not adopted in response
to any specific takeover proposal. Prior to our corporate restructuring, we amended our rights
plan to provide for the earlier expiration of the rights in the event that Noble Drilling merges
with a subsidiary company in connection with changing the parent corporation of the Noble corporate
group to a non-U.S. company. Immediately prior to such a merger as part of our corporate
restructuring, the Noble Drilling stockholder rights plan expired. Upon such merger, a new
shareholder rights plan became effective for the new
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
57
NOBLE CORPORATION AND SUBSIDIARIES
parent company, Noble Corporation, that is substantially similar to the previous Noble
Drilling stockholder rights plan. Under the rights plan, one right (Right) is attached to each
of our ordinary shares. Each Right will entitle the holder to purchase one one-hundredth of a
share of new Series A Junior Participating Preferred Shares, par value $1.00 per share, at an
exercise price of $120.00. The Rights are not currently exercisable and will become exercisable
only in the event a person or group acquires beneficial ownership of 25 percent or more of our
ordinary shares. The Rights expire on July 10, 2005.
In connection with our corporate restructuring (see Note 2), treasury shares of Noble Drilling
were either cancelled and retired or contributed to trusts for the purpose of Company employee
benefit plans. Any ordinary shares of Noble repurchased by it are automatically cancelled and
retired pursuant to Cayman Islands law. These employee benefit plan trusts were liquidated and
terminated in December 2004. Ordinary shares of Noble held by the trusts were cancelled and
retired upon dissolution of the trusts. These trusts held 1,700,000 ordinary shares of Noble at
December 31, 2003.
Share repurchases and sales of put options were effected pursuant to the share repurchase
program which our board of directors authorized and adopted and which we announced on January 31,
2002. The program authorization covers an aggregate of 15,000,000 ordinary shares. As of March 3,
2005, 9,162,000 shares remained available under this authorization.
NOTE 11 INCOME TAXES
Noble is a Cayman Islands company. The Cayman Islands does not impose corporate income taxes.
Consequently, income taxes have been provided based on the laws and rates in effect in the
countries in which operations are conducted, or in which Noble and/or its subsidiaries are
considered resident for income tax purposes. Our U.S. subsidiaries are subject to a U.S. corporate
tax rate of 35 percent.
In certain circumstances, management expects that, due to changing demands of the offshore
drilling markets and the ability to redeploy our offshore drilling units, certain of such units
will not reside in a location long enough to give rise to future tax consequences. As a result, no
deferred tax liability has been recognized in these circumstances. Should managements
expectations change regarding the length of time an offshore drilling unit will be used in a given
location, we will adjust deferred taxes accordingly.
The components of and changes in the net deferred taxes were as follows:
(Unless otherwise indicated, dollar amounts in tables are in
thousands, except per share amounts.)
58
NOBLE CORPORATION AND SUBSIDIARIES
Income before income taxes consisted of the following:
The income tax provision consisted of the following:
A reconciliation of statutory and effective income tax rates is shown below:
During 2004, we generated net operating losses (NOLs) of $21,767,000 and $53,950,000 for
U.S. Regular and Alternative Minimum Tax (AMT) purposes, respectively. Our total U.S. NOLs at
December 31, 2004 were $59,454,000 for U.S. Regular tax purposes and $136,728,000 for AMT purposes.
These NOLs can be carried forward 20 years and begin to expire in 2022. Based on current market
conditions, the reversal of temporary differences and forecasts of future U.S. income, we expect to
fully utilize these NOLs. Therefore, there is no valuation allowance offsetting the deferred tax
asset for these NOLs.
During 2003, we generated NOLs of $23,943,000 and $61,826,000 for U.S. Regular and AMT
purposes, respectively. During 2002, we generated NOLs of $13,744,000 and $47,024,000 for U.S.
Regular and AMT purposes, respectively. Due to our corporate restructuring in 2002, $13,744,000 of
the Regular NOL and $20,952,000 of the AMT NOL were subject to the Separate Return Limitation Year
limits and could not be carried back to prior tax years. The remaining AMT NOL of $26,072,000 was
carried back to 2001 and generated cash refunds of $5,019,000. Certain components of the Net
deferred tax liabilities in the table above were based on our
estimates of NOLs and tax credit carryforwards at December 31, 2003. The Net deferred tax
liabilities at December 31, 2004 reflect the actual NOLs and tax credit carryforwards from 2003.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
59
NOBLE CORPORATION AND SUBSIDIARIES
We had AMT credit carryforwards of $17,444,000 at December 31, 2004 and 2003. We expect to
fully utilize these credits, which can be carried forward indefinitely. Therefore, there is no
valuation allowance offsetting this asset. We had foreign tax credit carryforwards of $7,126,000
at December 31, 2004. These credits can be carried forward ten years, and begin to expire in 2010.
Because the majority of our international operations are conducted by non-U.S. subsidiaries, we
have offset the asset for these credits with a valuation allowance of $4,632,000. Our estimated
foreign tax credits and offsetting valuation allowance at December 31, 2003 were $5,959,000 and
$3,873,000, respectively.
Certain of our subsidiaries file stand alone tax returns in the U.S. During 2004, these
subsidiaries generated NOLs of $4,074,000 for U.S. Regular and AMT purposes. Our total U.S. NOLs
at December 31, 2004 for Regular and AMT purposes for these subsidiaries were $21,389,000 and
$21,294,000, respectively. Due to insufficient earnings history with these subsidiaries, we have
fully offset the deferred tax asset attributable to the U.S. Regular NOLs with a valuation
allowance of $7,486,000 and $4,470,000 at December 31, 2004 and 2003, respectively. These NOLs can
be carried forward 20 years, and begin to expire in 2023.
During 2004, we recorded a tax benefit of $10,803,000 due to the resolution of certain tax
authority audits. Also during 2004, two of our subsidiaries were granted approval by an
international tax authority to be taxed on a deemed profit basis in its jurisdiction. We recorded
a one-time tax benefit of $4,431,000 due to the change in tax status of these subsidiaries in such
jurisdiction.
Due to our ability to redeploy units between Mexico and other jurisdictions, we do not expect
our rig-owning subsidiaries operating in Mexico to incur income tax liability in Mexico.
Therefore, no deferred tax has been recorded for these subsidiaries. Should our expectations
change regarding these subsidiaries, we will adjust deferred taxes accordingly. Our recognition of
a deferred tax liability in these circumstances would not have had a material effect on our results
of operations for 2004, 2003 or 2002, and would have had no effect on our liquidity or our cash
flows.
Applicable U.S. and foreign income and withholding taxes have not been provided on
undistributed earnings of $808,000,000 for Nobles subsidiaries. Management does not intend to
repatriate such undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material. It is not practicable to
estimate the amount of deferred income taxes associated with these undistributed earnings.
On October 22, 2004, The American Jobs Creation Act of 2004 (the Act) was signed into law in
the U.S. The Act creates a temporary incentive for U.S. corporations to repatriate accumulated
income earned abroad by providing an 85 percent dividends received deduction for certain dividends
from controlled foreign corporations. The deduction is subject to a number of limitations. We
have reviewed this incentive under the Act. We believe it is in our best interest to continue to
keep these undistributed earnings permanently reinvested outside the U.S. and do not intend to
repatriate any undistributed earnings for the foreseeable future except for distributions upon
which incremental income and withholding taxes would not be material.
NOTE 12 EMPLOYEE BENEFIT PLANS
We have a U.S. noncontributory defined benefit pension plan which covers substantially all
salaried employees and a U.S. noncontributory defined benefit pension plan which covers certain
field hourly employees, whose initial date of employment is prior to August 1, 2004 (collectively
referred to as our qualified domestic plans). These plans are governed by the Noble Drilling
Corporation Retirement Trust (the Trust). The benefits from these plans are based primarily on
years of service and, for the salaried plan, employees compensation near retirement. These plans
qualify under the Employee Retirement Income Security Act of 1974 (ERISA), and our funding policy
is consistent with funding requirements of ERISA and other applicable laws and regulations. We
make cash contributions to the qualified domestic plans when required. The benefit amount that can
be covered by the qualified domestic plans is limited under ERISA and the Internal Revenue Code
(IRC) of 1986. Therefore, we maintain an unfunded, nonqualified excess benefit plan designed to
maintain benefits for all employees at the
formula level in the qualified domestic plans. We refer to the qualified domestic plans and
the excess benefit plan collectively as the domestic plans.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
60
NOBLE CORPORATION AND SUBSIDIARIES
Each of Noble Drilling (U.K.) Limited, Noble Enterprises Limited and Noble Drilling
(Nederland) B.V., all indirect, wholly-owned subsidiaries of Noble, maintains a pension plan which
covers all of its salaried, non-union employees (collectively referred to as our international
plans). Benefits are based on credited service and the average of the highest three years of
qualified salary within the past 10 years of participation.
In 2004, we made total fundings of $1,389,000 to our domestic and international pension
plans. We made total fundings of $22,155,000 to our domestic and international pension plans in
2003, including a discretionary funding of $17,100,000. During 2002, we made fundings totaling
$5,327,000 to our plans. We expect fundings in 2005 to approximate $1,500,000.
All of our plans use December 31 as the measurement date.
A reconciliation of the changes in projected benefit obligations for our international and
domestic plans is as follows:
A reconciliation of the changes in fair value of plan assets is as follows:
The funded status of the plans is as follows:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
61
NOBLE CORPORATION AND SUBSIDIARIES
Amounts recognized in the Consolidated Balance Sheets consist of:
Pension cost includes the following components:
Other information regarding our international and domestic plans is summarized below:
The key assumptions for the plans are summarized below:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
62
NOBLE CORPORATION AND SUBSIDIARIES
The projected benefit obligation for the unfunded excess benefit plan was $8,547,000 and
$7,850,000 at December 31, 2004 and 2003, respectively, and is included under Domestic in the
above tables.
Additional information regarding our qualified domestic plans is summarized below.
The Trust invests in equity securities, fixed income debt securities, and cash equivalents and
other short-term investments. The Trust may invest in these investments directly or through pooled
vehicles, including mutual funds.
The targeted and actual weighted average asset allocations by asset category for the two U.S.
defined benefit pension plans are as follows:
Any deviation from the target range of asset allocations must be approved by the Trusts
governing committee. The performance objective of the Trust is to outperform the return of the
Total Index Composite as constructed to reflect the target allocation weightings for each asset
class. This objective should be met over a market cycle, which is defined as a period not less
than three years or more than five years. Domestic equity securities (common stock, convertible
preferred stock and convertible bonds) should achieve a total return (after fees) that exceeds the
total return of an appropriate market index over a full market cycle of three to five years.
International equity securities (common stock, convertible preferred stock and convertible bonds),
either from developed or emerging markets, should achieve a total return (after fees) that exceeds
the total return of an appropriate market index over a full market cycle of three to five years.
Fixed income debt securities should achieve a total return (after fees) that exceeds the total
return of an appropriate market index over a full market cycle of three to five years. Cash
equivalent and short-term investments should achieve relative performance better than the 90-day
Treasury bills. When mutual funds are used by the Trust, those mutual funds should achieve a total
return that equals or exceeds the total return of each funds appropriate Lipper or Morningstar
category. Lipper and Morningstar are independent mutual fund rating and information services.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
63
NOBLE CORPORATION AND SUBSIDIARIES
For investments in equity securities, no individual options or financial futures contracts are
purchased unless approved in writing by the Trusts governing committee. In addition, no private
placements or purchases of venture capital are allowed. No direct investments in foreign
securities are made unless available in ADRs on a U.S. exchange. The maximum commitment to a
particular industry, as defined by Standard & Poors, may not exceed 20 percent. The Trusts equity
managers vote all proxies in the best interest of the Trust without regards to social issues. The
Trusts governing committee reserves the right to comment on and exercise control over the response
to any individual proxy solicitation.
For fixed income debt securities, corporate bonds purchased are limited to investment grade
securities as established by Moodys or Standard & Poors. At no time shall the lowest investment
grade make up more than 20 percent of the total market value of the Trusts fixed income holdings.
The total fixed income exposure from any single non-government or government agency issuer shall
not exceed 10 percent of the Trusts fixed income holdings. The average duration of the total
portfolio shall not exceed seven years. All interest and principal receipts are swept, as
received, into an alternative cash management vehicle until reallocated in accordance with the
Trusts core allocation.
For investments in cash equivalent and short-term investments, the Trust utilizes a money
market mutual fund which invests in U.S. government and agency obligations, repurchase agreements
collateralized by U.S. government or agency securities, commercial paper, bankers acceptances,
certificate of deposits, delayed delivery transactions, reverse repurchase agreements, time
deposits and Euro dollar obligations. Bankers acceptances shall be made in larger banks (ranked
by assets) rated AA or better by Moodys and in conformance with all FDIC regulations concerning
capital requirements.
