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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
     
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
NOBLE CORPORATION
(Exact name of registrant as specified in its charter)
     
Cayman Islands   98-0366361
     
(State or other jurisdiction of incorporation or organization )   (I.R.S. employer identification number)
13135 South Dairy Ashford, Suite 800, Sugar Land, Texas 77478
(Address of principal executive offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (281) 276-6100
Securities registered pursuant to Section 12(b) of the Act:
     
Title of each class
Ordinary Shares, Par Value $.10 Per Share 		  Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ
     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 registrant’s 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. þ
     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.
         
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 Exchange Act). Yes o No þ
     As of June 30, 2005, the aggregate market value of the registrant’s ordinary shares held by non-affiliates of the registrant was $8,305,000,000 based on the closing sale price as reported on the New York Stock Exchange.
     Number of Ordinary Shares outstanding as of March 2, 2006: 137,151,679
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 2006 annual general meeting of members scheduled to be held on April 27, 2006 — Part III
 
 

 

 

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  Form of Performance-Vested Restricted Stock Agreement
  Form of Time-Vested Restriced Stock Agreement
  Amendment No. 2 to the 401(k) Savings Restoration Plan
  Amendment No. 3 to the 401(k) Savings Restoration Plan
  Amendment No. 2 to the Retirement Restoration Plan
  Subsidiaries of the Registrant
  Consent of PricewaterhouseCoopers LLP
  Certification Pursuant to SEC Rule 13a-14(a)
  Certification Pursuant to SEC Rule 13a-14(a)
  Certification Pursuant to 18 U.S.C. Section 1350
  Certification Pursuant to 18 U.S.C. Section 1350

 

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PART I
ITEM 1. BUSINESS.
GENERAL
     The Company is a leading provider of diversified services for the oil and gas industry. We perform contract drilling services with our fleet of 62 offshore drilling units located in key markets worldwide. This fleet consists of 13 semisubmersibles, three dynamically positioned drillships, 43 jackups and three submersibles. The fleet count includes two new F&G JU-2000E enhanced premium jackups under construction. As previously reported, we have secured customer contracts for these jackups. 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 worldwide markets, principally including the Middle East, Mexico, the North Sea, Brazil, West Africa and India. In addition, we provide technologically advanced drilling-related products and services designed to create value for our customers. Our other services include 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. 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 worldwide offshore drilling and deepwater capabilities through acquisitions, upgrades and modifications, and the deployment of our drilling assets in important geological areas. We continued execution of our active expansion strategy in 2005 with the signing of long-term drilling contracts for three ultra-deepwater semisubmersibles: the Noble Clyde Boudreaux , Noble Dave Beard and Noble Danny Adkins . Furthermore, we signed long-term drilling contracts for two new F&G JU-2000E enhanced premium independent leg cantilevered jackups: the Noble Roger Lewis and Noble Hans Deul .
     The strategy of constructing rigs only upon receipt of a client’s contractual commitment for the rig is in contrast to the approach of a number of competitors in our industry. At the end of 2005, shipyards worldwide reportedly had received commitments to construct 48 jackups and 12 deepwater floaters. The majority of these units reportedly do not have a contractual commitment from a customer and are referred to in the offshore drilling industry as “being built on speculation.” We believe this practice is detrimental to our industry, because it can create a perception of unlimited supply and the valuation of services we perform as a commodity. In contrast, our strategy on new construction is to expand our drilling fleet with technologically advanced units only in connection with a long-term drilling contract that covers a substantial portion of our capital investment and provides a return on our capital employed acceptable to the Company.
     Significant increases in dayrates for premium drilling equipment worldwide have driven the increase in rigs currently being built on speculation. Hydrocarbon exploration and development activities have intensified sufficiently to create a tight market for drilling equipment and a shortage of personnel. This environment has driven operating costs higher and magnified the importance of recruiting, training and retaining skilled personnel. The Company maintains a safety record that has consistently outperformed the offshore drilling industry sector. In recognition of the importance of our offshore operations personnel in achieving this performance, we implemented two separate key operations personnel retention programs in 2005. The first program was designed for personnel associated with our day-to-day operations on the rig, and we will distribute incentive payments to these persons based upon individual performance over the next three years. The second program, which was designed for shore based and engineering personnel, is also performance-based and will be distributed over the next four years. We believe these programs, in addition to our short- and long-term incentive programs, will provide necessary tools to competitively attract and retain the skilled personnel required to maintain safe and efficient operations.

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     The application of technology in our operations is another key element of our strategy. As offshore exploration and development continues to move into deeper waters, our customers require drilling equipment capable of meeting these challenges. We seek ways to reach these deepwater targets with innovative technical solutions that require less capital investment. For example, floating drilling units connect to equipment on the seabed by means of a drilling riser typically made of steel. We have developed and patented an aluminum alloy drilling riser which can be manufactured cost competitively as compared to steel riser but at a riser weight reduction of up to 40 percent. This significant savings in weight allows us to extend the water depth specifications of our floating drilling units with less capital investment. We have expanded use of this technology to other applications, such as air pressure vessels typically used in motion compensating equipment on floating units, and we will continue to search for new ways to apply technology that allows us to enhance the capabilities of our offshore drilling fleet.
     Our active participation in the consolidation of the offshore drilling industry continues to be an important element of our growth strategy. Consolidation basically takes two forms: individual transactions for specific offshore drilling units or a transaction for an entire company. In the last three years, we have added six premium jackups and two floaters to our fleet through individual rig transactions. From time to time, we have discussed other individual rig transactions and business combinations with other parties, and we will continue to consider business opportunities we believe promote our business strategy. In December 2005, we purchased shares of Smedvig ASA (“Smedvig”) as part of our ongoing growth strategy. For additional information regarding the Company’s investment in Smedvig, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Investment in Smedvig .”
BUSINESS DEVELOPMENT DURING 2005
     We continued to capitalize on opportunities to increase our drilling fleet and further develop the technical capability and marketability of our existing rigs. 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 moored semisubmersible designed to drill in water depths of 10,000 feet. The unit is anticipated to be completed in the first quarter of 2007, and it will include a 16-point mooring system designed to withstand Category 5 hurricanes such as Rita and Katrina which struck the U.S. Gulf Coast in 2005. Our initiative to upgrade mooring system capabilities within our semisubmersible fleet is discussed in more detail below in this section.
     In June 2005, we received a commitment from Petroleo Brasileiro S.A. — PETROBRAS (“Petrobras”) for a five-year contract on the Noble Dave Beard , an ultra-deepwater dynamically-positioned semisubmersible also designed to drill in water depths of 10,000 feet. We expect to complete this project in the second quarter of 2008. Petrobras also committed to contract extensions on the Noble Paul Wolff , Noble Roger Eason , Noble Muravlenko and Noble Leo Segerius already working offshore Brazil and to a long-term contract on the Noble Therald Martin , a semisubmersible which will be mobilized from the U.S. Gulf of Mexico to Brazil. In October 2005, the Noble Paul Wolff entered a shipyard in Brazil to perform the upgrades required under the contract extension and is scheduled to return to operations late in the first quarter of 2006.
     We continued the expansion of our fleet in August 2005 by entering into two, two-year contracts with Shell E&P Offshore Services B.V. for two new F&G JU-2000E enhanced premium jackups, the Noble Roger Lewis and Noble Hans Deul . Both jackups are designed with 75-foot cantilever reach and rated for water depths of 400 feet and drilling depths of 30,000 feet. The jackups are also designed to operate in harsh environments, making them capable of drilling in the North Sea. Both rigs are being constructed in China at the shipyard of Dalian Shipbuilding Industry Co., Ltd., with expected delivery dates of the third quarter 2007 for the first unit and the first quarter 2008 for the second unit.
     Also in August 2005, we acquired the remaining 50 percent equity interest in the joint venture (already 50 percent owned by us) which owned the Panon (renamed the Noble Harvey Duhaney ), an independent leg cantilever jackup rated for water depths of 300 feet.
     In November 2005, we received a letter of intent from Shell Exploration & Production Company for a four-year contract on the Noble Danny Adkins , an ultra-deepwater dynamically positioned semisubmersible designed to operate in water depths of 12,000 feet. Construction is scheduled at the Jurong Shipyard in Singapore, with an expected completion date in the first quarter of 2009.

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     Along with the five major construction projects described above, we are also reviewing the mooring designs of our existing semisubmersible fleet. The two-100 year hurricanes, which devastated the U.S. Gulf Coast and drilling fleets within two months of each other in 2005, demonstrated to the Company that the existing operating criteria utilized by the offshore oil and gas industry were not adequate. We have been working closely with the U.S. Minerals Management Service to help define criteria that would become the new standard for the industry. Although the ultimate response of the industry remains unclear at this date, we are prepared to make the necessary investments to ensure safe and efficient operations. Accordingly, we plan to upgrade our moored semisubmersibles with a mooring system designed to withstand such events, and we anticipate the first semisubmersible upgrade with such mooring system to be completed in 2006.
     For additional information regarding the estimated costs of the above-described construction and upgrade projects, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources — Capital Expenditures. ”
DRILLING CONTRACTS
     We typically employ each drilling unit under an individual contract. Although the final terms of the contracts are the result of 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 at mutually agreed upon rates;
 
  •   payment of compensation to us (generally in U.S. dollars although some customers (typically national oil companies) require a part of the compensation to be paid in local currency) 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); and
 
  •   payment by us of the operating expenses of the drilling unit, including labor costs and the cost of incidental supplies.
     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 and in some cases upon the making of an early termination payment to us. Our drilling contracts with Petróleos Mexicanos (“Pemex”) in Mexico, for example, 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.
     At January 23, 2006, 36 of our rigs were contracted for the remainder of 2006. We anticipate that the primary terms of the current contracts on 22 of our rigs will expire at varying times in 2006, subject to options to extend in the case of 10 contracts. At January 23, 2006, approximately 84 percent of our available operating days were committed for 2006.

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     Generally, our contracts allow us to recover our mobilization and demobilization costs associated with moving a drilling unit from one regional 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 93 percent, 91 percent and 94 percent of operating revenues for the years ended December 31, 2005, 2004 and 2003, respectively, are conducted worldwide. Our principal regions of contract drilling operations are the Middle East, Gulf of Mexico, Mexico, the North Sea, Brazil, West Africa and India. In 2005, Pemex and Petrobras accounted for approximately 12 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 2005.
International Contract Drilling
     Our contract drilling services revenues from international sources accounted for approximately 78 percent, 74 percent and 73 percent of our total contract drilling services revenues for 2005, 2004 and 2003, respectively. In 2005, approximately 52 percent of our international contract drilling services revenues was derived from contracts with companies having equity market capitalization greater than $4 billion (“large cap companies”), 35 percent was derived from contracts with government-owned companies, and the remaining 13 percent was derived from contracts with other independent operators.
Domestic Contract Drilling
     Contract drilling services revenues generated in the U.S. accounted for approximately 22 percent, 26 percent and 27 percent of our total contract drilling services revenues for 2005, 2004 and 2003, respectively. In 2005, approximately 74 percent of our domestic contract drilling revenues was derived from contracts with large cap companies and the remaining 26 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 operating under a five-year agreement that extends through 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.
     Technological advances include the development and deployment of our proprietary, patented aluminum alloy riser, a drilling riser made from a high strength aluminum alloy. This product represents a replacement for the more commonly used high strength steel and results in riser weight reductions of up to 40 percent. This technology enables our floating units to operate in deeper water without extensive modifications.

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COMPETITION
     The offshore contract drilling industry is a highly competitive and cyclical business characterized by high capital and maintenance costs. Some of our competitors may have access to greater financial resources than we do.
     In the provision of contract drilling services, competition involves numerous factors, including price, rig availability and suitability, experience of the workforce, efficiency, safety performance record, condition of equipment, operating integrity, reputation, industry standing and client relations. We believe that we compete favorably with respect to all of these factors. 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.
     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.
     In addition, industry-wide shortages of supplies, services, skilled personnel and equipment necessary to conduct our business can occur. We cannot assure that any such shortages experienced in the past would not happen again or that any shortages, to the extent currently existing, will not continue or worsen in the future.
     Oil and natural gas prices were favorable in 2005, resulting in high demand for our equipment. However, these prices are extremely volatile. Drilling activity in certain international markets, which are influenced more by oil prices than natural gas prices, was generally stronger in 2005 as compared to 2004 and 2003. We believe that operators in these international markets will maintain high levels of oil and gas exploration and development activity through 2006 and that, consequently, international demand for our offshore drilling contract services is likely to remain consistent with levels experienced in 2005.
     Natural gas prices during 2005 averaged $8.71 per thousand cubic feet (source: average Henry Hub closing bidweek price). With natural gas prices in 2005 being 42 percent higher than 2004 and significantly higher than historical prices, operators began to increase drilling activities in the U.S. Gulf of Mexico in water depths applicable to jackups and submersibles in the second half of 2004. Excluding the disruptions caused by Hurricanes Katrina and Rita (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. – Results of Operations – Hurricane Losses and Recoveries” for a detailed discussion of the impact these storms had on 2005 operating results), drilling activities continued to increase throughout 2005. We believe exploration and production activity will continue at a high level through 2006 and that, consequently, demand for our offshore drilling contract services in the U.S. Gulf of Mexico markets is likely to remain consistent with levels experienced in 2005.
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.

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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, 2005, the Company employed approximately 5,600 persons, including persons engaged through labor contractors or agencies. Of the 5,600 persons, approximately 80 percent were engaged in international operations and approximately 20 percent were engaged in U.S. operations. We are not a party to any collective bargaining agreements that are material, and 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 18 to our consolidated financial statements included in this Annual Report on Form 10-K.
AVAILABLE INFORMATION
     Our annual report 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 U.S. 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 U.S. Securities and Exchange Commission’s (“SEC”) Public Reference Room at 100 F Street, NE, Room 1580, 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.
     Copies of our committee charters and code of business conduct and ethics are available in print to any member (shareholder) of the Company who requests them.
ITEM 1A. RISK FACTORS .
Risk Factors
      The following risk factors and all other information contained in this report should be considered carefully when evaluating us and our subsidiaries. These risk factors could affect our actual results. Other risks and uncertainties, in addition to those that are described below, may also impair our business operations. If any of the following risks occurs, our business, cash flows, results of operations and financial condition could be materially adversely affected. In addition, the trading price of our securities could decline due to the occurrence of any of these risks. These risk factors should be read in conjunction with the other detailed information concerning us set forth in our accompanying financial statements and notes and contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.

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Our business depends on the level of activity in the oil and gas industry, which is significantly affected by volatile oil and gas prices.
          Demand for drilling services depends on a variety of economic and political factors, and the level of activity in offshore oil and gas exploration, development and production markets worldwide. Commodity prices, and market expectations of potential changes in these prices, significantly affect this level of activity. However, higher prices do not necessarily translate into increased drilling activity since our clients’ expectations of future commodity prices typically drive demand for our rigs. Oil and gas prices are extremely volatile and are affected by numerous factors beyond our control, including:
  •   the political environment of oil-producing regions, including uncertainty or instability resulting from an outbreak or escalation of armed hostilities or acts of war or terrorism;
 
  •   worldwide demand for oil and gas, which is impacted by changes in the rate of economic growth in the U.S. and other international economies;
 
  •   the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing;
 
  •   the level of production in non-OPEC countries;
 
  •   the policies of the various governments regarding exploration and development of their oil and gas reserves;
 
  •   the cost of exploring for, developing, producing and delivering oil and gas;
 
  •   the discovery rate of new oil and gas reserves;
 
  •   the rate of decline of existing and new oil and gas reserves;
 
  •   available pipeline and other oil and gas transportation capacity;
 
  •   the ability of oil and gas companies to raise capital;
 
  •   adverse weather conditions (such as hurricanes and monsoons) and seas;
 
  •   development and exploitation of alternative fuels;
 
  •   domestic and foreign tax policy; and
 
  •   advances in exploration and development technology.
The contract drilling industry is a highly competitive and cyclical business with intense price competition.
          The offshore contract drilling industry is a highly competitive and cyclical business characterized by high capital and maintenance costs. Some of our competitors may have access to greater financial resources than we do.
          Drilling contracts are traditionally awarded on a competitive bid basis. Intense price competition, rig availability and suitability, experience of the workforce, efficiency, safety performance record, condition of equipment, operating integrity, reputation, industry standing and client relations are all factors in determining which contractor is awarded a job. Mergers among oil and natural gas exploration and production companies have reduced the number of available clients, resulting in increased price competition.
          Our industry has historically been cyclical. There have been periods of high demand, short rig supply and high dayrates, followed by periods of lower demand, excess rig supply and low dayrates. Periods of excess rig supply intensify the competition in the industry and may result in rigs being idle for long periods of time. Prolonged

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periods of low utilization and dayrates could result in the recognition of impairment charges on certain of our drilling rigs if future cash flow estimates, based upon information available to management at the time, indicate that the carrying value of these rigs may not be recoverable.
          Although oil and natural gas prices are currently significantly above historical averages, which has resulted in higher utilization and dayrates earned by our drilling units, we can give no assurance that the current industry cycle of high demand, short rig supply and higher dayrates will continue.
          The recent increase in the number of rigs being built, as well as changes in our competitors’ drilling rig fleets, could intensify price competition and require higher capital investment to keep our rigs competitive. In addition, the increase in rig supply from rigs being built, especially those being built on speculation, could tend to moderate future dayrates.
Construction, conversion or upgrades of rigs may be subject to cost overruns and delays.
          We currently have significant conversion projects and new construction projects underway and we may undertake additional such projects in the future. These projects and other efforts of this type are subject to risks of cost overruns or delays inherent in any large construction project as a result of numerous factors, including the following:
  •   shortages of equipment, materials or skilled labor;
 
  •   work stoppages;
 
  •   unscheduled delays in the delivery of ordered materials and equipment;
 
  •   local customs strikes or related work slowdowns that could delay importation of equipment or materials;
 
  •   weather interferences;
 
  •   difficulties in obtaining necessary permits or in meeting permit conditions;
 
  •   design and engineering problems;
 
  •   latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;
 
  •   shipyard failures; and
 
  •   failure or delay of third party service providers and labor disputes.
          Failure to complete a rig upgrade or new construction on time, or the inability to complete a rig conversion or new construction in accordance with its design specifications, may, in some circumstances, result in the delay, renegotiation or cancellation of a drilling contract.
Failure to retain highly skilled personnel could hurt our operations.
          We require highly skilled personnel to operate and provide technical services and support for our drilling units. As the demand for drilling services and the size of the worldwide industry fleet has increased, shortages of qualified personnel have occurred from time to time. Shortages of such personnel could result as the rigs currently being built enter service. These shortages could result in our loss of qualified personnel to competitors, impair our ability to attract and retain qualified personnel for our new or existing drilling units, and create upward pressure on wages, any of which could adversely affect our operations.

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We may have difficulty obtaining or maintaining insurance in the future and we cannot fully insure against all of the risks and hazards we face.
          No assurance can be given that we will be able to obtain or maintain adequate insurance in the future at rates and with deductible amounts that we consider commercially reasonable or that we will be able to obtain insurance against some risks. The marine energy insurance market sustained substantial losses as a result of the U.S. Gulf Coast hurricanes of 2005. Primary insurance underwriters are experiencing substantially increased reinsurance costs and are quoting substantially higher premium rates for Gulf of Mexico windstorm coverage. In addition, these underwriters are pricing premiums for renewal programs of insured parties that suffered storm losses on a basis designed to recover recent underwriting losses in an accelerated manner. The current marine energy insurance market is also reflecting tighter coverage terms and conditions, particularly in regard to damage due to windstorm, such as the introduction of limits of coverage based on an aggregate amount of windstorm damage.
          Although we maintain insurance in the areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses, or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on certain rigs. Uninsured exposures may include war risk, activities prohibited by U.S. law and regulation, radiation hazards, loss or damage to property on board our rigs and losses relating to terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could adversely affect our financial position, results of operations or cash flows. There can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.
Demand for our drilling services may decrease due to events beyond our control.
          Our business could be impacted by events beyond our control including 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 an economic slowdown, or regional or worldwide recession, any of which could result in deterioration in demand for our drilling services. In addition, our customers may cancel drilling contracts or letter agreements or letters of intent for drilling contracts, or exercise early termination provisions found in some of our drilling contracts, for a variety of reasons, many of which are beyond our control. Depending upon market conditions, our customers may also seek renegotiation of firm drilling contracts to reduce their obligations. We cannot control these factors or predict the future level of demand for our drilling services or future conditions in the offshore contract drilling industry.
Our business involves numerous operating hazards.
          Our operations are subject to the many hazards inherent in the drilling business, including blowouts, cratering, fires and collisions or groundings of offshore equipment, and damage or loss from adverse weather and seas. These hazards could cause personal injury or 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 or facilities. Operations also may be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services, or personnel shortages. Damage to the environment could also result from our operations, particularly through oil spillage or extensive uncontrolled fires. We may also be subject to damage claims by oil and gas companies.
Governmental laws and regulations, including environmental laws and regulations, may add to our costs or limit our drilling activity.
          Our business is affected by changes in public policy and by laws and regulations relating to the energy industry and the environment in the geographic areas where we operate.
          The drilling industry is dependent on demand for services from the oil and gas exploration and production industry, and accordingly, we are directly affected by the adoption of laws and regulations curtailing exploration and development drilling for oil and gas for economic, environmental and other policy reasons. We may be required to make significant capital expenditures to comply with governmental laws and regulations. It is also possible that

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these laws and regulations may in the future add significantly to our operating costs or may significantly limit drilling activity. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions, the exploration for oil and gas, and other aspects of the oil and gas industries in these countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work by major oil companies and may continue to do so in the future.
          Our operations are also subject to numerous laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. As a result, the application of these laws could have a material adverse effect on our results of operations by increasing our cost of doing business, discouraging our customers from drilling for hydrocarbons or subjecting us to liability. For example, we, as an operator of mobile offshore drilling units in navigable U.S. waters and certain offshore areas, including the U.S. Outer Continental Shelf, are liable for damages and for the cost of removing oil spills for which we may be held responsible, subject to certain limitations. Our operations may involve the use or handling of materials that may be classified as environmentally hazardous. Laws and regulations protecting the environment have generally become more stringent and may in certain circumstances impose “strict liability,” rendering a person liable for environmental damage without regard to negligence or fault. Environmental laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts that were in compliance with all applicable laws at the time they were performed.
Our international operations involve additional risks not associated with domestic operations.
          We operate in various regions throughout the world that may expose us to political and other uncertainties, including risks of:
  •   terrorist acts, war and civil disturbances;
 
  •   expropriation of property or equipment;
 
  •   foreign and domestic monetary policy;
 
  •   the inability to repatriate income or capital;
 
  •   regulatory or financial requirements to comply with foreign bureaucratic actions; and
 
  •   changing taxation policies.
          International contract drilling operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to:
  •   the equipping and operation of drilling units;
 
  •   repatriation of foreign earnings;
 
  •   oil and gas exploration and development;
 
  •   taxation of offshore earnings and earnings of expatriate personnel; and
 
  •   use and compensation of local employees and suppliers by foreign contractors.
          Governmental action, including initiatives by OPEC, may continue to cause oil price volatility. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil companies which may continue. In addition, some foreign governments favor or effectively require the awarding of drilling contracts to local contractors, require use of a local agent or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may adversely affect our ability to compete.

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Fluctuations in exchange rates and nonconvertibility of currencies could result in losses to us.
          Due to our international operations, we may experience currency exchange losses where revenues are received and expenses are paid in nonconvertible currencies or where we do not hedge an exposure to a foreign currency. We may also incur losses as a result of an inability to collect revenues because of a shortage of convertible currency available to the country of operation, controls over currency exchange or controls over the repatriation of income or capital.
We are subject to litigation that could have an adverse effect on us.
          We are, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, asbestos and other toxic tort claims, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend these matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and there can be no assurance as to the ultimate outcome of any litigation. Litigation may have an adverse effect on us because of potential negative outcomes, costs of attorneys, the allocation of management’s time and attention, and other factors.
We are subject to changes in tax laws.
          We are a Cayman Islands company and we operate through our various subsidiaries in numerous countries throughout the world including the United States. Consequently, we are subject to changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the U.S., the Cayman Islands or jurisdictions in which we or any of our subsidiaries operates or is resident. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If the U.S. Internal Revenue Service or other taxing authorities do not agree with our assessment of the effects of such laws, treaties and regulations, this could have a material adverse effect on us including the imposition of a higher effective tax rate on our worldwide earnings or a reclassification of the tax impact of our significant corporate restructuring transactions.
Forward-Looking Statements
          This report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations, industry conditions, and indebtedness covenant compliance are forward-looking statements. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “should” and similar expressions are intended to be among the statements that identify 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 those described in “–Risk Factors” above, or in our other U.S. Securities and Exchange Commission filings, among others. Such 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. You should consider these risks when you are evaluating us.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
          None.
ITEM 2. PROPERTIES.
DRILLING FLEET
          Our offshore fleet is composed of the following types of units: semisubmersibles, dynamically positioned drillships, independent leg cantilevered jackups and submersibles. Each type is described further below. Several factors determine the type of unit most suitable for a particular job, the most significant of which include the water

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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. This fleet also includes two Pentagone 85 semisubmersibles, two Bingo 9000 baredeck hulls (including the Noble Danny Adkins ), 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 computer controlled dynamic positioning system and can drill in many areas where jackups can 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 12,000 feet, depending on the unit. Semisubmersibles are more expensive to construct and operate than jackups.
Dynamically Positioned Drillships
          We have three dynamically positioned drillships in our fleet. Drillships are ships that are equipped for drilling and are typically self-propelled. Our units are positioned over the well through the use of a computer controlled dynamic positioning system. Two wholly-owned drillships, the Noble Leo Segerius and Noble Roger Eason , are capable of drilling in water depths up to 5,600 feet and 7,200 feet, respectively. The Noble Muravlenko , in which we own an 82 percent interest through a joint venture, is capable of drilling in water depths up to 4,600 feet.
Independent Leg Cantilevered Jackups
          We have 43 jackups in the fleet, including the Noble Roger Lewis and Noble Hans Deul , which are under construction. Jackups are mobile, self-elevating drilling platforms equipped with legs which can be lowered to the ocean floor until a foundation is established for support. 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 jackups are independent leg (i.e., the legs can be raised or lowered independently of each other) and cantilevered. 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 jackups are designed to drill to a maximum depth of 30,000 feet in water depths ranging between eight and 400 feet, depending on the jackup.
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 offshore fleet at January 23, 2006. The table does not include any units owned by operators for which we had labor contracts. The units located in the U.S. Gulf of Mexico are included in our domestic contract drilling segment, and the units in all other locations are included in our international contract drilling services segment. We operate and, unless otherwise indicated, own all of the units included in the table. All of our units are equipped with top drives.

