UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 001-31306

Registrant’s telephone number, including area code: (281) 276-6100

     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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     Number of Ordinary Shares outstanding October 31, 2007: 269,034,885

 

 

TABLE OF CONTENTS

		PAGE
PART I
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			29
Forward-Looking Statements			29
Executive Overview			29
Internal Investigation			30
Results of Operations			31
Liquidity and Capital Resources			43
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			45
ITEM 4. CONTROLS AND PROCEDURES			46
PART II
ITEM 1. LEGAL PROCEEDINGS			47
ITEM 1A. RISK FACTORS			47
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			48
ITEM 6. EXHIBITS			48
SIGNATURES			49
INDEX TO EXHIBITS			50
Second Amended and Restated 1992 Nonqualified Stock Option and Share Plan for Non-Employee Directors
Certification of William A. Sears
Certification of Thomas L. Mitchell
Certification of William A. Sears
Certification of Thomas L. Mitchell

PART I. FINANCIAL INFORMATION

See accompanying notes to the consolidated financial statements.

See accompanying notes to the consolidated financial statements .

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 1 — BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements of Noble Corporation (“Noble” or, together with its consolidated subsidiaries, the “Company”) have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. The Consolidated Balance Sheet at December 31, 2006 presented herein is derived from the December 31, 2006 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

     Unless otherwise indicated, all share and per share data included in the unaudited condensed consolidated financial statements and accompanying notes have been adjusted to reflect the stock split (see Note 5). Certain prior-period amounts have been reclassified to conform with the current year presentation.

     The computations of diluted net income per share do not include stock options and restricted stock totaling 2,900 and 712,700 shares for the three- and nine-month periods ended September 30, 2007, respectively, because they were antidilutive. The computations of diluted net income per share do not include stock options and restricted stock totaling 321,204 and 743,912 shares for the three- and nine-month periods ended September 30, 2006, respectively, because they were antidilutive.

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 3 — PROPERTY AND EQUIPMENT

     Interest is capitalized on construction-in-progress at the weighted average cost of debt outstanding during the period of construction. Capitalized interest for the three- and nine-month periods ended September 30, 2007 was $12.9 million and $37.9 million, respectively, and for the three- and nine-month periods ended September 30, 2006 was $11.1 million and $27.1 million, respectively.

NOTE 4 — DEBT

     On March 15, 2007, Noble entered into an unsecured revolving bank credit facility totaling $600 million (the “Bank Credit Agreement”). The Bank Credit Agreement has an initial term of five years and replaced Noble Drilling Corporation’s (“Noble Drilling”) $300 million unsecured revolving bank credit facility. Noble Drilling has issued a guaranty of the obligations under the Bank Credit Agreement. Pursuant to the terms of the Bank Credit Agreement, Noble may, subject to certain conditions, elect to increase the maximum amount available under the Bank Credit Agreement from $600 million to an amount not to exceed $800 million. Noble may, subject to certain conditions, also request that the term of the Bank Credit Agreement be extended for up to two additional one-year periods. Borrowings may be made under the facility (i) at the sum of Adjusted LIBOR (as defined in the Bank Credit Agreement) plus the Applicable Margin (as defined in the Bank Credit Agreement; 0.235 percent based on Noble’s current credit ratings), or (ii) at the base rate, determined as the greater of the prime rate for U.S. Dollar loans announced by Citibank, N.A. in New York or the sum of the weighted average overnight federal funds rate published by the Federal Reserve Bank of New York plus 0.50 percent. The Bank Credit Agreement contains various covenants, including a debt to total tangible capitalization covenant, and restrictions on incurring additional indebtedness and additional liens. At September 30, 2007, borrowings of $100 million were outstanding under the Bank Credit Agreement with a weighted average interest rate of 5.76 percent per annum.

     On July 24, 2007, Noble entered into a short-term loan agreement (the “Short-Term Loan Agreement”) with Goldman Sachs Credit Partners L.P., as the initial lender and administrative agent, pursuant to which Noble borrowed $685 million. Noble Drilling issued a guaranty of the obligations of Noble under the Short-Term Loan Agreement. The proceeds of the borrowing were used to repay an inter-company loan from a direct wholly-owned subsidiary of Noble. The process to liquidate and dissolve this subsidiary commenced on July 25, 2007, and on September 26, 2007, the short-term loan was repaid with proceeds distributed in connection with the liquidation and dissolution. The net pre-tax cost of this financing was $1.4 million, all incurred in the three months ended September 30, 2007.