Equity securities include Nobles ordinary shares in the amounts of $2,736,000 (5% of total
Domestic plan assets) and $1,968,000 (4% of total Domestic plan assets) at December 31, 2004, and
2003, respectively. Noble does not expect that it will be required to make a mandatory
contribution to its domestic plans in 2005, although Noble has made discretionary contributions in
prior years and expects it will consider making a discretionary contribution to its domestic plans
in 2005. Estimated benefit payments from our domestic plans are $2,255,000 for 2005, $2,440,000
for 2006, $2,567,000 for 2007, $2,950,000 for 2008, $3,039,000 for 2009 and $17,685,000 in the
aggregate for the five years thereafter.
The expected rate of return on plan assets was based on historical returns on each asset type
and weighted based on the target asset allocation.
Additional information regarding our international plans is summarized below.
Our international pension plans invest in equity securities, fixed income debt securities, and
cash equivalents and other short-term investments.
The weighted average asset allocations by asset category for the international pension plans
are as follows:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
64
NOBLE CORPORATION AND SUBSIDIARIES
Both the Noble Enterprises Limited and Noble Drilling (Nederland) B.V. pension plans have a
targeted asset allocation of 100 percent debt securities. The investment objective for the Noble
Enterprises Limited plan assets is to earn a favorable return against the Salomon Brothers U.S.
Government Bond Index for all maturities greater than one year. The investment objective for the
Noble Drilling (Nederland) B.V. plan assets is to earn a favorable return against the Salomon
Brothers EMU Government Bond Index for all maturities greater than one year. We evaluate the
performance of these plans on an annual basis. In establishing an expected rate of return for
these plans assets, the current level of expected returns on risk free investments (primarily
government bonds), the historical level of the risk premium associated with the other asset classes
in which the portfolio is invested and expectations for future returns of each asset class were all
considered. The expected return for each class was then weighted based on the target asset
allocation (100 percent debt securities for both of these plans at December 31, 2004) to develop
the expected long-term rate of return on assets assumption for the plans.
There is no target asset allocation for the Noble Drilling (U.K.) Limited pension plan.
However, the investment objectives of the plan, as adopted by the plans trustees, is to achieve a
favorable return against the Combined Actuarial Performance Service (CAPS) pooled fund median.
The CAPS pooled fund is a benchmark that attempts to reflect the performance of all pooled pension
funds in the United Kingdom. By achieving this objective, the trustees believe the plan will be
able to avoid significant volatility in the contribution rate and provide sufficient plan assets to
cover the plans benefit obligations were the plan to be liquidated. To achieve these objectives,
the trustees have given the plans investment managers full discretion in the day to day management
of the plans assets. The plans assets are divided between two investment managers. The
performance objective communicated to one of these investment managers is to achieve upper quartile
performance over a rolling five-year period against the CAPS pooled fund benchmark. The
performance objective communicated to the other investment manager is to exceed the CAPS pooled
fund benchmark by one percent per annum over a rolling three-year period. This investment manager
is prohibited by the trustees from investing in real estate. The trustees meet the investment
managers periodically to review and discuss their investment performance. The expected rate of
return on the plans assets is based on the plans asset allocation at December 31, 2004 and
assumes that equity securities will outperform fixed interest bonds issued by the United Kingdom
government by approximately 1.75 percent per annum.
Noble expects to contribute $1,500,000 to its international plans in 2005. Estimated benefit
payments from our international plans are $720,000 for 2005, $746,000 for 2006, $900,000 for 2007,
$969,000 for 2008, $1,046,000 for 2009 and $9,363,000 in the aggregate for the five years
thereafter.
We presently sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan
(Restoration Plan). The Restoration Plan is a nonqualified, unfunded employee benefit plan under
which certain highly compensated employees of the Company may elect to defer compensation in excess
of amounts deferrable under the Companys 401(k) savings plan, and receive employer matching
contributions (which are made in ordinary shares). The employer matching amount is limited in the
same manner as are employer matching contributions under the Companys 401(k) savings plan. Our
liability for this plan was $15,591,000 and $11,750,000 at December 31, 2004 and 2003,
respectively, and is included in Accrued payroll and related costs in the accompanying
Consolidated Balance Sheets. Although not considered plan assets, a grantor trust was established
from which payments for obligations under the Restoration Plan were made prior to the trusts
dissolution in December 2004. The grantor trust had a balance of $9,458,000 at December 31, 2003
and is included in Investments in marketable securities in the accompanying Consolidated Balance
Sheet at that date. We also maintained a trust that held ordinary shares of Noble for purposes of
funding our obligations under the benefit plans, including the Restoration Plan. This trust was
also dissolved in December 2004. This trust held 1,700,000 ordinary shares of Noble at December
31, 2003. These shares are classified as Treasury stock in the accompanying Consolidated Balance
Sheet at December 31, 2003.
We presently sponsor a 401(k) savings plan, a medical plan and other plans for the benefit of
our employees. The cost of maintaining these plans aggregated $22,193,000, $20,220,000 and
$18,167,000 in 2004, 2003 and 2002, respectively. We do not provide post-retirement benefits (other
than pensions) or any post-employment benefits to our employees.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
65
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 13 COMMITMENTS AND CONTINGENCIES
In August 2004, an indirect, wholly-owned subsidiary of Noble was served as a named defendant
in two lawsuits filed in the Circuit Courts of the State of Mississippi involving numerous other
companies (not affiliated with Noble) as co-defendants. In December 2004, such subsidiary was
served as a named defendant in a third lawsuit filed in Mississippi Circuit Court. The lawsuits
seek an unspecified amount of monetary damages on behalf of approximately 130 named individuals
alleging personal injury or death, including claims under the Jones Act, purportedly resulting from
exposure to asbestos on drilling rigs and associated facilities during the period 1965 through
1986. The lawsuits are in preliminary stages and we have not confirmed the number of plaintiffs,
if any, that were employed by our subsidiary or otherwise associated with our drilling operations
during the relevant period. We intend to defend vigorously against the litigation, and based on
information currently available, we do not believe the resolution of these lawsuits will have a
material adverse effect on our financial position, results of operations or cash flows.
Noble Asset Company Limited (NACL), a wholly-owned, indirect subsidiary of Noble, was named
one of 21 parties served a Show Cause Notice issued by the Commissioner of Customs (Prev.), Mumbai,
India in August 2003. The Show Cause Notice concerns alleged violations of Indian Customs laws and
regulations regarding one of our jackup drilling rigs. The Commissioner alleges certain violations
to have occurred before, at the time of, and after NACL acquired the rig from the rigs previous
owner. We maintain that NACL has acted in accordance with all Indian Customs laws and regulations
and believe the Show Cause Notice is without merit as against NACL. In the purchase agreement for
the rig, NACL received contractual indemnification against liability for Indian customs duty from
the rigs previous owner. In connection with the export of the rig from India in 2001, NACL posted
a bank guarantee in the amount of $3,300,000 and a customs bond in the amount of $21,340,000, both
of which remain in place. NACL filed its initial replies to the Show Cause Notice in December
2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral
arguments and written submissions. The Commissioner has not ruled to date. We do not believe the
resolution of this matter will have a material adverse effect on our financial position, results of
operations or cash flows.
We are a defendant in certain claims and litigation arising out of operations in the normal
course of business. In the opinion of management, uninsured losses, if any, will not be material
to our financial position, results of operations or cash flows.
In connection with several projects, we have entered into agreements with various vendors to
purchase or construct property and equipment that generally have long lead times for delivery. Any
equipment purchased for a project on which we do not proceed would be used, where applicable, as
capital spares for other units in our fleet. As of December 31, 2004, we had approximately
$32,000,000 of outstanding purchase commitments related to these projects.
At December 31, 2004, we had certain noncancelable, long-term operating leases, principally
for office space and facilities, with various expiration dates. Future minimum rentals under these
leases aggregate $3,525,000 for 2005, $2,889,000 for 2006, $2,444,000 for 2007, $2,257,000 for
2008, $2,256,000 for 2009 and $6,157,000 thereafter. Rental expense for all operating leases was
$4,896,000, $4,038,000 and $3,688,000 for the years ended December 31, 2004, 2003 and 2002,
respectively.
We have entered into employment agreements with each of our executive officers, as well as
certain other employees. These agreements become effective upon a change of control of Noble
(within the meaning set forth in the agreements) or a termination of employment in connection with
or in anticipation of a change of control, and remain effective for three years thereafter. These
agreements provide for compensation and certain other benefits under such circumstances.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
66
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 14 UNAUDITED INTERIM FINANCIAL DATA
Unaudited interim consolidated financial information for the years ended December 31, 2004 and
2003 is as follows:
NOTE 15 PARENT GUARANTEE OF REGISTERED SECURITIES ISSUED BY SUBSIDIARY
Noble and Noble Holding are guarantors for certain debt securities issued by Noble Drilling.
These debt securities include Noble Drillings 6.95% Senior Notes due 2009 and its 7.50% Senior
Notes due 2019. The outstanding principal balances of the 6.95% Senior Notes and the 7.50% Senior
Notes at December 31, 2004 were $149,954,000 and $201,695,000, respectively. Noble Drilling is an
indirect, wholly-owned subsidiary of Noble and a direct, wholly-owned subsidiary of Noble Holding.
Nobles and Noble Holdings guarantee of these securities is full and unconditional.
The following consolidating financial statements of Noble, Noble Holding, Noble Drilling and
all other subsidiaries are included so that separate financial statements of Noble Drilling are
not required to be filed with the United States Securities and Exchange Commission. These
consolidating financial statements present Nobles and Noble Holdings investments in both
consolidated and unconsolidated affiliates using the equity method of accounting.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
67
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
68
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
69
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
70
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
71
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
72
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
73
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
74
NOBLE CORPORATION AND OTHER SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
75
NOBLE CORPORATION AND SUBSIDIARIES
NOTE 16 SEGMENT AND RELATED INFORMATION
We provide diversified services for the oil and gas industry. Our reportable segments consist
of the primary services we provide, which include domestic and international offshore contract
drilling and engineering and consulting services. Although these segments are generally influenced
by the same economic factors, each represents a distinct service to the oil and gas industry. Each
of our drilling rigs is considered by us to be an operating segment within our domestic and
international offshore contract drilling services reportable segments, and these operating segments
are aggregated to comprise our domestic and international contract drilling services reportable
segments in accordance with SFAS No. 131,
Disclosure about Segments of an Enterprise and Related
Information
(SFAS 131).
Our international contract drilling services segment conducts contract drilling services in
the Middle East, Mexico, the North Sea, Brazil, West Africa, India and the Mediterranean Sea. Our
domestic contract drilling services segment conducts contract drilling services in the U.S. Gulf
of Mexico. Our engineering and consulting services segment, as represented by our Noble
Technology Services Division, provides drilling products and drilling-related software programs,
well site management, project management, technical services, and operations support for our
downhole technology tools.
The accounting policies of the reportable segments are the same as those described in the
summary of significant accounting policies (see Note 1). All intersegment sales pricing is based
on current market conditions. We evaluate the performance of our operating segments based on
operating revenues and net income. Summarized financial information of our reportable segments for
the years ended December 31, 2004, 2003 and 2002 is shown in the following table
(in thousands). The Other column includes results of labor contract drilling services,
other insignificant operations and corporate related items.
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
76
NOBLE CORPORATION AND SUBSIDIARIES
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
77
NOBLE CORPORATION AND SUBSIDIARIES
The following table is a reconciliation of reportable segment profit or loss to consolidated
totals:
The following tables present revenues and identifiable assets by country based on the location
of the service provided:
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts)
78
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Nobles Chairman, Chief Executive Officer and President, James C. Day, and Nobles Chief Operating Officer, Senior Vice President
and Chief Financial Officer, Mark A. Jackson, have overseen and participated in an evaluation of
the Companys disclosure controls and procedures as of the end of the period covered by this
report. On the basis of this evaluation, Mr. Day and Mr. Jackson have concluded that the Companys
disclosure controls and procedures are effective. The Companys disclosure controls and procedures
are designed to ensure that information required to be disclosed by the Company in the reports that
it files with or submits to the Securities and Exchange Commission is recorded, processed,
summarized and reported within the time periods specified in the Commissions rules and forms.
Changes in Internal Control over Financial Reporting
There was no change in the Companys internal control over financial reporting that occurred
during the quarter ended December 31, 2004 that has materially affected, or is reasonably likely to
materially affect, the Companys internal control over financial reporting.
Managements Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) promulgated under the Securities
Exchange Act of 1934, as amended. Under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the framework in
Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. Based on managements assessment, the Company maintained effective
internal control over financial reporting as of December 31, 2004.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the
Companys financial statements included in this annual report on Form 10-K, has audited
managements assessment of the effectiveness of the Companys internal control over financial
reporting as of December 31, 2004 as stated in their report which is provided in this annual report
on Form 10-K.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The sections entitled Election of Directors, Additional Information Regarding the Board of
Directors, Section 16(a) Beneficial Ownership Reporting Compliance, and Member Proposals and
Other Matters appearing in our proxy statement for the annual general meeting of members to be
held on April 28, 2005 (the 2005 Proxy Statement), set forth certain information with respect to
the directors of Noble and with respect to reporting under Section 16(a) of the Securities Exchange
Act of 1934, and are incorporated herein by reference.