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Drilling Fleet Table
                                     
                Water   Drilling        
                Depth   Depth        
        Year Built   Rating   Capacity        
Name   Make   or Rebuilt (1)   (feet)   (feet)   Location   Status (2)
 
Semisubmersibles – 13
                                   
Noble Paul Wolff
  Noble EVA-4000™- DP     1998 R       8,900       30,000     Brazil   Shipyard/Contracted
Noble Paul Romano
  Noble EVA-4000™     1998 R       6,000       30,000     U.S. Gulf of Mexico   Active
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
  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 		    2007 R       10,000       35,000     U.S. Gulf of Mexico   Shipyard/Contracted
Noble Dave Beard (5)
  Friede & Goldman 9500
  Enhanced Pacesetter 		    2008 R       10,000       35,000     China   Shipyard/Contracted
Noble Danny Adkins (5)
  Trosvik Bingo 9000     2009 N       12,000       35,000     China   Shipyard/Contracted
Noble Bingo 9000 Rig 4 (5)
  Trosvik Bingo 9000     1999       12,000       35,000     China   Shipyard
 
Dynamically Positioned
  Drillships – 3
                                   
Noble Roger Eason
  Nedlloyd     2005 R       7,200       25,000     Brazil   Active
Noble Leo Segerius
  Gusto Engineering Pelican Class     2002 R       5,600       20,000     Brazil   Active
Noble Muravlenko (6)
  Gusto Engineering Pelican Class     1997 R       4,600       21,000     Brazil   Active
 
Independent Leg Cantilevered
  Jackups – 43
                                   
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     2005 R       360       25,000     The Netherlands   Active
Noble Byron Welliver (4)
  CFEM T-2005C     1982       300       25,000     Denmark   Active
Noble Kolskaya (4) (8)
  Gusto Engineering-C     1997 R       330       25,000     Germany   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     1990 R       300       25,000     Nigeria   Active
Noble Kenneth Delaney
  F&G L-780 MOD II     1998 R       300       25,000     U.A.E.   Shipyard/Contracted
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     Mexico   Active
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
Noble Harvey Duhaney
  Levingston 111-C     2001 R       300       20,000     Qatar   Active
Noble Mark Burns
  Levingston 111-C     2005 R       300       25,000     Qatar   Active
Noble Cees van Diemen
  MODEC 300C-38     2004 R       300       25,000     Qatar   Active
Noble David Tinsley
  MODEC 300C-38     2004 R       300       25,000     Qatar   Active
Noble Gene House
  MODEC 300C-38     2004 R       300       25,000     Qatar   Active
Noble Charlie Yester
  MLT Class 116-C     1979       300       25,000     India   Active
Noble Roy Rhodes (10)
  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     1999 R       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     1996 R       250       20,000     Mediterranean Sea   Active
Noble Chuck Syring
  MLT Class 82-C     1996 R       250       20,000     Qatar   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     U.K.   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     2005 R       150       20,000     U.A.E.   Active
Noble Don Walker
  Baker Marine BMC 150     1992 R       150       20,000     Nigeria   Active
Dhabi II
  Baker Marine BMC 150     1982       150       20,000     U.A.E.   Active
Noble Roger Lewis (4)
  F&G JU-2000E     2007 N       400       30,000     China   Shipyard/Contracted
Noble Hans Deul (4)
  F&G JU-2000E     2008 N       400       30,000     China   Shipyard/Contracted
 
Submersibles – 3
                                   
Noble Joe Alford
  Pace Marine 85G     2006 R       85       25,000     U.S. Gulf of Mexico   Shipyard/Contracted
Noble Lester Pettus
  Pace Marine 85G     2005 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.

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Footnotes to Drilling Fleet Table
(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. Rigs designated with an “N” are newbuilds.
 
(2)   Rigs listed as “active” were operating under contract; 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 construction, repair, refurbishment or upgrade.
 
(3)   Water depth rating is based on installation of our proprietary aluminum alloy riser.
 
(4)   Harsh environment capability.
 
(5)   Water depth rating is subsequent to the rig’s planned upgrade. The Noble Danny Adkins and Noble Bingo 9000 Rig 4 are new baredeck hulls. We began a project to construct the Noble Danny Adkins as an ultra-deepwater semisubmersible in late 2005.
 
(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 to us. Under this agreement, we retain 30 percent of operating profits as defined in the 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)   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 estimate the cost of adding the additional leg capacity at approximately $4,500,000.

          The Noble Jim Thompson is subject to a first naval mortgage securing project financing of $51,637,000 outstanding at December 31, 2005. See Note 8 to our consolidated financial statements included in this Annual Report on Form 10-K.

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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, and research and development for drilling rigs and equipment, in Zug, Switzerland; Sugar Land, Texas; New Orleans, Louisiana; Leduc, Alberta and St. John’s, Newfoundland, Canada; Lagos and Port Harcourt, Nigeria; Stavanger, Norway; Ciudad del Carmen, Mexico; Doha, Qatar; Abu Dhabi and Dubai, U.A.E.; Beverwijk and Den Helder, The Netherlands; Macae, Brazil; 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.
     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 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 $3,320,000 and a customs bond in the amount of $21,466,000, both of which remain in place. NACL filed its initial replies to the SCN in December 2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral arguments and written submissions. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN, as anticipated, confirming his findings consistent with his allegations in the SCN and seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $16,718,000 plus interest related to a 1997 alleged import and (b) $19,065,000 plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) shall not be payable if the duty and interest demanded in (a) is paid by NACL, and (iii) to assess penalty ($442,600) against NACL. NACL promptly filed a Writ Petition in the High Court, Bombay, and obtained from the court a favorable order staying the Commissioner from invoking the guarantee and confirming NACL’s right to appeal the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). We continue to maintain that NACL has acted in accordance with all Indian customs laws and regulations and believe the Commissioner’s order is without merit as against NACL. NACL intends vigorously to pursue its appeal. NACL also is pursuing contractual indemnification against liability for Indian customs duty against the rig’s previous owner in arbitration proceedings in London. In August 2005, the CESTAT made an interim order staying the enforcement of the Commissioner’s order pending the outcome of NACL’s, among others, substantive appeal. The CESTAT held that, prima facie , (a) the Commissioner’s demands for duty were unsustainable upon limitation grounds, (b) the confiscation of the rig was not justified, and (c) the penalties imposed by the Commissioner were bad in law. 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.
     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 131 named individuals alleging personal injury, including claims under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986. Although the lawsuits continue to be in procedural stages, supplemental pleadings recently filed by plaintiffs reflect that only approximately 23 or fewer of the approximately 131 named individuals may have claims that they were employed by our subsidiary or otherwise associated with our drilling operations. 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.
     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.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
     Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
     The following table sets forth certain information as of March 1, 2006 with respect to our executive officers:
             
Name   Age   Position
James C. Day
    62     Chairman of the Board and Chief Executive Officer and Director
 
           
Mark A. Jackson
    50     President and Chief Operating Officer
 
           
Julie J. Robertson
    50     Executive Vice President and Corporate Secretary
 
           
Bruce W. Busmire
    48     Senior Vice President and Chief Financial Officer, Treasurer and Controller
 
           
Robert D. Campbell
    55     Senior Vice President and General Counsel and Assistant Secretary
     James C. Day has served as Chairman of the Board of Noble since 1992 and as Chief Executive Officer since 1984. He served as President of Noble Drilling from 1984 to 1999 and from March 1, 2005 to February 10, 2006. From 1983 until his election as President and Chief Executive Officer, Mr. Day served as Executive Vice President and 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 1983. 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 was named President and Chief Operating Officer of Noble effective February 10, 2006. Mr. Jackson served as Senior Vice President and Chief Operating Officer of Noble from March 1, 2005 to February 10, 2006. Mr. Jackson served as Senior Vice President and Chief Financial Officer, Treasurer and Controller of Noble from September 1, 2000 through September 26, 2005. From 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 1997 to 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 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.
     Julie J. Robertson was named Executive Vice President of Noble effective February 10, 2006. Ms. Robertson served as Senior Vice President — Administration of Noble from July 2001 to February 10, 2006. Ms. Robertson has served continuously as Corporate Secretary of Noble since December 1993. Ms. Robertson served as Vice President — Administration of Noble Drilling from 1996 to July 2001. In 1994, Ms. Robertson became Vice President — Administration of Noble Drilling Services Inc. From 1989 to 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.
     Bruce W. Busmire was named Senior Vice President and Chief Financial Officer, Treasurer and Controller of Noble effective September 26, 2005. Mr. Busmire served as Managing Director of Pickering Energy Partners, Inc., a privately-held energy research firm from 2004 to 2005. Prior to 2004, Mr. Busmire served as Vice President of Investor Relations at Ocean Energy, Inc., then a publicly-traded independent oil and gas company, beginning in 2000. Mr. Busmire served as Controller of Altura Energy from 1997 to 2000. Prior to 1997, Mr. Busmire worked with Amoco, where he served in a number of accounting and finance positions.
     Robert D. Campbell was named Senior Vice President and General Counsel of Noble effective February 10, 2006. Mr. Campbell served as Vice President and General Counsel of Noble Drilling Services Inc. since June

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2003. From January 1999 to June 2003, he served as President of Noble, and from February 1999 to April 2003, he served as a director of Noble. Prior to January 1999, Mr. Campbell practiced corporate/securities law as a senior partner with the firm of Thompson & Knight LLP and served as general counsel to Noble Drilling for more than five years.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
     Noble’s 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 and dividends declared per share for our ordinary shares:
                         
                    Dividends
    High   Low   Declared
2005
                       
Fourth quarter
  $ 75.63     $ 57.14     $ 0.04  
Third quarter
    72.72       59.86       0.02  
Second quarter
    64.60       48.81       0.02  
First quarter
    59.09       47.04       0.02  
2004
                       
Fourth quarter
  $ 50.54     $ 42.77     $ —  
Third quarter
    46.50       35.32       —  
Second quarter
    39.69       33.53       —  
First quarter
    42.91       35.00       —  
     In October 2004, Noble’s 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. The declaration and payment of dividends in the future are at the discretion of Noble’s board of directors and the amount thereof will depend on the Company’s results of operations, financial condition, cash requirements, future business prospects, contractual restrictions and other factors deemed relevant by Noble’s board of directors.
     At March 2, 2006, there were approximately 1,368 shareholder accounts of record.
     The following table sets forth for the periods indicated certain information with respect to purchases by the Company of our ordinary shares:
                                 
                    Total Number of   Maximum Number
                    Shares Purchased   of Shares
    Total Number   Average   as part of   that may yet be
    of Shares   Price Paid   Publicly Announced   Purchased under the
    Purchased (1)   per Share   Programs (2)   Programs (2)
October 1 – 31, 2005
    —       —       —       —  
November 1 – 30, 2005
    —       —       —       —  
December 1 – 31, 2005
    100,000     $ 74.09       5,938,000       9,062,000  
 
(1)   These purchases of our ordinary shares were made in an open-market transaction.
 
(2)   Noble’s board of directors has authorized and approved a share repurchase program covering an aggregate of 15,000,000 ordinary shares. The program was publicly announced by the Company on January 31, 2002.

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ITEM 6. SELECTED FINANCIAL DATA.
                                         
    Year Ended December 31,
    2005   2004   2003   2002   2001
    (In thousands, except per share amounts)
Statement of Income Data
                                       
Operating revenues
  $ 1,382,137     $ 1,066,231     $ 987,380     $ 990,248     $ 1,029,760  
Net income
    296,696       146,086       166,416       209,503       262,922  
Net income per share:
                                       
Basic
    2.18       1.10       1.26       1.58       1.98  
Diluted
    2.16       1.09       1.25       1.57       1.96  
 
                                       
Balance Sheet Data (at end of period)
                                       
Cash and marketable securities (1)
  $ 166,302     $ 191,578     $ 237,843     $ 265,466     $ 278,306  
Property and equipment, net
    2,999,019       2,743,620       2,625,866       2,471,043       2,149,217  
Total assets
    4,346,367       3,307,973       3,189,633       3,065,714       2,750,740  
Long-term debt
    1,129,325       503,288       541,907       589,562       550,131  
Total debt (2)
    1,138,297       511,649       589,573       670,139       605,561  
Shareholders’ equity
    2,731,734       2,384,434       2,178,425       1,989,210       1,778,319  
 
                                       
Other Data
                                       
Net cash provided by operating activities
  $ 529,010     $ 332,221     $ 365,308     $ 445,364     $ 451,046  
Acquisitions and related capital upgrades
    212,050       110,548       194,400       356,854       50,440  
Investment in Smedvig
    691,100       —       —       —       —  
Other capital expenditures
    221,806       150,493       112,734       121,500       89,426  
Cash dividends declared per share (3)
    0.10       —       —       —       —  
 
(1)   Consists of Cash and cash equivalents and Investments in marketable securities as reported on our consolidated balance sheets under Current Assets.
 
(2)   Consists of Long-term debt and Current maturities of long-term debt.
 
(3)   In October 2004, Noble’s 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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
     The following discussion is intended to assist you in understanding our financial position at December 31, 2005 and 2004, and our results of operations for each of the three years in the period ended December 31, 2005. You should read the accompanying consolidated financial statements and related 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, 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. The continuation of favorable oil prices in 2005 supported increases in drilling activity in oil markets worldwide.
     Similar increases in natural gas as well as oil prices domestically have resulted in increased levels of drilling activity in the offshore U.S. Gulf of Mexico. Natural gas prices during 2005 averaged $8.71 per thousand cubic feet (source: average Henry Hub closing bidweek price), 42 percent higher than 2004 and significantly higher

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than historical prices. Drilling activity levels in water depths applicable to semisubmersibles improved significantly in 2005 compared to 2004. While Hurricanes Katrina and Rita temporarily disrupted offshore U.S. Gulf of Mexico drilling activity, they do not appear to have affected preceding trends in demand for offshore drilling services in these markets.
          As a result of the increase in worldwide drilling activities described above, at January 23, 2006, approximately 84 percent of our operating days were committed for 2006.
          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.
          Our long-standing business strategy continues to be the active expansion of our worldwide offshore drilling and deepwater capabilities through acquisitions, upgrades and modifications, and the deployment of our drilling assets in important geological areas. Since the beginning of 2001 we have added seven jackups, two deepwater semisubmersibles, and two ultra-deepwater semisubmersible baredeck hulls to our worldwide fleet through acquisitions. We continued execution of our active expansion strategy in 2005 with the signing of long-term contracts for three ultra-deepwater semisubmersibles, the Noble Clyde Boudreaux , Noble Dave Beard and Noble Danny Adkins . We also signed long-term contracts for two new F&G JU-2000E enhanced premium independent leg cantilevered jackups, the Noble Roger Lewis and Noble Hans Deul .
RESULTS OF OPERATIONS
Hurricane Losses and Recoveries
          Certain of our rigs operating in the U.S. Gulf of Mexico sustained damage in 2005 as a result of Hurricanes Katrina and Rita. During 2005, we recorded a $20,000,000 charge, net of insurance recoveries, for the non-reimbursable portion of these damages and $49,759,000 in loss of hire insurance proceeds that we expect to recover from our insurance underwriters for our Noble EVA-4000™ semisubmersibles (the Noble Jim Thompson , Noble Max Smith , Noble Paul Romano and Noble Amos Runner ) that suffered downtime attributable to these events. Our loss of hire coverage commenced at the respective dates of occurrence of Hurricanes Katrina and Rita, and losses covered thereunder, combined with physical damage losses, are subject to a $10,000,000 retention for each insurable event. Our loss of hire coverage continues through the respective dates the units return on contract subject to a 360-day limit per unit. These financial impacts are presented in “Hurricane losses and recoveries, net” as a component of “Operating Costs and Expenses” in our Consolidated Statements of Income. Earnings were also adversely impacted by $9,026,000 in lost revenue during 2005 as a result of Hurricane Rita on rigs that do not carry loss of hire insurance.
          Following Hurricane Katrina, the Noble Jim Thompson was moved to a shipyard in Sabine Pass, Texas where it was inspected and repairs were begun. The unit was ballasted down in a designated anchorage location in anticipation of the passage of Hurricane Rita. A physical survey after Hurricane Rita indicated that it had not suffered significant additional damage. The Noble Max Smith , Noble Paul Romano , Noble Amos Runner , Noble Lorris Bouzigard , Noble Therald Martin and Noble Joe Alford sustained varying degrees of damage associated with Hurricane Rita. All of these units have returned to work except for the Noble Joe Alford, which is scheduled to return on contract in March 2006.
2005 Compared to 2004
      General
          Net income for 2005 was $296,696,000, or $2.16 per diluted share, on operating revenues of $1,382,137,000, compared to net income of $146,086,000, or $1.09 per diluted share, on operating revenues of $1,066,231,000 for 2004.

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     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 18 of our accompanying consolidated financial statements) for the periods indicated:
                                         
    International     Domestic                    
    Contract     Contract     Engineering              
    Drilling     Drilling     & Consulting              
    Services     Services     Services     Other     Total  
    (In thousands)
2005
                                       
Operating Revenues:
                                       
Contract drilling services
  $ 938,254     $ 271,193     $ —     $ —     $ 1,209,447  
Reimbursables
    39,630       20,141       9,295       17,266       86,332  
Labor contract drilling services
    —       —       —       69,203       69,203  
Engineering, consulting and other
    2,410       1,554       12,632       559       17,155  
 
                             
 
  $ 980,294     $ 292,888     $ 21,927     $ 87,028     $ 1,382,137  
 
                             
 
                                       
Operating Costs and Expenses:
                                       
Contract drilling services
  $ 470,770     $ 128,437     $ —     $ —     $ 599,207  
Reimbursables
    30,638       19,424       9,520       16,656       76,238  
Labor contract drilling services
    —       —       —       58,698       58,698  
Engineering, consulting and other
    955       1,342       19,559       822       22,678  
Depreciation and amortization
    190,043       48,116       365       3,228       241,752  
Selling, general and administrative
    27,728       10,256       935       1,359       40,278  
Hurricane losses and recoveries, net
    —       (29,759 )     —       —       (29,759 )
 
                             
 
  $ 720,134     $ 177,816     $ 30,379     $ 80,763     $ 1,009,092  
 
                             
                                         
    International     Domestic                    
    Contract     Contract     Engineering              
    Drilling     Drilling     & Consulting              
    Services     Services     Services     Other     Total  
    (In thousands)
2004
                                       
Operating Revenues:
                                       
Contract drilling services
  $ 697,858     $ 239,556     $ —     $ —     $ 937,414  
Reimbursables
    19,720       13,777       7,557       9,180       50,234  
Labor contract drilling services
    —       —       —       51,327       51,327  
Engineering, consulting and other
    2,834       1,694       13,935       8,793       27,256  
 
                             
 
  $ 720,412     $ 255,027     $ 21,492     $ 69,300     $ 1,066,231  
 
                             
 
                                       
Operating Costs and Expenses:
                                       
Contract drilling services
  $ 400,031     $ 121,632     $ —     $ —     $ 521,663  
Reimbursables
    15,184       13,100       7,509       8,817       44,610  
Labor contract drilling services
    —       —       —       42,610       42,610  
Engineering, consulting and other
    (2,250 )     620       20,034       8,935       27,339  
Depreciation and amortization
    156,472       48,547       589       3,515       209,123  
Selling, general and administrative
    22,340       8,602       1,113       1,659       33,714  
 
                             
 
  $ 591,777     $ 192,501     $ 29,245     $ 65,536     $ 879,059  
 
                             

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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 2005 and 2004:
                                                 
    Average Rig            
    Utilization (1)   Operating Days (2)     Average Dayrate  
    2005   2004   2005     2004     2005     2004  
International (3):
                                               
Jackups
    97 %     87 %     13,327       11,332     $ 54,491     $ 50,325  
Semisubmersibles — >6,000’(4)
    100 %     72 %     730       397     $ 134,009     $ 144,018  
Semisubmersibles — <6,000’(5)
    96 %     100 %     352       366     $ 86,654     $ 49,877  
Drillships
    91 %     60 %     992       659     $ 84,423     $ 79,134  
 
                                           
Total International
    97 %     85 %     15,401       12,754     $ 60,922     $ 54,717  
 
                                           
 
                                               
Domestic (6):
                                               
Jackups
    100 %     97 %     730       713     $ 65,479     $ 45,785  
Semisubmersibles — >6,000’(4)
    93 %     97 %     1,354       1,612     $ 101,650     $ 103,210  
Semisubmersibles — <6,000’(5)
    95 %     43 %     696       313     $ 73,908     $ 44,144  
Submersibles
    81 %     94 %     882       1,034     $ 38,917     $ 25,840  
 
                                           
Total Domestic
    91 %     87 %     3,662       3,672     $ 74,056     $ 65,239  
 
                                           
 
(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. The average dayrate for domestic semisubmersibles for 2005 was negatively impacted by the classification of loss of hire insurance coverage related to U.S. Gulf Coast hurricanes in 2005. See “Results of Operations – Hurricane Losses and Recoveries” above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
(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.
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 2005 and 2004:
                                 
                    Operating Costs  
    Operating Revenues     and Expenses  
    2005     2004     2005     2004  
    (In thousands)  
Contract drilling services
  $ 938,254     $ 697,858     $ 470,770     $ 400,031  
Reimbursables (1)
    39,630       19,720       30,638       15,184  
Labor contract drilling services
    —       —       —       —  
Engineering, consulting and other
    2,410       2,834       955       (2,250 )
Depreciation and amortization
    N/A       N/A       190,043       156,472  
Selling, general and administrative
    N/A       N/A       27,728       22,340  
 
                       
Total
  $ 980,294     $ 720,412     $ 720,134     $ 591,777  
 
                       
 
(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.

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      Operating Revenues . International contract drilling services revenues increased $240,396,000 primarily due to additional operating days in West Africa, Middle East, Brazil and the North Sea and higher average dayrates in the North Sea and West Africa. These factors were partially offset by fewer operating days in our Mexico division as the Noble Lewis Dugger underwent planned upgrades and refurbishments before commencing a new two-year contract with Petróleos Mexicanos (“Pemex”) in May 2005.
     Our Middle East division, which includes India and the Mediterranean Sea in addition to the Persian Gulf, continues to be our largest international offshore drilling division with 17 jackups deployed at year end 2005, five of which (the Noble Cees van Diemen , Noble David Tinsley , Noble Mark Burns , Noble Harvey Duhaney and Noble Dick Favor ) were acquired or returned to work in the division following major refurbishment projects since the second half of 2004. These rig activations and increased demand for our rigs resulted in an increase of 1,117 operating days in the division. This increased activity level, coupled with an average dayrate increase of $2,145, resulted in additional revenues of $66,240,000. All but one of our units in the Middle East are working under long-term contracts which extend into the second half of 2006 and have options for further extensions. We anticipate that demand for our jackups in the Middle East will continue to be strong subject to continued high commodity prices in 2006.
     Nigeria traditionally has had the largest concentration of drilling rigs in West Africa. Favorable geology for offshore exploration and production, combined with strong world crude oil prices and the expectation that these strong prices will continue, have led to a significant increase in drilling activity in West Africa. We had 100 percent utilization on our six jackups in our West Africa division in 2005 as compared to 61 percent in 2004 due to increased demand and improved political conditions, while our average dayrate increased $10,402 (or 20 percent) as we renewed contracts under favorable market conditions. Revenues increased approximately $38,662,000 due to higher utilization and dayrates. The Noble Homer Ferrington also moved to this region from the U.S. Gulf of Mexico for a long-term contract that commenced in November 2004, increasing revenues by approximately $45,556,000. We believe the long-term contracts initiated during 2004 and 2005 for our jackups and the Noble Homer Ferrington semisubmersible support our favorable outlook for this region.
     The North Sea drilling rig market continued to strengthen in 2005 with increased activity in the region by independent operators in response to higher oil and gas prices worldwide. All of our units in the North Sea are currently operating and dayrates have continued to strengthen on recent contracts. Our fleet of nine drilling rigs in the North Sea operated for 223 more days in 2005 than 2004 at an average dayrate of $13,143 (or 25 percent) higher than the previous year, generating contract drilling revenue growth of $53,773,000.
     We expanded the scale of our operations in Brazil in 2005 in response to strong market conditions. The Noble Roger Eason returned to work in April 2005 after completing planned maintenance and upgrades. During 2005, we executed a contract with Petrobras for the Noble Dave Beard semisubmersible. Following its construction project, the unit will be capable of drilling in water depths of 10,000 feet. The drilling contract is expected to commence in the second quarter of 2008. We also received a commitment for a four-year contract with Petrobras for the Noble Therald Martin semisubmersible. The rig will be mobilized to Brazil following completion of its existing contract in the U.S. Gulf of Mexico. During 2005, we negotiated contract extensions for our three drillships and the Noble Paul Wolff semisubmersible located in Brazil.
     During 2005, we operated a total of eight jackups in Mexico under long-term contracts with Pemex. Although operating days in Mexico decreased by 134 days as the Noble Lewis Dugger underwent shipyard upgrade and maintenance for three months in 2005, revenues increased by $9,485,000 as our average dayrate increased by $5,755 (or 11 percent) over 2004.
      Operating Costs and Expenses. International contract drilling services expenses increased $70,739,000 mainly due to additional operating days in our Middle East and West Africa divisions and additional costs related to the shipyard project on the Noble Roger Eason in Brazil. The increase in operating days in the Middle East was primarily due to the acquisitions of the Noble Cees van Diemen and Noble David Tinsley during 2004 and the acquisition and major upgrade of the Noble Mark Burns which was completed in 2005. The increase in contract drilling services expenses in West Africa was mainly attributable to the higher utilization in this region and the mobilization of the Noble Homer Ferrington semisubmersible from the U.S. Gulf of Mexico.