NOTE 5 — SHAREHOLDERS’ EQUITY

Stock Split

     On July 27, 2007, the Company’s board of directors approved what is commonly referred to in the United States as a “two-for-one stock split” of the Company’s ordinary shares effected in the form of a 100 percent stock dividend to members (shareholders) of record on August 7, 2007. The stock dividend was distributed on August 28, 2007 when shareholders of record were issued one additional ordinary share for each ordinary share held.

     All share and per share data included in the unaudited condensed consolidated financial statements and accompanying notes have been adjusted to reflect the stock split. Accordingly, the number of ordinary shares and Par Value and Capital in Excess of Par Value amounts shown in the accompanying Consolidated Statement of Shareholders’ Equity have been adjusted to reflect the approximately 134 million shares issued and distributed in connection with the stock split on August 28, 2007. Additionally, the Net Income Per Share amounts have been retroactively adjusted to reflect the per share amounts post-split for all periods presented.

     As a result of the stock split, the number of restricted shares and stock options outstanding and available for award or grant and the exercise prices for the outstanding stock options under share-based compensation plans have been adjusted in accordance with the terms of the plans. Such modifications have no impact on the amount of share-based compensation costs.

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

Share Repurchases

     On February 2, 2007, Noble’s board of directors increased its share repurchase program authorization by 20 million ordinary shares, resulting in 30.5 million ordinary shares being authorized for repurchase. During the nine months ended September 30, 2007, the Company repurchased 2.8 million ordinary shares pursuant to this program at an average price of $37.24 per share for a total cost of $103.4 million. At September 30, 2007, 27.7 million ordinary shares remained available for repurchase under such authorization. Additional repurchases, if any, may be made on the open market or in private transactions at prices determined by the Company.

NOTE 6 — INCOME TAXES

     Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”), an interpretation of Statement of Financial Accounting Standards (“SFAS”) No. 109. As a result of the initial adoption of FIN 48, the Company recognized an additional reserve for uncertain tax positions and a corresponding reduction of retained earnings totaling $17 million. After the adoption of FIN 48 on January 1, 2007, the Company had $31.7 million (net of related tax benefits of $3.2 million) of reserves for uncertain tax positions, including estimated accrued interest and penalties totaling $6.6 million, which are included in Other Liabilities in the Consolidated Balance Sheet. At September 30, 2007, the reserves for uncertain tax positions totaled $51.0 million, with the increase during the nine months ended September 30, 2007 related to additional reserves for uncertain tax positions of $14.8 million and accrued interest and penalties of $4.5 million. If these reserves are not realized, the provision for income taxes will be reduced by $40.3 million and equity would be directly increased by $10.7 million.

     We include as a component of our income tax provision potential accrued interest and penalties related to recognized tax contingencies within our global operations.

     The Company does not anticipate that any tax contingencies resolved in the next 12 months will have a material impact on our consolidated financial position or results of operations.

     We conduct business globally and, as a result, we file numerous income tax returns in the U.S. and international jurisdictions. In the normal course of business we are subject to examination by taxing authorities throughout the world, including such jurisdictions as Brazil, Canada, Denmark, Equatorial Guinea, Mexico, Nigeria, Norway, Qatar, Singapore, the Netherlands, the United Kingdom and the United States. The Company is no longer subject to U.S. Federal income tax examinations for years before 2003 and international income tax examinations for years before 2000.

     In August 2006, U.S. President Bush signed into law the Pension Protection Act of 2006 (“PPA”). The PPA could significantly impact pension funding calculations and requires that pension plans become fully funded over a seven-year period beginning in 2008. We anticipate that the PPA will increase the amount we are allowed to contribute to our domestic pension plans in the near term.

     During the nine months ended September 30, 2007, we made contributions to our pension plans totaling approximately $37.6 million. We presently expect to contribute, subject to applicable law, an aggregate of $45 million to $50 million to our pension plans in 2007.

     During the quarter ended June 30, 2007, the Company obtained an updated actuarial report for one of its international pension plans. As a result of modifications to such plan, along with certain updated actuarial assumptions, the net funded status and other comprehensive income was reduced for such period by $8.0 million and $5.6 million, respectively.

     We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan has no assets, and amounts “contributed” to the Restoration Plan are kept by the Company for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, the Company has a liability to the employees for amounts originally contributed plus phantom investment income or less phantom investment losses. The Company is at risk for phantom investment income and, conversely, benefits if phantom investment losses occur. At September 30, 2007, the Company’s liability under the Restoration Plan and a similar Canadian plan totaled $19.4 million.