Certain information with respect to the executive officers of Noble is set forth under the
caption Executive Officers of the Registrant in Part I of this report.
Noble has adopted a Code of Business Conduct and Ethics that applies to directors, officers
and employees, including Nobles principal executive officer, principal financial officer and
principal accounting officer. Nobles Code of Business Conduct and Ethics is posted on the
Companys website at http://www.noblecorp.com in the
79
Governance area. Changes to and waivers granted with respect to Nobles Code of Business
Conduct and Ethics related to officers identified above, and other executive officers and directors
of Noble, that we are required to disclose pursuant to applicable rules and regulations of the
Commission will also be posted on our website.
ITEM 11. EXECUTIVE COMPENSATION.
The section entitled Executive Compensation appearing in the 2005 Proxy Statement sets forth
certain information with respect to the compensation of our management, and, except for the report
of the compensation committee of the board of directors of Noble on executive compensation and the
information in such section under Performance Graph, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The sections entitled Executive Compensation Equity Compensation Plan Information,
Security Ownership of Certain Beneficial Owners and Security Ownership of Management appearing
in the 2005 Proxy Statement set forth certain information with respect to securities authorized for
issuance under equity compensation plans and the ownership of voting securities and equity
securities of Noble, and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The section entitled Additional Information Regarding the Board of Directors Certain
Transactions appearing in the 2005 Proxy Statement sets forth certain information with respect to
certain relationships and related party transactions, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The section entitled Auditors appearing in the 2005 Proxy Statement sets forth certain
information with respect to accounting fees and services, and is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES.
80
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed by the following persons on behalf of the Registrant and in the capacities and on the dates
indicated.
81
INDEX TO EXHIBITS
82
83
84
85
High
Low
$
42.91
$
35.00
39.69
33.53
46.50
35.32
50.54
42.77
$
38.40
$
31.18
37.80
30.46
36.61
31.37
37.46
32.75
Table of Contents
Year Ended December 31,
2004
2003
2002
2001
2000
(In thousands, except per share amounts)
$
1,066,231
$
987,380
$
990,248
$
1,029,760
$
898,224
146,086
166,416
209,503
262,922
165,554
$
1.10
$
1.26
$
1.58
$
1.98
$
1.24
1.09
1.25
1.57
1.96
1.22
$
191,578
$
237,843
$
265,466
$
278,306
$
173,235
2,743,620
2,625,866
2,471,043
2,149,217
2,095,129
3,307,973
3,189,633
3,065,714
2,750,740
2,595,531
503,288
541,907
589,562
550,131
650,291
511,649
589,573
670,139
605,561
699,642
2,384,434
2,178,425
1,989,210
1,778,319
1,576,719
$
332,221
$
365,308
$
445,364
$
451,046
$
330,736
110,548
194,400
356,854
50,440
58,993
150,493
112,734
121,500
89,426
66,206
(1)
Consists of Cash and cash equivalents and Investments in marketable securities as reported on our
consolidated balance sheets.
(2)
Consists of long-term debt and current maturities of long-term debt.
Table of Contents
Table of Contents
International
Domestic
Contract
Contract
Engineering
Drilling
Drilling
& Consulting
Services
Services
Services
Other
Total
(In thousands)
$
697,858
$
239,556
$
$
$
937,414
19,720
13,777
7,557
9,180
50,234
51,327
51,327
2,834
1,694
13,935
8,793
27,256
$
720,412
$
255,027
$
21,492
$
69,300
$
1,066,231
$
436,895
$
125,613
$
$
$
562,508
15,184
13,100
7,509
8,817
44,610
42,669
42,669
(2,250
)
620
20,034
8,935
27,339
119,608
44,566
589
3,456
168,219
22,340
8,602
1,113
1,659
33,714
$
591,777
$
192,501
$
29,245
$
65,536
$
879,059
Table of Contents
International
Domestic
Contract
Contract
Engineering
Drilling
Drilling
& Consulting
Services
Services
Services
Other
Total
(In thousands)
$
646,949
$
242,654
$
$
$
889,603
15,234
10,350
13,887
4,743
44,214
28,492
28,492
1,138
9,374
9,658
4,901
25,071
$
663,321
$
262,378
$
23,545
$
38,136
$
987,380
$
380,029
$
125,009
$
$
$
505,038
11,135
9,722
13,606
4,561
39,024
22,642
22,642
(614
)
3,012
21,270
4,581
28,249
97,584
46,473
610
3,460
148,127
15,839
8,527
1,235
1,033
26,634
(3,472
)
(3,472
)
$
503,973
$
189,271
$
36,721
$
36,277
$
766,242
Average Rig
Utilization (1)
Operating Days (2)
Average Dayrate
2004
2003
2004
2003
2004
2003
87
%
82
%
11,332
9,620
$
50,325
$
51,614
72
%
100
%
397
365
$
144,018
$
149,217
100
%
95
%
366
347
$
49,877
$
44,131
60
%
98
%
659
1,071
$
79,134
$
75,296
85
%
84
%
12,754
11,403
$
54,717
$
56,735
97
%
91
%
713
1,144
$
45,785
$
30,271
97
%
87
%
1,612
1,580
$
103,210
$
120,784
43
%
29
%
313
107
$
44,144
$
45,025
94
%
77
%
1,034
613
$
25,840
$
20,188
87
%
81
%
3,672
3,444
$
65,239
$
70,457
(1)
Information reflects our policy of reporting on the basis of the number of actively marketed
rigs in our fleet. Percentages reflect the results of rigs only during the period in which
they are owned or operated by us.
(2)
Information reflects the number of days that our rigs were operating under contractual
terms.
(3)
International encompasses contract drilling services conducted in the Middle East, Mexico,
the North Sea, Brazil, West Africa, India and the Mediterranean Sea.
(4)
These units have water depth ratings of 6,000 feet or greater depending on the unit.
(5)
These units have water depth ratings less than 6,000 feet.
(6)
Domestic encompasses contract drilling services conducted in the U.S. Gulf of Mexico.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2004
2003
2004
2003
(In thousands)
$
697,858
$
646,949
$
436,895
$
380,029
19,720
15,234
15,184
11,135
2,834
1,138
(2,250
)
(614
)
N/A
N/A
119,608
97,584
N/A
N/A
22,340
15,839
$
720,412
$
663,321
$
591,777
$
503,973
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows.
Table of Contents
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2004
2003
2004
2003
(In thousands)
$
239,556
$
242,654
$
125,613
$
125,009
13,777
10,350
13,100
9,722
1,694
9,374
620
3,012
N/A
N/A
44,566
46,473
N/A
N/A
8,602
8,527
N/A
N/A
(3,472
)
$
255,027
$
262,378
$
192,501
$
189,271
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2004
2003
2004
2003
(In thousands)
$
$
$
$
7,557
13,887
7,509
13,606
13,935
9,658
20,034
21,270
N/A
N/A
589
610
N/A
N/A
1,113
1,235
$
21,492
$
23,545
$
29,245
$
36,721
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2004
2003
2004
2003
(In thousands)
$
$
$
$
9,180
4,743
8,817
4,561
51,327
28,492
42,669
22,642
8,793
4,901
8,935
4,581
N/A
N/A
3,456
3,460
N/A
N/A
1,659
1,033
$
69,300
$
38,136
$
65,536
$
36,277
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows.
Table of Contents
Table of Contents
International
Domestic
Contract
Contract
Engineering
Drilling
Drilling
& Consulting
Services
Services
Services
Other
Total
(In thousands)
$
646,949
$
242,654
$
$
$
889,603
15,234
10,350
13,887
4,743
44,214
28,492
28,492
1,138
9,374
9,658
4,901
25,071
$
663,321
$
262,378
$
23,545
$
38,136
$
987,380
$
380,029
$
125,009
$
$
$
505,038
11,135
9,722
13,606
4,561
39,024
22,642
22,642
(614
)
3,012
21,270
4,581
28,249
97,584
46,473
610
3,460
148,127
15,839
8,527
1,235
1,033
26,634
(3,472
)
(3,472
)
$
503,973
$
189,271
$
36,721
$
36,277
$
766,242
Table of Contents
International
Domestic
Contract
Contract
Engineering
Drilling
Drilling
& Consulting
Services
Services
Services
Other
Total
(In thousands)
$
620,289
$
290,130
$
$
$
910,419
14,970
10,646
567
26,183
26,416
26,416
1,610
4,066
14,569
6,985
27,230
$
636,869
$
304,842
$
14,569
$
33,968
$
990,248
$
325,830
$
162,799
$
$
$
488,629
13,341
9,253
464
23,058
20,951
20,951
(716
)
1,230
20,731
6,623
27,868
70,803
50,774
380
3,197
125,154
14,764
10,333
742
1,100
26,939
(5,908
)
(5,908
)
$
424,022
$
228,481
$
21,853
$
32,335
$
706,691
Average Rig
Utilization (1)
Operating Days (2)
Average Dayrate
2003
2002
2003
2002
2003
2002
82
%
97
%
9,620
8,480
$
51,614
$
58,149
100
%
100
%
365
365
$
149,217
$
129,472
95
%
74
%
347
269
$
44,131
$
61,882
98
%
86
%
1,071
938
$
75,296
$
67,464
84
%
95
%
11,403
10,052
$
56,735
$
61,708
91
%
86
%
1,144
2,832
$
30,271
$
28,723
87
%
91
%
1,580
1,667
$
120,784
$
120,217
29
%
107
$
45,025
$
77
%
56
%
613
435
$
20,188
$
19,271
81
%
84
%
3,444
4,934
$
70,457
$
58,802
(1)
Information reflects our policy of reporting on the basis of the number of actively marketed
rigs in our fleet. Percentages reflect the results of rigs only during the period in which
they are owned or operated by us.
(2)
Information reflects the number of days that our rigs were operating under contractual
terms.
(3)
International encompasses contract drilling services conducted in the Middle East, Mexico,
the North Sea, Brazil, West Africa, India and the Mediterranean Sea.
(4)
These units have water depth ratings of 6,000 feet or greater depending on the unit.
(5)
These units have water depth ratings less than 6,000 feet.
(6)
Domestic encompasses contract drilling services conducted in the U.S. Gulf of Mexico.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2003
2002
2003
2002
(In thousands)
$
646,949
$
620,289
$
380,029
$
325,830
15,234
14,970
11,135
13,341
1,138
1,610
(614
)
(716
)
N/A
N/A
97,584
70,803
N/A
N/A
15,839
14,764
$
663,321
$
636,869
$
503,973
$
424,022
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2003
2002
2003
2002
(In thousands)
$
242,654
$
290,130
$
125,009
$
162,799
10,350
10,646
9,722
9,253
9,374
4,066
3,012
1,230
N/A
N/A
46,473
50,774
N/A
N/A
8,527
10,333
N/A
N/A
(3,472
)
(5,908
)
$
262,378
$
304,842
$
189,271
$
228,481
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as direct operating expenses. Changes in the amount of these
reimbursables do not have a material effect on our financial position, results of operations
or cash flows.
Table of Contents
Operating Costs
Operating Revenues
and Expenses
2003
2002
2003
2002
(In thousands)
$
$
$
$
13,887
13,606
9,658
14,569
21,270
20,731
N/A
N/A
610
380
N/A
N/A
1,235
742
$
23,545
$
14,569
$
36,721
$
21,853
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows.
Operating Costs
Operating Revenues
and Expenses
2003
2002
2003
2002
(In thousands)
$
$
$
$
4,743
567
4,561
464
28,492
26,416
22,642
20,951
4,901
6,985
4,581
6,623
N/A
N/A
3,460
3,197
N/A
N/A
1,033
1,100
$
38,136
$
33,968
$
36,277
$
32,335
(1)
We record reimbursements from customers for out-of-pocket expenses as revenues and the
related direct cost as operating expenses. Changes in the amount of these reimbursables do
not have a material effect on our financial position, results of operations or cash flows.