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     Depreciation and amortization expense increased $33,571,000 primarily due to the acquisitions of the Noble Mark Burns , Noble Cees van Diemen and Noble David Tinsley and the upgrades on the Noble Roger Eason and Noble Homer Ferrington.
     See the discussion below under “ Other Items ” regarding selling, general and administrative expenses.
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 2005 and 2004:
                                 
                    Operating Costs  
    Operating Revenues     and Expenses  
    2005     2004     2005     2004  
    (In thousands)  
Contract drilling services (1)
  $ 271,193     $ 239,556     $ 128,437     $ 121,632  
Reimbursables (2)
    20,141       13,777       19,424       13,100  
Labor contract drilling services
    —       —       —       —  
Engineering, consulting and other
    1,554       1,694       1,342       620  
Depreciation and amortization
    N/A       N/A       48,116       48,547  
Selling, general and administrative
    N/A       N/A       10,256       8,602  
Hurricane losses and recoveries, net
    —       —       (29,759 )     —  
 
                       
Total
  $ 292,888     $ 255,027     $ 177,816     $ 192,501  
 
                       
 
(1)   Operating revenues for 2005 were negatively impacted by the classification of loss of hire insurance coverage related to the U.S. Gulf Coast hurricanes in 2005. See “Results of Operations – Hurricane Losses and Recoveries” above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
(2)   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 Revenues . Domestic contract drilling services revenues increased $31,637,000 in 2005 as improved market conditions drove higher average dayrates and utilization. Excluding the Noble Homer Ferrington, which was transferred to West Africa in July 2004, operating days from our domestic semisubmersibles increased 306 days as the Noble Lorris Bouzigard and Noble Therald Martin operated for 696 days in 2005 as compared to 313 days in 2004. This was partially offset by the Noble Paul Romano being in the shipyard for planned maintenance work which was completed in April 2005. Utilization and average dayrates on our jackups increased to 100 percent and $65,479, respectively, from 97 percent and $45,785 in 2004. Our submersible units also experienced an increase in average dayrate to $38,917 in 2005 from $25,840 in 2004. Utilization on our submersible fleet fell from 94 percent to 81 percent, as the Noble Lester Pettus and Noble Joe Alford were stacked for 213 days in 2005 for inspection and refurbishment.
     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. 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 (“Shell”) 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. We expect completion of this upgrade in the first quarter of 2007. In November 2005, we received Shell’s commitment for a four-year contract on the Noble Danny Adkins , an ultra-deepwater dynamically positioned semisubmersible designed to operate in water depths of 12,000 feet. We expect completion of this unit in the first quarter of 2009.
      Operating Costs and Expenses. Domestic contract drilling services expenses increased $6,805,000 mainly due to higher utilization on the Noble Lorris Bouzigard and Noble Therald Martin , partially offset by our transfer in July 2004 of the Noble Homer Ferrington from the Gulf Coast Marine division to the West Africa division.

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          Depreciation and amortization expense decreased $431,000 primarily as a result of the transfer of the Noble Homer Ferrington to West Africa.
          For additional information regarding weather-related damages to certain of our rigs that impacted operating costs and expenses in 2005, see “Results of Operations – Hurricane Losses and Recoveries” above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.
          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 2005 and 2004:
                                 
                    Operating Costs  
    Operating Revenues     and Expenses  
    2005     2004     2005     2004  
    (In thousands)  
Engineering, consulting and other
  $ 12,632     $ 13,935     $ 19,559     $ 20,034  
Reimbursables (1)
    9,295       7,557       9,520       7,509  
Depreciation and amortization
    N/A       N/A       365       589  
Selling, general and administrative
    N/A       N/A       935       1,113  
 
                       
Total
  $ 21,927     $ 21,492     $ 30,379     $ 29,245  
 
                       
 
(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 Revenues . Excluding reimbursables, operating revenues for our engineering and consulting services segment decreased $1,303,000 primarily due to a license sale of our OptiDrill™ drilling efficiency technology in 2004, partially offset by additional project management work by our Triton subsidiary during 2005.
           Operating Costs and Expenses . Engineering, consulting and other expenses associated with our engineering and consulting services segment decreased $ 475,000 primarily due to lower research and development costs in 2005 for our Noble Technology Services Division.
      Other
          The following table sets forth the operating revenues and the operating costs and expenses for our other services for 2005 and 2004:
                                 
                    Operating Costs  
    Operating Revenues     and Expenses  
    2005     2004     2005     2004  
    (In thousands)  
Labor contract drilling services
  $ 69,203     $ 51,327     $ 58,698     $ 42,610  
Reimbursables (1)
    17,266       9,180       16,656       8,817  
Engineering, consulting and other
    559       8,793       822       8,935  
Depreciation and amortization
    N/A       N/A       3,228       3,515  
Selling, general and administrative
    N/A       N/A       1,359       1,659  
 
                       
Total
  $ 87,028     $ 69,300     $ 80,763     $ 65,536  
 
                       
 
(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.

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           Operating Revenues . Revenues from labor contract drilling services increased $17,876,000 as a result of an additional 1,000 operating days from our North Sea platform operations. This was primarily due to increased activity levels under our labor contracts with Apache Corporation, Chevron Corporation and BP PLC.
           Operating Costs and Expenses . Operating costs and expenses for labor contract drilling services increased $16,088,000 primarily due to the additional operating days from our North Sea platform operations, as discussed above.
      Other Items
           Selling, General and Administrative Expenses . Selling, general and administrative (“SG&A”) expenses increased $6,564,000 primarily due to additional expenses related to employee benefit plans.
           Interest Expense . Interest expense decreased $14,603,000 mainly due to capitalized interest of $13,989,000 related to the Noble Clyde Boudreaux upgrade project and lower average borrowings on the Bank Credit Agreement (for more information on the Bank Credit Agreement (as defined in such section), see “Liquidity and Capital Resources – Credit Facilities and Long-Term Debt ” below).
           Other, net. Other, net increased $1,799,000 primarily due to additional interest income attributable to higher yields in 2005 on our cash and cash equivalents and investments in marketable securities. Equity earnings were lower as we acquired the remaining 50 percent equity interest we did not own in a joint venture, Noble Crosco Drilling Ltd., which formerly owned and operated the Panon jackup. Since the August 2005 acquisition, the operating results of the Panon , which has been renamed the Noble Harvey Duhaney , have been fully consolidated.
           Income Tax Provision . Income tax provision increased $51,665,000 primarily due to higher pre-tax earnings and a higher overall effective tax rate. Our effective tax rate increased from 9.7 percent to 18.5 percent, resulting in higher income tax expense of $32,001,000 primarily due to increased earnings in our U.S. subsidiaries. The U.S. tax rate is generally higher than the effective tax rate on earnings derived from our international 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.

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     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 18 of our accompanying consolidated financial statements) for the periods indicated:
                                         
    International     Domestic                    
    Contract     Contract     Engineering              
    Drilling     Drilling     & Consulting              
    Services     Services     Services     Other     Total  
    (In thousands)  
2004
                                       
Operating Revenues:
                                       
Contract drilling services
  $ 697,858     $ 239,556     $ —     $ —     $ 937,414  
Reimbursables
    19,720       13,777       7,557       9,180       50,234  
Labor contract drilling services
    —       —       —       51,327       51,327  
Engineering, consulting and other
    2,834       1,694       13,935       8,793       27,256  
 
                             
 
  $ 720,412     $ 255,027     $ 21,492     $ 69,300     $ 1,066,231  
 
                             
 
                                       
Operating Costs and Expenses:
                                       
Contract drilling services
  $ 400,031     $ 121,632     $ —     $ —     $ 521,663  
Reimbursables
    15,184       13,100       7,509       8,817       44,610  
Labor contract drilling services
    —       —       —       42,610       42,610  
Engineering, consulting and other
    (2,250 )     620       20,034       8,935       27,339  
Depreciation and amortization
    156,472       48,547       589       3,515       209,123  
Selling, general and administrative
    22,340       8,602       1,113       1,659       33,714  
 
                             
 
  $ 591,777     $ 192,501     $ 29,245     $ 65,536     $ 879,059  
 
                             
                                         
    International     Domestic                    
    Contract     Contract     Engineering              
    Drilling     Drilling     & Consulting              
    Services     Services     Services     Other     Total  
    (In thousands)  
2003
                                       
Operating Revenues:
                                       
Contract drilling services
  $ 646,949     $ 242,654     $ —     $ —     $ 889,603  
Reimbursables
    15,234       10,350       13,887       4,743       44,214  
Labor contract drilling services
    —       —       —       28,492       28,492  
Engineering, consulting and other
    1,138       9,374       9,658       4,901       25,071  
 
                             
 
  $ 663,321     $ 262,378     $ 23,545     $ 38,136     $ 987,380  
 
                             
 
                                       
Operating Costs and Expenses:
                                       
Contract drilling services
  $ 348,760     $ 121,961     $ —     $ —     $ 470,721  
Reimbursables
    11,135       9,722       13,606       4,561       39,024  
Labor contract drilling services
    —       —       —       22,496       22,496  
Engineering, consulting and other
    (614 )     3,012       21,270       4,581       28,249  
Depreciation and amortization
    128,853       49,521       610       3,606       182,590  
Selling, general and administrative
    15,839       8,527       1,235       1,033       26,634  
Gain on sale of property and equipment
    —       (3,472 )     —       —       (3,472 )
 
                             
 
  $ 503,973     $ 189,271     $ 36,721     $ 36,277     $ 766,242  
 
                             

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      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:
                                                 
    Average Rig              
    Utilization (1)     Operating Days (2)     Average Dayrate  
    2004     2003     2004     2003     2004     2003  
International (3):
                                               
Jackups
    87%       82%       11,332       9,620     $ 50,325     $ 51,614  
Semisubmersibles — >6,000’(4)
    72%       100%       397       365     $ 144,018     $ 149,217  
Semisubmersibles — <6,000’(5)
    100%       95%       366       347     $ 49,877     $ 44,131  
Drillships
    60%       98%       659       1,071     $ 79,134     $ 75,296  
 
                                           
Total International
    85%       84%       12,754       11,403     $ 54,717     $ 56,735  
 
                                           
 
                                               
Domestic (6):
                                               
Jackups
    97%       91%       713       1,144     $ 45,785     $ 30,271  
Semisubmersibles — >6,000’(4)
    97%       87%       1,612       1,580     $ 103,210     $ 120,784  
Semisubmersibles — <6,000’(5)
    43%       29%       313       107     $ 44,144     $ 45,025  
Submersibles
    94%       77%       1,034       613     $ 25,840     $ 20,188  
 
                                         
Total Domestic
    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.
      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 Costs  
    Operating Revenues     and Expenses  
    2004     2003     2004     2003  
    (In thousands)  
Contract drilling services
  $ 697,858     $ 646,949     $ 400,031     $ 348,760  
Reimbursables (1)
    19,720       15,234       15,184       11,135  
Engineering, consulting and other
    2,834       1,138       (2,250 )     (614 )
Depreciation and amortization
    N/A       N/A       156,472       128,853  
Selling, general and administrative
    N/A       N/A       22,340       15,839  
 
                       
Total
  $ 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 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.

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      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.
     Nigeria traditionally has had the largest concentration of drilling rigs in West Africa. 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 long-term 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 decreased revenues by approximately $28,000,000.
     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. The shipyard project on the Noble Roger Eason decreased revenue by approximately $21,000,000.
     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. As of December 31, 2004, we had mobilized a total of seven jackups from the U.S. Gulf of Mexico to Mexico for long-term contracts with Pemex. The mobilization of these jackups to Mexico was pursuant to our long-standing business strategy of deploying our assets in important geological regions.
     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 rig’s preparations for its long-term contract in Nigeria.
      Operating Costs and Expenses. International contract drilling services expenses increased $51,271,000 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 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 completed in the first quarter of 2005, 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.
     Depreciation and amortization expense increased $27,619,000 due to the rig acquisitions, mobilization of jackups to international locations, and transfer of the Noble Homer Ferrington to our West Africa division discussed above.
     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 rig’s drydocking in late July 2004, resulting in a reduced minority interest amount.
     See the discussion below under “ Other Items ” regarding selling, general and administrative expenses.

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      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 Costs  
    Operating Revenues     and Expenses  
    2004     2003     2004     2003  
    (In thousands)  
Contract drilling services
  $ 239,556     $ 242,654     $ 121,632     $ 121,961  
Reimbursables (1)
    13,777       10,350       13,100       9,722  
Engineering, consulting and other
    1,694       9,374       620       3,012  
Depreciation and amortization
    N/A       N/A       48,547       49,521  
Selling, general and administrative
    N/A       N/A       8,602       8,527  
Gain on sale of property and equipment
    N/A       N/A       —       (3,472 )
 
                       
Total
  $ 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 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 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 came closer into balance with demand following the industry’s mobilization of jackups 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 jackups 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 and mobilized to the shipyard in July 2004 in preparation for a long-term 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.
           Operating Costs and Expenses. Before considering 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, domestic contract drilling services expenses decreased $9,329,000 due to the mobilization of four jackups 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 jackups 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.
          Depreciation and amortization expense decreased $974,000 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,

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which reduced depreciation and amortization 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.
          Engineering, consulting and other expenses were lower in 2004 by $2,392,000 due to the sale of our interests in certain deepwater oil and gas properties during the fourth quarter of 2003.
          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 Costs  
    Operating Revenues     and Expenses  
    2004     2003     2004     2003  
    (In thousands)  
Engineering, consulting and other
  $ 13,935     $ 9,658     $ 20,034     $ 21,270  
Reimbursables (1)
    7,557       13,887       7,509       13,606  
Depreciation and amortization
    N/A       N/A       589       610  
Selling, general and administrative
    N/A       N/A       1,113       1,235  
 
                       
Total
  $ 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.
           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.
      Other
          The following table sets forth the operating revenues and the operating costs and expenses for our other services for 2004 and 2003:
                                 
                    Operating Costs  
    Operating Revenues     and Expenses  
    2004     2003     2004     2003  
    (In thousands)  
Labor contract drilling services
  $ 51,327     $ 28,492     $ 42,610     $ 22,496  
Reimbursables (1)
    9,180       4,743       8,817       4,561  
Engineering, consulting and other
    8,793       4,901       8,935       4,581  
Depreciation and amortization
    N/A       N/A       3,515       3,606  
Selling, general and administrative
    N/A       N/A       1,659       1,033  
 
                       
Total
  $ 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.

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           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 labor, maintenance and administrative costs under our contract 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 . 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.
           Interest Expense . Interest expense decreased $5,902,000 due to the continued retirement of debt since the beginning of 2003. During the two-year period ended December 31, 2004, we 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 owned the Panon jackup in 2003 and 2004, and additional interest income earned on our cash and cash equivalents and investments in marketable 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.
LIQUIDITY AND CAPITAL RESOURCES
      Overview
          Our principal capital resource in 2005 was net cash provided by operating activities of $529,010,000, which compared to $332,221,000 and $365,308,000 in 2004 and 2003, respectively. The increase in net cash provided by operating activities in 2005 was primarily attributable to higher net income. At December 31, 2005, we had cash and cash equivalents of $121,845,000, investments in marketable securities totaling $44,457,000 (excluding non-current investments), an insurance receivable of $51,565,000 and approximately $157,928,000 of funds available under the Bank Credit Agreement. We had working capital of $263,120,000 and $211,117,000 at

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December 31, 2005 and 2004, respectively. Total debt as a percentage of total debt plus shareholders’ equity was 29 percent at December 31, 2005 and 18 percent at December 31, 2004. The increase in 2005 reflects our borrowings of an aggregate of $700,000,000 in connection with our acquisition of shares of Smedvig ASA (“Smedvig”) on December 23, 2005. See “ Investment in Smedvig ” below in this Item 7.
          During 2005, we repurchased 100,000 of our ordinary shares at an average price of $74.09 per ordinary share for a total cost of $7,409,000. 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. Additional repurchases, if any, may be made on the open market or in private transactions at prices determined by us. The share repurchases 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. At March 1 , 2006, 9,062,000 shares remained available under this authorization.
          In 2005, we made contributions to our international and domestic pension plans of $6,965,000 and $11,967,000, respectively. We made total fundings of $802,000 and $587,000 to our international and domestic pension plans, respectively, in 2004. During 2003, we made fundings totaling $12,040,000 and $10,115,000 to our international and domestic pension plans, respectively. We expect fundings to our international and domestic pension plans in 2006 to aggregate approximately $14,000,000.
      Capital Expenditures
          Capital expenditures totaled $433,856,000 and $261,041,000 for 2005 and 2004, respectively.
          Capital expenditures in 2005 include $137,778,000 toward the construction of the Noble Roger Lewis and Noble Hans Deul , two new F&G JU-2000E enhanced premium jackups. Other significant capital expenditures in 2005 included $52,426,000 for the Noble Clyde Boudreaux upgrade project, $36,883,000 for initial upgrades to the Noble Mark Burns, $25,485,000 for the Noble Paul Wolff , $28,317,000 for the Noble Al White , $15,727,000 for refurbishments to the Noble Paul Romano , and $12,127,000 for initial upgrades to the Noble David Tinsley . We are modifying the design of the Noble Clyde Boudreaux to a 16-point mooring system, which is expected to increase the cost for this project by approximately $60,000,000 and to extend the project completion to the first quarter of 2007.
          We also invested $31,576,000, net of cash received, to purchase the remaining 50 percent equity interest in our Noble Crosco Drilling Ltd. joint venture, which owned the Panon . The Panon was renamed the Noble Harvey Duhaney following this transaction.
          In addition, major maintenance expenditures (see “Critical Accounting Policies – Property and Equipment ” below for a discussion of major maintenance projects) totaled $79,663,000 and $72,948,000 for 2005 and 2004, respectively.
          We expect that our capital expenditures and major maintenance expenditures for 2006 will aggregate approximately $1,200,000,000 and $120,000,000, respectively, which includes approximately $185,000,000 for the Noble Dave Beard , $155,000,000 for the upgrade of the Noble Clyde Boudreaux , $120,000,000 for the construction of two jackups, the Noble Roger Lewis and Noble Hans Deul , and $110,000,000 for the construction of the Noble Danny Adkins .
          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. At December 31, 2005, we had approximately $439,124,000 of outstanding purchase commitments, $288,905,000 of which are included in the projected 2006 capital expenditures and major maintenance expenditures described above.
          Certain projects currently under consideration could require, if they materialize, capital expenditures or other cash requirements not included in the 2006 budget. In addition, we will continue to evaluate acquisitions of drilling units from time to time. Factors that could cause actual capital expenditures to materially exceed the planned capital expenditures include delays and cost overruns in shipyards, shortages of equipment, latent damage

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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.
          We believe that our cash and cash equivalents, investments in marketable securities, net cash provided by operating activities, available capacity under the Bank Credit Agreement, 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.
      Investment in Smedvig
          On December 23, 2005, we acquired, directly and indirectly, 21,095,600 Class A shares and 2,501,374 Class B shares of Smedvig. Our acquisition comprised 39.2 percent of the Class A voting shares and 28.9 percent of the total capital shares of Smedvig. The purchase price for the Class A shares was NOK 200.00 per share and for the Class B shares was NOK 150.00 per share, totaling NOK 4,594,326,100 ($691,100,000 at the date of acquisition) before certain legal and other transaction costs. We financed the acquisition of the Smedvig shares, including related transaction costs, with an aggregate of $700,000,000 in new debt borrowings.
          On January 23, 2006, SeaDrill Limited, a Bermudian limited company (“SeaDrill”), reported that SeaDrill had received acceptances for a total of 24,876,009 Class A shares and 15,417,402 Class B shares of Smedvig under the voluntary offer conducted by SeaDrill for shares of Smedvig. SeaDrill further reported that, including its already owned shares, SeaDrill controlled 51.24 percent of the Class A shares and 52.47 percent of the Smedvig capital. SeaDrill has commenced a mandatory offer in Norway together with a tender offer in the United States to all remaining shareholders in Smedvig. In addition, at an extraordinary general meeting of Smedvig held on February 16, 2006, shareholders elected a board of directors composed of five members, including John Fredriksen, Tor Olav Troim and Kate Blankenship, each of whom is a director of SeaDrill. Mr. Fredriksen was elected Chairman of the Board of Smedvig at the meeting. As a result of the foregoing, we are currently reviewing all available alternatives relative to our investment in Smedvig shares, and we reserve the right to pursue all options available to us.
          The terms of the Company’s Smedvig share purchase agreement require that any resale of the Smedvig shares by us during the period through December 12, 2006 at a price in excess of the original purchase price (NOK basis) we paid is payable by us to the parties from whom we originally purchased such shares. Accordingly, our ability to realize a gain on resale is limited through December 12, 2006.
      Credit Facilities and Long-Term Debt
          On December 22, 2005, Noble, Noble Holding (U.S.) Corporation (“NHC”) and Noble Drilling Corporation (“Noble Drilling”) entered into a credit agreement (the “GS Credit Agreement”) with Goldman Sachs Credit Partners L.P. (“Goldman Sachs”), pursuant to which Noble Drilling borrowed $600,000,000. Noble, NHC and Noble Drilling Holding LLC have unconditionally guaranteed the performance of Noble Drilling under the GS Credit Agreement. Each of NHC, Noble Drilling and Noble Drilling Holding LLC is a direct or indirect wholly-owned subsidiary of Noble. On March 2, 2006, the parties to the GS Credit Agreement amended its terms, including provisions to extend the maturity through April 1, 2007 and to provide Goldman Sachs a right of syndication under certain conditions. In order to reduce our exposure to changes in interest rates between the date of borrowing and its expected refinancing, we entered into interest rates swaps on December 19, 2005 with notional amounts totaling $600,000,000. To provide for additional flexibility in the refinancing of the GS Credit Agreement, on January 27, 2006, we terminated these interest rate swaps at no cost to us.
          Noble Drilling has in place an unsecured revolving bank credit facility totaling $300,000,000, including a letter of credit facility totaling $50,000,000, which extends through November 30, 2009 (the “Bank Credit Agreement”). Noble and NHC have unconditionally guaranteed the performance of Noble Drilling under the Bank Credit Agreement. At December 31, 2005, we had borrowings and letters of credit of $135,000,000 and $7,072,000, respectively, outstanding under the Bank Credit Agreement, with $157,928,000 remaining available thereunder. At December 31, 2005, we had letters of credit and third-party guarantees of $65,014,000 and performance and customs bonds totaling $76,575,000 supported by surety bonds outstanding in addition to amounts outstanding under the Bank Credit Agreement.

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          At December 31, 2005, our total debt had increased to $1,138,297,000, including current maturities of $8,972,000, due to the borrowing of $600,000,000 under the GS Credit Agreement and $100,000,000 under the Bank Credit Agreement for the acquisition of shares of Smedvig in December 2005, partially offset by $65,000,000 of paydowns under the Bank Credit Agreement in early 2005. At December 31, 2005 and 2004, we had no off-balance sheet debt. At December 31, 2005, we were in compliance with all our debt covenants. For additional information on debt, see Note 8 to our accompanying consolidated financial statements.
      Summary of Contractual Cash Obligations and Commitments
          The following table summarizes our contractual cash obligations and commitments at December 31, 2005 (dollar amounts are in thousands):
                                         
    Payments Due by Period  
            Less than                     After  
    Total     1 year     1-3 years     3-5 years     5 years  
Contractual Cash Obligations
                                       
Total debt (including current maturities)
  $ 1,138,297     $ 8,972     $ 619,965     $ 307,665     $ 201,695  
Interest payments
    309,200       66,196       72,474       42,249       128,281  
Operating leases
    19,223       3,571       5,146       4,683       5,823  
Pension fundings
    14,000       14,000       —       —       —  
Purchase commitments
    439,124       288,905       150,219       —       —  
 
                             
Total contractual cash obligations
  $ 1,919,844     $ 381,644     $ 847,804     $ 354,597     $ 335,799  
 
                             
                                         
    Amount of Commitment Expiration Per Period  
    Total Amounts     Less than                     Over  
    Committed     1 year     1-3 years     3-5 years     5 years  
Other Commercial Commitments
                                       
Letters of credit
  $ 72,086     $ 58,055     $ 11,531     $ 2,500     $ —  
Surety bonds
    76,575       33,618       42,957       —       —  
 
                             
Total commercial commitments
  $ 148,661     $ 91,673     $ 54,488     $ 2,500     $ —  
 
                             
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 assets, insurance reserves, equity investments, 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 asset’s 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 are eliminated from the accounts and the gain or loss is recognized. 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.
          Interest is capitalized on construction-in-progress at the interest rate on debt incurred for construction or at the weighted average cost of debt outstanding during the period of construction. Capitalized interest for the years ended December 31, 2005, 2004 and 2003 was $13,989,000, $0 and $0, respectively.
          Scheduled maintenance of equipment and overhauls are performed on the basis of number of hours operated in accordance with our preventative maintenance program. Routine repair and maintenance costs are

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charged to expense as incurred; however, the costs of the overhauls related to major maintenance projects that benefit the periods between overhauls and which typically occur every three to five years are deferred when incurred and amortized over an equivalent period. The deferred portion of these major maintenance projects is included in “Other assets” in the Consolidated Balance Sheets. Such amounts totaled $118,703,000 and $88,621,000 at December 31, 2005 and 2004, respectively.
          In order to allow readers of our financial statements to identify more easily costs that benefit multiple years associated with rigs, amortization of deferred costs for major maintenance projects has been reclassified in the consolidated financial statements for all periods and is now reflected along with depreciation in “Depreciation and amortization”. In prior periods, amortization of deferred costs for major maintenance projects was included in contract drilling services expenses and labor contract drilling services expenses. The amount of such amortization was $50,000,000, $40,904,000 and $34,463,000 for the years ended December 31, 2005, 2004 and 2003, respectively. This revision in classification had no impact on previously reported operating income and net income. Total maintenance and repair expenses for the years ended December 31, 2005, 2004 and 2003, exclusive of amortization of deferred costs for major maintenance projects were $133,372,000, $113,398,000 and $87,975,000, respectively.
      Impairment of 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 asset’s 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 asset’s 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, 2005, 2004 and 2003. There were no other impairment losses during the years ended December 31, 2005, 2004 and 2003.
      Insurance Reserves
          We maintain insurance coverage against certain marine liabilities, including liability for physical damage to our drilling rigs, loss of hire on our deepwater drillships and certain semisubmersibles and one jackup, and personal injury to our drilling crews. Our marine package policy insures us for physical damage to our drilling rigs up to the scheduled value of each rig. We retain the first $10,000,000 per event under this policy. Our protection and indemnity policy insures us for personal injury to our offshore 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 the marine package deductibles on a per event basis and the protection and indemnity 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, 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 direct cost as operating expenses. Reimbursements for loss of hire under our insurance coverages are included in “Hurricane recoveries and losses, net.”