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 8 — 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, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, and we are not a party to leveraged derivatives.

     Our North Sea operations have a significant amount of their cash operating expenses payable in either the Euro or British Pound, and the Company maintains forward currency contracts settling monthly for these currencies. The Euro-denominated forward currency contracts settling in the remainder of 2007 and in 2008 represent approximately 50 percent and 23 percent, respectively, of our forecasted Euro requirements. The British Pound-denominated forward currency contracts settling in the remainder of 2007 and in 2008 represent approximately 35 percent and 22 percent, respectively, of our forecasted British Pound requirements. The notional amounts of forward currency contracts outstanding at September 30, 2007 were approximately 22.7 million Euros and 14.7 million British Pounds. The aggregate notional amount of these forward currency contracts, expressed in U.S. Dollars, was $58.6 million at September 30, 2007.

     All of the above forward currency contracts were accounted for as cash flow hedges under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities , as amended. The fair market value of those derivative instruments is included in Other Current Assets or Other Current Liabilities with the cumulative unrealized gain or loss included in Accumulated Other Comprehensive Loss in our Consolidated Balance Sheets. The fair market value of outstanding forward currency contracts was $3.6 million at September 30, 2007. Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between derivative contracts and the hedged item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during the three- or nine-month periods ended September 30, 2007 and 2006 related to these derivative instruments.

     The balance of the net unrealized gain or loss related to our forward currency contracts and interest rate swaps included in Accumulated Other Comprehensive Loss and related activity is as follows:

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 9 — COMMITMENTS AND CONTINGENCIES

     Noble Asset Company Limited (“NACL”), a wholly-owned, indirect subsidiary of Noble, was named one of 21 parties served a Show Cause Notice (“SCN”) issued by the Commissioner of Customs (Prev.), Mumbai, India (the “Commissioner”) in August 2003. The SCN concerned alleged violations of Indian customs laws and regulations regarding one of our jackups. The Commissioner alleged certain violations to have occurred before, at the time of, and after NACL acquired the rig from the rig’s previous owner. In the purchase agreement for the rig, NACL received contractual indemnification against liability for Indian customs duty from the rig’s previous owner. In connection with the export of the rig from India in 2001, NACL posted a bank guarantee in the amount of $3.8 million and a customs bond in the amount of $24.4 million, both of which remain in place. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $19.0 million plus interest related to a 1997 alleged import and (b) $21.6 million plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) would not be payable if the duty and interest demanded in (a) were paid by NACL, and (iii) to assess a penalty of $0.5 million against NACL. NACL appealed the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). At a hearing on April 5, 2006, CESTAT upheld NACL’s appeal and overturned the Commissioner’s March 2005 order against NACL in its entirety. CESTAT thereafter issued its written judgment dated August 8, 2006 upholding NACL’s appeal on all grounds and setting aside the duty demand, interest, fine and penalty. The Commissioner filed an appeal in the Bombay High Court challenging the order passed by CESTAT. In April 2007, the Division Bench of the Bombay High Court ruled that the Commissioner’s appeal is maintainable and directed that the appeal be scheduled for a hearing in the Bombay High Court. In connection with this ruling, the Division Bench ordered that for the time being the customs bond and the bank guarantee should continue to remain in place. NACL continues to pursue contractual indemnification against liability for Indian customs duty and related costs and expenses against the rig’s previous owner in arbitration proceedings in London, which proceedings the parties have temporarily stayed pending further developments in the Indian proceeding. We do not believe the ultimate resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows.

     We operate in a number of countries throughout the world and our income tax returns filed in those jurisdictions are subject to review and examination by tax authorities within those jurisdictions. We are currently contesting several tax assessments and may contest future assessments when we believe the assessments are in error. We cannot predict or provide assurance as to the ultimate outcome of the existing or future assessments. We believe the ultimate resolution of the outstanding assessments for which we have not accrued, will not have a material adverse effect on our consolidated financial statements. Effective January 1, 2007, we recognize uncertain tax positions that we believe have a greater than 50 percent likelihood of being sustained. See Note 6 of the condensed consolidated financial statements for a discussion of our adoption of FIN 48.