Table of Contents
Table of Contents
Table of Contents
Payments Due by Period
Less than
After
Total
1 year
1-3 years
3-5 years
5 years
$
511,649
$
8,361
$
18,605
$
282,988
$
201,695
288,617
33,076
64,273
51,972
139,296
19,528
3,525
5,333
4,513
6,157
1,500
1,500
32,000
32,000
$
853,294
$
78,462
$
88,211
$
339,473
$
347,148
Amount of Commitment Expiration Per Period
Total Amounts
Less than
Over
Committed
1 year
1-3 years
3-5 years
5 years
$
51,637
$
35,117
$
16,520
$
$
46,949
9,020
37,929
$
98,586
$
44,137
$
54,449
$
$
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Table of Contents
Shareholders of Noble Corporation:
Table of Contents
March 8, 2005
Table of Contents
CONSOLIDATED BALANCE SHEETS
(In thousands)
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Year Ended December 31,
2004
2003
2002
$
937,414
$
889,603
$
910,419
50,234
44,214
26,183
51,327
28,492
26,416
27,256
25,071
27,230
1,066,231
987,380
990,248
562,508
505,038
488,629
44,610
39,024
23,058
42,669
22,642
20,951
27,339
28,249
27,868
168,219
148,127
125,154
33,714
26,634
26,939
(3,472
)
(5,908
)
879,059
766,242
706,691
187,172
221,138
283,557
(34,389
)
(40,291
)
(42,622
)
9,034
6,137
2,390
161,817
186,984
243,325
(15,731
)
(20,568
)
(33,822
)
$
146,086
$
166,416
$
209,503
$
1.10
$
1.26
$
1.58
$
1.09
$
1.25
$
1.57
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Table of Contents
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands)
Table of Contents
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended
December 31, 2004
$
146,086
3,079
(490
)
(61
)
2,528
$
148,614
Year Ended
December 31, 2003
$
166,416
192
(296
)
6,406
6,302
$
172,718
Year Ended
December 31, 2002
$
209,503
1,223
(707
)
(4,829
)
9,758
5,445
$
214,948
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net
Basic
Basic
Diluted
Diluted
Income
Shares
EPS
Shares
EPS
$
146,086
132,897
$
1.10
134,115
$
1.09
166,416
131,948
1.26
133,007
1.25
209,503
132,204
1.58
133,452
1.57
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2004
2003
2002
$
33,911
$
39,162
$
41,364
$
27,409
$
10,509
$
8,667
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2004
2003
2002
Number of
Weighted
Number of
Weighted
Number of
Weighted
Shares
Average
Shares
Average
Shares
Average
Underlying
Exercise
Underlying
Exercise
Underlying
Exercise
Options
Price
Options
Price
Options
Price
8,630,114
$
29.86
9,187,658
$
29.64
8,494,250
$
28.40
334,485
37.61
45,000
32.11
1,630,000
31.53
(3,056,216
)
25.87
(413,079
)
22.83
(775,118
)
19.99
(92,024
)
33.69
(189,465
)
35.01
(161,474
)
32.82
5,816,359
$
31.99
8,630,114
$
29.86
9,187,658
$
29.64
5,005,471
$
31.83
6,995,876
$
29.55
5,682,838
$
27.41
Options Outstanding
Options Exercisable
Weighted
Average
Weighted
Weighted
Number
Remaining
Average
Number
Average
Range of Exercise Prices
Outstanding
Life (Years)
Exercise Price
Exercisable
Exercise Price
20,000
0.3
$
6.53
20,000
$
6.53
41,249
1.1
9.81
41,249
9.81
1,553,009
3.5
23.51
1,553,009
23.51
4,202,101
6.7
35.96
3,391,213
36.48
5,816,359
5.8
$
31.99
5,005,471
$
31.83
December 31,
2004
2003
2002
$
15.80
$
13.41
$
11.57
5
5
5
42.27
%
43.32
%
43.72
%
0
%
0
%
0
%
3.52
%
2.88
%
4.42
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2004
2003
2002
$
146,086
$
166,416
$
209,503
3,739
3,008
3,171
(12,887
)
(20,085
)
(22,450
)
$
136,938
$
149,339
$
190,224
$
1.10
$
1.26
$
1.58
$
1.03
$
1.13
$
1.44
$
1.09
$
1.25
$
1.57
$
1.02
$
1.12
$
1.43
2004
2003
2002
95,237
$
37.56
$
$
142,852
$
37.56
$
$
$
5,753
$
4,627
$
4,878
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2004
2003
Gross
Gross
Gross
Gross
Amortized
Fair
Unrealized
Unrealized
Amortized
Fair
Unrealized
Unrealized
Cost
Value
Gains
Losses
Cost
Value
Gains
Losses
$
8,764
$
8,728
$
$
(36
)
$
4,137
$
4,126
$
$
(11
)
81,866
81,467
11
(410
)
136,709
136,635
47
(121
)
42,989
42,593
5
(401
)
25,075
25,057
15
(33
)
$
133,619
$
132,788
$
16
$
(847
)
$
165,921
$
165,818
$
62
$
(165
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated
Foreign
Unrealized
Minimum
Other
Currency
(Losses) Gains
Pension
Comprehensive
Items
on Securities
Liability
Income (Loss)
$
25
$
(9,777
)
$
(1,985
)
$
(11,737
)
1,223
9,051
(4,829
)
5,445
1,248
(726
)
(6,814
)
(6,292
)
192
(296
)
6,406
6,302
1,440
(1,022
)
(408
)
10
3,079
(490
)
(61
)
2,528
$
4,519
$
(1,512
)
$
(469
)
$
2,538
2004
2003
$
3,931
$
2,307
18,804
17,585
2,283
(1)
Balance included in Other, net in the Consolidated Statements of Income. Amounts exclude
management fees and interest income related to joint ventures of $1,253,000 and $1,838,000 in
2004 and 2003, respectively.
(2)
Balance included in Investments in and advances to joint ventures in the Consolidated
Balance Sheets.
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
2004
2003
$
149,954
$
149,945
201,695
201,695
100,000
125,000
28,228
60,000
76,805
7,900
511,649
589,573
(8,361
)
(47,666
)
$
503,288
$
541,907
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2005
2006
2007
2008
2009
Thereafter
Total
$
$
$
$
$
149,954
$
$
149,954
201,695
201,695
100,000
100,000
8,361
8,975
9,630
10,334
22,700
60,000
$
8,361
$
8,975
$
9,630
$
10,334
$
272,654
$
201,695
$
511,649
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31,
December 31,
2004
2003
$
28,295
$
11,576
24,570
23,403
52,865
34,979
(12,118
)
(8,343
)
$
40,747
$
26,636
$
(246,892
)
$
(232,642
)
(361
)
(7,351
)
$
(247,253
)
$
(239,993
)
$
(206,506
)
$
(213,357
)
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2004
2003
2002
$
(12,310
)
$
(3,996
)
$
34,966
174,127
190,980
208,359
$
161,817
$
186,984
$
243,325
Year Ended December 31,
2004
2003
2002
$
(8,403
)
$
(2,561
)
$
160
19,112
18,753
16,792
11,546
14,878
13,020
(6,524
)
(10,502
)
3,850
$
15,731
$
20,568
$
33,822
Year Ended December 31,
2004
2003
2002
0.0
%
0.0
%
0.0
%
9.8
3.6
4.5
10.9
7.3
8.3
(6.7
)
(2.7
)
(1.8
)
0.2
0.1
1.1
9.7
%
11.0
%
13.9
%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31,
2004
2003
International
Domestic
International
Domestic
$
41,542
$
68,945
$
36,600
$
54,227
2,411
4,455
1,957
3,504
2,418
4,097
2,015
3,486
1,060
1,415
1,078
9,586
(898
)
(2,072
)
(598
)
(1,858
)
216
178
3,507
312
367
$
50,256
$
77,207
$
41,542
$
68,945
As of December 31,
2004
2003
International
Domestic
International
Domestic
$
44,171
$
53,386
$
26,764
$
37,251
2,998
5,173
3,330
7,878
802
587
12,040
10,115
216
178
(963
)
(2,072
)
(618
)
(1,858
)
5,337
2,477
$
52,561
$
57,074
$
44,171
$
53,386
As of December 31,
2004
2003
International
Domestic
International
Domestic
$
2,305
$
(20,133
)
$
2,629
$
(15,559
)
991
17,501
225
17,887
1,695
1,588
1,326
1,452
$
4,622
$
(937
)
$
4,306
$
3,916
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31,
2004
2003
International
Domestic
International
Domestic
$
4,622
$
(3,611
)
$
4,306
$
2,404
1,953
885
721
627
$
4,622
$
(937
)
$
4,306
$
3,916
Year Ended December 31,
2004
2003
2002
International
Domestic
International
Domestic
International
Domestic
$
2,411
$
4,455
$
1,957
$
3,504
$
2,424
$
3,392
2,418
4,097
2,015
3,486
1,970
3,552
(3,023
)
(4,273
)
(1,856
)
(3,376
)
(2,025
)
(3,532
)
260
217
52
189
168
530
93
(58
)
900
(358
)
697
(19
)
391
$
1,916
$
5,439
$
2,288
$
4,528
$
2,495
$
3,992
As of December 31,
2004
2003
International
Domestic
International
Domestic
$
50,256
$
77,207
$
41,542
$
68,945
48,716
63,327
39,490
53,275
52,561
57,074
44,171
53,386
721
627
As of December 31,
2004
2003
International
Domestic
International
Domestic
4.75%-5.70%
5.75%
5.50%
6.00%
3.70%-3.88%
5.00%
3.50%-3.88%
5.00%
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2004
2003
2002
International
Domestic
International
Domestic
International
Domestic
5.25%-5.50
%
6.00
%
5.25%-5.50
%
6.50
%
5.50
%
7.00
%
5.25%-6.25
%
8.00
%
5.25%-6.25
%
8.00
%
5.50%-6.25
%
9.00
%
3.50%-3.88
%
5.00
%
3.50%-3.88
%
5.00
%
3.50
%
5.00
%
Year Ended December 31,
2004
2003
Target
Allocation
Actual
Actual
or Range
Allocation
Assets
Allocation
Assets
65
%
68
%
$
39,114
68
%
$
36,102
32
%
28
%
15,910
29
%
15,517
0
%
0
%
0
%
3
%
4
%
2,050
3
%
1,767
0
%
0
%
0
%
100
%
100
%
$
57,074
100
%
$
53,386
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31,
2004
2003
Actual
Actual
Allocation
Assets
Allocation
Assets
62
%
$
32,700
62
%
$
27,225
31
%
16,339
34
%
15,240
0
%
0
%
7
%
3,446
4
%
1,706
0
%
76
0
%
100
%
$
52,561
100
%
$
44,171
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Quarter Ended
March 31
June 30
Sept. 30
Dec. 31
$
245,433
$
253,009
$
265,638
$
302,151
38,842
46,561
44,015
57,754
28,260
34,381
30,571
52,874
$
0.21
$
0.26
$
0.23
$
0.39
0.21
0.26
0.23
0.39
Quarter Ended
March 31
June 30
Sept. 30
Dec. 31
$
245,008
$
247,920
$
254,646
$
239,806
54,718
58,670
67,157
40,593
39,421
43,738
52,957
30,300
$
0.30
$
0.33
$
0.40
$
0.23
0.30
0.33
0.40
0.23
(1)
Earnings per share is computed independently for each of the quarters presented. Therefore,
the sum of the quarters earnings per share may not agree to the total computed for the year.