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      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 Noble’s 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 asset or liability in these circumstances would not have had a material effect on our financial position or results of operations.
          For additional information on our accounting policies, see Note 1 to our accompanying consolidated financial statements.
ACCOUNTING PRONOUNCEMENTS
           In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123 (revised 2004), Share-Based Payment (“SFAS 123R”), which is a revision to SFAS  123, Accounting for Stock-Based Compensation (“SFAS 123”). SFAS 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and amends SFAS 95, Statement of Cash Flows . Generally, the approach in SFAS 123R is similar to SFAS 123, which requires companies to 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 to recognize the related cost in the income statement over the period in which the employee services are performed, which is usually the equity instrument’s vesting period. Under SFAS 123, this accounting treatment was optional with pro forma disclosures required.
          We will adopt SFAS 123R effective January 1, 2006. It will be effective for all awards granted after that date. For those stock option awards granted prior to January 1, 2006 but for which the vesting period is not complete, we will use the modified prospective transition method permitted by SFAS 123R. Under this method, we will account for such awards on a prospective basis, with expense being recognized in our statement of income beginning in the first quarter of 2006 using the grant-date fair values previously calculated for our SFAS 123 pro forma disclosures presented in Note 1 – Organization and Significant Accounting Policies – Stock–Based Compensation Plans of the accompanying consolidated financial statements. We will recognize the related compensation cost not previously recognized in the SFAS 123 pro forma disclosures over the remaining vesting period.
           The impact that the adoption of SFAS 123R will have on our consolidated results of operations will be determined primarily by the number of stock options issued to employees in future periods. The incremental expense related to future stock option and employee stock purchase plan grants is difficult to predict because the expense will depend on the number of awards granted, the grant date stock price, volatility of our stock price and other factors. However, based on recent stock option issuances, we estimate that the adoption of SFAS 123R will reduce 2006 net income by approximately $7,000,000 to $9,000,000, or $.05 to $.07 per diluted share. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net cash provided by operating activities and increase net cash provided by financing activities in periods after adoption. While we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options and the value of the stock at the time of exercise), there were no such excess tax deductions included in net cash provided by operating activities in 2005, 2004 and 2003.
           In May 2005, the FASB issued SFAS  154, “ Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements ” (“SFAS 154”). SFAS 154 provides guidance on the accounting for and reporting of accounting changes and error corrections. It establishes, unless impracticable, retrospective application as the required method for reporting a change in accounting principle in the absence of explicit transition requirements specific to the newly adopted accounting principle. SFAS 154 also provides guidance for determining whether retrospective application of a change in accounting principle is impracticable and for reporting a change

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when retrospective application is impracticable. The provisions of SFAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. We do not expect the adoption of SFAS 154 to have a material impact on our financial position or results of operations.
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. A one percent change in the December 31, 2005 closing price of these marketable equity and debt securities would impact the carrying value of these investments by $13,000 and $445,000, respectively, excluding our investment in shares of Smedvig discussed below in this Item 7A. To mitigate the risk of losses, these investments are monitored by management to assure compliance with policies established by the Company.
     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 Company’s 401(k) savings plan and, subject to certain limitations specified in the plan, receive employer matching contributions (which are made in Noble’s ordinary shares). The employer matching amount is limited in the same manner as are employer matching contributions under the Company’s 401(k) savings 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 employee 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 should phantom investment losses occur. At December 31, 2005, the Company’s liability under the Restoration Plan totaled $16,757,000. At December 31, 2005, a one percent increase in the fair value of the phantom investments would increase the Company’s liability by $168,000 and a one percent decline in the fair value of the phantom investments would reduce the Company’s liability by $168,000.
     We are subject to market risk exposure related to changes in interest rates on the GS Credit Agreement and Bank Credit Agreement. Interest on the GS Credit Agreement and Bank Credit Agreement is at an agreed upon percentage point spread from LIBOR. At December 31, 2005, there were $735,000,000 of outstanding borrowings under the GS Credit Agreement and Bank Credit Agreement. An immediate change of one percent in the interest rate would cause a $7,350,000 change in interest expense on an annual basis.
     At December 31, 2005, we owned 21,095,600 Class A shares and 2,501,374 Class B shares of Smedvig, which we continue to own. The purchase price for the Class A shares was NOK 200.00 per share and for the Class B shares was NOK 150.00 per share, totaling NOK 4,594,326,100 ($691,100,000 at the date of acquisition) before certain legal and other transaction costs. We are subject to market risk exposure related to the changes in exchange rates between Norwegian Kroner (NOK) and U.S. Dollars (USD). Similarly, we are subject to market risk exposure related to the equity prices of Class A shares and Class B shares of Smedvig. A one percent change in the exchange rate between NOK and USD would affect the fair value of our investment in Smedvig shares by $6,840,000. Similarly, a one percent change in the market price of Smedvig Class A shares and Class B shares would affect the fair value of our investment by $6,915,000.
     Our Senior Notes due 2009 and 2019 bear interest at fixed interest rates of 6.95% and 7.50% per annum, respectively. Both series of notes currently trade at a premium to their face value. The estimated fair value of our Senior Notes due 2009 and 2019, based on quoted market prices, was $157,986,000 and $240,747,000 at December 31, 2005, respectively. This compares to carrying amounts (net of any unamortized discount) of $149,965,000 and $201,695,000, respectively. While our interest payments on these notes are at fixed rates, if U.S. Treasury rates were to change, the fair value of our Senior Notes could be impacted. We estimate that a one percent increase in interest rates would decrease the fair value of our Senior Notes due 2009 and 2019 by approximately $4,450,000 and $20,000,000, respectively. As we have no current plans to retire or refinance our fixed rate notes, are not highly leveraged and are not aware of any conditions that would cause our credit rating to be negatively impacted in a manner that would force refinancing of our fixed rate debt, we believe our exposure to market risk associated with our fixed rate notes is minimal.
     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.

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Dollars to mitigate our exposure to fluctuations in foreign currencies. Other than trade accounts receivable and trade accounts payable, which mostly offset one another, and our investment in shares of Smedvig, we do not currently have any significant assets, liabilities, 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. 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, nor are we 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. To reduce our exposure to fluctuations in these currencies during 2005, we entered into forward contracts in February, March and June 2005 to purchase 30,680,000 Euros and 20,899,000 British Pounds for the months February 2005 through June 2006. The forward contracts settled in 2005 represented approximately two-thirds of our forecasted Euro and British Pound requirements for 2005 after the respective dates on which we entered into the forward contracts. The outstanding notional amounts of these forward contracts at December 31, 2005 were approximately 7,625,000 Euros and 6,755,000 British Pounds, respectively. Similarly, we entered into forward contracts in November and December 2005 to purchase 19,124,000 Euros and 4,988,000 British Pounds for the period from January 2006 through December 2006. The forward contracts settling in 2006 represent approximately 40 percent of our forecasted Euro and British Pound requirements in 2006. The notional amount of these hedges at December 31, 2005 was $53,592,000. We entered into similar derivative instruments in 2004 to reduce our exposure to fluctuations in currency exchange rates in 2004.
     All the foreign currency contracts disclosed above 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 . The change in the fair value of those derivative instruments outstanding at December 31, 2005, ($1,397,000), is included in “Other current assets” or “Other current liabilities” with the cumulative unrealized loss included in “Accumulated other comprehensive (loss) income” in our Consolidated Balance Sheets. Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between derivative contracts in 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 2005, 2004 or 2003 related to these derivative instruments.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
     The following financial statements are filed in this Item 8:
     
    Page
 
  40-41
 
   
  42
 
   
  43
 
   
  44
 
   
  45
 
   
  46
 
   
  47-82

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Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Shareholders of Noble Corporation:
We have completed integrated audits of Noble Corporation’s 2005 and 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2005, and an audit of its 2003 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 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 at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s 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, management’s assessment, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2005 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, 2005, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Company’s 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 management’s assessment and on the effectiveness of the Company’s 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 management’s 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 company’s 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 company’s 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 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 company’s assets that could have a material effect on the financial statements.

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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.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 13, 2006

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    December 31,  
    2005     2004  
ASSETS
               
CURRENT ASSETS
               
Cash and cash equivalents
  $ 121,845     $ 58,790  
Investments in marketable securities
    44,457       132,788  
Accounts receivable
    276,688       205,023  
Insurance receivables
    51,565       —  
Inventories
    3,940       4,013  
Prepaid expenses
    10,064       12,454  
Other current assets
    13,896       12,215  
 
           
Total current assets
    522,455       425,283  
 
           
 
               
PROPERTY AND EQUIPMENT
               
Drilling equipment and facilities
    4,178,097       3,739,338  
Other
    66,698       65,550  
 
           
 
    4,244,795       3,804,888  
Accumulated depreciation
    (1,245,776 )     (1,061,268 )
 
           
 
    2,999,019       2,743,620  
 
           
 
               
INVESTMENTS IN MARKETABLE SECURITIES
    673,639       528  
OTHER ASSETS
    151,254       138,542  
 
           
 
  $ 4,346,367     $ 3,307,973  
 
           
 
               
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
Current maturities of long-term debt
  $ 8,972     $ 8,361  
Accounts payable
    93,914       83,012  
Accrued payroll and related costs
    78,558       60,911  
Taxes payable
    45,245       22,883  
Interest payable
    9,640       8,981  
Other current liabilities
    23,006       30,018  
 
           
Total current liabilities
    259,335       214,166  
 
               
LONG-TERM DEBT
    1,129,325       503,288  
DEFERRED INCOME TAXES
    227,589       206,506  
OTHER LIABILITIES
    6,290       8,110  
 
           
 
    1,622,539       932,070  
 
           
 
               
COMMITMENTS AND CONTINGENCIES (Note 15)
               
MINORITY INTEREST
    (7,906 )     (8,531 )
 
               
SHAREHOLDERS’ EQUITY
               
Ordinary Shares-par value $0.10 per share; 400,000 shares authorized and 137,009 issued and outstanding in 2005; 400,000 shares authorized and 134,407 issued and outstanding in 2004
    13,701       13,441  
Capital in excess of par value
    1,024,470       926,652  
Retained earnings
    1,736,015       1,452,974  
Restricted stock (unearned compensation)
    (17,099 )     (11,171 )
Accumulated other comprehensive (loss) income
    (25,353 )     2,538  
 
           
 
    2,731,734       2,384,434  
 
           
 
  $ 4,346,367     $ 3,307,973  
 
           
See accompanying notes to the consolidated financial statements.

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
                         
    Year Ended December 31,  
    2005     2004     2003  
OPERATING REVENUES
                       
Contract drilling services
  $ 1,209,447     $ 937,414     $ 889,603  
Reimbursables
    86,332       50,234       44,214  
Labor contract drilling services
    69,203       51,327       28,492  
Engineering, consulting and other
    17,155       27,256       25,071  
 
                 
 
    1,382,137       1,066,231       987,380  
 
                 
 
                       
OPERATING COSTS AND EXPENSES
                       
Contract drilling services
    599,207       521,663       470,721  
Reimbursables
    76,238       44,610       39,024  
Labor contract drilling services
    58,698       42,610       22,496  
Engineering, consulting and other
    22,678       27,339       28,249  
Depreciation and amortization
    241,752       209,123       182,590  
Selling, general and administrative
    40,278       33,714       26,634  
Hurricane losses and recoveries, net
    (29,759 )     —       —  
Gain on sale of property and equipment
    —       —       (3,472 )
 
                 
 
    1,009,092       879,059       766,242  
 
                 
 
                       
OPERATING INCOME
    373,045       187,172       221,138  
 
                       
OTHER INCOME (EXPENSE)
                       
Interest expense
    (19,786 )     (34,389 )     (40,291 )
Other, net
    10,833       9,034       6,137  
 
                 
 
                       
INCOME BEFORE INCOME TAXES
    364,092       161,817       186,984  
INCOME TAX PROVISION
    (67,396 )     (15,731 )     (20,568 )
 
                 
 
                       
NET INCOME
  $ 296,696     $ 146,086     $ 166,416  
 
                 
 
                       
NET INCOME PER SHARE:
                       
Basic
  $ 2.18     $ 1.10     $ 1.26  
Diluted
  $ 2.16     $ 1.09     $ 1.25  
See accompanying notes to the consolidated financial statements.

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                         
    Year Ended December 31,  
    2005     2004     2003  
CASH FLOWS FROM OPERATING ACTIVITIES
                       
Net income
  $ 296,696     $ 146,086     $ 166,416  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    241,752       209,123       182,590  
Deferred income tax provision
    36,207       5,022       4,376  
Loss on sales of marketable securities
    531       129       382  
Equity in income of joint venture
    (3,194 )     (3,931 )     (2,307 )
Distributions received from joint venture
    2,194       2,700       —  
Compensation expense from stock-based plans
    7,377       5,753       4,627  
Hurricane losses and recoveries, net
    (29,759 )     —       —  
Gain on sale of interest in deepwater oil and gas properties
    —       —       (3,472 )
Dissolution of rabbi trust
    —       11,945       —  
Discretionary pension funding
    —       —       (17,100 )
Other
    2,751       (4,028 )     1,518  
Other changes in current assets and liabilities, net of acquired working capital:
                       
Accounts receivable
    (68,094 )     (55,788 )     15,378  
Other current assets
    18,968       1,187       (12,081 )
Accounts payable
    (2,395 )     (4,164 )     22,400  
Other current liabilities
    25,976       18,187       2,581  
 
                 
Net cash provided by operating activities
    529,010       332,221       365,308  
 
                 
 
                       
CASH FLOWS FROM INVESTING ACTIVITIES
                       
Acquisitions and related capital upgrades
    (212,050 )     (110,548 )     (194,400 )
Other capital expenditures
    (221,806 )     (150,493 )     (112,734 )
Major maintenance expenditures
    (79,663 )     (72,948 )     (36,984 )
Proceeds from sales of property and equipment
    1,129       2,135       1,606  
Proceeds from sale of interest in deepwater oil and gas properties
    —       —       5,200  
Purchase of remaining 50% interest in the Panon , net of cash acquired
    (31,576 )     —       —  
Repayments from joint venture
    —       2,295       4,977  
Investment in Smedvig
    (691,100 )     —       —  
Investment in marketable securities
    (24,973 )     (233,216 )     (210,020 )
Proceeds from sales of marketable securities
    112,628       265,352       239,285  
 
                 
Net cash used for investing activities
    (1,147,411 )     (297,423 )     (303,070 )
 
                 
 
                       
CASH FLOWS FROM FINANCING ACTIVITIES
                       
Borrowings on credit facilities
    700,000       —       —  
Payments on credit facilities
    (65,000 )     (25,000 )     —  
Payments of other long-term debt
    (8,517 )     (52,933 )     (80,580 )
Proceeds from issuance of ordinary shares
    76,037       79,072       9,432  
Payments of dividends
    (13,655 )     —       —  
Repurchase of ordinary shares
    (7,409 )     (39,714 )     —  
Decrease in restricted cash
    —       —       8,668  
 
                 
Net cash provided by (used for) financing activities
    681,456       (38,575 )     (62,480 )
 
                 
 
                       
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    63,055       (3,777 )     (242 )
 
                       
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    58,790       62,567       62,809  
 
                 
 
                       
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 121,845     $ 58,790     $ 62,567  
 
                 
See accompanying notes to the consolidated financial statements.

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)
                                                 
    2005     2004     2003  
    Shares     Amount     Shares     Amount     Shares     Amount  
ORDINARY SHARES
                                               
Balance at beginning of year
    134,407     $ 13,441       133,894     $ 13,389       133,534     $ 13,353  
Exercise of stock options
    2,412       241       3,048       305       413       41  
Treasury shares cancelled upon restructuring
    —       —       (1,625 )     (162 )     —       —  
Repurchase of ordinary shares
    (100 )     (10 )     (1,087 )     (109 )     —       —  
Issuance of restricted shares
    267       27       238       24       —       —  
Other
    23       2       (61 )     (6 )     (53 )     (5 )
 
                                   
Balance at end of year
    137,009       13,701       134,407       13,441       133,894       13,389  
 
                                   
 
                                               
CAPITAL IN EXCESS OF PAR VALUE
                                               
Balance at beginning of year
            926,652               915,240               905,865  
Exercise of stock options
            75,796               78,767               9,391  
Tax benefit of stock options
            14,432               11,840               820  
Treasury shares cancelled upon restructuring
            —               (46,832 )             —  
Repurchase of ordinary shares
            (7,399 )             (39,605 )             —  
Issuance of restricted shares
            14,257               8,919               —  
Restricted shares surrendered for employee taxes
            (2,548 )             (2,120 )             (1,430 )
Other
            3,280               443               594  
 
                                         
Balance at end of year
            1,024,470               926,652               915,240  
 
                                         
 
                                               
RETAINED EARNINGS
                                               
Balance at beginning of year
            1,452,974               1,306,888               1,140,472  
Net income
            296,696               146,086               166,416  
Dividends paid ($0.10 per share)
            (13,655 )             —               —  
 
                                         
Balance at end of year
            1,736,015               1,452,974               1,306,888  
 
                                         
 
                                               
TREASURY STOCK
                                               
Balance at beginning of year
    —       —       (1,700 )     (49,121 )     (1,791 )     (51,317 )
Treasury shares cancelled upon restructuring
    —       —       1,625       46,994       —       —  
Contribution to employee benefit plans
    —       —       72       2,037       79       2,076  
Other
    —       —       3       90       12       120  
 
                                   
Balance at end of year
    —       —       —       —       (1,700 )     (49,121 )
 
                                   
 
                                               
RESTRICTED STOCK (UNEARNED COMPENSATION)
                                               
Balance at beginning of year
            (11,171 )             (7,981 )             (12,871 )
Issuance of restricted shares
            (14,284 )             (8,943 )             —  
Compensation expense recognized
            7,377               5,753               4,627  
Other
            979               —               263  
 
                                         
Balance at end of year
            (17,099 )             (11,171 )             (7,981 )
 
                                         
 
                                               
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
                                               
Balance at beginning of year
            2,538               10               (6,292 )
Other comprehensive income (loss)
            (27,891 )             2,528               6,302  
 
                                         
Balance at end of year
            (25,353 )             2,538               10  
 
                                         
TOTAL SHAREHOLDERS’ EQUITY
    137,009     $ 2,731,734       134,407     $ 2,384,434       132,194     $ 2,178,425  
 
                                   
See accompanying notes to the consolidated financial statements.

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NOBLE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
         
    Year Ended  
    December 31, 2005  
NET INCOME
  $ 296,696  
 
     
 
       
OTHER COMPREHENSIVE LOSS, NET OF TAX:
       
Foreign currency translation adjustments
    (4,148 )
Unrealized holding loss on securities
    (18,491 )
Unrealized losses on foreign currency forward contracts
    (1,397 )
Unrealized losses on interest rate swaps
    (2,509 )
Minimum pension liability adjustment (net of tax provision of $725)
    (1,346 )
 
     
Other comprehensive loss
    (27,891 )
 
     
 
       
COMPREHENSIVE INCOME
  $ 268,805  
 
     
         
    Year Ended  
    December 31, 2004  
NET INCOME
  $ 146,086  
 
     
 
       
OTHER COMPREHENSIVE INCOME, NET OF TAX:
       
Foreign currency translation adjustments
    3,079  
Unrealized holding loss on securities
    (490 )
Minimum pension liability adjustment (net of tax provision of $33)
    (61 )
 
     
Other comprehensive income
    2,528  
 
     
 
       
COMPREHENSIVE INCOME
  $ 148,614  
 
     
         
    Year Ended  
    December 31, 2003  
NET INCOME
  $ 166,416  
 
     
 
       
OTHER COMPREHENSIVE INCOME, NET OF TAX:
       
Foreign currency translation adjustments
    192  
Unrealized holding loss on securities
    (296 )
Minimum pension liability adjustment (net of tax benefit of $3,450)
    6,406  
 
     
Other comprehensive income
    6,302  
 
     
 
       
COMPREHENSIVE INCOME
  $ 172,718  
 
     
See accompanying notes to the consolidated financial statements.

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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 — 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 drilling-related products and services to our customers. We also provide labor contract drilling services, well site and project management services, and engineering services. Our operations are conducted principally in the Middle East, U.S. Gulf of Mexico, Mexico, the North Sea, Brazil, West Africa, India and Canada.
Consolidation/Basis of Presentation
     The consolidated financial statements include the accounts of Noble and its wholly-owned 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 corporate affiliates where we have a significant influence but not a controlling interest.
     The Company has equity investments in affiliates from time to time. The fair value of these investments is dependent on the performance of the investee companies as well as volatility inherent in the external markets for these investments. In assessing the potential impairment for these investments, we consider these factors, as well as forecasted financial performance of our investees. If these forecasts are not met, impairment charges may be required.
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 (loss) 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, 2005, 2004 and 2003. 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 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 2005, 2004 or 2003.
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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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 asset’s carrying value may not be recoverable. At December 31, 2005 and 2004, there were $612,135,000 and $469,623,000, 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 cost and related accumulated depreciation are eliminated from the accounts and the gain or loss is recognized. 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.
     Interest is capitalized on construction in progress at the interest rate on debt incurred for construction or at the weighted average cost of debt outstanding during the period of construction. Capitalized interest for the years ended December 31, 2005, 2004 and 2003 was $13,989,000, $0 and $0, respectively.
     Scheduled maintenance of equipment and overhauls are performed on the basis of number of hours operated in accordance with our preventative maintenance program. Routine repair and maintenance costs are charged to expense as incurred; however, the costs of the overhauls related to major maintenance projects that benefit the periods between overhauls and which typically occur every three to five years are deferred when incurred and amortized over an equivalent period. The deferred portion of these major maintenance projects is included in “Other assets” in the Consolidated Balance Sheets. Such amounts totaled $118,703,000 and $88,621,000 at December 31, 2005 and 2004, respectively.
     In order to allow readers of our financial statements to identify more easily costs that benefit multiple years associated with rigs, amortization of deferred costs for major maintenance projects has been reclassified in the consolidated financial statements for all periods and is now reflected along with depreciation in “Depreciation and amortization”. In prior periods, amortization of deferred costs for major maintenance projects was included in contract drilling services expenses and labor contract drilling services expenses. The amount of such amortization was $50,000,000, $40,904,000 and $34,463,000 for the years ended December 31, 2005, 2004 and 2003, respectively. This revision in classification had no impact on previously reported net income. Total maintenance and repair expenses for the years ended December 31, 2005, 2004 and 2003, exclusive of amortization of deferred costs for major maintenance projects, were $133,372,000, $113,398,000 and $87,975,000, respectively.
     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 asset’s 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 asset’s estimated fair value .
     No material impairment losses were recorded on our property and equipment balances during the years ended December 31, 2005, 2004 and 2003.
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 at each of December 31, 2005 and 2004. All of our goodwill is attributable to our Engineering and Consulting Services Segment. No impairment losses were recorded on our goodwill balances during the years ended December 31, 2005, 2004 and 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     Deferred debt issuance costs, which totaled $2,303,000 and $2,194,000 at December 31, 2005 and 2004, respectively, are being amortized over the life of the debt securities. Amortization related to debt issuance costs was $403,000, $645,000 and $1,016,000 for the years ended December 31, 2005, 2004 and 2003, 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 Reserves
     We maintain insurance coverage against certain marine liabilities, including liability for physical damage to our drilling rigs, loss of hire on our deepwater drillships and certain semisubmersibles and one jackup, and personal injury to our drilling crews. Our marine package policy insures us for physical damage to our drilling rigs up to the scheduled value of each rig. We retain the first $10,000,000 per event under this policy. Our protection and indemnity policy insures us for personal injury to our offshore 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 the marine package deductibles on a per event basis and the protection and indemnity 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, 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 direct cost as operating expenses. Reimbursements for loss of hire under our insurance coverages are included in “Hurricane recoveries and losses, net.”
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 Noble’s 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 asset or 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 asset or liability in these circumstances would not have had a material effect on our financial position or results of operations.
     Noble operates through our various subsidiaries in numerous countries throughout the world including the United States. Consequently, we are subject to changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the U.S., the Cayman Islands or jurisdictions in which we or any of our subsidiaries operates or is resident. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If the U.S. Internal Revenue Service or other taxing authorities do not agree with our assessment of the effects of such laws, treaties and regulations, this could have a material adverse effect on us including the imposition of a higher effective tax rate on our worldwide earnings or a reclassification of the tax impact of our significant corporate restructuring transactions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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 2005, one customer accounted for $159,384,000 or 12 percent of consolidated operating revenues, of which all was included in our international contract drilling services segment. Another customer accounted for $137,306,000 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 2005. 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 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.
Supplemental Cash Flow Information
                         
    Year Ended December 31,
    2005   2004   2003
Cash paid during the period for:
                       
Interest, net of amounts capitalized
  $ 18,724     $ 33,911     $ 39,162  
Income taxes (net of refunds)
  $ 13,328     $ 27,409     $ 10,509  
Stock-Based Compensation Plans
     We have several stock-based compensation plans. 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 No. 25, Accounting for Stock Issued to Employees (“APB 25”). No compensation expense was recognized in the years ended December 31, 2005 and 2004 related to stock option awards, although compensation expense was recognized for the Company’s restricted stock awards during these periods.
      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, 2005, there were 3,184,199 shares 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, 2005, 213,500 shares were available for grant under the 1992 Plan. We grant options at fair market value on the grant date. The options

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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.
     A summary of the status of our stock options under both the 1991 Plan and 1992 Plan as of December 31, 2005, 2004 and 2003 and the changes during the year ended on those dates is presented below (actual amounts):
                                                 
    2005     2004     2003  
    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  
Outstanding at beginning of the year
    5,816,359     $ 31.99       8,630,114     $ 29.86       9,187,658     $ 29.64  
Granted
    725,450       53.18       334,485       37.61       45,000       32.11  
Exercised
    (2,412,624 )     31.74       (3,056,216 )     25.87       (413,079 )     22.83  
Forfeited
    (137,177 )     43.99       (92,024 )     33.69       (189,465 )     35.01  
 
                                   
Outstanding at end of year
    3,992,008     $ 36.14       5,816,359     $ 31.99       8,630,114     $ 29.86  
 
                                   
Exercisable at end of year
    3,175,786     $ 32.52       5,005,471     $ 31.83       6,995,876     $ 29.55  
 
                                   
     The following table summarizes information about stock options outstanding at December 31, 2005 (actual amounts):
                                                                 
                            Options Outstanding     Options Exercisable  
                                    Weighted                      
                                    Average     Weighted             Weighted  
Range of Exercise     Number     Remaining     Average     Number     Average  
Prices     Outstanding     Life (Years)     Exercise Price     Exercisable     Exercise Price  
 
  $ 9.81     to   $ 14.00       6,000       0.1     $ 9.81       6,000     $ 9.81  
 
    14.01     to     28.31       810,237       2.5       23.24       810,237       23.24  
 
    28.32     to     48.81       2,515,521       5.9       35.88       2,359,549       35.77  
 
    48.82     to     69.25       660,250       9.3       53.17       —       —  
 
                                                     
 
  $ 9.81     to   $ 69.25       3,992,008       5.7     $ 36.14       3,175,786     $ 32.52  
 
                                                     
     Additional disclosures required by SFAS 123 are as follows:
                         
    December 31,
    2005   2004   2003
Weighted average fair value per option granted
  $ 21.37     $ 15.80     $ 13.41  
 
                       
Valuation assumptions:
                       
Expected option term (years)
    5       5       5  
Expected volatility
    41.29 %     42.27 %     43.32 %
Expected dividend yield
    0.18 %     0 %     0 %
Risk-free interest rate
    3.78 %     3.52 %     2.88 %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     The following table reflects pro forma net income and net income per share had we elected to adopt the fair value approach of SFAS 123:
                         
    Year Ended December 31,  
    2005     2004     2003  
Net income — as reported
  $ 296,696     $ 146,086     $ 166,416  
Compensation expense, net of tax, as reported
    4,795       3,739       3,008  
Compensation expense, net of tax, pro forma
    (11,126 )     (12,887 )     (20,085 )
 
                 
Net income — pro forma
  $ 290,365     $ 136,938     $ 149,339  
 
                       
Net income per share:
                       