     Certain of our international income tax returns have been examined for the 2002 through 2004 periods and audit claims have been assessed for approximately $54 million (including interest and penalties). We believe audit claims of an additional $15 million to $18 million attributable to other business tax returns may be assessed against the Company. We have contested, or intend to contest, most of the audit findings, including through litigation if necessary, and we do not believe that there is a greater than 50 percent likelihood that additional taxes will be incurred. Accordingly, no accrual has been made for such amounts.

     We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including claims under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At October 31, 2007, there were approximately 31 of these lawsuits in which we are one of many defendants, none of which are scheduled for trial in 2007. These lawsuits have been filed in the states of Louisiana, Mississippi and Texas. Exposure related to these lawsuits is not currently determinable. We intend to defend vigorously against the litigation.

     Noble and Noble Drilling Services Inc., an indirect, wholly-owned subsidiary of Noble, were named as defendants in a lawsuit filed on February 16, 2007 by Transocean Offshore Deepwater Drilling Inc. (“Transocean”) in the United States District Court for the Southern District of Texas, Houston Division. The lawsuit alleged that the dual activity drilling design and intended mode of operations of the Noble Clyde Boudreaux infringed claims in certain U.S. patents owned by Transocean. The Company and Transocean settled the lawsuit in July 2007 and entered into an agreement under which Transocean granted the Company a worldwide and non-exclusive license for

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

the Noble Clyde Boudreaux for the life of the dual activity patents for an undisclosed royalty. The financial terms of the agreement are not material to our financial position, results of operations or cash flows.

     We are a defendant in certain claims and litigation arising out of operations in the ordinary course of business, the resolution of which, in the opinion of management, will not be material to our financial position, results of operations or cash flows.

     Our Nigerian subsidiary has recently received letters from a Nigerian government agency seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels”, within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these letters are applicable to the Company’s ownership of drilling units, the agency may be seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels”. Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. We intend to take all appropriate legal action to resist this characterization. The application of the Nigerian cabotage laws to our drilling units and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.

     Our capital expenditures and major maintenance expenditures for 2007 are budgeted at approximately $1.3 billion. In connection with our capital expenditure programs, we have entered into certain commitments, including outstanding purchase commitments aggregating approximately $900 million at September 30, 2007.

Internal Investigation

     In June 2007, the Company announced that it was conducting an internal investigation of its Nigerian operations, focusing on the legality under the U.S. Foreign Corrupt Practices Act (“FCPA”) and local laws of its Nigerian affiliate’s reimbursement of certain expenses incurred by its customs agents in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigerian waters, including permits that are necessary for the Company’s drilling units to operate in Nigerian waters. The Company also announced that the audit committee of the Company’s board of directors had engaged a leading law firm with significant experience in investigating and advising on FCPA matters to lead the investigation. The scope of the investigation also includes the Company’s dealings with customs agents and customs authorities in certain parts of the world other than Nigeria in which the Company conducts its operations, as well as dealings with other types of local agents in Nigeria and these other parts of the world.

     The audit committee commissioned the internal investigation after the Company’s management brought to the attention of the audit committee a news release issued by another company that disclosed that the other company was conducting an internal investigation into the FCPA implications of certain actions by a customs agent in Nigeria in connection with the temporary importation of that company’s vessels into Nigeria. The Company’s drilling units that conduct operations in Nigeria do so under temporary import permits, and management considered it prudent to review the Company’s own practices in this regard.

     The Company voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them that an independent investigation was under way. The Company is cooperating, and intends to continue to cooperate, fully with both agencies. If the SEC or the DOJ determines that violations of the FCPA have occurred, they could seek civil and criminal sanctions, including monetary penalties, against the Company and/or certain of its employees, as well as additional changes to the Company’s business practices and compliance programs, any of which could have a material adverse effect on the Company’s business and financial condition. In addition, such actions, whether actual or alleged, could damage our reputation and ability to do business. Further, detecting, investigating, and resolving such actions is expensive and consumes significant time and attention of our senior management.

     The internal investigation is ongoing, and the Company cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

agencies may seek. Based on information obtained to date in its internal investigation, the Company has not determined that any potential liability that may result is either probable or can be reasonably estimated. As a result, the Company has not made any accrual in its financial statements at September 30, 2007.