Table of Contents
CONSOLIDATING BALANCE SHEET
December 31, 2004
(In thousands)
Table of Contents
CONSOLIDATING BALANCE SHEET
December 31, 2003
(In thousands)
Table of Contents
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2004
(In thousands)
Noble
Holding
Noble
Noble
(Subsidiary
Drilling
Other
Consolidating
(Guarantor)
(Guarantor)
(Issuer)
Subsidiaries
Adjustments
Total
$
$
$
30,423
$
906,991
$
$
937,414
28
50,206
50,234
51,327
51,327
17
27,239
27,256
30,468
1,035,763
1,066,231
(334
)
9,749
553,093
562,508
28
44,582
44,610
42,669
42,669
27,339
27,339
4,641
163,578
168,219
578
1,038
32,098
33,714
244
15,456
863,359
879,059
(244
)
15,012
172,404
187,172
101,280
123,020
130,828
(355,128
)
(47,472
)
(27,935
)
(6,454
)
47,472
(34,389
)
47,928
911
7,667
(47,472
)
9,034
148,964
75,548
118,816
173,617
(355,128
)
161,817
(2,878
)
18,341
4,204
(35,398
)
(15,731
)
$
146,086
$
93,889
$
123,020
$
138,219
$
(355,128
)
$
146,086
Table of Contents
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2003
(In thousands)
Noble
Holding
Noble
Noble
(Subsidiary
Drilling
Other
Consolidating
(Guarantor)
(Guarantor)
(Issuer)
Subsidiaries
Adjustments
Total
$
$
$
13,544
$
876,059
$
$
889,603
350
43,864
44,214
28,492
28,492
25,071
25,071
13,894
973,486
987,380
(27
)
1
10,348
494,716
505,038
350
38,674
39,024
22,642
22,642
(150
)
28,399
28,249
3,851
144,276
148,127
300
1,025
25,309
26,634
(3,472
)
(3,472
)
273
1
15,424
750,544
766,242
(273
)
(1
)
(1,530
)
222,942
221,138
120,460
164,802
180,861
(466,123
)
(48,956
)
(27,782
)
(16,259
)
52,706
(40,291
)
49,166
4,606
5,071
(52,706
)
6,137
169,353
115,845
156,155
211,754
(466,123
)
186,984
(2,937
)
17,135
8,647
(43,413
)
(20,568
)
$
166,416
$
132,980
$
164,802
$
168,341
$
(466,123
)
$
166,416
Table of Contents
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2002
(In thousands)
Noble
Holding
Noble
Noble
(Subsidiary
Drilling
Other
Consolidating
(Guarantor)
(Guarantor)
(Issuer)
Subsidiaries
Adjustments
Total
$
$
$
11,336
$
899,083
$
$
910,419
26,183
26,183
26,416
26,416
276
27,230
(276
)
27,230
11,612
978,912
(276
)
990,248
217
9,923
478,765
(276
)
488,629
23,058
23,058
20,951
20,951
27,868
27,868
5,718
119,436
125,154
3,087
(4,012
)
27,864
26,939
(5,908
)
(5,908
)
3,304
11,629
692,034
(276
)
706,691
(3,304
)
(17
)
286,878
283,557
193,105
207,291
220,381
(620,777
)
(20,952
)
(25,988
)
(16,634
)
20,952
(42,622
)
20,959
5,867
(3,484
)
(20,952
)
2,390
210,760
186,339
200,243
266,760
(620,777
)
243,325
(1,257
)
7,333
7,048
(46,946
)
(33,822
)
$
209,503
$
193,672
$
207,291
$
219,814
$
(620,777
)
$
209,503
Table of Contents
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2004
(In thousands)
Table of Contents
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2003
(In thousands)
Table of Contents
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2002
(In thousands)
Noble
Holding
Noble
Noble
(Subsidiary
Drilling
Other
Consolidating
(Guarantor)
(Guarantor)
(Issuer)
Subsidiaries
Adjustments
Total
$
209,503
$
193,672
$
207,291
$
219,814
$
(620,777
)
$
209,503
6,449
148,020
154,469
(576
)
17,446
16,870
168
168
(1,780
)
(1,780
)
3,208
1,670
4,878
9,758
9,758
(5,908
)
(5,908
)
400
400
(193,105
)
(207,291
)
(220,381
)
620,777
6,471
(2,948
)
3,523
(560
)
4,955
4,395
10,972
(85,777
)
74,805
(29
)
992
3,979
4,942
396
14,113
14,509
17,459
57,346
(74,805
)
1,172
28,465
29,637
30,549
3,840
(82,453
)
493,428
445,364
(46,423
)
(310,431
)
(356,854
)
(121,500
)
(121,500
)
(905
)
(41,866
)
(42,771
)
3,840
(3,840
)
1,879
1,879
6,200
6,200
4,160
4,160
(115,082
)
(115,082
)
83,219
83,219
3,840
(47,328
)
(493,421
)
(3,840
)
(540,749
)
125,000
125,000
(3,840
)
(5,350
)
(55,422
)
3,840
(60,772
)
6,275
9,092
15,367
(33,966
)
(33,966
)
2,619
1,039
3,658
698
698
(25,072
)
(3,840
)
129,781
(54,724
)
3,840
49,985
9,317
(54,717
)
(45,400
)
108,209
108,209
$
9,317
$
$
$
53,492
$
$
62,809
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
International
Domestic
Contract
Contract
Engineering
Drilling
Drilling
& Consulting
Services
Services
Services
Other
Total
$
720,412
$
255,027
$
21,492
$
69,300
$
1,066,231
119,608
44,566
589
3,456
168,219
16,997
16,500
117
775
34,389
3,931
3,931
16,012
11,655
315
(12,251
)
15,731
103,523
34,966
(8,363
)
15,960
146,086
1,834,385
1,243,063
38,366
192,159
3,307,973
244,172
8,973
1,620
6,276
261,041
$
663,321
$
262,378
$
23,545
$
38,136
$
987,380
97,584
46,473
610
3,460
148,127
19,548
19,899
147
697
40,291
2,307
2,307
13,252
14,201
286
(7,171
)
20,568
131,379
40,470
(12,737
)
7,304
166,416
1,578,736
1,283,662
30,322
296,913
3,189,633
135,986
79,816
637
90,695
307,134
$
636,869
$
304,842
$
14,569
$
33,968
$
990,248
70,803
50,774
380
3,197
125,154
18,676
23,405
361
180
42,622
1,780
1,780
22,674
16,509
(191
)
(5,170
)
33,822
177,223
44,636
(5,754
)
(6,602
)
209,503
1,448,572
1,377,386
30,631
209,125
3,065,714
249,924
97,232
15,669
115,529
478,354
Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROFIT OR LOSS
2004
2003
2002
$
130,126
$
159,112
$
216,105
15,960
7,304
(6,602
)
$
146,086
$
166,416
$
209,503
Revenues
Identifiable Assets
Year Ended December 31,
December 31,
2004
2003
2002
2004
2003
2002
$
265,767
$
283,097
$
317,059
$
1,483,844
$
1,528,333
$
1,514,619
5,502
8,110
7,180
29,821
105,405
138,623
123,157
456,079
427,375
443,823
26,741
24,755
19,445
11,479
10,116
16,674
84,225
78,660
78,632
12,809
28,141
35,307
21,213
22,359
32,307
41,980
44,498
44,909
4,377
7,257
771
9,440
1,569
17,025
38,396
14,318
11,380
87,443
99,211
28,267
150,030
129,473
34,818
167,766
172,471
111,742
81,357
61,218
132,378
136,609
130,891
145,126
78,556
48,853
62,272
213,788
127,203
114,621
99,125
100,984
141,571
134,958
148,503
149,002
83,366
72,216
40,946
290,670
219,246
192,160
91,783
74,955
66,174
151,310
150,434
164,312
1,804
1,162
790
10,241
15,816
14,981
800,464
704,283
673,189
1,824,129
1,661,300
1,551,095
$
1,066,231
$
987,380
$
990,248
$
3,307,973
$
3,189,633
$
3,065,714
Table of Contents
Table of Contents
(a)
The following documents are filed as part of this report:
(1)
A list of the financial statements filed as a part of this report is set forth
in Item 8 on page 36 and is incorporated herein by reference.
(2)
Financial Statement Schedules:
All schedules are omitted because they are either not applicable or required information
is shown in the financial statements or notes thereto.
(3)
Exhibits:
The information required by this Item 15(a)(3) is set forth in the Index to Exhibits
accompanying this Annual Report on Form 10-K and is incorporated herein by reference.
Table of Contents
NOBLE CORPORATION
By:
/s/ James C. Day
James C. Day, Chairman, Chief Executive Officer and President
Signature
Capacity In Which Signed
Date
Chairman, Chief Executive Officer and
March 8, 2005
President and Director
(Principal Executive Officer)
Chief Operating Officer,
March 8, 2005
Senior Vice President,
Chief Financial Officer, Treasurer and
Controller
(Principal Financial and Accounting
Officer)
Director
March 8, 2005
Director
March 8, 2005
Director
March 8, 2005
Director
March 8, 2005
Director
March 8, 2005
Director
March 8, 2005
Director
March 8, 2005
Table of Contents
Exhibit
Number
Exhibit
Agreement and Plan of Merger dated as of March 11, 2002 among Noble Corporation, Noble Cayman
Acquisition Corporation, Noble Holding (U.S.) Corporation and Noble Drilling Corporation
(included as Annex A to the proxy statement/prospectus that constitutes a part of the
Registrants Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by
reference).
Memorandum of Association of the Registrant (filed as Exhibit 3.3 to the Registrants
Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
Articles of Association of the Registrant (filed as Exhibit 3.4 to the Registrants Registration
Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
Terms of Series A Junior Participating Preferred Shares of the Registrant (filed as Exhibit 4.1
to the Registrants Registration Statement on Form S-4 (No. 333-84278) and incorporated herein
by reference).
Indenture dated as of March 1, 1999, between Noble Drilling Corporation and JP Morgan Chase Bank
(formerly Chase Bank of Texas, National Association), as trustee (filed as Exhibit 4.1 to the
Form 8-K of Noble Drilling Corporation (hereinafter sometimes referred to as NDC) dated March
22, 1999 (date of event: March 1, 1999) and incorporated herein by reference).
Supplemental Indenture dated as of March 16, 1999, between Noble Drilling Corporation and JP
Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as trustee (filed as
Exhibit 4.2 to NDCs Form 8-K dated March 22, 1999 (date of event: March 1, 1999) and
incorporated herein by reference).
Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights Agent, which includes
the Form of Right Certificate as Exhibit B thereto (filed as Exhibit 4.1 to the Registrants
Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
First Amendment to Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights
Agent, dated as of March 12, 2003 (filed as Exhibit 4.2 to the Registrants Form 8-K filed on
March 14, 2003 and incorporated herein by reference).
Note Purchase Agreement dated as of December 21, 1998, by and among Noble Drilling (Jim
Thompson) Inc., JP Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as
Trustee, and each of the note purchasers thereunder. Each note purchaser has entered into a
separate Note Purchase Agreement, which agreements are substantially identical in all material
respects, except for the principal amount of notes purchased. A schedule identifying each of
the note purchasers that entered into a Note Purchase Agreement with Noble Drilling (Jim
Thompson) Inc. and the principal amount of notes purchased by each such note purchaser is
included as Annex I to the Note Purchase Agreement (filed as Exhibit 4.24 to NDCs Registration
Statement on Form S-3 (No. 333-72059) and incorporated herein by reference).
Indenture of First Naval Mortgage, dated as of December 21, 1998, made by Noble Drilling (Jim
Thompson) Inc. in favor of JP Morgan Chase Bank (formerly Chase Bank of Texas, National
Association), as Trustee (filed as Exhibit 4.25 to NDCs Registration Statement on Form S-3 (No.
333-72059) and incorporated herein by reference).
Parent Guaranty, dated as of December 21, 1998, by Noble Drilling Corporation in favor of JP
Morgan Chase Bank (formerly Chase Bank of Texas, National Association), as Trustee (filed as
Table of Contents
Exhibit
Number
Exhibit
Exhibit 4.26 to NDCs Registration Statement on Form S-3 (No. 333-72059) and incorporated herein
by reference).
Credit Agreement dated May 30, 2001, among Noble Drilling Corporation, Christiania Bank og
Kreditkasse ASA, New York Branch, as Administrative Agent, and the lenders named therein (filed
as Exhibit 4 to NDCs Quarterly Report on Form 10-Q for the three-month period ended June 30,
2001 and incorporated herein by reference).
Irrevocable Letter of Credit, dated December 20, 2001, by Nordea Bank Norge ASA, New York
Branch, and issued to JP Morgan Chase Bank, as Trustee of the Trust Indenture and Security
Agreement, dated as of November 24, 1998, between Noble Drilling (Paul Romano) Inc. and the
Trustee, for the benefit of the note holders thereunder (filed as Exhibit 4.17 to NDCs Annual
Report on Form 10-K for the year ended December 31, 2001 and incorporated herein by reference).
Amended and Restated Credit Agreement dated May 1, 2002 among Noble Corporation, Noble Holding
(U.S.) Corporation, Noble Drilling Corporation, Nordea Bank Norge ASA, New York Branch, as Administrative Agent, and the lenders named therein (filed as Exhibit 4.1 to the Registrants Quarterly Report
on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by
reference).
First Amendment to Note Purchase Agreement and Consent, dated March 15, 2002, between Noble
Drilling (Jim Thompson) Inc., each of the note purchasers thereunder and JPMorgan Chase Bank,
National Association, as trustee (filed as Exhibit 4.2 to the Registrants Quarterly Report on
Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
Amended and Restated Parent Guaranty, dated as April 25, 2002, by Noble Corporation, Noble
Holding (U.S.) Corporation and Noble Drilling Corporation, in favor of JPMorgan Chase Bank,
National Association, as trustee, for the benefit of the note purchasers under the Note
Purchase Agreement and Consent with Noble Drilling (Jim Thompson) Inc. (filed as Exhibit 4.3 to the Registrants Quarterly Report
on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by
reference).
Second Supplemental Indenture, dated as of April 30, 2002, between Noble Drilling Corporation,
Noble Holding (U.S.) Corporation and Noble Corporation, and JP Morgan Chase Bank, as trustee
(filed as Exhibit 4.6 to the Registrants Quarterly Report on Form 10-Q for the three-month
period ended March 31, 2002 and incorporated herein by reference).
Second Amendment, dated November 24, 2004, among Noble Corporation, Noble Holding (U.S.)