Basic — as reported
  $ 2.18     $ 1.10     $ 1.26  
Basic — pro forma
  $ 2.13     $ 1.03     $ 1.13  
 
                       
Diluted — as reported
  $ 2.16     $ 1.09     $ 1.25  
Diluted — pro forma
  $ 2.11     $ 1.02     $ 1.12  
Other Stock-Based Compensation
     At December 31, 2002, we had a total of 480,400 shares of restricted stock that had been awarded to selected employees and remained unvested. No restricted shares were awarded in 2003. In April 2004, we awarded selected employees 95,237 time-vested 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-vested restricted shares that have a three-year performance period from 2004 through 2006. The actual number of shares awarded and available for vesting will vary depending on the degree of achievement of certain specified corporate performance criteria over the three-year performance period. The maximum number of these performance-vested restricted shares that could vest is 142,852. In 2005, we awarded selected employees an aggregate of 105,000 time-vested restricted shares. These restricted shares vest one-third per year over a three-year period commencing on the first anniversary date of the award. In 2005, we also awarded selected employees performance-vested restricted shares that have a three-year performance period from 2005 through 2007. 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 maximum number of these performance-vested restricted shares that could vest is 161,775. 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, 2005, 2004 and 2003 is as follows:
                         
    2005   2004   2003
Restricted shares:
                       
Shares awarded
    105,000       95,237       —  
Weighted-average share price at award date
  $ 53.67     $ 37.56     $ —  
Performance restricted shares:
                       
Shares awarded (maximum available)
    161,775       142,852       —  
Weighted-average share price at award date
  $ 53.72     $ 37.56     $ —  
Compensation expense recognized
  $ 7,377     $ 5,753     $ 4,627  
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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounting Pronouncements
     In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 123 (revised 2004), Share-Based Payment (“SFAS 123R”), which is a revision to SFAS 123, Accounting for Stock-Based Compensation (“SFAS 123”). SFAS 123R supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and amends SFAS 95, Statement of Cash Flows . Generally, the approach in SFAS 123R is similar to SFAS 123, which requires companies to 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 to recognize the related cost in the income statement over the period in which the employee services are performed, which is usually the equity instrument’s vesting period. Under SFAS 123, this accounting treatment was optional with pro forma disclosures required.
     We will adopt SFAS 123R effective January 1, 2006. It will be effective for all awards granted after that date. For those stock option awards granted prior to January 1, 2006 but for which the vesting period is not complete, we will use the modified prospective transition method permitted by SFAS 123R. Under this method, we will account for such awards on a prospective basis, with expense being recognized in our statement of income beginning in the first quarter of 2006 using the grant-date fair values previously calculated for our SFAS 123 pro forma disclosures presented in Stock Based Compensation Plans of this Note 1. We will recognize the related compensation cost not previously recognized in the SFAS 123 pro forma disclosures over the remaining vesting period.
     The impact that the adoption of SFAS 123R will have on our consolidated results of operations will be determined primarily by the number of stock options issued to employees in future periods. The incremental expense related to future stock option and employee stock purchase plan grants is difficult to predict because the expense will depend on the number of awards granted, the grant date stock price, volatility of our stock price and other factors. However, based on recent stock option issuances, we estimate that the adoption of SFAS 123R will reduce 2006 net income by approximately $7,000,000 to $9,000,000, or $.05 to $.07 per diluted share. SFAS 123R also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net cash provided by operating activities and increase net cash provided by financing activities in periods after adoption. Although we cannot estimate what those amounts will be in the future (because they depend on, among other things, when employees exercise stock options and the value of the stock at the time of exercise), there were no such excess tax deductions included in net cash provided by operating activities in 2005, 2004 and 2003.
     In May 2005, the FASB issued SFAS 154, “ Accounting Changes and Error Corrections ” (“SFAS No. 154”), which is a replacement of APB Opinion No. 20, “ Accounting Changes ”, and SFAS No. 3, “ Reporting Accounting Changes in Interim Financial Statements ”. SFAS 154 provides guidance on the accounting for, and reporting of, accounting changes and error corrections. SFAS No. 154 establishes the method of retrospective application as the required method of reporting a change in accounting principle, unless impracticable or the new accounting principle explicitly states transition requirements, and the Company expects that in the future there will be more instances of retrospective application of new accounting principles to prior periods whereas previously such applications were typically required to be reported as a cumulative effect adjustment in the period in which the accounting principle was adopted. With respect to reporting the correction of an error in previously issued financial statements, SFAS 154 carries forward without change the guidance contained in APB Opinion No. 20 which requires the correction to be reflected as a prior restatement of the corresponding periods. The provisions of SFAS 154 are effective for accounting changes and corrections of errors made in fiscal periods beginning after December 15, 2005. We do not expect the adoption of SFAS 154 to have a material impact on our financial position or results of operations.
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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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.
NOTE 3 — NET INCOME PER SHARE
     The basic and diluted net income per share (“EPS”) computations for the years ended December 31, 2005, 2004 and 2003 are as follows (shares in thousands):
                                         
    Net   Basic   Basic   Diluted   Diluted
    Income   Shares   EPS   Shares   EPS
2005
  $ 296,696       136,253     $ 2.18       137,561     $ 2.16  
 
                                       
2004
    146,086       132,897       1.10       134,115       1.09  
 
                                       
2003
    166,416       131,948       1.26       133,007       1.25  
     Included in diluted shares are ordinary share equivalents relating primarily to outstanding stock options covering 1,309,000, 1,218,000 and 1,059,000 shares for the years ended December 31, 2005, 2004 and 2003, respectively. The computation of diluted earnings per share for 2005, 2004 and 2003 did not include options to purchase 10,000, 100,000 and 1,804,000 ordinary shares, respectively, because the options’ exercise prices were greater than the average market price of the ordinary shares. Excluded from the basic and diluted share amounts above for 2004 and 2003 are ordinary shares held in a Rabbi Trust, which was liquidated and terminated in December 2004. Ordinary shares held by the trust, which were to have been used for future funding of the Company’s stock-based compensation plans, were cancelled and retired upon the dissolution of the trust.
NOTE 4 — ACQUISITIONS
     In August 2005, in accordance with the provisions of our joint venture agreement, we acquired the remaining 50 percent equity interest in our Noble Crosco Drilling Ltd. Joint venture, which owned the Panon, for an exercise price of $31,917,000. Operating results from the Panon , renamed the Noble Harvey Duhaney , have been fully consolidated since the date of acquisition .
     In October 2004, we exercised our option to purchase the Noble David Tinsley (formerly Maersk Valiant ) jackup 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 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 for $29,500,000 in cash.
     In September 2003, we exercised our option to purchase the Noble Charlie Yester (formerly Trident 18 ) jackup 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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 5 — MARKETABLE SECURITIES
Current Marketable Securities
     At December 31, 2005 and 2004, we owned marketable debt securities with a fair value of $44,457,000 and $132,788,000, 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 value. Our balance of marketable debt securities at December 31, 2005 includes $27,806,000 that mature within one year and $16,651,000 that mature between one and five years. We recognized in other comprehensive income (loss) a net unrealized holding gain of $200,000 and in earnings a net realized loss of $531,000 related to these investments in 2005. We recognized in other comprehensive income (loss) a net unrealized holding loss of $773,000 in 2004. In 2004 and 2003, we recognized realized losses on these securities of $129,000 and $382,000, 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, 2005 and 2004:
                                                                 
    December 31,  
    2005     2004  
            Gross     Gross                     Gross     Gross        
    Amortized     Unrealized     Unrealized     Fair     Amortized     Unrealized     Unrealized     Fair  
    Cost     Gains     Losses     Value     Cost     Gains     Losses     Value  
U.S. Government Obligations
  $ 8,759     $ —     $ (89 )   $ 8,670     $ 8,764     $ —     $ (36 )   $ 8,728  
Corporate debt securities
    11,978       —       (128 )     11,850       81,866       11       (410 )     81,467  
Asset-backed securities
    24,351       —       (414 )     23,937       42,989       5       (401 )     42,593  
 
                                               
Total
  $ 45,088     $ —     $ (631 )   $ 44,457     $ 133,619     $ 16     $ (847 )   $ 132,788  
 
                                               
     The credit quality of each of our investments in marketable debt securities is rated no lower than “A” or “A2” by Standard & Poor’s and Moody’s Investors Service (“Moody’s”), respectively.
     Our investments in corporate debt securities included auction rate securities of $41,400,000 at December 31, 2004. We had no investments in auction rate securities as of December 31, 2005. These auction rate securities were recorded at cost, which approximated fair value due to their variable interest rates, which interest rates reset within a period of less than 60 days. Although these securities had long-term stated contractual maturities, we had the ability to quickly liquidate these securities. As a result, we classified these securities as current investments. Because these securities were recorded at cost, which approximated fair value, we had no realized or unrealized gains or losses related to these securities during the years ended December 31, 2005, 2004 and 2003. All income related to these current investments was recorded as interest income.
Non-Current Marketable Securities
     At December 31, 2005 and 2004, we owned marketable equity securities (exclusive of our investment in Smedvig discussed below) with a fair value of $1,535,000 and $528,000, respectively. We recorded in “Other comprehensive income (loss)” a gross unrealized gain of $1,009,000 in 2005 and $283,000 in 2004. These investments are classified as available-for-sale and are included in “Investments in marketable securities” in the Consolidated Balance Sheets at their respective fair value.
     On December 23, 2005, we acquired, directly and indirectly, 21,095,600 Class A shares and 2,501,374 Class B shares of Smedvig ASA (“Smedvig”). Our acquisition comprised 39.2 percent of the Class A voting shares and 28.9 percent of the total capital shares of Smedvig. The purchase price for the Class A shares was NOK 200.00 per share and for the Class B shares was NOK 150.00 per share, totaling NOK 4,594,326,100 ($691,100,000 at the date of acquisition) before certain legal and other transaction costs. We financed the acquisition of the Smedvig shares, including related transaction costs, with an aggregate of $700,000,000 in new debt borrowings (See Note 8).
     On January 23, 2006, SeaDrill Limited, a Bermudian limited company (“SeaDrill”), reported that SeaDrill had received acceptances for a total of 24,876,009 Class A shares and 15,417,402 Class B shares of Smedvig under the voluntary offer conducted by SeaDrill for shares of Smedvig. SeaDrill further reported that, including its already

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
owned shares, SeaDrill controlled 51.24 percent of the Class A shares and 52.47 percent of the Smedvig capital. SeaDrill has expressed its intention to put forward a mandatory offer in Norway together with a tender offer in the United States to all remaining shareholders in Smedvig as soon as practically possible (see Note 19). In addition, at an extraordinary general meeting of Smedvig held on February 16, 2006, shareholders elected a board of directors composed of five members, including John Fredriksen, Tor Olav Troim and Kate Blankenship, each of whom is a director of SeaDrill. Mr. Fredriksen was elected Chairman of the Board of Smedvig at the meeting. As a result of the foregoing, we are currently reviewing all available alternatives relative to our investment in Smedvig shares, and we reserve the right to pursue all options available to us.
     Our investment in Smedvig is accounted for in accordance with SFAS 115, “ Accounting for Certain Investments in Debt and Equity Securities ”, because of the lack of significant influence over the operating and financial policies of Smedvig. Our investment in Smedvig is classified as available-for-sale securities pursuant to SFAS 115. Accordingly, the fair value of our Smedvig investment is presented on the Consolidated Balance Sheet and unrealized holding gains or losses are excluded from earnings and reported in a separate component of shareholders’ equity, “Accumulated other comprehensive income (loss)”, until realized. At December 31, 2005, the fair value of our Smedvig investment totaled $672,104,000 and our cost basis totaled $691,804,000 resulting in an unrealized loss of $19,700,000, which was included as a component of “Other comprehensive income (loss)”. The terms of the Company’s Smedvig share purchase agreement require that any resale of the Smedvig shares by us during the period through December 12, 2006 at a price in excess of the original purchase price (NOK basis) we paid is payable by us to the parties from whom we originally purchased such shares. Accordingly, our ability to realize a gain on resale is limited through December 12, 2006.
NOTE 6 — COMPREHENSIVE INCOME
     We report and display comprehensive income in accordance with SFAS 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 enterprise’s 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.
     The following table sets forth the components of accumulated other comprehensive income (loss), net of deferred taxes:
                                                 
                    Unrealized     Unrealized             Accumulated  
    Foreign     Unrealized     (Losses) Gains on     (Losses) Gains     Minimum     Other  
    Currency     (Losses) Gains     Foreign Currency     on Interest     Pension     Comprehensive  
    Items     on Securities     Forward Contracts     Rate Swaps     Liability     Income (Loss)  
Balance at December 31, 2002
  $ 1,248     $ (726 )   $ —     $ —     $ (6,814 )   $ (6,292 )
2003-period change
    192       (296 )     —       —       6,406       6,302  
 
                                   
Balance at December 31, 2003
    1,440       (1,022 )     —       —       (408 )     10  
2004-period change
    3,079       (490 )     —       —       (61 )     2,528  
 
                                   
Balance at December 31, 2004
    4,519       (1,512 )     —       —       (469 )     2,538  
2005-period change
    (4,148 )     (18,491 )     (1,397 )     (2,509 )     (1,346 )     (27,891 )
 
                                   
Balance at December 31, 2005
  $ 371     $ (20,003 )   $ (1,397 )   $ (2,509 )   $ (1,815 )   $ (25,353 )
 
                                   

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 7 — INVESTMENTS IN 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 jackup for its 50 percent equity interest. In August 2005, in accordance with the provisions of our joint venture agreement, we acquired the remaining 50 percent equity interest in our Noble Crosco Drilling Ltd. joint venture for an exercise price of $31,576,000, net of cash acquired. Prior to our acquisition of the remaining 50 percent equity interest in Noble Crosco Drilling, Ltd., we accounted for our investment using the equity method. Operating results from the Panon , renamed the Noble Harvey Duhaney , have been fully consolidated since the date of acquisition of the remaining 50 percent equity interest.
     Balances related to joint ventures for 2005 and 2004 are reflected in the table below:
                 
    2005   2004
Equity in income of investments (1)
  $ 3,194     $ 3,931  
Investments (2)
    —       18,804  
 
(1)   Balance included in “Other, net” in the Consolidated Statements of Income. Amounts exclude management fees and interest income related to joint ventures of $865,000 and $1,253,000 in 2005 and 2004, respectively.
 
(2)   Balance included in “Other Assets” in the Consolidated Balance Sheets.
NOTE 8 — DEBT
     On December 22, 2005, Noble, Noble Holding (U.S.) Corporation (“NHC”) and Noble Drilling Corporation (“Noble Drilling”) entered into a credit agreement (the “GS Credit Agreement”) with Goldman Sachs Credit Partners L.P. (“Goldman Sachs”), pursuant to which Noble Drilling borrowed $600,000,000 (see Note 5). Noble, NHC and Noble Drilling Holding LLC have unconditionally guaranteed the performance of Noble Drilling under the GS Credit Agreement. Each of NHC, Noble Drilling and Noble Drilling Holding LLC is a direct or indirect wholly-owned subsidiary of Noble. The GS Credit Agreement contains various affirmative and negative covenants, including maintenance of specified interest coverage and debt-to-capital ratios, restrictions on incurring additional indebtedness, and restrictions on permitting additional liens, payment of dividends, transactions with affiliates, and mergers or consolidations. The interest rate under the GS Credit Agreement, which adjusts periodically with LIBOR, was 4.77 percent at December 31, 2005. On March 2, 2006, the parties to the GS Credit Agreement amended its terms, including provisions to extend the maturity through April 1, 2007 and to provide Goldman Sachs a right of syndication under certain conditions.
     For information regarding our unsecured revolving bank credit facility, see Note 9 – Bank Credit Agreement.
     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 “Senior Notes”). Interest on the Senior Notes is payable on March 15 and September 15 of each year. The Senior 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 Senior Notes are senior unsecured obligations and the indenture governing the Senior 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 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     We were in compliance with all our debt covenants at December 31, 2005.
     The following table summarizes our long-term debt:
                 
    December 31,  
    2005     2004  
6.95% Senior Notes due 2009
  $ 149,965     $ 149,954  
7.50% Senior Notes due 2019
    201,695       201,695  
Bank Credit Agreement
    135,000       100,000  
GS Credit Agreement
    600,000       —  
Project Financing — Thompson Notes
    51,637       60,000  
 
           
Total Debt
    1,138,297       511,649  
Current Maturities
    (8,972 )     (8,361 )
 
           
Long-term Debt
  $ 1,129,325     $ 503,288  
 
           
     The fair value of our Senior Notes at December 31, 2005 was $398,733,000, 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 Agreement (as defined in Note 9), the GS Credit Agreement and the Thompson Notes approximates their respective carrying values.
     Aggregate principal repayments of total debt for the next five years and thereafter are as follows:
                                                         
    2006     2007     2008     2009     2010     Thereafter     Total  
6.95% Senior Notes due 2009
  $ —     $ —     $ —     $ 149,965     $ —     $ —     $ 149,965  
7.50% Senior Notes due 2019
    —       —       —       —       —       201,695       201,695  
Bank Credit Agreement
    —       —       —       135,000       —       —       135,000  
Thompson Notes
    8,972       9,630       10,335       22,700       —       —       51,637  
GS Credit Agreement
    —       600,000       —       —       —       —       600,000  
 
                                         
Total
  $ 8,972     $ 609,630     $ 10,335     $ 307,665     $ —     $ 201,695     $ 1,138,297  
 
                                         
NOTE 9 — BANK CREDIT AGREEMENT
     We have an unsecured revolving bank credit facility totaling $300,000,000, including a letter of credit facility totaling $50,000,000, through November 30, 2009 (the “Bank Credit Agreement”). Noble and NHC have unconditionally guaranteed the performance of Noble Drilling under the Bank Credit Agreement. The Bank Credit Agreement contains various affirmative and negative covenants, including restrictive covenants, including maintenance of specified interest coverage and debt-to-capital ratios, restrictions on incurring additional indebtedness, and restrictions on permitting additional liens, payment of dividends, transactions with affiliates, and mergers or consolidations. At December 31, 2005, we had borrowings and letters of credit of $135,000,000 and $7,072,000, respectively, outstanding under the Bank Credit Agreement, with $157,928,000 remaining available thereunder. At December 31, 2005, we had letters of credit and third-party guarantees of $65,014,000 and performance and customs bonds totaling $76,575,000 supported by surety bonds outstanding in addition to amounts outstanding under the Bank Credit Agreement. The interest rate under the Bank Credit Agreement, which adjusts periodically with LIBOR, was 5.02 percent at December 31, 2005.
NOTE 10 — 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. We reported income before income taxes from such properties of $743,000 and $3,246,000 in 2004 and 2003, respectively.
     In December 2003, we sold our interest in Mariner Energy’s Green Canyon property to ENI Petroleum for $5,200,000 in cash. We realized a gain of $3,472,000 upon this sale.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 11 — SHAREHOLDERS’ EQUITY
     The shareholder rights plan of Noble, which was substantially similar to the previous Noble Drilling stockholder rights plan, became effective in connection with our corporate restructuring (see Note 2). The rights plan was not adopted in response to any specific takeover proposal. Under the rights plan, one right (“Right”) was attached to each of our ordinary shares. Each Right would have entitled the holder to purchase one one-hundredth of a share of Series A Junior Participating Preferred Shares, par value $1.00 per share (“Series A Preferred Shares”), at an exercise price of $120.00. In June 2005, Noble amended the agreement setting forth the rights plan (the “Rights Agreement”) to extend the term of the rights plan and to increase the purchase price with respect to each Right. As a result of an amendment to the Rights Agreement effective as of February 3, 2006 and the adoption by the Board of Directors of Noble of the Noble Corporation Board Policy on Shareholder Rights Plans, the Rights Agreement expired as of that date and no rights to purchase Series A Preferred Shares remain outstanding.
     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.
     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. During 2005, we repurchased 100,000 of our ordinary shares at an average price of $74.09 per ordinary share for a total cost of $7,409,000. 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. At March 1, 2006, 9,062,000 shares remained available under this authorization.
NOTE 12 — 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 asset or liability has been recognized in these circumstances. Should management’s expectations change regarding the length of time an offshore drilling unit will be used in a given location, we will adjust deferred taxes accordingly.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     The components of the net deferred taxes were as follows:
                 
    December 31,     December 31,  
    2005     2004  
Deferred tax assets:
               
United States:
               
Net operating loss carryforwards
  $ 11,048     $ 28,295  
Tax credit carryforwards
    23,755       24,570  
International:
               
Excess of net tax basis over remaining book basis
    195       —  
 
           
Deferred tax assets
    34,998       52,865  
Less: Valuation allowance
    (11,048 )     (12,118 )
 
           
Net deferred tax assets
  $ 23,950     $ 40,747  
 
           
 
               
Deferred tax liabilities:
               
United States:
               
Excess of net book basis over remaining tax basis
  $ (251,539 )   $ (246,892 )
International:
               
Excess of net book basis over remaining tax basis
    —       (361 )
 
           
Deferred tax liabilities
  $ (251,539 )   $ (247,253 )
 
           
 
               
Net deferred tax liabilities
  $ (227,589 )   $ (206,506 )
 
           
     Income before income taxes consisted of the following:
                         
    Year Ended December 31,  
    2005     2004     2003  
United States
  $ 128,060     $ (12,310 )   $ (3,996 )
International
    236,032       174,127       190,980  
 
                 
Total
  $ 364,092     $ 161,817     $ 186,984  
 
                 
     The income tax provision consisted of the following:
                         
    Year Ended December 31,  
    2005     2004     2003  
Current — United States
  $ 2,743     $ (8,403 )   $ (2,561 )
Current — International
    28,446       19,112       18,753  
Deferred — United States
    36,786       11,546       14,878  
Deferred — International
    (579 )     (6,524 )     (10,502 )
 
                 
Total
  $ 67,396     $ 15,731     $ 20,568  
 
                 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     A reconciliation of statutory and effective income tax rates is shown below:
                         
    Year Ended December 31,  
    2005     2004     2003  
Statutory rate
    0.0 %     0.0 %     0.0 %
Effect of:
                       
U.S. tax rate which is different than the Cayman Islands rate
    10.8       9.8       3.6  
Internal restructuring of non-U.S. assets
    1.7       —       —  
International tax rates which are different than the Cayman Islands rate
    7.1       10.9       7.3  
Reserve for (resolution of) tax authority audits
    0.7       (6.7 )     —  
Change in tax status of international subsidiaries
    —       (2.7 )     —  
Release of valuation allowance
    (1.5 )     —       —  
U.S. and international return to provision adjustments
    (0.2 )     (1.8 )     —  
Other
    (0.1 )     0.2       0.1  
 
                 
Total
    18.5 %     9.7 %     11.0 %
 
                 
     Certain of our subsidiaries file stand alone tax returns in the U.S. Our total U.S. net operating loss (“NOL”) carryforwards at December 31, 2005 for these subsidiaries were $31,560,000. Due to insufficient earnings history with these subsidiaries, we have fully offset the deferred tax asset attributable to the U.S. NOLs with a valuation allowance. These NOLs can be carried forward 20 years and begin to expire in 2023.
     We had AMT credit carryforwards of $14,470,000 and $17,444,000 at December 31, 2005 and 2004, respectively. 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 $9,285,000 at December 31, 2005. These credits can be carried forward ten years, and begin to expire in 2010. Due to contracts received by U.S.-owned rigs operating in international jurisdictions during 2005, the Company believes these foreign tax credits will be utilized in 2006. Therefore, in 2005 we reversed a valuation allowance of $5,560,000 previously offset against these credits.
     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 international jurisdictions, we do not generally expect our rig-owning subsidiaries operating internationally to incur significant deferred income tax liabilities. Therefore, deferred tax has generally not 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 2005, 2004 or 2003, and would have had no effect on our liquidity or our cash flows.
     During 2005, the Company restructured certain of its foreign assets and subsidiaries in a transaction designed to consolidate our non U.S.-owned drilling units and operations. The Company’s income tax provision for 2005 includes $6,300,000 related to this asset consolidation. As a result of this restructuring, the Company’s subsidiaries did not have significant undistributed earnings at December 31, 2005. Management does not intend to repatriate future undistributed earnings of its subsidiaries except for distributions upon which incremental income and withholding taxes would not be material.
NOTE 13 — 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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.”
     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 2005, we made total fundings of $6,965,000 and $11,967,000 to our international and domestic pension plans, respectively. In 2004, we made total fundings of $802,000, and $587,000 to our international and domestic pension plans, respectively. We made total fundings of $12,040,000 and $10,115,000 to our international and domestic pension plans in 2003, respectively. We expect fundings to our international and domestic plans in 2006 to aggregate approximately $14,000,000.
     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:
                                 
    Year Ended December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Benefit obligation at beginning of year
  $ 50,256     $ 77,207     $ 41,542     $ 68,945  
Service cost
    2,455       4,637       2,411       4,455  
Interest cost
    2,670       4,318       2,418       4,097  
Actuarial losses
    14,122       6,887       1,060       1,415  
Benefits paid
    (1,410 )     (2,087 )     (898 )     (2,072 )
Plan participants’ contribution
    205       —       216       —  
Foreign exchange rate changes
    (2,506 )     —       3,507       —  
Other
    1       —       —       367  
 
                       
Benefit obligation at end of year
  $ 65,793     $ 90,962     $ 50,256     $ 77,207  
 
                       
     For the international plans, the increase in actuarial losses in 2005 as compared to 2004 was principally due to the increase in male life expectancy from 82 to 86 years, based on changes in mortality assumptions utilized by the Continuous Mortality Investigation Bureau in the United Kingdom. For the qualified domestic plans, the increase in actuarial losses in 2005 as compared to 2004 was principally due to the increase in male life expectancy by four months to 83 years, as determined under mortality tables prepared by the Society of Actuaries, coupled with increases in salaries.