     Although management will seek to avoid material disruption to the Company’s Nigerian operations, the Company cannot determine at this time the ultimate effect of implementing any measures that may be necessary to ensure compliance with applicable laws, including the FCPA and Nigerian local laws, in connection with its operations in Nigeria and other parts of the world. We are operating seven drilling units offshore Nigeria. Due to the ongoing internal investigation described above, we have not been able to obtain or renew temporary import permits for six of the units, and we are currently operating with expired permits for such units. We recently filed applications for new temporary import permits for all seven of our units in Nigeria. We had filed these applications directly with Nigerian customs authorities without using an intermediary licensed customs agent. Nigerian customs authorities informed us, however, that we must utilize a licensed customs agent or obtain a corporate self-clearance license (which is not feasible in the short term). Thereafter, we retained a licensed customs agent and have required that agent to work directly with our Nigerian counsel in prosecuting our temporary import permit applications. Though our representatives have met several times with the Nigerian customs authorities regarding our applications and the authorities have indicated to our representatives that our applications for new permits will be approved, we have to date not received official definitive documentation of such approval. There can be no assurance that we will be able to obtain the permits necessary to continue operations in Nigeria with each rig currently located there. Furthermore, if we do obtain permits, the terms of each such permit may not extend for a time sufficient for the relevant drilling unit to complete its operations in Nigeria. In such a case, we may be required to obtain extensions of the permit. There can be no assurance that we will be able to obtain any such extension. Should we be unable to obtain such permits or extensions, we may need to terminate the drilling contract of any rig for which we are unable to obtain the necessary permit or permit extension and relocate such rig.

     For the three- and nine-month periods ended September 30, 2007, the Company has incurred legal fees and related costs of $4.8 million and $6.5 million, respectively, related to the internal investigation. It is anticipated that additional costs will be incurred in future periods, but the amount thereof cannot be presently determined.

NOTE 10 — SEGMENT AND RELATED INFORMATION

     We provide diversified services for the oil and gas industry. Our reportable segments consist of international and domestic contract drilling services, reflecting the primary services we provide. Our international contract drilling services segment provides contract drilling services in the Middle East, India, Mexico, the North Sea, Brazil and West Africa. Our domestic contract drilling services segment provides contract drilling services in the U.S. Gulf of Mexico. The “Other” column includes results of labor contract drilling services, engineering and consulting services, other insignificant operations and corporate related items. Although our segments are generally influenced by the same economic factors, each represents a distinct service to the oil and gas industry.

     We evaluate the performance of our operating segments based on operating revenues, operating income and segment profit. Effective January 1, 2007, the Company’s 30 percent effective net profit interest in the Noble Kolskaya , operated through a bareboat charter which expires by its terms in July 2008, is reported in labor contract drilling services in our Consolidated Statements of Income. Additionally, beginning January 1, 2007, general corporate interest expense is no longer allocated to segments. The related prior period amounts have been reclassified to conform with the current presentation.

     Summarized financial information of our reportable segments for the three- and nine-month periods ended September 30, 2007 and 2006 is shown in the following table.

NOTE 11 — OPERATING COSTS AND EXPENSES

Engineering and Consulting Services

     In June 2007, the Company entered into a letter of intent for the sale of the rotary steerable system assets and intellectual property owned by the Company’s subsidiary, Noble Downhole Technology Ltd. In the second quarter of 2007, the Company recorded a pre-tax loss of $6.9 million ($0.03 per diluted share) for the potential sale of these assets and intellectual property and related exit activities, including a $5.0 million impairment of goodwill. In the third quarter of 2007, the Company recorded an additional pre-tax loss of $6.0 million ($0.02 per diluted share) for the potential sale of these assets and intellectual property and related exit activities, including an impairment of the remaining goodwill totaling $4.4 million. This sale was completed on November 1, 2007 for $10 million. At September 30, 2007, the Company had no remaining goodwill recorded.

     In March 2007, the operations of the Company’s Triton Engineering Services Inc. subsidiary were closed, resulting in closure costs of $1.9 million ($0.01 per diluted share), including a $0.4 million impairment of goodwill.

     In June 2006, the software business of the Company’s Maurer Technology Incorporated subsidiary was sold, resulting in a pre-tax loss of $3.8 million ($0.01 per diluted share). This loss included the write-off of goodwill totaling $4.8 million.

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

Selling, General and Administrative

     On April 30, 2007, James C. Day retired from Noble and its board of directors. On April 26, 2007, Noble and Mr. Day entered into a Transition Consulting Services Agreement providing for not more than a specified level of consulting services to the Company over a two-year period in return for $0.5 million, plus reasonable expenses, payable in equal monthly amounts over the two-year period. The compensation committee of the board of directors of Noble exercised its discretion pursuant to the terms of the Noble Corporation 1991 Stock Option and Restricted Stock Plan to accelerate, effective with Mr. Day’s retirement, the vesting of 39,186 time-vested restricted shares of Noble held by Mr. Day that had not vested on or before April 30, 2007. Additionally, non-vested stock options held by Mr. Day fully vested according to their terms.