Corporation, Noble Drilling Corporation, various lending institutions party to the Credit
Agreement, Wells Fargo Bank, N.A. (as successor to Wells Fargo Bank Texas, National
Association) and SunTrust Bank, as Documentation Agents, The Bank of Tokyo-Mitsubishi, Ltd. and
Westdeutsche Landesbank Girozentrale, New York Branch, as Syndication Agents, The Bank of
Tokyo-Mitsubishi, Ltd. and Nordea Bank Finland Plc, New York Branch, as Co-Lead Arrangers,
Nordea Bank Finland Plc, as Bookrunner, and Nordea Bank Finland Plc, New York Branch (as the
replacement Administrative Agent to Nordea Bank Norge ASA, New York Branch, as successor by
merger to Christiania Bank og Kreditkasse ASA, New York Branch), as Administrative Agent (filed
as Exhibit 4.1 to the Registrants Current Report on Form 8-K dated November 30, 2004 and
incorporated herein by reference).
Amendment to the Noble Corporation 1991 Stock Option and Restricted Stock Plan dated as of April
24, 2003, and composite copy of the Plan through such Amendment (filed as Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended
March 31, 2003 and incorporated herein by reference).
Amendment No. 4 to the Noble Corporation 1992 Nonqualified Stock Option Plan for Non-Employee
Directors dated as of April 24, 2003, and composite copy of the Plan through such
Table of Contents
Exhibit
Number
Exhibit
Amendment (filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the three-month
period ended March 31, 2003 and incorporated herein by reference).
Noble Corporation Equity Compensation Plan for Non-Employee Directors (filed as Exhibit 10.1 to
NDCs Quarterly Report on Form 10-Q for the three-month period ended September 30, 1996 and
incorporated herein by reference).
Amendment, effective as of May 1, 2002, to the Noble Corporation Equity Compensation Plan for
Non-Employee Directors (filed as Exhibit 10.1 to Post-Effective Amendment No. 1 to the
Registrants Registration Statement on Form S-8 (No. 333-17407) and incorporated herein by
reference).
Noble Corporation Short Term Incentive Plan (revised July 2004) (filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended
June 30, 2004 and incorporated herein by reference).
Noble Drilling Corporation 401(k) Savings Restoration Plan (filed as Exhibit 10.1 to the
Registrants Registration Statement on Form S-8 dated January 18, 2001 (No. 333-53912) and
incorporated herein by reference).
Amendment No. 1 to the Noble Drilling Corporation 401(k) Savings Restoration Plan (filed as
Exhibit 10.1 to Post-Effective Amendment No. 1 to the Registrants Registration Statement on
Form S-8 (No. 333-53912) and incorporated herein by reference).
Noble Drilling Corporation Retirement Restoration Plan dated April 27, 1995 (filed as Exhibit
10.2 to NDCs Quarterly Report on Form 10-Q for the three-month period ended
March 31, 1995 and incorporated herein by reference).
Amendment No. 1 to the Noble Drilling Corporation Retirement Restoration Plan dated January 29,
1998 (filed as Exhibit 10.18 to NDCs Annual Report on Form 10-K for the year ended December 31,
1997 and incorporated herein by reference).
Guarantee dated August 26, 1994 between Noble Drilling Corporation and Hibernia Management and
Development Company Ltd. (filed as Exhibit 10.45 to NDCs Annual Report on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference).
Form of Indemnity Agreement entered into between Noble Corporation and each of its directors and officers (filed as Exhibit
10.1 to the Registrants Quarterly Report on Form 10-Q for the three-month period ended March
31, 2002 and incorporated herein by reference).
Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and James
C. Day (filed as Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).
Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and James C. Day (filed as Exhibit 10.3 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).
Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and Mark
A. Jackson (filed as Exhibit 10.6 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).
Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and Mark A. Jackson
Table of Contents
Exhibit
Number
Exhibit
(filed as Exhibit 10.7 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).
Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble
Drilling Corporation and Julie J. Robertson (filed as Exhibit 10.8 to the Registrants
Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated
herein by reference).
Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and Julie J. Robertson (filed as Exhibit 10.9 to the
Registrants Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and
incorporated herein by reference).
Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and Danny
W. Adkins (filed as Exhibit 10.10 to the Registrants Quarterly Report on Form 10-Q for the
three-month period ended March 31, 2002 and incorporated herein by reference).
Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated
Employment Agreement by and between Noble Drilling Corporation and Danny W. Adkins (filed as
Exhibit 10.11 to the Registrants Quarterly Report on Form 10-Q for the three-month period ended
March 31, 2002 and incorporated herein by reference).
Amendment No. 2 to the Noble Corporation Equity Compensation Plan for Non-Employee Directors
dated February 4, 2005.
Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan
For Non-Employee Directors dated February 4, 2005.
Noble Corporation Code of Business Conduct and Ethics (filed as Exhibit 14.1 to the Registrants
Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by
reference).
Subsidiaries of the Registrant.
Consent of PricewaterhouseCoopers LLP.
Certification of James C. Day Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).
Certification of Mark A. Jackson Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).
Certification of James C. Day Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
Certification of Mark A. Jackson Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
*
Management contract or compensatory plan or arrangement required to be filed as an exhibit
hereto.
+
Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K.
EXHIBIT 10.20
AMENDMENT NO. 2
TO THE
NOBLE CORPORATION
EQUITY COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
WHEREAS, Noble Corporation, a Cayman Islands exempted company limited by shares (the "Company"), has previously adopted the Noble Corporation Equity Compensation Plan for Non-Employee Directors (the "Plan");
WHEREAS, the Board of Directors of the Company (the "Board") has determined that certain amendments to the Plan are appropriate and in the best interests of the Company and its members; and
WHEREAS, pursuant to the provisions of Section 6 of the Plan and the rules of the New York Stock Exchange (which are applicable to the Company), the Board of Directors has determined to submit such amendments to members for their approval;
NOW THEREFORE, the Company does hereby amend the Plan, subject to member approval, as follows:
1. The first sentence of Section 4(a) of the Plan is amended by deleting "Seventy-five thousand (75,000)" in such section and replacing it with "One hundred twenty-five thousand (125,000)".
2. Section 5(a) of the Plan is deleted in its entirety and the following is substituted in its place:
"Quarterly Amounts; Required Share Amount. Subject to the
provisions of the Plan, each Outside Director shall be paid an annual
retainer for serving as a director of the Company (the "Annual
Retainer"). The amount of the Annual Retainer to be paid to each
Outside Director for each Plan Year shall be $50,000. Of this amount,
(i) $40,000 shall be the cash component of the Annual Retainer, payable
in cash in quarterly installments of $10,000 each at the end of each
Plan Quarter of the Plan Year (each such quarterly installment being
herein referred to as a "Quarterly Amount"), and (ii) $10,000 shall be
the equity component of the Annual Retainer, payable in Ordinary Shares
in one installment at the end of the Plan Year (the "Required Share
Amount"). An Outside Director who serves in such capacity for less than
an entire Plan Quarter shall have his Quarterly Amount for such Plan
Quarter pro-rated based on his number of days of service as an Outside
Director during such Plan Quarter. An Outside Director who serves in
such capacity for less than an entire Plan Year shall have his Required
Share Amount for such Plan Year pro-rated based on his number of days
of service as an Outside Director during such Plan Year."
3. This Amendment No. 2 shall amend only those provisions of the Plan set forth herein, and those Sections, paragraphs and sentences not expressly amended hereby shall remain in full force and effect.
4. This Amendment No. 2 shall become effective as of August 1, 2004, subject to and upon the receipt of member approval by the affirmative votes of the holders of a majority of the Ordinary Shares present, or represented, and entitled to vote at a meeting of members duly held in accordance with the applicable laws of the Cayman Islands.
IN WITNESS WHEREOF, the undersigned has executed this Amendment No. 2 as of February 4, 2005.
NOBLE CORPORATION
By: /s/ JAMES C. DAY ------------------------------------ James C. Day Chairman of the Board and Chief Executive Officer |
EXHIBIT 10.21
AMENDED AND RESTATED
NOBLE CORPORATION
1992 NONQUALIFIED STOCK OPTION AND RESTRICTED SHARE PLAN
FOR NON-EMPLOYEE DIRECTORS
RECITALS
WHEREAS, Noble Drilling Corporation, a Delaware corporation ("Noble-Delaware"), established on December 17, 1992 the Noble Drilling Corporation 1992 Nonqualified Stock Option Plan for Non-Employee Directors;
WHEREAS, Noble Corporation, a Cayman Islands exempted company limited by shares (the "Company"), has previously assumed such plan (as amended and restated prior to the date hereof, the "Original Plan") in connection with the corporate restructuring of Noble-Delaware;
WHEREAS, it is the purpose of the Original Plan to promote the interests of the Company and its members by attracting, retaining and stimulating the performance of qualified non-employee directors by giving them the opportunity to acquire a proprietary interest in the Company and an increased personal interest in its continued success and progress;
WHEREAS, pursuant to the provisions of Section 5.01 of the Original Plan, the Board of Directors of the Company may amend the Original Plan;
WHEREAS, the rules of the New York Stock Exchange (which are applicable to the Company) require that certain amendments of equity-compensation plans of listed companies be submitted to members for their approval; and
WHEREAS, the Board of Directors of the Company has determined that it is advisable to amend and restate the Original Plan, that such amendment and restatement of the Original Plan is appropriate and in the best interests of the Company and its members and that such amendment and restatement shall be submitted to the members of the Company for their approval in accordance with the rules of the New York Stock Exchange and the articles of association of the Company;
NOW THEREFORE, the Company does hereby amend and restate the Original Plan, subject to member approval, as follows:
ARTICLE I
GENERAL
1.01 Definitions. As used herein the following terms shall have the following meanings:
(a) "Award Date" means the next business day after each annual general meeting of members of the Company occurring after the Effective Date.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the United States Internal Revenue Code of 1986, as amended.
(d) "Company" means Noble Corporation, a Cayman Islands exempted company limited by shares, and its successors.
(e) "Director" means a member of the Board and does not include any person named as a director emeritus pursuant to the articles of association of the Company.
(f) "Effective Date" means February 4, 2005, the date of adoption of the Plan by the Board, subject to member approval.
(g) "Employee" means any employee of the Company or any parent or subsidiary corporation of the Company within the meaning of Sections 424(e) and (f) of the Code.
(h) "Fair Market Value" means (1) the average of the closing sales prices of the Ordinary Shares for the 10 business days immediately preceding the date in question, as reported on a national securities exchange (if the Ordinary Shares are listed for trading on such exchange) or as reported of the NASDAQ National Market (if the Ordinary Shares are not listed for trading on a national securities exchange), or (2) if the Ordinary Shares are not listed for trading on a national securities exchange or is not listed as a national market security of NASDAQ or any similar system then in use, then the average of the mean between the bid and asked prices of the Ordinary Shares for the 10 business days immediately preceding the date in question, as reported by the National Association of Securities Dealers, Inc. Such closing sales prices shall be appropriately adjusted to take into account any share dividend, split or combination with respect to the Ordinary Shares that occurs within such 10 business day period.
(i) "Immediate Family Members" means the spouse, former spouse, children (including stepchildren) or grandchildren of an individual.
(j) "Initial Award" shall have the meaning assigned to such term in Section 3.02(b) hereof.
(k) "Non-Employee Director" shall mean an individual who (1) is now, or hereafter becomes, a Director by virtue of an election (a) by the members of the Company, or (b) to the extent permitted under applicable law and the articles of association of the Company, by the Board for the purpose of filling a vacancy on the Board resulting from the death, disability, resignation, removal or retirement of a Director or from an increase in the number of persons constituting the entire Board, (2) is neither an Employee nor an officer of the Company (i.e., an individual elected or appointed by the Board or chosen in such other manner as may be prescribed in the articles of association of the Company to serve as such) and (3) has not elected to decline to participate in the Plan with respect to a particular Option or award of Restricted Shares pursuant to Section 1.03 hereof.
(l) "Option" means any option to purchase Ordinary Shares granted pursuant to the Plan.
(m) "Optionee" means a Non-Employee Director who has been granted an Option.
(n) "Option Period" shall have the meaning assigned to such term in Section 3.02(d) hereof.
(o) "Ordinary Shares" means the Ordinary Shares, par value US$0.10 per share, of the Company.
(p) "Plan" shall mean this Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan for Non-Employee Directors, as it may be amended from time to time.
(q) "Restricted Shares" means Ordinary Shares issued or transferred pursuant to Article IV hereof.
(r) "Vesting Period" shall have the meaning assigned to such term in Section 4.02(d) hereof.
1.02 Options. The Options shall be options that are not qualified as "incentive stock options" under Section 422 of the Code.
1.03 Election to Not Participate in Grants or Awards. A Director
otherwise eligible to participate in the Plan may elect to decline to accept any
Option or award of Restricted Shares by giving notice thereof to the Company, or
(i) in the case of an Option, by refusing to execute a share option agreement
relating to such Option, or (ii) in the case of an award of Restricted Shares,
by refusing to execute a restricted share agreement relating to such award.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board. The Board shall have no authority, discretion or power to select the Non-Employee Directors who will receive Options or Restricted Shares or to set the number of shares to be covered by each Option or the number of Restricted Shares covered by each award. The Board shall have no authority, discretion or power to set the exercise price or the period within which Options may be exercised, or to alter any other terms or conditions specified herein, except in the sense of administering the Plan subject to the express provisions hereof, including Section 6.01.