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(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     A reconciliation of the changes in fair value of plan assets is as follows:
                                 
    Year Ended December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Fair value of plan assets at beginning of year
  $ 52,561     $ 57,074     $ 44,171     $ 53,386  
Actual return on plan assets
    9,025       5,158       2,998       5,173  
Employer contribution
    6,965       11,967       802       587  
Plan participants’ contribution
    205       —       216       —  
Benefits and expenses paid
    (1,410 )     (2,087 )     (963 )     (2,072 )
Foreign exchange rate changes
    (4,866 )     —       5,337       —  
 
                       
Fair value of plan assets at end of year
  $ 62,480     $ 72,112     $ 52,561     $ 57,074  
 
                       
     The funded status of the plans is as follows:
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Funded status
  $ (3,313 )   $ (18,850 )   $ 2,305     $ (20,133 )
Unrecognized net loss
    10,519       23,117       991       17,501  
Unrecognized prior service cost
    —       1,434       —       1,695  
Unrecognized transition obligation
    1,107       —       1,326       —  
 
                       
Net amount recognized
  $ 8,313     $ 5,701     $ 4,622     $ (937 )
 
                       
     Amounts recognized in the Consolidated Balance Sheets consist of:
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Prepaid (accrued) pension cost
  $ 8,313     $ 2,352     $ 4,622     $ (3,611 )
Intangible asset
    —       557       —       1,953  
Accumulated other comprehensive loss
    —       2,792       —       721  
 
                       
Net amount recognized
  $ 8,313     $ 5,701     $ 4,622     $ (937 )
 
                       
     Pension cost includes the following components:
                                                 
    Year Ended December 31,
    2005     2004     2003  
    International     Domestic     International     Domestic     International     Domestic  
Service cost
  $ 2,455     $ 4,637     $ 2,411     $ 4,455     $ 1,957     $ 3,504  
Interest cost
    2,670       4,318       2,418       4,097       2,015       3,486  
Return on plan assets
    (3,094 )     (4,718 )     (3,023 )     (4,273 )     (1,856 )     (3,376 )
Amortization of prior service cost
    —       262       —       260       —       217  
Amortization of transition obligation
    159       —       168       —       530       —  
Recognized net actuarial loss (gain)
    13       831       (58 )     900       (358 )     697  
 
                                   
Net pension expense
  $ 2,203     $ 5,330     $ 1,916     $ 5,439     $ 2,288     $ 4,528  
 
                                   

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(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     Other information regarding our international and domestic plans is summarized below:
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Projected benefit obligation
  $ 65,793     $ 90,962     $ 50,256     $ 77,207  
Accumulated benefit obligation
    61,460       72,064       48,716       63,327  
Fair value of plan assets
    62,480       72,112       52,561       57,074  
Increase in minimum liability included in other comprehensive income (loss)
    —       2,071       —       94  
     The key assumptions for the plans are summarized below:
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Weighted-average assumptions used to determine benefit obligations:
                               
Discount rate
    4.25%-5.10 %     5.50 %     4.75%-5.70 %     5.75 %
Rate of compensation increase
    3.60%-3.88 %     5.00 %     3.70%-3.88 %     5.00 %
                                                 
    December 31,  
    2005     2004     2003  
    International     Domestic     International     Domestic     International     Domestic  
Weighted-average assumptions used to determine net periodic benefit cost:
                                               
Discount rate
    4.75%-5.70 %     5.75 %     5.25%-5.50 %     6.00 %     5.25%-5.50 %     6.50 %
Expected long-term return on plan assets
    4.00%-6.25 %     7.75 %     5.25%-6.25 %     8.00 %     5.25%-6.25 %     8.00 %
Rate of compensation increase
    3.60%-3.88 %     5.00 %     3.50%-3.88 %     5.00 %     3.50%-3.88 %     5.00 %
     The projected benefit obligation (“PBO”) for the unfunded excess benefit plan was $12,027,000 and $8,547,000 at December 31, 2005 and 2004, respectively, and is included under “Domestic” in the above tables.
     The discount rates used to calculate the net present value of future benefit obligations for both our U.S. and international plans are based on the average of current rates earned on long-term bonds that receive a Moody’s rating of Aa or better. The third-party consultants we employ for our U.S. and international plans have determined that the timing and amount of expected cash outflows on our plans reasonably matches this index.
     We employ third-party consultants for our U.S. and international plans that use a portfolio return model to assess the initial reasonableness of the expected long-term rate of return on plan assets assumption. To develop the expected long-term rate of return on assets assumption, the Company considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     The following table provides information related to those plans in which the PBO exceeded the fair value of the plan assets at December 31, 2005 and 2004. The PBO is the actuarially computed present value of earned benefits based on service to date and includes the estimated effect of any salary increases.
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Projected benefit obligation
  $ 23,674     $ 78,339     $ 18,640     $ 66,239  
Fair value of plan assets
    18,786       57,605       12,976       43,542  
     The following table provides information related to those plans in which the accumulated benefit obligation (“ABO”) exceeded the fair value of plan assets at December 31, 2005 and 2004. The ABO is the actuarially computed present value of earned benefits based on service to date, but differs from the PBO in that it is based on current salary levels.
                                 
    December 31,  
    2005     2004  
    International     Domestic     International     Domestic  
Accumulated benefit obligation
  $ 20,480     $ 9,675     $ 16,541     $ 52,359  
Fair value of plan assets
    18,786       —       12,976       43,542  
     Our qualified pension plans covering our U.S. hourly employees and U.K. employees are excluded from the 2005 amounts in the table above because the fair value of these plans’ assets of $115,806,000 at December 31, 2005 exceeded the ABO of $103,369,000 at December 31, 2005.
     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:
                                         
    December 31,  
    2005     2004  
    Target                            
    Allocation     Actual             Actual        
    or Range     Allocation     Assets     Allocation     Assets  
Asset category:
                                       
Equity securities
    65 %     68 %   $ 48,877       68 %   $ 39,114  
Debt securities
    32 %     29 %     21,058       28 %     15,910  
Cash
    3 %     3 %     2,177       4 %     2,050  
 
                             
Total plan assets
    100 %     100 %   $ 72,112       100 %   $ 57,074  
 
                             
     Any deviation from the target range of asset allocations must be approved by the Trust’s 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

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(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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 fund’s appropriate Lipper or Morningstar category. Lipper and Morningstar are independent mutual fund rating and information services.
     For investments in equity securities, no individual options or financial futures contracts are purchased unless approved in writing by the Trust’s 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 & Poor’s, may not exceed 20 percent. The Trust’s equity managers vote all proxies in the best interest of the Trust without regards to social issues. The Trust’s 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 Moody’s or Standard & Poor’s. At no time shall the lowest investment grade make up more than 20 percent of the total market value of the Trust’s fixed income holdings. The total fixed income exposure from any single non-government or government agency issuer shall not exceed 10 percent of the Trust’s 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 Trust’s 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 Moody’s and in conformance with all FDIC regulations concerning capital requirements.
     Equity securities include Noble’s ordinary shares in the amounts of $3,879,000 (5 percent of total domestic plan assets) and $2,736,000 (5 percent of total domestic plan assets) at December 31, 2005 and 2004, respectively. Noble expects to make contributions of $9,100,000 to its domestic plans in 2006. Estimated benefit payments from our domestic plans are $2,224,000 for 2006, $2,323,000 for 2007, $2,504,000 for 2008, $2,642,000 for 2009, $2,845,000 for 2010 and $19,112,000 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.

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(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     The weighted average asset allocations by asset category for the international pension plans are as follows:
                                 
    December 31,  
    2005     2004  
    Actual             Actual        
    Allocation     Assets     Allocation     Assets  
Asset category:
                               
Equity securities
    58 %   $ 36,222       62 %   $ 32,700  
Debt securities
    33 %     20,918       31 %     16,339  
Cash
    9 %     5,340       7 %     3,446  
Other
    0 %     —       0 %     76  
 
                       
Total plan assets
    100 %   $ 62,480       100 %   $ 52,561  
 
                       
     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, 2005) 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 objective of the plan, as adopted by the plan’s 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 plan’s benefit obligations were the plan to be liquidated. To achieve these objectives, the trustees have given the plan’s investment managers full discretion in the day to day management of the plan’s assets. The plan’s 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 plan’s assets is based on the plan’s asset allocation at December 31, 2005 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 make estimated contributions of $4,900,000 to its international plans in 2006. Estimated benefit payments from our international plans are $763,000 for 2006, $862,000 for 2007, $943,000 for 2008, $941,000 for 2009, $1,104,000 for 2010 and $9,782,000 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 Company’s 401(k) savings plan and, subject to certain limitations specified in the plan, receive employer matching contributions (which are made in Noble’s ordinary shares). The employer matching amount is limited in the same manner as are employer matching contributions under the Company’s 401(k) savings plan. Our liability for the Restoration Plan was $16,757,000 and $15,591,000 at December 31, 2005 and 2004, respectively, and is included in “Accrued payroll and related costs” in the accompanying Consolidated Balance Sheets. Although not considered

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(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
plan assets, a grantor trust was established from which payments for obligations under the Restoration Plan were made prior to the trust’s dissolution in December 2004. 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. Subsequent to the dissolution of the grantor trusts in 2004, 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 employee 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 should phantom investment losses occur.
     In 2005 we enacted a profit sharing plan, the Noble Drilling Corporation Profit Sharing Plan, which covers eligible employees, as defined. Participants in the plan become fully vested in the plan after five years of service. Profit sharing contributions are discretionary, require Board of Directors approval and shall be made in the form of cash. We accrued a liability of $1,000,000 toward contributions to this plan as of December 31, 2005.
     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 $24,946,000, $22,193,000 and $20,220,000 in 2005, 2004 and 2003, respectively. We do not provide post-retirement benefits (other than pensions) or any post-employment benefits to our employees.
NOTE 14 — 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, nor are we 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. To reduce our exposure to fluctuations in these currencies during 2005, we entered into forward contracts in February, March and June 2005 to purchase 30,680,000 Euros and 20,899,000 British Pounds for the months February 2005 through June 2006. The forward contracts settled in 2005 represented approximately two-thirds of our forecasted Euro and British Pound requirements for 2005 after the respective dates on which we entered into the forward contracts. The outstanding notional amounts of these forward contracts at December 31, 2005 were approximately 7,625,000 Euros and 6,755,000 British Pounds, respectively. Similarly, we entered into forward contracts in November and December 2005 to purchase 19,124,000 Euros and 4,988,000 British Pounds for the period from January 2006 through December 2006. The forward contracts settling in 2006 represent approximately 40 percent of our forecasted Euro and British Pound requirements in 2006. We entered into similar derivative instruments in 2004 to reduce our exposure to fluctuations in currency translation rates in 2004. 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 (loss) income” in our Consolidated Balance Sheet at December 31, 2004. We did not utilize any derivative financial instruments or undertake any hedging activities in 2003.
     On December 22, 2005, we borrowed $600,000,000 under the GS Credit Agreement. In order to reduce our exposure to changes in interest rates between the date of borrowing and its expected refinancing, we entered into interest rate swaps on December 19, 2005 with notional amounts totaling $600,000,000. On January 27, 2006, we terminated these interest rate swaps at no cost to us.
     All of the above foreign currency forward contracts and interest rate swaps 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 . The fair market value of those derivative instruments is included in “Other current assets” or “Other current liabilities” with the cumulative unrealized loss included in “Accumulated other comprehensive income (loss)” in our Consolidated Balance Sheet. Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between derivative contracts and the hedge 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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
to hedge ineffectiveness in our Consolidated Statements of Income during 2005 related to these derivative instruments.
     The balance of the net unrealized gain or loss related to our foreign currency forward contracts and interest rate swaps included in “Accumulated other comprehensive (loss) income” and related activity for 2005, 2004 and 2003 is presented in the following table:
                         
    2005     2004     2003  
Net unrealized gain (loss) at beginning of year
  $ —     $ —     $ —  
Activity during period:
                       
Net unrealized loss on outstanding foreign currency forward contracts
    (1,397 )     —       —  
Net unrealized loss on interest rate swaps
    (2,509 )     —       —  
 
                 
Net unrealized loss at end of year
  $ (3,906 )   $ —     $ —  
 
                 
NOTE 15 — COMMITMENTS AND CONTINGENCIES
     We have entered into drilling contracts with Shell E&P Offshore Services B.V. for two new F&G JU-2000E enhanced premium jackups to be constructed by China Shipbuilding & Offshore International Co., Ltd./Dalian Shipbuilding Industry Co., Ltd. (formerly named Dalian New Shipbuilding Heavy Industries Co., Ltd.) (“DSIC”). Our indirect subsidiary, Noble Drilling Holding LLC, has entered into contracts with DSIC for the construction of the two F&G JU-2000E jackups. Under the terms of the contracts, delivery of the first rig should occur in the third quarter of 2007 at an estimated total delivered price of approximately $153,400,000 and delivery of the second rig should occur in the first quarter of 2008 at an estimated total delivered price of approximately $156,400,000. Capital expenditures in 2005 included $137,778,000 toward these projects.
     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 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 $3,320,000 and a customs bond in the amount of $21,466,100, both of which remain in place. NACL filed its initial replies to the SCN in December 2003. NACL appeared through counsel before the Commissioner in September 2004 and made oral arguments and written submissions. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN, as anticipated, confirming his findings consistent with his allegations in the SCN and seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $16,718,000 plus interest related to a 1997 alleged import and (b) $19,065,000 plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) shall not be payable if the duty and interest demanded in (a) is paid by NACL, and (iii) to assess penalty ($442,600) against NACL. NACL promptly filed a Writ Petition in the High Court, Bombay, and obtained from the court a favorable order staying the Commissioner from invoking the guarantee and confirming NACL’s right to appeal the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). We continue to maintain that NACL has acted in accordance with all Indian customs laws and regulations and believe the Commissioner’s order is without merit as against NACL. NACL intends to vigorously pursue its appeal. NACL also is pursuing contractual indemnification against liability for Indian customs duty against the rig’s previous owner in arbitration proceedings in London. In August 2005, the CESTAT made an interim order staying the enforcement of the Commissioner’s order pending the outcome of NACL’s, among others, substantive appeal. The CESTAT held that, prima facie , (a) the Commissioner’s demands for duty were unsustainable upon limitation grounds, (b) the confiscation of the rig was not justified, and (c) the penalties imposed by the Commissioner were bad in law. 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.
     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

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
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 131 named individuals alleging personal injury, including claims under the Jones Act, purportedly resulting from exposure to asbestos on drilling rigs and associated facilities during the period 1965 through 1986. Although the lawsuits continue to be in procedural stages, supplemental pleadings recently filed by plaintiffs reflect that only approximately 23 or fewer of the approximately 131 named individuals may have claims that they were employed by our subsidiary or otherwise associated with our drilling operations. 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.
     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.
     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. At December 31, 2005, we had approximately $439,124,000 of outstanding purchase commitments.
     At December 31, 2005, 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 $3,571,000 for 2006, $2,666,000 for 2007, $2,480,000 for 2008, $2,377,000 for 2009, $2,346,000 for 2010, and $5,823,000 thereafter. Rental expense for all operating leases was $5,005,000, $4,896,000 and $4,038,000 for the years ended December 31, 2005, 2004 and 2003, 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.
NOTE 16 — PARENT GUARANTEE OF REGISTERED SECURITIES ISSUED BY SUBSIDIARY
     Noble and NHC are guarantors for certain debt securities issued by Noble Drilling. These debt securities include 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 December 31, 2005 were $149,965,000 and $201,695,000, respectively. Noble Drilling is an indirect, wholly-owned subsidiary of Noble and a direct, wholly-owned subsidiary of NHC. Noble’s and NHC’s guarantee of these securities is full and unconditional.
     The following consolidating financial statements of Noble, NHC, Noble Drilling and all other subsidiaries are included so that separate financial statements of Noble Drilling are not required to be filed with the U.S. Securities and Exchange Commission. These consolidating financial statements present Noble’s and NHC’s investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2005
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
ASSETS
                                               
CURRENT ASSETS
                                               
Cash and cash equivalents
  $ 13,957     $ —     $ —     $ 107,888     $ —     $ 121,845  
Investments in marketable securities
    —       —       —       44,457       —       44,457  
Accounts receivable
    —       —       8,611       268,077       —       276,688  
Inventories
    —       —       —       3,940       —       3,940  
Prepaid expenses
    —       —       321       9,743       —       10,064  
Accounts receivable from affiliates
    273,597       —       526,351       —       (799,948 )     —  
Insurance receivables
    —       —       —       51,565       —       51,565  
Other current assets
    —       —       247       42,526       (28,877 )     13,896  
 
                                   
Total current assets
    287,554       —       535,530       528,196       (828,825 )     522,455  
 
                                   
 
                                               
PROPERTY AND EQUIPMENT
                                               
Drilling equipment and facilities
    —       —       99,591       4,078,506       —       4,178,097  
Other
    —       —       —       66,698       —       66,698  
 
                                   
 
    —       —       99,591       4,145,204       —       4,244,795  
Accumulated depreciation
    —       —       (56,143 )     (1,189,633 )     —       (1,245,776 )
 
                                   
 
    —       —       43,448       2,955,571       —       2,999,019  
 
                                   
 
                                               
NOTES RECEIVABLE FROM AFFILIATES
    511,835       —       744,159       1,220,577       (2,476,571 )     —  
INVESTMENTS IN AFFILIATES
    1,960,241       2,242,204       2,029,863       —       (6,232,308 )     —  
INVESTMENTS IN MARKETABLE SECURITIES
    672,104       —       —       1,535       —       673,639  
OTHER ASSETS
    —       —       4,404       146,850       —       151,254  
 
                                   
 
  $ 3,431,734     $ 2,242,204     $ 3,357,404     $ 4,852,729     $ (9,537,704 )   $ 4,346,367  
 
                                   
 
                                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                               
CURRENT LIABILITIES
                                               
Current maturities of long-term debt
  $ —     $ 21,562     $ —     $ 8,972     $ (21,562 )   $ 8,972  
Accounts payable
    —       —       1,805       92,109       —       93,914  
Accrued payroll and related costs
    —       —       16,388       62,170       —       78,558  
Taxes payable
    —       —       —       45,245       —       45,245  
Interest payable
    —       —       8,718       8,237       (7,315 )     9,640  
Accounts payable to affiliates
    —       114,696       —       685,252       (799,948 )     —  
Other current liabilities
    —       —       146       22,860       —       23,006  
 
                                   
Total current liabilities
    —       136,258       27,057       924,845       (828,825 )     259,335  
 
                                               
LONG-TERM DEBT
    —       —       1,086,661       42,664       —       1,129,325  
NOTES PAYABLE TO AFFILIATES
    700,000       520,577       —       1,255,994       (2,476,571 )     —  
DEFERRED INCOME TAXES
    —       (2,700 )     13,016       217,273       —       227,589  
OTHER LIABILITIES
    —       1,043       4,264       983       —       6,290  
 
                                   
 
    700,000       655,178       1,130,998       2,441,759       (3,305,396 )     1,622,539  
 
                                   
COMMITMENTS AND CONTINGENCIES
                                               
MINORITY INTEREST
    —       —       —       (7,906 )     —       (7,906 )
 
                                               
SHAREHOLDERS’ EQUITY
                                               
Ordinary Shares-par value $0.10 per share
    13,701       —       —       —       —       13,701  
Capital in excess of par value
    1,024,470       870,744       870,744       713,975       (2,455,463 )     1,024,470  
Retained earnings
    1,736,015       716,282       1,355,662       1,730,254       (3,802,198 )     1,736,015  
Restricted stock (unearned compensation)
    (17,099 )     —       —       —       —       (17,099 )
Accumulated other comprehensive loss
    (25,353 )     —       —       (25,353 )     25,353       (25,353 )
 
                                   
 
    2,731,734       1,587,026       2,226,406       2,418,876       (6,232,308 )     2,731,734  
 
                                   
 
  $ 3,431,734     $ 2,242,204     $ 3,357,404     $ 4,852,729     $ (9,537,704 )   $ 4,346,367  
 
                                   

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2004
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
ASSETS
                                               
CURRENT ASSETS
                                               
Cash and cash equivalents
  $ 8,130     $ —     $ —     $ 50,660     $ —     $ 58,790  
Investments in marketable securities
    23,707       —       —       109,081       —       132,788  
Accounts receivable
    —       —       7,434       197,589       —       205,023  
Inventories
    —       —       —       4,013       —       4,013  
Prepaid expenses
    —       —       1,285       11,169       —       12,454  
Accounts receivable from affiliates
    177,091       —       588,705       —       (765,796 )     —  
Other current assets
    19,918       —       262       11,963       (19,928 )     12,215  
 
                                   
Total current assets
    228,846       —       597,686       384,475       (785,724 )     425,283  
 
                                   
 
                                               
PROPERTY AND EQUIPMENT
                                               
Drilling equipment and facilities
    —       —       99,624       3,639,714       —       3,739,338  
Other
    —       —       —       65,550       —       65,550  
 
                                   
 
    —       —       99,624       3,705,264       —       3,804,888  
Accumulated depreciation
    —       —       (51,581 )     (1,009,687 )     —       (1,061,268 )
 
                                   
 
    —       —       48,043       2,695,577       —       2,743,620  
 
                                   
 
NOTES RECEIVABLE FROM AFFILIATES
    492,139       —       44,159       —       (536,298 )     —  
INVESTMENTS IN AFFILIATES
    1,664,904       1,987,843       1,773,952       —       (5,426,699 )     —  
INVESTMENTS IN MARKETABLE SECURITIES
    —       —       —       528       —       528  
OTHER ASSETS
    —       —       5,929       132,613       —       138,542  
 
                                   
 
  $ 2,385,889     $ 1,987,843     $ 2,469,769     $ 3,213,193     $ (6,748,721 )   $ 3,307,973  
 
                                   
 
                                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                               
CURRENT LIABILITIES
                                               
Current maturities of long-term debt
  $ —     $ 19,682     $ —     $ 8,361     $ (19,682 )   $ 8,361  
Accounts payable
    —       —       2,374       80,638       —       83,012  
Accrued payroll and related costs
    26       —       15,222       45,663       —       60,911  
Taxes payable
    1,429       —       —       21,454       —       22,883  
Interest payable
    —       —       7,912       1,315       (246 )     8,981  
Accounts payable to affiliates
    —       114,330       —       651,466       (765,796 )     —  
Other current liabilities
    —       —       809       29,209       —       30,018  
 
                                   
Total current liabilities
    1,455       134,012       26,317       838,106       (785,724 )     214,166  
 
                                               
LONG-TERM DEBT
    —       —       451,650       51,638       —       503,288  
NOTES PAYABLE TO AFFILIATES
    —       492,139       —       44,159       (536,298 )     —  
DEFERRED INCOME TAXES
    —       (2,700 )     15,083       194,123       —       206,506  
OTHER LIABILITIES
    —       1,043       4,674       2,393       —       8,110  
 
                                   
 
    1,455       624,494       497,724       1,130,419       (1,322,022 )     932,070  
 
                                   
COMMITMENTS AND CONTINGENCIES
                                   
MINORITY INTEREST
    —       —       —       (8,531 )     —       (8,531 )
 
                                               
SHAREHOLDERS’ EQUITY
                                               
Ordinary Shares-par value $0.10 per share
    13,441       —       —       —       —       13,441  
Capital in excess of par value
    926,652       870,744       870,744       691,289       (2,432,777 )     926,652  
Retained earnings
    1,452,974       492,605       1,101,301       1,397,478       (2,991,384 )     1,452,974  
Restricted stock (unearned compensation)
    (11,171 )     —       —       —       —       (11,171 )
Accumulated other comprehensive loss
    2,538       —       —       2,538       (2,538 )     2,538  
 
                                   
 
    2,384,434       1,363,349       1,972,045       2,091,305       (5,426,699 )     2,384,434  
 
                                   
 
  $ 2,385,889     $ 1,987,843     $ 2,469,769     $ 3,213,193     $ (6,748,721 )   $ 3,307,973  
 
                                   

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2005
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
OPERATING REVENUES
                                               
Contract drilling services
  $ —     $ —     $ 30,927     $ 1,178,520     $ —     $ 1,209,447  
Reimbursables
    —       —       42       86,290       —       86,332  
Labor contract drilling services
    —       —       —       69,203       —       69,203  
Engineering, consulting and other
    —       —       63       17,092       —       17,155  
 
                                   
 
    —       —       31,032       1,351,105       —       1,382,137  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    109       —       5,777       593,321       —       599,207  
Reimbursables
    —       —       42       76,196       —       76,238  
Labor contract drilling services
    —       —       —       58,698       —       58,698  
Engineering, consulting and other
    —       —       —       22,678       —       22,678  
Depreciation and amortization
    —       —       6,087       235,665       —       241,752  
Selling, general and administrative
    1,070       —       280       38,928       —       40,278  
Hurricane losses and recoveries, net
    —       —       —       (29,759 )     —       (29,759 )
 
                                   
 
    1,179       —       12,186       995,727       —       1,009,092  
 
                                   
 
                                               
OPERATING INCOME
    (1,179 )     —       18,846       355,378       —       373,045  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    295,337       254,361       261,116       —       (810,814 )     —  
Interest expense
    (4 )     (46,650 )     (29,523 )     9,741       46,650       (19,786 )
Other, net
    2,634       —       285       54,564       (46,650 )     10,833  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    296,788       207,711       250,724       419,683       (810,814 )     364,092  
INCOME TAX (PROVISION) BENEFIT
    (92 )     15,966       3,637       (86,907 )     —       (67,396 )
 
                                   
 
                                               
NET INCOME
  $ 296,696     $ 223,677     $ 254,361     $ 332,776     $ (810,814 )   $ 296,696  
 
                                   

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2004
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
OPERATING REVENUES
                                               
Contract drilling services
  $ —     $ —     $ 30,423     $ 906,991     $ —     $ 937,414  
Reimbursables
    —       —       28       50,206       —       50,234  
Labor contract drilling services
    —       —       —       51,327       —       51,327  
Engineering, consulting and other
    —       —       17       27,239       —       27,256  
 
                                   
 
    —       —       30,468       1,035,763       —       1,066,231  
 
                                   
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    (334 )     —       6,716       515,281       —       521,663  
Reimbursables
    —       —       28       44,582       —       44,610  
Labor contract drilling services
    —       —       —       42,610       —       42,610  
Engineering, consulting and other
    —       —       —       27,339       —       27,339  
Depreciation and amortization
    —       —       7,674       201,449       —       209,123  
Selling, general and administrative
    578       —       1,038       32,098       —       33,714  
 
                                   
 
    244       —       15,456       863,359       —       879,059  
 
                                   
 
                                               
OPERATING INCOME
    (244 )     —       15,012       172,404       —       187,172  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    101,280       123,020       130,828       —       (355,128 )     —  
Interest expense
    —       (47,472 )     (27,935 )     (6,454 )     47,472       (34,389 )
Other, net
    47,928       —       911       7,667       (47,472 )     9,034  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    148,964       75,548       118,816       173,617       (355,128 )     161,817  
INCOME TAX (PROVISION) BENEFIT
    (2,878 )     18,341       4,204       (35,398 )     —       (15,731 )
 
                                   
 
                                               
NET INCOME
  $ 146,086     $ 93,889     $ 123,020     $ 138,219     $ (355,128 )   $ 146,086  
 
                                   

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Year Ended December 31, 2003
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
OPERATING REVENUES
                                               
Contract drilling services
  $ —     $ —     $ 13,544     $ 876,059     $ —     $ 889,603  
Reimbursables
    —       —       350       43,864       —       44,214  
Labor contract drilling services
    —       —       —       28,492       —       28,492  
Engineering, consulting and other
    —       —       —       25,071       —       25,071
 
                                   
 
            —       13,894       973,486       —       987,380  
 
                                   
 