     The board of directors of Noble also approved a charitable gift of $1.5 million to the capital campaign of the University of Oklahoma College of Earth and Energy in recognition of Mr. Day’s service to the Company.

     The retirement of Mr. Day resulted in a pre-tax charge to earnings of approximately $3.7 million ($0.01 per diluted share) in the nine months ended September 30, 2007. This charge includes the accelerated vesting of time-vested restricted stock, the charitable gift described above and the effect of stock options under outstanding agreements vesting according to their terms.

     On September 20, 2007, Noble and Mark A. Jackson, Chairman of the Board, President and Chief Executive Officer of the Company, mutually determined to terminate their employment relationship effective immediately. Under the terms of the Separation Agreement and Release entered into by Noble and Mr. Jackson (the “Agreement”), Mr. Jackson’s employment and all positions held by Mr. Jackson with the Company and its subsidiaries and affiliates were terminated effective September 20, 2007 (the “Separation Date”). The Company made a separation payment to Mr. Jackson equal to one year of Mr. Jackson’s base salary in effect as of the Separation Date ($0.8 million), plus an amount equal to the bonus amount Mr. Jackson could have earned (on a pro rated basis through the Separation Date) under the Noble Corporation 2007 Short Term Incentive Plan ($0.6 million).

     Pursuant to the terms of the Separation Agreement, as of the Separation Date, (i) 97,144 shares subject to nonqualified stock options granted to Mr. Jackson became immediately vested and exercisable, and (ii) 61,388 time-vested restricted shares awarded to Mr. Jackson became immediately vested.

     The resignation of Mr. Jackson resulted in a pre-tax charge to earnings in the third quarter of 2007 of approximately $2.9 million ($0.01 per diluted share). This charge includes the accelerated vesting of nonqualified stock options and time-vested restricted shares.

NOTE 12 — ACCOUNTING PRONOUNCEMENTS

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements . SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, rather, its application will be made pursuant to other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those years. The provisions of SFAS No. 157 are to be applied prospectively upon adoption, except for limited specified exceptions. We do not expect the adoption of SFAS No. 157 to have a material impact on our financial position, results of operations or cash flows.

     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities . SFAS No. 159 permits entities to measure eligible assets and liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We will adopt SFAS No. 159 on January 1, 2008, and have not yet determined the impact, if any, on our financial position, results of operations or cash flows.

NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 13 — SUBSEQUENT EVENTS

     On October 25, 2007, the Company’s board of directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on November 7, 2007, with a distribution date of December 3, 2007.

     On October 25, 2007, 42,420 unrestricted ordinary shares in the aggregate, were granted to Noble’s directors pursuant to the Second Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Share Plan for Non-Employee Directors. Accordingly, share-based compensation expense of approximately $2.3 million will be recorded in the fourth quarter of 2007.

     On November 1, 2007, Noble Downhole Technology Ltd. sold its rotary steerable system assets and intellectual property for $10 million (see Note 11).

NOTE 14 — GUARANTEES OF REGISTERED SECURITIES

     Noble and Noble Holding (U.S.) Corporation (“NHC”), a wholly-owned subsidiary of Noble, are guarantors for certain debt securities issued by Noble Drilling. These debt securities consist of Noble Drilling’s 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 September 30, 2007 were $150.0 million and $201.7 million, respectively. Noble Drilling is a corporation wholly-owned by direct and indirect subsidiaries of Noble and a direct, wholly-owned subsidiary of NHC. Noble’s and NHC’s guarantees of the 6.95% Senior Notes and the 7.50% Senior Notes are full and unconditional as well as joint and several. In December 2005, Noble Drilling Holding LLC (“NDH”), an indirect wholly-owned subsidiary of Noble, became a co-obligor on (and effectively a guarantor of) the 6.95% Senior Notes and the 7.50% Senior Notes.

     In connection with the issuance in 2006 of Noble’s 5.875% Senior Notes due 2013, Noble Drilling guaranteed the payment of the 5.875% Senior Notes. Noble Drilling’s guarantee of the 5.875% Senior Notes is full and unconditional. The outstanding principal balance of the 5.875% Senior Notes at September 30, 2007 was $299.8 million.

     The following consolidating financial statements of Noble, NHC and NDH combined, Noble Drilling and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.