Subject to the foregoing limitations, the Board shall have authority and power to adopt such rules and regulations and to take such action as it shall consider necessary or advisable for the administration of the Plan, and to construe, interpret and administer the Plan. The decisions of the Board relating to the Plan shall be final and binding upon the Company, the Non-Employee Directors, the Optionees, the holders of Restricted Shares and all other persons. No member of the Board shall incur any liability by reason of any action or determination made in good faith with respect to the Plan or any share option agreement or restricted share agreement entered into pursuant to the Plan.
ARTICLE III
GRANT OF OPTIONS
3.01 Participation. Subject to Section 1.03, each Non-Employee Director shall be granted Options on the terms and conditions herein described.
3.02 Share Option Agreements. Each Option shall be evidenced by a written share option agreement, which agreement shall be entered into by the Company and the Non-Employee Director to whom the Option is granted. Each such agreement shall include, incorporate or conform to the following terms and conditions, and such other terms and conditions not inconsistent therewith or with the terms and conditions of this Plan as the Board considers appropriate in each case:
(a) Grant. On each Award Date Options shall be granted automatically to each person who is a Non-Employee Director on such date.
(b) Number. Each Non-Employee Director who begins serving on the Board after the Effective Date shall automatically be granted an Option to purchase 10,000 Ordinary Shares on the first Award Date occurring after such person begins serving (the "Initial Award"). Each Non-Employee Director serving on an Award Date, and who is not entitled to receive an Initial Award on such date in accordance with the preceding sentence, shall automatically be granted, as of such date, an Option to purchase 2,000 Ordinary Shares.
(c) Price. The exercise price under each Option shall be the Fair Market Value per Ordinary Share on the Award Date of such Option.
(d) Option Period. Each Option shall be exercisable from time to time over a period (i) commencing upon the earlier of (A) the date that is one year following the Award Date of such Option and (B) the day immediately prior to the date of the next annual general meeting of members occurring following such Award Date, provided that the date of such annual general meeting of members is at least 355 days after such Award Date, and (ii) ending upon the expiration of ten years from such Award Date (the "Option Period"), unless terminated sooner pursuant to the provisions described in Section 3.02(e) below.
(e) Termination of Services, Death, Etc. Each share option agreement shall provide as follows with respect to the exercise of the Option evidenced thereby in the event that the Optionee ceases to be a Director for the reasons described in this Section 3.02(e):
(i) If the Optionee ceases to be a Director on account of such Optionee's (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any direct or indirect majority-owned subsidiary of the Company, then the Option shall automatically terminate and be of no further force or effect as of the date the Optionee ceases to be a Director;
(ii) If the Optionee shall die during the Option Period while a Director (or during the additional five-year period provided by paragraph (iii) of this Section 3.02(e)), the Option may be exercised, to the extent that the Optionee was entitled to exercise it at the date of the Optionee's death, within five years after such death (if otherwise within the Option Period), but not thereafter, by the executor or administrator of the estate of such Optionee, or by the person or persons who shall have acquired the Option directly from the Optionee by bequest or inheritance; or
(iii) If an Optionee ceases to be a Director for any
reason (other than the circumstances specified in paragraphs
(i) and (ii) of this Section 3.02(e)) within the Option
Period, the Option may be exercised, to the extent the
Optionee was able to do so at the date of termination of the
directorship, within five years after such termination (if
otherwise within the Option Period), but not thereafter.
(f) Transferability. No Option shall be transferable, other than by will or the laws of descent and distribution, or the rules thereunder, or pursuant to a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, and may be exercised during the life of the Optionee only by the Optionee, except as otherwise provided herein below. Notwithstanding the foregoing, all or a portion of the Options granted to an Optionee may be transferred by such Optionee (i) by gift to the Immediate Family Members of such Optionee, partnerships whose only partners are such Optionee or the Immediate Family Members of such Optionee, limited liability companies whose only shareholders or members are such Optionee or the Immediate Family Members of such Optionee, and trusts established solely for the benefit of such Optionee or the Immediate Family Members of such Optionee, or (ii) to any other persons or entities in the discretion of the Board; provided, that subsequent transfers of transferred Options shall be prohibited except those in accordance with this Section (by will or the laws of descent and distribution). Following transfer, any such Options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer; provided, that for purposes of the Plan and any share option agreement under the Plan, the term "Optionee" shall be deemed to refer to the transferee. The events of any termination of association set forth in Section 3.02(e) of the Plan and in the share option agreement shall continue to be applied with respect to the original Optionee, following which the transferred Options shall be exercisable by the transferee only to the extent, and for the periods, specified in Section 3.02(e) of the Plan and in the share option agreement.
(g) Agreement to Continue in Service. Each Optionee shall agree to remain in the service of the Company, at the pleasure of the Company's members, for a continuous period extending at least through the earlier of (i) the date that is one year following the Award Date of the Option and (ii) the day immediately prior to the date of the next annual general meeting of members occurring following such Award Date, at the retainer rate and fee schedule then in effect or at such changed rate or schedule as the Company from time to time may establish; provided, that nothing in the Plan or in any share option agreement evidencing an Option shall confer upon such Optionee any right to continue as a Director.
(h) Exercise, Payments, Etc. Each share option agreement between the Company and an Optionee shall provide that the method for exercising the Option evidenced thereby shall be by delivery to the President of the Company by United States registered or certified mail, postage prepaid, addressed to the Company, or by hand delivery, of written notice signed by the Optionee specifying the number Ordinary Shares with respect to which such Option is being exercised. Upon exercise of an Option, the purchase price for the Ordinary Shares purchased shall be paid in full by cash or check; provided, however, that at the request of an Optionee and to the extent permitted by applicable law, the Company shall approve reasonable arrangements with such Optionee and a brokerage firm under which such Optionee may exercise an Option by properly delivering notice of exercise, together with such other documents as the Company shall require, and the Company shall, upon payment in full by cash or check of the purchase
price and any other amounts due in respect of such exercise, deliver to such Optionee's brokerage firm one or more certificates representing Ordinary Shares issued in respect of such exercise.
Any notice given hereunder shall be deemed to be given on the date on which the same was deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and sent as above-stated, or, in the case of hand delivery, on the date of delivery to the President of the Company. The proceeds of any sale of Ordinary Shares covered by Options shall constitute general funds of the Company. Upon exercise of an Option, the Optionee will be required to pay to the Company the amount of any federal, state or local taxes required by law to be withheld in connection with such exercise.
ARTICLE IV
AWARD OF RESTRICTED SHARES
4.01 Participation. Subject to Section 1.03 hereof, each Non-Employee Director shall be awarded Restricted Shares on the terms and conditions herein described.
4.02 Restricted Share Agreements. Each Restricted Share award shall be evidenced by a written restricted share agreement, which agreement shall be entered into by the Company and the Non-Employee Director to whom Restricted Shares are awarded. Each such agreement shall include, incorporate or conform to the following terms and conditions, and such other terms and conditions not inconsistent therewith or with the terms and conditions of this Plan as the Board considers appropriate in each case:
(a) Restricted Share Awards. On each Award Date occurring after the Effective Date, Restricted Shares shall be awarded automatically to each person who is a Non-Employee Director on such date; provided, however, that no such award shall be made to a Non-Employee Director in respect of the Award Date on which such director receives the Initial Award.
(b) Number. Each Non-Employee Director serving on an Award Date, other than any Non-Employee Director who is entitled to receive the Initial Award on such Award Date in accordance with Section 3.02, shall automatically be awarded, as of such date, 4,000 Restricted Shares.
(c) Price. There shall not be any purchase price charged for any Restricted Shares awarded under the Plan.
(d) Vesting Period. Each Restricted Share award shall vest one-third per year over three years commencing on the first anniversary of the Award Date ("Vesting Period"), unless terminated sooner pursuant to the provisions described in Section 4.02(g) below. If a Non-Employee Director is awarded Restricted Shares, whether or not escrowed as provided below, the Non-Employee Director shall be the record owner of such Restricted Shares and shall have all the rights of a member with respect to such Restricted Shares (unless the escrow agreement, if any, specifically provides otherwise), including the right to vote and the right to receive dividends or other distributions made or paid with respect to such Restricted Shares.
(e) Sale, Transferability, Etc. Restricted Shares may not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of prior to the date all applicable restrictions lapse.
(f) Restrictive Legend. Any certificate or certificates representing Restricted Shares shall bear a legend similar to the following:
"The shares represented by this certificate have been issued pursuant to the terms of the Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan for Non-Employee Directors and may not be sold, assigned, transferred, discounted, exchanged, pledged or otherwise encumbered or disposed of in any manner except as set forth in the terms of the agreement embodying the award of such shares dated _________, 20__."
In order to enforce the restrictions, terms and conditions that may be applicable to a Non-Employee Director's Restricted Shares, the Board may require the Non-Employee Director, upon the receipt of a certificate or certificates representing such Restricted Shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement in such form as by the Board shall prescribe. After the satisfaction of the restrictions, terms and conditions set by the Board at the time of an award of Restricted Shares to a Non-Employee Director, a new certificate, without the legend set forth above, for the number of Ordinary Shares that are no longer subject to such restrictions, terms and conditions shall be delivered to the Non-Employee Director.
(g) Termination of Service, Death, Etc. Each restricted share agreement shall provide as follows with respect to the award of Restricted Shares in the event that the holder of Restricted Shares ceases to be a Director for the reasons described in this Section 4.02(g):
(i) If the holder of Restricted Shares ceases to be a Director on account of such holder's (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation or conversion of assets or opportunities of the Company or any direct or indirect majority-owned subsidiary of the Company, then any Restricted Shares remaining subject to restrictions shall thereupon be forfeited by the holder and transferred to, and reacquired by, the Company or an Affiliate at no cost to the Company or the affiliate of the Company as of the date the holder ceases to be a Director.
(ii) The Board shall have the authority (and the restricted share agreement evidencing an award of Restricted Shares may so provide) to cancel all or any portion of any outstanding restrictions prior to the expiration of such restrictions with respect to any or all of the Restricted Shares awarded to a Non-Employee Director hereunder on such terms and conditions as the Board may deem appropriate.
(iii) If a Non-Employee Director to whom Restricted Shares has been awarded ceases to be a Director, for any reason, prior to the satisfaction of any terms and conditions of an award, any Restricted Shares remaining subject to restrictions shall thereupon be forfeited by the Director and transferred to, and reacquired by, the Company or an affiliate of the Company at no cost to the Company or such affiliate; provided, however, if the cessation is due to the person's death, retirement or disability, the Board may, in its sole and absolute discretion, deem that the terms and conditions have been met for all or part of such remaining portion.
(iv) In case of any consolidation, amalgamation or merger of another corporation into the Company in which the Company is the surviving corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the Ordinary Shares (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares), the Board may provide that payment of Restricted Shares shall take the form of the kind and amount of shares of stock and other securities (including those of any new direct or indirect parent of the Company), property, cash or any combination thereof receivable upon such consolidation or merger.
(v) In the event of any forfeiture of Restricted Shares, the Director holding such shares, or in the event of his or her death, his or her personal representative, shall forthwith deliver to the Secretary of the Company the certificates for the Restricted Shares remaining subject to such restrictions, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Company.
(h) No Right to Continue in Service. Nothing in the Plan or in any restricted share agreement evidencing the award of Restricted Shares shall confer upon such holder any right to continue as a Director.
ARTICLE V
AUTHORIZED ORDINARY SHARES
5.01 Ordinary Shares. The total number of Ordinary Shares as to which Options may be granted or Restricted Shares may be awarded shall be 975,000, in the aggregate, except as such number of shares shall be adjusted from and after the Effective Date in accordance with the provisions of Section 5.02 hereof. If any outstanding Option shall expire or be terminated for any reason before the end of the Option Period, the Ordinary Shares allocable to the unexercised portion of such Option shall again be subject to the Plan. If any Restricted Shares are forfeited for any reason before the end of the Vesting Period, the Restricted Shares shall again be subject to the Plan. The Company shall, at all times during the life of any outstanding Options, retain as authorized and unissued Ordinary Shares at least the number of shares from time to time included in the outstanding Options or otherwise assure itself of its ability to perform its obligations under the Plan.
5.02 Adjustments Upon Changes in Ordinary Shares. In the event the Company shall effect a split of the Ordinary Shares or dividend payable in Ordinary Shares, or in the event the outstanding Ordinary Shares shall be combined into a smaller number of shares, the maximum number of shares as to which Options may be granted or Restricted Shares may be awarded shall be increased or decreased proportionately. In the event that before delivery by the Company of all of the Ordinary Shares in respect of which any Option has been granted, the Company shall have effected such a split, dividend or combination, the shares still subject to the Option shall be increased or decreased proportionately and the purchase price per share shall be increased or decreased proportionately so that the aggregate purchase price for all the then optioned shares shall remain the same as immediately prior to such split, dividend or combination.