                                               
OPERATING COSTS AND EXPENSES
                                               
Contract drilling services
    (27 )     1       8,638       462,109       —       470,721  
Reimbursables
    —       —       350       38,674       —       39,024  
Labor contract drilling services
    —       —       —       22,496       —       22,496  
Engineering, consulting and other
    —       —       (150 )     28,399       —       28,249  
Depreciation and amortization
    —       —       5,561       177,029       —       182,590  
Selling, general and administrative
    300       —       1,025       25,309       —       26,634  
Gain on sale of property and equipment
    —       —       —       (3,472 )     —       (3,472 )
 
                                   
 
    273       1       15,424       750,544       —       766,242  
 
                                   
 
                                               
OPERATING (LOSS) INCOME
    (273 )     (1 )     (1,530 )     222,942       —       221,138  
 
                                               
OTHER INCOME (EXPENSE)
                                               
Equity earnings in affiliates (net of tax)
    120,460       164,802       180,861       —       (466,123 )     —  
Interest expense
    —       (48,956 )     (27,782 )     (16,259 )     52,706       (40,291 )
Other, net
    49,166       —       4,606       5,071       (52,706 )     6,137  
 
                                   
 
                                               
INCOME BEFORE INCOME TAXES
    169,353       115,845       156,155       211,754       (466,123 )     186,984  
INCOME TAX (PROVISION) BENEFIT
    (2,937 )     17,135       8,647       (43,413 )     —       (20,568 )
 
                                   
 
                                               
NET INCOME
  $ 166,416     $ 132,980     $ 164,802     $ 168,341     $ (466,123 )   $ 166,416  
 
                                   

75

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2005
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
CASH FLOWS FROM OPERATING ACTIVITIES
                                               
Net income
  $ 296,696     $ 223,677     $ 254,361     $ 332,776     $ (810,814 )   $ 296,696  
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
                                               
Depreciation and amortization
    —       —       6,087       235,665       —       241,752  
Deferred income tax provision
    —       —       —       36,207       —       36,207  
Loss on sales of marketable securities
    —       —       —       531       —       531  
Equity in income of joint venture
    —       —       —       (3,194 )     —       (3,194 )
Distributions received from joint venture
    —       —       —       2,194       —       2,194  
Compensation expense from stock-based plans
    7,377       —       —       —       —       7,377  
Equity earnings in affiliates
    (295,337 )     (254,361 )     (261,116 )     —       810,814       —  
Hurricane losses and recoveries, net
    —       —       —       (29,759 )     —       (29,759 )
Other
    —       —       (952 )     3,703       —       2,751  
Other changes in current assets and liabilities, net of acquired working capital:
                                               
Accounts receivable
    —       —       (1,177 )     (66,917 )     —       (68,094 )
Accounts receivable from affiliates
    (108,845 )     —       66,266       —       42,579       —  
Other current assets
    19,918       —       979       (1,929 )     —       18,968  
Accounts payable
    —       —       (569 )     (1,826 )     —       (2,395 )
Accounts payable to affiliates
    —       366       —       42,213       (42,579 )     —  
Other current liabilities
    (1,455 )     —       1,309       26,122       —       25,976  
 
                                   
Net cash (used for) provided by operating activities
    (81,646 )     (30,318 )     65,188       575,786       —       529,010  
 
                                   
 
                                               
CASH FLOWS FROM INVESTING ACTIVITIES
                                               
Acquisitions and related capital upgrades
    —       —       —       (212,050 )     —       (212,050 )
Other capital expenditures
    —       —       (42 )     (221,764 )     —       (221,806 )
Major maintenance expenditures
    —       —       (146 )     (79,517 )     —       (79,663 )
Repayments from affiliates
    —       —       —       19,682       (19,682 )     —  
Loans to affiliates
    —       —       (700,000 )     (50,000 )     750,000       —  
Proceeds from sales of property and equipment
    —       —       —       1,129       —       1,129  
Purchase of remaining 50% interest in the Panon , net of cash acquired
    —       —       —       (31,576 )     —       (31,576 )
Investment in Smedvig
    (691,100 )     —       —       —       —       (691,100 )
Investment in marketable securities
    —       —       —       (24,973 )     —       (24,973 )
Proceeds from sales of marketable securities
    23,600       —       —       89,028       —       112,628  
 
                                   
Net cash used for investing activities
    (667,500 )     —       (700,188 )     (510,041 )     730,318       (1,147,411 )
 
                                   
 
                                               
CASH FLOWS FROM FINANCING ACTIVITIES
                                               
Borrowing on credit facilities
    —       —       700,000       —       —       700,000  
Borrowings from affiliates
    700,000       50,000       —       —       (750,000 )     —  
Payments on credit facilities
    —       —       (65,000 )     —       —       (65,000 )
Payment of other long-term debt
    —       (19,682 )     —       (8,517 )     19,682       (8,517 )
Proceeds from issuance of ordinary shares
    76,037       —       —       —       —       76,037  
Payments of dividends
    (13,655 )     —       —       —       —       (13,655 )
Repurchase of ordinary shares
    (7,409 )     —       —       —       —       (7,409 )
 
                                   
Net cash provided by (used for) financing activities
    754,973       30,318       635,000       (8,517 )     (730,318 )     681,456  
 
                                   
 
                                               
NET INCREASE IN CASH AND CASH EQUIVALENTS
    5,827       —       —       57,228       —       63,055  
 
                                               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    8,130       —       —       50,660       —       58,790  
 
                                               
 
                                   
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 13,957     $ —     $ —     $ 107,888     $ —     $ 121,845  
 
                                   

76

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NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2004
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
CASH FLOWS FROM OPERATING ACTIVITIES
                                               
Net income
  $ 146,086     $ 93,889     $ 123,020     $ 138,219     $ (355,128 )   $ 146,086  
Adjustments to reconcile net income to net cash (used for) provided by operating activities:
                                               
Depreciation and amortization
    —       —       7,674       201,449       —       209,123  
Deferred income tax provision
    —       —       —       5,022       —       5,022  
Loss on sales of marketable securities
    —       —       —       129       —       129  
Equity in income of joint venture
    —       —       —       (3,931 )     —       (3,931 )
Distributions received from joint venture
    —       —       —       2,700       —       2,700  
Compensation expense from stock-based plans
    5,753       —       —       —       —       5,753  
Equity earnings in affiliates
    (101,280 )     (123,020 )     (130,828 )     —       355,128       —  
Dissolution of rabbi trust
    11,945       —       —       —       —       11,945  
Other
    —       (1,657 )     (188 )     (2,183 )     —       (4,028 )
Other changes in current assets and liabilities, net of acquired working capital:
                                               
Accounts receivable
    —       —       (4,290 )     (51,498 )     —       (55,788 )
Accounts receivable from affiliates
    (146,459 )     —       21,674       —       124,785       —  
Other current assets
    6,180       —       5,806       (10,799 )     —       1,187  
Accounts payable
    6       —       (1,806 )     (2,364 )     —       (4,164 )
Accounts payable to affiliates
    —       56,803       —       67,982       (124,785 )     —  
Other current liabilities
    2,433       (8,064 )     4,064       19,754       —       18,187  
 
                                   
Net cash (used for) provided by operating activities
    (75,336 )     17,951       25,126       364,480       —       332,221  
 
                                   
 
                                               
CASH FLOWS FROM INVESTING ACTIVITIES
                                               
Acquisitions and related capital upgrades
    —       —       —       (110,548 )     —       (110,548 )
Other capital expenditures
    —       —       334       (150,827 )     —       (150,493 )
Major maintenance expenditures
    —       —       (460 )     (72,488 )     —       (72,948 )
Repayments from affiliates
    17,951       —       —       —       (17,951 )     —  
Proceeds from sales of property and equipment
    —       —       —       2,135       —       2,135  
Repayments from joint venture
    —       —       —       2,295       —       2,295  
Investment in marketable securities
    (168,300 )     —       —       (64,916 )     —       (233,216 )
Proceeds from sales of marketable securities
    160,466       —       —       104,886       —       265,352  
 
                                   
Net cash provided by (used for) investing activities
    10,117       —       (126 )     (289,463 )     (17,951 )     (297,423 )
 
                                   
 
                                               
CASH FLOWS FROM FINANCING ACTIVITIES
                                               
Payments of borrowing on credit facility
    —       —       (25,000 )     —       —       (25,000 )
Payment of other long-term debt
    —       (17,951 )     —       (52,933 )     17,951       (52,933 )
Proceeds from issuance of ordinary shares
    79,072       —       —       —       —       79,072  
Repurchase of ordinary shares
    (39,714 )     —       —       —       —       (39,714 )
 
                                   
Net cash provided by (used for) financing activities
    39,358       (17,951 )     (25,000 )     (52,933 )     17,951       (38,575 )
 
                                   
 
                                               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (25,861 )     —       —       22,084       —       (3,777 )
 
                                               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    33,991       —       —       28,576       —       62,567  
 
                                   
 
                                               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 8,130     $ —     $ —     $ 50,660     $ —     $ 58,790  
 
                                   

77

Table of Contents

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2003
(In thousands)
                                                 
            NHC     Noble                    
    Noble     (Subsidiary     Drilling     Other     Consolidating        
    (Guarantor)     Guarantor)     (Issuer)     Subsidiaries     Adjustments     Total  
CASH FLOWS FROM OPERATING ACTIVITIES
                                               
Net income
  $ 166,416     $ 132,980     $ 164,802     $ 168,341     $ (466,123 )   $ 166,416  
Adjustments to reconcile net income to net cash provided by operating activities:
                                               
Depreciation and amortization
    —       —       5,561       177,029       —       182,590  
Deferred income tax provision
    —       —       194       4,182       —       4,376  
Loss on sales of marketable securities
    —       —       —       382       —       382  
Equity in income of joint venture
    —       —       —       (2,307 )     —       (2,307 )
Compensation expense from stock-based plans
    4,627       —       —       —       —       4,627  
Gain on sale of interest in deepwater oil and gas properties
    —       —       —       (3,472 )     —       (3,472 )
Discretionary pension funding
    —       —       (6,900 )     (10,200 )     —       (17,100 )
Equity earnings in affiliates
    (120,460 )     (164,802 )     (180,861 )     —       466,123       —  
Other
    —       —       (2,430 )     3,948       —       1,518  
Other changes in current assets and liabilities, net of acquired working capital:
                                               
Accounts receivable
    —       —       (1,771 )     17,149       —       15,378  
Accounts receivable from affiliates
    —       —       40,940       —       (40,940 )     —  
Other current assets
    (9,681 )     —       (7,094 )     4,694       —       (12,081 )
Accounts payable
    (6 )     —       3,161       19,245       —       22,400  
Accounts payable to affiliates
    (15,408 )     40,147       —       (65,679 )     40,940       —  
Other current liabilities
    (1,026 )     8,064       3,678       (8,135 )     —       2,581  
 
                                   
Net cash provided by operating activities
    24,462       16,389       19,280       305,177       —       365,308  
 
                                   
 
                                               
CASH FLOWS FROM INVESTING ACTIVITIES
                                               
Acquisitions and related capital upgrades
    —       —       —       (194,400 )     —       (194,400 )
Other capital expenditures
    —       —       (16,411 )     (96,323 )     —       (112,734 )
Major maintenance expenditures
    —       —       (2,869 )     (34,115 )     —       (36,984 )
Repayments from affiliates
    16,389       —       —       —       (16,389 )     —  
Proceeds from sales of property and equipment
    —       —       —       1,606       —       1,606  
Proceeds from sale of interest in deepwater oil and gas properties
    —       —       —       5,200       —       5,200  
Repayments from joint venture
    —       —       —       4,977       —       4,977  
Investment in marketable securities
    (97,385 )     —       —       (112,635 )     —       (210,020 )
Proceeds from sales of marketable securities
    71,776       —       —       167,509       —       239,285  
 
                                   
Net cash used for investing activities
    (9,220 )     —       (19,280 )     (258,181 )     (16,389 )     (303,070 )
 
                                   
 
                                               
CASH FLOWS FROM FINANCING ACTIVITIES
                                               
Payment of long-term debt
    —       (16,389 )     —       (80,580 )     16,389       (80,580 )
Proceeds from issuance of ordinary shares
    9,432       —       —       —       —       9,432  
Decrease in restricted cash
    —       —       —       8,668       —       8,668  
 
                                   
Net cash provided by (used for) financing activities
    9,432       (16,389 )     —       (71,912 )     16,389       (62,480 )
 
                                   
 
                                               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    24,674       —       —       (24,916 )     —       (242 )
 
                                               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    9,317       —       —       53,492       —       62,809  
 
                                   
 
                                               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 33,991     $ —     $ —     $ 28,576     $ —     $ 62,567  
 
                                   

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 17 — HURRICANE LOSSES AND RECOVERIES
     Certain of our rigs operating in the U.S. Gulf of Mexico sustained damage in 2005 as a result of Hurricanes Katrina and Rita. During 2005, we recorded a $20,000,000 charge, net of insurance recoveries, for the non-reimbursable portion of these damages and $49,759,000 in loss of hire insurance proceeds that we expect to recover from our insurance underwriters for our Noble EVA-4000™ semisubmersibles (the Noble Jim Thompson , Noble Max Smith , Noble Paul Romano and Noble Amos Runner ) that suffered downtime attributable to these events. Our loss of hire coverage commenced at the respective dates of occurrence of Hurricanes Katrina and Rita, and losses covered thereunder, combined with physical damage losses, are subject to a $10,000,000 retention for each insurable event. Our loss of hire coverage continues through the respective dates the units return on contract subject to a 360-day limit per unit. These financial impacts are presented in “Hurricane losses and recoveries, net” as a component of “Operating Costs and Expenses” in our Consolidated Statements of Income.
NOTE 18 — 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 and India. 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, 2005, 2004 and 2003 is shown in the following table. The “Other” column includes results of labor contract drilling services, other insignificant operations and corporate related items.

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
                                         
    International   Domestic            
    Contract   Contract   Engineering        
    Drilling   Drilling   & Consulting        
    Services   Services   Services   Other   Total
 
                                       
2005
                                       
 
                                       
Revenues from external customers
  $ 980,294     $ 292,888     $ 21,927     $ 87,028     $ 1,382,137  
Depreciation and amortization
    190,043       48,116       365       3,228       241,752  
Interest expense
    10,811       6,533       157       2,285       19,786  
Equity in income of joint venture
    3,194       —       —       —       3,194  
Income tax provision
    38,105       27,239       393       1,659       67,396  
Segment profit (loss)
    215,589       81,717       (8,935 )     8,325       296,696  
Total assets
    2,300,768       1,151,158       29,253       865,188       4,346,367  
Capital expenditures
    152,127       59,686       355       253,605       465,773  
 
                                       
2004
                                       
 
                                       
Revenues from external customers
  $ 720,412     $ 255,027     $ 21,492     $ 69,300     $ 1,066,231  
Depreciation and amortization
    156,472       48,547       589       3,515       209,123  
Interest expense
    16,997       16,500       117       775       34,389  
Equity in income of joint venture
    3,931       —       —       —       3,931  
Income tax provision (benefit)
    16,012       11,655       315       (12,251 )     15,731  
Segment profit (loss)
    103,523       34,966       (8,363 )     15,960       146,086  
Total assets
    1,834,385       1,243,063       38,366       192,159       3,307,973  
Capital expenditures
    244,172       8,973       1,620       6,276       261,041  
 
                                       
2003
                                       
 
                                       
Revenues from external customers
  $ 663,321     $ 262,378     $ 23,545     $ 38,136     $ 987,380  
Depreciation and amortization
    128,853       49,521       610       3,606       182,590  
Interest expense
    19,548       19,899       147       697       40,291  
Equity in income of joint venture
    2,307       —       —       —       2,307  
Income tax provision (benefit)
    13,252       14,201       286       (7,171 )     20,568  
Segment profit (loss)
    131,379       40,470       (12,737 )     7,304       166,416  
Total assets
    1,578,736       1,283,662       30,322       296,913       3,189,633  
Capital expenditures
    135,986       79,816       637       90,695       307,134  

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
     The following tables present revenues and identifiable assets by country based on the location of the service provided:
                                                 
    Revenues     Identifiable Assets  
    Year Ended December 31,     December 31,  
    2005     2004     2003     2005     2004     2003  
United States
  $ 314,813     $ 265,767     $ 283,097     $ 1,138,237     $ 1,483,844     $ 1,528,333  
 
                                   
 
                                               
Bahrain
    20       5,502       8,110       —       —       —  
Brazil
    132,115       105,405       138,623       470,295       456,079       427,375  
Canada
    29,294       26,741       24,755       11,463       11,479       10,116  
China
    —       —       —       237,678       84,225       78,660  
Croatia
    13,385       12,809       —       31,115       28,141       35,307  
Denmark
    22,203       21,213       22,359       42,733       41,980       44,498  
Germany
    8,610       4,377       7,257       16,430       9,440       1,569  
India
    36,635       38,396       14,318       97,935       87,443       99,211  
Mexico
    159,413       150,030       129,473       196,498       167,766       172,471  
Nigeria
    185,327       81,357       61,218       348,150       136,609       130,891  
Norway (1)
    —       —       —       672,104       —       —  
Qatar
    136,599       78,556       48,853       514,841       213,788       127,203  
The Netherlands
    93,690       99,125       100,984       134,796       134,958       148,503  
United Arab Emirates
    97,922       83,366       72,216       222,846       290,670       219,246  
United Kingdom
    151,991       91,783       74,955       170,818       151,310       150,434  
Other
    120       1,804       1,162       40,428       10,241       15,816  
 
                                   
Total International
    1,067,324       800,464       704,283       3,208,130       1,824,129       1,661,300  
 
                                   
 
                                               
Total
  $ 1,382,137     $ 1,066,231     $ 987,380     $ 4,346,367     $ 3,307,973     $ 3,189,633  
 
                                   
 
(1)   Norway consists of the December 2005 investment in shares of Smedvig. Smedvig is a Norwegian company whose shares are traded on the Oslo Stock Exchange under the ticker symbol SME and SMEB.
NOTE 19 — SUBSEQUENT EVENTS
     By an Offer Document dated March 2, 2006, SeaDrill commenced a mandatory offer for the Class A shares and Class B shares of Smedvig not already owned by SeaDrill pursuant to the applicable requirements of Norwegian law (the “Mandatory Offer”). SeaDrill also commenced a tender offer for any and all outstanding Class A shares and Class B shares of Smedvig held by residents of the United States. The terms and conditions of the Mandatory Offer are applicable to the Smedvig shares held by the Company. The price offered by SeaDrill is NOK 205 per Class A share and NOK 165 per Class B share. The acceptance period under the Mandatory Offer extends through March 31, 2006. The terms of the Company’s Smedvig share purchase agreement limit the ability of the Company to realize a gain should the Company determine to accept the Mandatory Offer (see Note 5). The Company’s gain or loss cannot be determined until expiration of the Mandatory Offer acceptance period or the date of other disposition by the Company of its Smedvig shares because of the movement of the NOK currency exchange rate vis-à-vis the U.S. Dollar.
     For information on the expiration of the Company’s shareholder rights plan effective as of February 3, 2006, see Note 11.

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NOBLE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)
NOTE 20 — UNAUDITED INTERIM FINANCIAL DATA
     Unaudited interim consolidated financial information for the years ended December 31, 2005 and 2004 is as follows:
                                 
    Quarter Ended
    March 31   June 30   Sept. 30   Dec. 31
2005
                               
 
                               
Operating revenues
  $ 310,325     $ 344,008     $ 367,205     $ 360,599  
Operating income
    58,125       91,718       94,579       128,623  
Net income
    45,530       73,310       76,523       101,333  
Net income per share (1):
                               
Basic
    0.34       0.54       0.56       0.74  
Diluted
    0.33       0.53       0.55       0.73  
                                 
    Quarter Ended
    March 31   June 30   Sept. 30   Dec. 31
2004
                               
 
                               
Operating revenues
  $ 245,433     $ 253,009     $ 265,638     $ 302,151  
Operating income
    38,842       46,561       44,015       57,754  
Net income
    28,260       34,381       30,571       52,874  
Net income per share (1):
                               
Basic
    0.21       0.26       0.23       0.39  
Diluted
    0.21       0.26       0.23       0.39  
 
(1)   Net income per share is computed independently for each of the quarters presented. Therefore, the sum of the quarters’ net income per share may not agree to the total computed for the year.

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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
     Noble’s Chairman of the Board and Chief Executive Officer, James C. Day, and Noble’s Senior Vice President and Chief Financial Officer, Bruce W. Busmire, have overseen and participated in an evaluation of the Company’s 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. Busmire have concluded that the Company’s disclosure controls and procedures are effective as of December 31, 2005. The Company’s 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 U.S. Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
     There was no change in the Company’s internal control over financial reporting that occurred during the year ended December 31, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Management’s 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 U.S. 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 management’s assessment, the Company maintained effective internal control over financial reporting as of December 31, 2005.
     PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the Company’s financial statements included in this annual report on Form 10-K, has audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005 and the effectiveness of internal control over financial reporting as of December 31, 2005 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 “Other Matters” appearing in our proxy statement for the annual general meeting of members to be held on April 27, 2006 (the “2006 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.

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     Noble has adopted a Code of Business Conduct and Ethics that applies to directors, officers and employees, including Noble’s principal executive officer, principal financial officer and principal accounting officer. Noble’s Code of Business Conduct and Ethics is posted on the Company’s website at http://www.noblecorp.com in the “Governance” area. Changes to and waivers granted with respect to Noble’s Code of Business Conduct and Ethics related to the 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 2006 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 AND RELATED STOCKHOLDER MATTERS.
     The sections entitled “Executive Compensation — Equity Compensation Plan Information”, “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” appearing in the 2006 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 2006 Proxy Statement sets forth certain information with respect to certain relationships and related party transactions, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
     The section entitled “Auditors” appearing in the 2006 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.
(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 39 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.

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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.
         
  NOBLE CORPORATION
  		 
Date: March 13, 2006  By:   /s/ JAMES C. DAY    
    James C. Day, Chairman of the Board and   
    Chief Executive Officer   
 
     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.
         
Signature   Capacity In Which Signed   Date
/s/ JAMES C. DAY
 
  Chairman of the Board and    March 13, 2006 
James C. Day
  Chief Executive Officer and Director (Principal Executive Officer)    
 
       
/s/ BRUCE W. BUSMIRE
 
  Senior Vice President and    March 13, 2006 
Bruce W. Busmire
  Chief Financial Officer, Treasurer and Controller (Principal Financial and Accounting Officer)    
 
       
/s/ MICHAEL A. CAWLEY
 
  Director    March 13, 2006 
Michael A. Cawley
       
 
       
/s/ LAWRENCE J. CHAZEN
 
  Director    March 13, 2006 
Lawrence J. Chazen
       
 
       
/s/ LUKE R. CORBETT
 
  Director    March 13, 2006 
Luke R. Corbett
       
 
       
/s/ JULIE H. EDWARDS
 
  Director    March 13, 2006 
Julie H. Edwards
       
 
       
/s/ MARC E. LELAND
 
  Director    March 13, 2006 
Marc E. Leland
       
 
       
/s/ JACK E. LITTLE
 
  Director    March 13, 2006 
Jack E. Little
       
 
       
/s/ MARY P. RICCIARDELLO
 
  Director    March 13, 2006 
Mary P. Ricciardello
       
 
       
/s/ WILLIAM A. SEARS
 
  Director    March 13, 2006 
William A. Sears
       

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INDEX TO EXHIBITS
     
Exhibit Number   Exhibit
2.1  
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 Registrant’s Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
   
 
3.1  
Memorandum of Association of the Registrant (filed as Exhibit 3.3 to the Registrant’s Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
   
 
3.2  
Articles of Association of the Registrant, as amended (filed as Exhibit 3.2 to the Registrant’s Quarterly Report on
Form 10-Q for the three-month period ended March 31, 2005 and incorporated herein by reference).
   
 
4.1  
Indenture dated as of March 1, 1999, between Noble Drilling Corporation and JP Morgan Chase Bank, National Association (formerly Chase Bank of Texas, National Association), as trustee (filed as Exhibit 4.1 to the Form 8-K of Noble Drilling Corporation dated March 22, 1999 (date of event: March 1, 1999) and incorporated herein by reference).
   
 
4.2  
Supplemental Indenture dated as of March 16, 1999, between Noble Drilling Corporation and JP Morgan Chase Bank, National Association (formerly Chase Bank of Texas, National Association), as trustee (filed as Exhibit 4.2 to Noble Drilling Corporation’s Form 8-K dated March 22, 1999 (date of event: March 1, 1999) and incorporated herein by reference).
   
 
4.3  
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 Registrant’s Registration Statement on Form S-4 (No. 333-84278) and incorporated herein by reference).
   
 
4.4  
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 Registrant’s Current Report on Form 8-K filed on March 14, 2003 and incorporated herein by reference).
   
 
4.5  
Second Amendment to Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights Agent, dated as of June 9, 2005 (filed as Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on June 10, 2005 and incorporated herein by reference).
   
 
4.6  
Third Amendment to Rights Agreement between Noble Corporation and UMB Bank, N.A., as Rights Agent, effective as of February 3, 2006 (filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on February 8, 2006 and incorporated herein by reference).
   
 
4.7  
Note Purchase Agreement dated as of December 21, 1998, by and among Noble Drilling (Jim Thompson) Inc., JP Morgan Chase Bank, National Association (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 Noble Drilling Corporation’s Registration Statement on Form S-3 (No. 333-72059) and incorporated herein by reference).

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Exhibit Number   Exhibit
4.8  
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, National Association (formerly Chase Bank of Texas, National Association), as Trustee (filed as Exhibit 4.25 to Noble Drilling Corporation’s Registration Statement on Form S-3 (No. 333-72059) and incorporated herein by reference).
   
 
4.9  
Parent Guaranty, dated as of December 21, 1998, by Noble Drilling Corporation in favor of JP Morgan Chase Bank, National Association (formerly Chase Bank of Texas, National Association), as Trustee (filed as Exhibit 4.26 to Noble Drilling Corporation’s Registration Statement on Form S-3 (No. 333-72059) and incorporated herein by reference).
   
 
4.10  
Credit Agreement, dated as of December 22, 2005, among Noble Corporation, Noble Holding (U.S.) Corporation, Noble Drilling Corporation and Goldman Sachs Credit Partners L.P. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 28, 2005 and incorporated herein by reference).
   
 
4.11  
First Amendment to Credit Agreement, dated as of February 17, 2006 among Noble Corporation, Noble Holding (U.S.) Corporation, Noble Drilling Corporation and Goldman Sachs Credit Partners L.P. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 22, 2006 and incorporated herein by reference).
   
 
4.12  
Third Supplemental Indenture, dated as of December 20, 2005, between Noble Drilling Corporation, Noble Drilling Holding LLC, Noble Holding (U.S.) Corporation and Noble Corporation and JP Morgan Chase Bank, National Association, as trustee (filed as Exhibit 4.14 to the Registrant’s Registration Statement on Form S-3 (No. 333-131885) and incorporated herein by reference).
   