In the event of a reclassification of the Ordinary Shares not covered by the foregoing, or in the event of a liquidation, separation or reorganization, including a merger, consolidation or sale of assets, the Board shall make such adjustments, if any, as it may deem appropriate in the maximum number of shares then subject to being optioned or awarded as Restricted Shares and in the number, purchase price and kind of shares covered by the unexercised portions of Options theretofore granted. The provisions of this Section 5.02 shall only be applicable if, and only to the extent that, the application thereof does not conflict with any valid governmental statute, regulation or rule.
5.03 Insufficient Ordinary Shares. If on the Award Date of any Option or Restricted Shares fewer Ordinary Shares remain available for grant or award under the Plan than are necessary to permit the grant of Options and/or the award of Restricted Shares in accordance with the provisions of Sections 3.02 and/or 4.02 hereof, then (i) first, an Option covering an equal number of whole Ordinary Shares, up to 10,000 shares, shall be granted on such date to each Non-Employee Director who is to receive an Initial Award on such date and (ii) second, Options shall be granted and Restricted Shares shall be awarded to the remaining Non-Employee Directors then serving covering, in the aggregate for each such Non-Employee Director, an equal number of whole Ordinary Shares, and all such Options and Restricted Shares so awarded to all such Non-Employee Directors shall cover, in the aggregate, all remaining Ordinary Shares then available for grant or award under the Plan. In the case of clause (ii), for each such Non-Employee Director, the number of Ordinary Shares to be covered by Options and the number of Restricted Shares shall be determined in accordance with the allocation of annual awards between Options and Restricted Shares that would occur if no such deficiency of Ordinary Shares existed.
ARTICLE VI
GENERAL PROVISIONS
6.01 Amendment, Suspension or Termination of Plan. Subject to the limitations set forth in this Section 6.01, the Board may from time to time amend, modify, suspend or terminate the Plan. Nevertheless, no such amendment, modification, suspension or termination shall (a) impair any Options theretofore granted or Restricted Shares awarded, or (b) be made without the approval of the members of the Company where such change would (i) materially increase the total number of Ordinary Shares which may be issued under the Plan (other than as provided in Section 5.02 hereof), (ii) materially modify the requirements as to eligibility for participation in the Plan, (iii) materially increase the benefits accruing to participants under the Plan, (iv) have the effect of providing for the grant of options to purchase Ordinary Shares at less than the fair market value per share thereof on the applicable Award
Date or (v) require the approval of members under the rules of any securities
exchange on which the Ordinary Shares are then listed for trading.
Notwithstanding any other provision of this Section 6.01, the provisions of the
Plan governing (A) the number of Ordinary Shares covered by each Option, (B) the
exercise price per Ordinary Share under each Option, (C) when and under what
circumstances each Option will be granted, (D) the period within which each
Option may be exercised or (E) the number of shares in each award of Restricted
Shares, shall not be amended more than once every six months, other than to
comport with changes in the Code or the rules promulgated thereunder, and the
Employee Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder.
6.02 Effectiveness. This Plan shall become effective as of the Effective Date, subject to and upon the receipt of member approval by the affirmative votes of the holders of a majority of the Ordinary Shares present, or represented, and entitled to vote at a meeting of members duly held in accordance with the applicable laws of the Cayman Islands.
6.03 Paragraph Headings. The paragraph headings included herein are only for convenience, and they shall have no effect on the interpretation of the Plan.
6.04 Gender. Words of any gender used in the Plan shall be construed to include any other gender.
IN WITNESS WHEREOF, the undersigned has executed this amendment and restatement of the Plan as of February 4, 2005.
NOBLE CORPORATION
By: /s/ JAMES C. DAY -------------------------------- James C. Day Chairman of the Board and Chief Executive Officer |
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EXHIBIT 21.1
NOBLE CORPORATION SUBSIDIARIES (AS OF FEBRUARY 24, 2005)
SUBSIDIARY NAME INCORPORATED OR ORGANIZED IN: --------------------------------------------------------------------------------------------------------------------------- Noble Holding (U.S.) Corporation (1) Delaware Noble Holding Europe Sarl (1) Luxembourg Noble Drilling (Cyprus) Limited (1) Cyprus Noble Engineering & Development Limited (1) Cayman Islands Noble Downhole Technology Ltd. (1) Cayman Islands Noble Holding International Limited (1) Cayman Islands Noble Drilling Corporation (2) Delaware Noble Wellbore Technologies Inc. (2) Delaware Noble Drilling Holding LLC (3) Delaware Noble Drilling Americas LLC (3) Delaware Noble International Services LLC (3) Delaware Noble North Africa Limited (3) Cayman Islands Noble Drilling Holding Limited (4) Switzerland Noble Drilling (Denmark) Holding ApS (4) Denmark Noble Drilling (Deutschland) GmbH (5) Germany Noble Technology (Canada) Ltd. (5) Canada Noble Engineering & Development de Venezuela C.A. (6) Venezuela Noble Drilling International Inc. (7) Delaware Noble Drilling Services Inc. (7) Delaware Noble Drilling (U.S.) Inc. (7) Delaware Noble Earl Frederickson LLC (7) Delaware Triton Engineering Services Company (7) Delaware WELLDONE Engineering GmbH (8) Germany Maurer Technology Incorporated (9) Delaware Noble (Middle East) Limited (10) Cayman Islands Sedco Dubai LLC (11) Dubai Noble Brasil Investimentos e Participacoes Ltda. (12) Brazil Noble Drilling (Norway) AS (13) Norway Noble Drilling Services (Norge) AS (13) Norway Noble John Sandifer LLC (14) Delaware Noble Drilling (Jim Thompson) Inc. (14) Delaware Noble (Gulf of Mexico) Inc. (14) Delaware Noble Drilling Exploration Company (14) Delaware Noble Asset Mexico LLC (14) Delaware Noble Bill Jennings LLC (14) Delaware Noble Johnnie Hoffman LLC (14) Delaware Noble Leonard Jones LLC (14) Delaware Noble Drilling (Canada) Ltd. (15) Alberta Triton Engineering Services Company, S.A. (16) Venezuela Triton International, Inc. (16) Delaware Noble Drilling International (Cayman) Ltd. (17) Cayman Islands Maregem AS (18) Norway International Directional Services Ltd. (19) Bermuda Noble Asset Company Limited (19) Cayman Islands Noble Asset (U.K.) Limited (19) Cayman Islands Noble Contracting GmbH (19) Switzerland Noble Drilling (Nigeria) Ltd. (19) Nigeria Noble Drilling (Paul Wolff) Ltd. (19) Cayman Islands Noble Drilling (TVL) Ltd. (19) Cayman Islands Noble Enterprises Limited (19) Cayman Islands Noble International Finance Company (19) Cayman Islands Noble International Limited (19) Cayman Islands Noble Mexico Limited (19) Cayman Islands Noble-Neddrill International Limited (19) Cayman Islands Noble Drilling (N.S.) Limited (19) U.K. Noble Drilling (Denmark) ApS (19) Denmark Noble Campeche Limited (19) Cayman Islands Noble Drilling (Carmen) Limited (19) Cayman Islands Noble Gene Rosser Limited (19) Cayman Islands Noble Mexico Services Limited (19) Cayman Islands Noble Offshore Contracting Limited (19) Cayman Islands Noble Offshore Mexico Limited (19) Cayman Islands Noble do Brasil Ltda. (20) Brazil --------------------------------------------------------------------------------------------------------------------------- |
NOBLE CORPORATION SUBSIDIARIES (AS OF FEBRUARY 24, 2005)
SUBSIDIARY NAME INCORPORATED OR ORGANIZED IN: --------------------------------------------------------------------------------------------------------------------------- 372733 Alberta Inc. (21) Alberta Bawden Drilling Inc. (21) Delaware Bawden Drilling International Ltd. (21) Bermuda Noble International Services Ltd. (21) Bermuda Triton Drilling Services Nigeria Limited (22) Nigeria Triton International de Mexico, S.A. de C.V. (22) Mexico Noble Drilling (Nederland) B.V. (23) The Netherlands Noble CROSCO Drilling Ltd. (24) Cayman Islands Noble Rochford Drilling (North Sea) Ltd. (25) Cayman Islands TSIA International (Antilles) N.V. (25) The Netherlands Antilles Arktik Drilling Limited, Inc. (26) Bahamas Noble Drilling International Ltd. (27) Bermuda Noble Drilling International Services Pte Ltd. (27) Singapore Noble Drilling (Malaysia) Sdn. Bhd. (27) Malaysia Noble Drilling Arabia Limited (28) Saudi Arabia Noble Drilling de Venezuela C.A. (28) Venezuela Noble Offshore de Venezuela C.A. (28) Venezuela Noble Drilling (U.K.) Ltd. (29) U.K. Noble Drilling (Land Support) Limited (29) U.K. Noble CROSCO Operating Ltd. (30) Cayman Islands Resolute Insurance Group Ltd. (31) Bermuda 1 100% owned by Noble Corporation 2 100% owned by Noble Holding (U.S.) Corporation 3 100% owned by Noble Holding International Limited 4 100% owned by Noble Holding Europe Sarl 5 100% owned by Noble Downhole Technology Ltd. 6 100% owned by Noble Engineering & Development Limited 7 100% owned by Noble Drilling Corporation 8 100% owned by Noble Drilling (Deutschland) GmbH 9 100% owned by Noble Wellbore Technologies Inc. 10 100% owned by Noble Drilling Holding LLC 11 Joint venture (owned 49% by Noble Drilling Holding LLC) 12 99% owned by Noble Drilling Holding Limited, 1% owned by Noble Drilling Holding LLC 13 100% owned by Noble Drilling (Denmark) Holding ApS 14 100% owned by Noble Drilling (U.S.) Inc. 15 100% owned by Noble Drilling International Inc. 16 100% owned by Triton Engineering Services Company 17 95% owned by Noble Drilling International Inc., 5% owned by Noble Drilling (U.S.) Inc. 18 99% owned by Noble Drilling Services Norge AS 19 100% owned by Noble Drilling International (Cayman) Ltd. 20 99% owned by Noble Drilling International (Cayman) Ltd., 1% owned by Noble Asset Company Limited 21 100% owned by Noble Drilling (Canada) Ltd. 22 100% owned by Triton International Inc. 23 100% owned by Noble Drilling (Denmark) ApS 24 Joint venture (owned 50% by Noble Asset Company Limited) 25 100% owned by Noble Asset Company Limited 26 Joint venture (owned 82% by Noble Asset Company Limited) 27 100% owned by Noble Enterprises Limited (70% in the case of Noble Drilling (Malaysia) Sdn. Bhd.) 28 100% owned by Noble International Limited 29 100% owned by Noble Drilling (N.S.) Limited 30 100% owned by Noble CROSCO Drilling Ltd. 31 100% owned by Bawden Drilling International Ltd. --------------------------------------------------------------------------------------------------------------------------- |
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-107595) and Form S-8 (Nos. 33-18966-99, 33-46724-99, 33-50270-99, 33-57675-99, 33-62394-99, 333-17407-99, 333-25857-99, 333-53912-99, 333-80511-99, 333-107450, and 333-107451) of Noble Corporation of our report dated March 8, 2005 relating to the consolidated financial statements, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.
PricewaterhouseCoopers LLP
Houston, Texas
March 8, 2005
EXHIBIT 31.1
I, James C. Day, certify that:
1. I have reviewed this annual report on Form 10-K of Noble Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 8, 2005 /s/ JAMES C. DAY ----------------------------- James C. Day Chairman, Chief Executive Officer and President of Noble Corporation |
EXHIBIT 31.2
I, Mark A. Jackson, certify that:
1. I have reviewed this annual report on Form 10-K of Noble Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: March 8, 2005 /s/ MARK A. JACKSON ----------------------------- Mark A. Jackson Chief Operating Officer, Senior Vice President and Chief Financial Officer of Noble Corporation |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Noble Corporation (the
"Company") on Form 10-K for the period ended December 31, 2004, as filed with
the United States Securities and Exchange Commission on the date hereof (the
"Report"), I, James C. Day, Chairman, Chief Executive Officer and President of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 8, 2005 /s/ JAMES C. DAY ----------------------------------------------- James C. Day Chairman, Chief Executive Officer and President of Noble Corporation |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Noble Corporation (the "Company") on Form 10-K for the period ended December 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark A. Jackson, Chief Operating Officer, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
March 8, 2005 /s/ MARK A. JACKSON ---------------------------------------------- Mark A. Jackson Chief Operating Officer, Senior Vice President and Chief Financial Officer of Noble Corporation |