 
4.13  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
4.14  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
4.15  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
4.16  
Second Supplemental Indenture, dated as of April 30, 2002, between Noble Drilling Corporation, Noble Holding (U.S.) Corporation and Noble Corporation, and JPMorgan Chase Bank, National Association, as trustee (filed as Exhibit 4.6 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).

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Exhibit Number   Exhibit
4.17  
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 Registrant’s Current Report on Form 8-K dated November 30, 2004 and incorporated herein by reference).
   
 
4.18  
Second Amendment to Credit Agreement, dated as of March 2, 2006 among Noble Corporation, Noble Holding (U.S.) Corporation, Noble Drilling Corporation and Goldman Sachs Credit Partners, L.P. (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 6, 2006 and incorporated herein by reference).
   
 
10.1*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2003 and incorporated herein by reference).
   
 
10.2*  
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 Amendment (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2003 and incorporated herein by reference).
   
 
10.3*  
Noble Corporation Equity Compensation Plan for Non-Employee Directors (filed as Exhibit 10.1 to Noble Drilling Corporation’s Quarterly Report on Form 10-Q for the three-month period ended September 30, 1996 and incorporated herein by reference).
   
 
10.4*  
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 Registrant’s Registration Statement on Form S-8 (No. 333-17407) and incorporated herein by reference).
   
 
10.5*  
Noble Corporation’s Short Term Incentive Plan (revised April 2005) (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2005 and incorporated herein by reference).
   
 
10.6*  
Noble Drilling Corporation 401(k) Savings Restoration Plan (filed as Exhibit 10.1 to the Registrant’s Registration Statement on Form S-8 dated January 18, 2001 (No. 333-53912) and incorporated herein by reference).
   
 
10.7*  
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 Registrant’s Registration Statement on Form S-8 (No. 333-53912) and incorporated herein by reference).
   
 
10.8*  
Noble Drilling Corporation Retirement Restoration Plan dated April 27, 1995 (filed as Exhibit 10.2 to Noble Drilling Corporation’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 1995 and incorporated herein by reference).
   
 
10.9*  
Amendment No. 1 to the Noble Drilling Corporation Retirement Restoration Plan dated January 29, 1998 (filed as Exhibit 10.18 to Noble Drilling Corporation’s Annual Report on Form 10-K for the year ended December 31, 1997 and incorporated herein by reference).

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Exhibit Number   Exhibit
10.10  
Guarantee dated August 26, 1994 between Noble Drilling Corporation and Hibernia Management and Development Company Ltd. (filed as Exhibit 10.45 to Noble Drilling Corporation’s Annual Report on Form 10-K for the year ended December 31, 1994 and incorporated herein by reference).
   
 
10.11*  
Form of Indemnity Agreement entered into between Noble Corporation and each of its directors and officers (filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.12*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.13*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.14*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.15*  
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 (filed as Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.16*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.17*  
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 Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.18*  
Amended and Restated Employment Agreement, dated as of April 30, 2002, by and between Noble Drilling Corporation and Robert D. Campbell (filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.19*  
Parent Guaranty by Noble Corporation, dated as of April 30, 2002, of Amended and Restated Employment Agreement by and between Noble Drilling Corporation and Robert D. Campbell (filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended March 31, 2002 and incorporated herein by reference).
   
 
10.20*  
Amendment No. 2 to the Noble Corporation Equity Compensation Plan for Non-Employee Directors dated February 4, 2005 (filed as Exhibit 10.20 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference).
   
 
10.21*  
Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan for Non-Employee Directors dated February 4, 2005 (filed as Exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference).

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Exhibit Number   Exhibit
10.22*  
Form of Noble Corporation Nonqualified Stock Option Agreement under the Noble Corporation 1991 Stock Option and Restricted Stock Plan (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on May 4, 2005 and incorporated herein by reference).
   
 
10.23*  
Form of Noble Corporation Performance-Vested Restricted Stock Agreement under the Noble Corporation 1991 Stock Option and Restricted Stock Plan.
   
 
10.24*  
Form of Noble Corporation Time-Vested Restricted Stock Agreement under the Noble Corporation 1991 Stock Option and Restricted Stock Plan.
   
 
10.25*  
Form of Noble Corporation Nonqualified Stock Option Agreement under the Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan for Non-Employee Directors (filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on May 4, 2005 and incorporated herein by reference).
   
 
10.26*  
Form of Noble Corporation Restricted Share Agreement under the Amended and Restated Noble Corporation 1992 Nonqualified Stock Option and Restricted Share Plan for Non-Employee Directors (filed as Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on May 4, 2005 and incorporated herein by reference).
   
 
10.27*  
Employment Agreement, dated as of September 26, 2005, by and between Noble Drilling Corporation and Bruce W. Busmire (filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended September 30, 2005 and incorporated herein by reference).
   
 
10.28*  
Parent Guaranty by Noble Corporation, dated as of September 26, 2005, of Employment Agreement by and between Noble Drilling Corporation and Bruce W. Busmire (filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the three-month period ended September 30, 2005 and incorporated herein by reference).
   
 
10.29  
Share Purchase Agreement between Noble Corporation and Nora Smedvig, Peter T. Smedvig, Hjordis Smedvig, HKS AS, AS Veni, Petrus AS and Peder Smedvig Capital AS, dated December 12, 2005 (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on December 15, 2005 and incorporated herein by reference).
   
 
10.30  
Amendment No. 2 to the Noble Drilling Corporation 401(k) Savings Restoration Plan dated February 25, 2003.
   
 
10.31  
Amendment No. 3 to the Noble Drilling Corporation 401(k) Savings Restoration Plan dated March 9, 2005.
   
 
10.32  
Amendment No. 2 to the Noble Drilling Corporation Retirement Restoration Plan dated June 28, 2004, effective as of July 1, 2004.
   
 
14.1  
Noble Corporation Code of Business Conduct and Ethics (filed as Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2003 and incorporated herein by reference).
   
 
21.1  
Subsidiaries of the Registrant.
   
 
23.1  
Consent of PricewaterhouseCoopers LLP.
   
 
31.1  
Certification of James C. Day Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).
   
 
31.2  
Certification of Bruce W. Busmire Pursuant to SEC Rule 13a-14(a) or Rule 15d-14(a).
   
 
32.1 +  
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.

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Exhibit Number   Exhibit
32.2 +  
Certification of Bruce W. Busmire 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.

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EXHIBIT 10.23
NOBLE CORPORATION
PERFORMANCE-VESTED RESTRICTED STOCK AGREEMENT
     THIS AGREEMENT, made as of the            day of                      20       , by and between NOBLE CORPORATION, a Cayman Islands exempted company limited by shares (the “Company”), and                                                                                     (“Executive”);
W I T N E S S E T H:
     WHEREAS, the committee (the “Committee”) acting under the Company’s 1991 Stock Option and Restricted Stock Plan, as amended (the “Plan”), has determined that it is desirable to award shares of performance-vested restricted stock to Executive under the Plan; and
     WHEREAS, pursuant to the Plan, the Committee has determined that the shares of performance-vested restricted stock so awarded shall be subject to the restrictions, terms and conditions of this Agreement;
     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
     1.  Performance-Vested Restricted Stock Award . On the terms and conditions and subject to the restrictions, including forfeiture, hereinafter set forth, the Company hereby makes to Executive a performance-vested restricted stock award (the “Award”) of an aggregate of                                           ordinary shares (the “Restricted Shares”), par value U.S.$0.10 per share (“Ordinary Shares”), of the Company. The Award is made effective as of the date hereof (the “Effective Date”). The Restricted Shares shall be issued to Executive, subject to forfeiture as herein provided, without the payment of any cash consideration by Executive. A certificate representing the Restricted Shares shall be issued in the name of Executive as of the Effective Date and delivered to Executive on the Effective Date or as soon thereafter as practicable. Executive shall cause the certificate representing the Restricted Shares, upon receipt thereof by Executive, to be deposited, together with stock powers and any other instrument of transfer reasonably requested by the Company duly endorsed in blank, with the Company pursuant to an escrow agreement substantially in the form of Exhibit A hereto (the “Escrow Agreement”). The Restricted Shares shall be delivered to the Executive upon vesting or assigned and transferred to and reacquired and canceled by the Company upon forfeiture, as hereinafter set forth, and in accordance with the terms and conditions of the Escrow Agreement. Unless and until the Restricted Shares are delivered to Executive upon vesting, the Restricted Shares shall not be sold, assigned, transferred, discounted, exchanged, pledged or otherwise encumbered or disposed of by Executive in any manner.
     2.  Vesting/Forfeiture .
     (a) Except as set forth in Section 3 of this Agreement, (i) the Award shall not be fully vested immediately but shall be subject to forfeiture in accordance with the restricted period and performance measurement determined by the Committee and set forth on Schedule I hereto and (ii) the termination of the forfeiture provisions applicable to the Restricted Shares shall be conditioned

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upon the continuous employment of Executive by the Company or an Affiliate from the date of this Agreement to the applicable date of vesting.
     (b) Upon and to the extent of the achievement of the performance measurement hereunder with respect to the Restricted Shares, as determined by the Committee, the shares with respect to which such performance measurement has been achieved shall vest in Executive in accordance with Schedule I hereto, and Executive shall be entitled to have delivered to him a new certificate, without the legend referenced in Section 10 of this Agreement, for the number of such vested Ordinary Shares.
     (c) If the employment of Executive by the Company or an Affiliate terminates at any time prior to determination of vesting/forfeiture except on account of (i) death, Disability or Retirement of Executive or (ii) a Change in Control (as defined in Section 3(c)) of the Company, then, subject to Section 3(b), the Restricted Shares shall be forfeited and automatically transferred to and reacquired and canceled by the Company. Transfer of employment without interruption of service between or among the Company and any of its subsidiaries shall not be considered a termination of employment.
     3.  Acceleration of Vesting and Termination of Forfeiture Provisions .
     (a) The vesting of this Award and the termination of the forfeiture provisions hereof are subject to acceleration upon the occurrence of (i) the death, Disability or Retirement of Executive or (ii) a Change in Control of the Company (whether with or without termination of employment of Executive by the Company or an Affiliate). Upon the occurrence of any of the events specified in (i) of this subsection (a),
  (A)   the Restricted Shares comprising the Award shall be prorated based on the number of months of actual service by Executive during the three years in the period ended December 31, 2008, and
 
  (B)   the determination of vesting shall be made in accordance with Section 2(b) of this Agreement.
Upon the occurrence of the event specified in (ii) of this subsection (a),
  (A)   a number of shares equal to 66.7 percent of the Restricted Shares (which equates to the target for this Award) shall immediately become vested and no longer be subject to any forfeiture provisions of this Agreement,
 
  (B)   Executive shall be entitled to have delivered to him a new certificate, without the legend referenced in Section 10 of this Agreement, for such number of vested Ordinary Shares, and
 
  (C)   the balance of 33.3 percent of the Restricted Shares shall be forfeited.
     (b) Notwithstanding anything contained herein to the contrary, the Committee shall have the right to cancel all or any portion of any outstanding restrictions prior to the expiration of such

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restrictions with respect to any or all of the Restricted Shares on such terms and conditions as the Committee may, in writing, deem appropriate.
     (c) For purposes of this Agreement, the following term shall have the indicated meaning:
     Change in Control: The term “Change in Control” means (i) a determination by the Committee that any person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50 percent of the Voting Stock of the Company; (ii) the Company is merged or amalgamated with or into or consolidated with another corporation and, immediately after giving effect to the merger, amalgamation or consolidation, less than 50 percent of the outstanding voting securities entitled to vote generally in the election of directors or persons who serve similar functions of the surviving or resulting entity are then beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) in the aggregate by (x) the members of the Company immediately prior to such merger, amalgamation or consolidation, or (y) if a record date has been set to determine the members of the Company entitled to vote on such merger, amalgamation or consolidation, the members of the Company as of such record date; (iii) the Company either individually or in conjunction with one or more subsidiaries of the Company, sells, conveys, transfers or leases, or the subsidiaries of the Company sell, convey, transfer or lease, all or substantially all of the property of the Company and the subsidiaries of the Company, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the subsidiaries of the Company, to any Person (other than a Wholly Owned Subsidiary); (iv) the liquidation or dissolution of the Company; or (v) the first day on which a majority of the individuals who constitute the board of directors of the Company are not Continuing Directors. For purposes of this definition, “Voting Stock” means, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors (or comparable body) of such Person; “Person” means any individual, corporation, limited liability company, partnership, joint venture, joint stock company, unincorporated organization or government or any agency or political subdivision thereof; “Capital Stock” in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such Person; “Wholly Owned Subsidiary” means any subsidiary of the Company of which 100 percent of the total Voting Stock (other than directors’ qualifying shares) is at the time owned by the Company, either directly or indirectly through ownership of one or more subsidiaries of the Company; and “Continuing Director” means an individual who (A) is a member of the board of directors of the Company and (B) either (I) was a member of the board of directors of the Company on the Effective Date or (II) whose nomination for election or election to the board of directors of the Company was approved by a vote of at least 66-2/3 percent of the Continuing Directors who were members of the board of directors of the Company at the time of such nomination or election.
     4.  Escrow Agreement . In accordance with Section 20(b) of the Plan, the Committee has approved the form of Escrow Agreement and prescribed its use hereunder in order to enforce the restrictions, terms and conditions applicable to the Restricted Shares.

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     5.  Rights as Member . Upon the issuance of a certificate or certificates representing the Restricted Shares to Executive, Executive shall become the owner thereof for all purposes and shall have all rights as a member of the Company, including, without limitation, voting rights and the right to receive dividends and distributions, with respect to the Restricted Shares, subject to the forfeiture provisions hereof and the following provisions of this Section 5. If the Company shall pay or declare a dividend or make a distribution of any kind, whether due to a reorganization, recapitalization or otherwise, with respect to the Ordinary Shares constituting the Restricted Shares, then the Company shall pay or make such dividend or other distribution with respect to the Restricted Shares.
     6.  Agreements Regarding Withholding Taxes .
     (a) Executive may elect, within 30 days of the Effective Date and on notice to the Company, to realize income for United States federal income tax purposes equal to the fair market value of the Restricted Shares on the date of award, which shall be the Effective Date. In such event, Executive shall make arrangements satisfactory to the Committee to pay in the year of such award any United States federal, state or local taxes required to be withheld with respect to such shares. If Executive fails to make such payments, the Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct in the year of such award any United States federal, state or local taxes of any kind required by law to be withheld with respect to such Ordinary Shares.
     (b) (i) No later than the date of the lapse of the restrictions on any of the Restricted Shares set forth herein, Executive will pay to the Company or its subsidiaries, or make arrangements satisfactory to the Committee regarding payment of, any United States federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Shares with respect to which such restrictions have lapsed.
     (ii) Executive shall, to the extent permitted by law, have the right to deliver to the Company or its subsidiaries Restricted Shares to which Executive shall be entitled upon the vesting thereof (or other Ordinary Shares owned by Executive), valued at the fair market value of such shares at the time of such delivery to the Company or its subsidiaries, to satisfy the obligation of Executive under Section 6(b)(i) of this Agreement.
     (iii) If Executive does not otherwise satisfy the obligation of Executive under Section 6(b)(i) of this Agreement, then the Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Executive any United States federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Shares with respect to which the restrictions on the Restricted Shares set forth herein have lapsed.
     7.  Non-Assignability . The Award is not assignable or transferable by Executive.
     8.  Newly-Issued Ordinary Shares . The Ordinary Shares awarded to Executive as the Restricted Shares shall be newly-issued Ordinary Shares of the Company.
     9.  Capital Adjustments . If any of the following events shall occur at any time while the Award is outstanding and any Restricted Shares have not either become vested or been forfeited, the

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following adjustments shall be made in the number of Ordinary Shares then constituting the Restricted Shares under the Award, as appropriate:
     (a) Share Dividend or Split; Combination. If the Company pays a dividend on its outstanding Ordinary Shares in Ordinary Shares or subdivides its outstanding Ordinary Shares into a greater number of Ordinary Shares, the number of Ordinary Shares then subject to the Award shall be proportionately increased. Conversely, if the outstanding Ordinary Shares are combined into a smaller number of Ordinary Shares, the number of Ordinary Shares then subject to the Award shall be proportionately reduced. An adjustment made pursuant to this Section 9(a) shall become effective as of the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination.
     (b) Recapitalization or Reorganization. In case of any recapitalization or reclassification of the Ordinary Shares, or any merger, amalgamation or consolidation of the Company with or into one or more other corporations, or any sale of all or substantially all the assets of the Company, as a result of which the holders of the Ordinary Shares receive other stock, securities or property in lieu of or in addition to, but on account of, their Ordinary Shares, the Company shall make or cause to be made lawful and adequate provision whereby, upon the vesting of the Award after the record date for the determination of the holders of Ordinary Shares entitled to receive such other stock, securities or property, the Executive shall receive, in addition to the Ordinary Shares with respect to which the Award has vested, the shares of stock, securities or other property which would have been allocable to such Ordinary Shares had the Award vested immediately prior to such record date. The subdivision or combination of Ordinary Shares at any time outstanding into a greater or smaller number of Ordinary Shares shall not be deemed to be a recapitalization or reclassification of the Ordinary Shares for the purposes of this Section 9(b).
     10.  Legend . Each certificate representing Restricted Shares shall conspicuously set forth on the face or back thereof, in addition to any legends required by applicable law or other agreement, a legend in substantially the following form:
THE ORDINARY SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THE TERMS OF THE NOBLE CORPORATION 1991 STOCK OPTION AND RESTRICTED STOCK PLAN 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                      , 200       . A COPY OF SUCH PLAN AND AGREEMENT IS ON FILE IN THE OFFICES OF THE CORPORATION.
     11.  Defined Terms; Plan Provisions . Unless the context clearly indicates otherwise, the capitalized terms used (and not otherwise defined) in this Agreement shall have the meanings assigned to them under the provisions of the Plan. By execution of this Agreement, Executive agrees that the Award and the Restricted Shares shall be governed by and subject to all applicable provisions of the Plan. This Agreement is subject to the Plan, and the Plan shall govern where there is any inconsistency between the Plan and this Agreement.

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     12.  Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by Federal law of the United States or by the laws of the Cayman Islands.
     13.  Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.
     14.  Entire Agreement; Amendment . This Agreement, together with any Schedules and Exhibits and any other writings referred to herein or delivered pursuant hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Agreement may be amended, modified and supplemented by mutual consent of the parties hereto at any time, with respect to any of the terms contained herein, in such manner as may be agreed upon in writing by such parties.
     15.  Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
     (a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Chief Executive Officer
Fax: 281-491-2398
With a copy to:
Chairman of Compensation Committee
c/o Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Fax: 281-276-6316

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     (b) If to Executive, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The address and number, if any, set forth opposite
Executive’s signature below
Either party may at any time give to the other notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified will be deemed to be the address of such party for the purposes of giving notice hereunder.
     16.  Severability . If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.
     17.  Counterparts . This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto.
     18.  Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only, do not constitute a part of this Agreement, and shall not affect in any manner the meaning or interpretation of this Agreement.
     19.  Gender . Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.
     20.  References . The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Whenever the words “include,” “includes” and “including” are used in this Agreement, such words shall be deemed to be followed by the words “without limitation.”

7

 

     IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the date first above written.
         
    NOBLE CORPORATION
 
       
 
  By:    
 
       
 
  Name:    
 
  Title:    
 
       
Address and fax number, if any:
       
     
    Name of Executive:
13135 S. Dairy Ashford, Suite 800
       
Sugar Land, Texas 77478
       
Fax: 281-276-6316
       

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SCHEDULE I
NOBLE CORPORATION
PERFORMANCE MEASURES FOR THE 2006-2008 PERFORMANCE CYCLE
AWARD OF PERFORMANCE-VESTED RESTRICTED STOCK
     The Committee has determined that the following restricted period and performance measures shall be applicable to the Award of Restricted Shares represented hereby:
1. Restricted Period. The restricted period for the Restricted Shares shall extend from the Effective Date of the Award through December 31, 2008, and thereafter until such time as vesting or forfeiture of the Restricted Shares is confirmed, as determined by the Committee, based on achievement of the performance measures specified in paragraph 2 below.
2. Performance Measures. This performance-vested restricted stock Award provides for performance to be assessed over a three-year performance cycle based on corporate performance. The number of the Restricted Shares awarded that will be earned/vested will vary based on performance, as shown in the following table:
         
    Percentage of Target
Performance Level   Earned/Vested
Maximum
    150 %
Target
    100 %
Threshold
    50 %
Below Threshold
    0 %
     The number of Ordinary Shares set by the Committee as the target for this Award is                      and therefore the maximum number of Ordinary Shares that can be earned/vested is                      (being the total number of the Restricted Shares of this Award).
     The performance measures used to determine the extent of vesting of the Restricted Shares are (i) the cumulative total member (shareholder) return (“TSR”) for the Ordinary Shares of the Company relative to the Dow Jones U.S. Oil Equipment & Services Index (the “Index”) for the three-year period beginning on the first NYSE trading day of 2006 and ending on the last NYSE trading day of 2008 (the “Performance Cycle”) (the “Competitor Index Measure”) and (ii) the TSR of the Ordinary Shares of the Company relative to each of the companies (each, a “Competitor” and, collectively, the “Competitor Group”) in a specific competitor group for the Performance Cycle (the “Specific Competitor Measure”). The companies comprising the Competitor Group for the Performance Cycle are set forth on Annex I to this Schedule I.
     For the purpose of determining the Competitor Index Measure, TSR for the Performance Cycle shall be defined and calculated using the methodology for comparing the yearly percentage change in a registrant’s cumulative total shareholder return on a class of common equity security registered under section 12 of the U.S. Securities Exchange Act of 1934 in a line graph set forth in such registrant’s proxy statement for its annual meeting of security holders pursuant to the rules and

I-1

 

regulations of the U. S. Securities and Exchange Commission in effect on the Effective Date (the “SEC Methodology”). The companies comprising the Index on the last trading day of the Performance Cycle shall be the companies used in the comparison for determining the Competitor Index Measure.
     For the purpose of determining the Specific Competitor Measure, TSR for the Performance Cycle shall be defined and calculated using the SEC Methodology; provided, however, that the share price at the beginning and at the end of the measurement period shall be the Current Market Price (as defined below) of the applicable security. The “Current Market Price” of a security on any date shall be deemed to be the greater of (a) the average of the daily closing prices of the security for the 20 consecutive trading days immediately preceding the day in question and (b) the then per share par value of the security. The companies comprising the Competitor Group on the last trading day of the Performance Cycle shall be the companies used in the comparison for determining the Specific Competitor Measure. If a Competitor’s common equity security is no longer publicly traded on the last NYSE trading day of the Performance Cycle, then an appropriate proportionate adjustment will be effected over the remaining number of Competitors in the Competitor Group in making the determination of the Specific Competitor Measure; provided, however, that if the number of companies comprising the Competitor Group on the last NYSE trading day of the Performance Cycle is less than five Competitors, then, notwithstanding anything contained herein to the contrary, the Specific Competitor Measure shall be inapplicable and not used in determining the overall performance measure for vesting.
     Notwithstanding anything contained herein to the contrary, the Company must have positive TSR for the Performance Cycle for any of the Restricted Shares to vest.
     The number of the Restricted Shares vesting, if at all, over the Performance Cycle shall be determined in accordance with the vesting matrix set forth on Annex I to this Schedule I.
3. Administrative Matters. The Committee shall confirm the vesting or forfeiture of the Restricted Shares as soon as reasonably practicable after the completion of the Performance Cycle and, in any event, within two months after the calculation of the TSR for the Ordinary Shares and the Index. Executive shall be given notice of the confirmation of vesting of all or part of the Restricted Shares.

I-2

 

[Annex I to Schedule I to this Form of Performance-Vested Restricted Stock Agreement, as determined by the Compensation Committee of the Board of Directors of the Company upon an award, is to be inserted here.]
Annex I to Schedule I

 

 

EXHIBIT A
NOBLE CORPORATION
ESCROW AGREEMENT
FOR PERFORMANCE-VESTED RESTRICTED STOCK AWARD
     THIS ESCROW AGREEMENT, made as of the ___day of                      20___, by and among Noble Corporation, a Cayman Islands exempted company limited by shares (the “Company”),                                                                (“Executive”), and the Company, as escrow agent (the “Escrow Agent”), pursuant to a Performance Restricted Stock Agreement dated of even date herewith (the “Restricted Stock Agreement”) between the Company and Executive;
W I T N E S S E T H:
     WHEREAS, the Company and Executive desire the Escrow Agent to serve as Escrow Agent for the Deposit Shares (as hereinafter defined) as contemplated by Section 1 of the Restricted Stock Agreement, and the Escrow Agent is willing to serve as Escrow Agent pursuant to the provisions hereof; and
     WHEREAS, the Restricted Stock Agreement requires that an Escrow Agreement in the form hereof be entered into by the parties hereto;
     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
     1.  Defined Terms . Each capitalized term used herein and not otherwise defined shall have the meaning accorded thereto in the Restricted Stock Agreement.
     2.  Deposit of Shares . In order to enforce the restrictions, terms and conditions, including forfeiture, applicable to the Award of Restricted Shares to Executive pursuant to the Restricted Stock Agreement, concurrent with the signing of the Restricted Stock Agreement, Executive has deposited or caused to be deposited with the Escrow Agent the Restricted Shares, together with stock powers duly endorsed in blank by Executive. The shares so deposited with the Escrow Agent and such stock powers are referred to herein collectively as the “Deposit Shares.” The Deposit Shares shall be registered in the name of Executive.
     3.  Term . The Deposit Shares shall be held by the Escrow Agent in accordance with the terms of this Agreement from the date of deposit until the Deposit Shares have been disposed of by Escrow Agent in accordance with this Agreement.

A-1

 

     4.  Disposition of the Deposit Shares .
     (a) Upon receipt by the Escrow Agent at any time of joint written instructions from the Committee and Executive, the Escrow Agent will deliver the Deposit Shares in accordance with such instructions.
     (b) Upon receipt by Escrow Agent of the Committee’s notice that (i) a number of the Restricted Shares specified in such notice has become vested in Executive (the “Vested Shares”) and a number of the Restricted Shares specified in such notice has been forfeited by Executive (the “Forfeited Shares”), (ii) Executive is entitled to delivery of the Vested Shares pursuant to the Restricted Stock Agreement and the Company is entitled to delivery of the Forfeited Shares pursuant to the Restricted Stock Agreement and (iii) the certificate representing the Deposit Shares, together with the stock powers duly endorsed in blank by Executive, should be delivered to the Company, Escrow Agent shall promptly deliver the certificate representing the Deposit Shares and such stock powers to the Company. The Company shall then cause a new certificate to be issued for any Vested Shares to be delivered to Executive and any Forfeited Shares to be delivered to the Company for cancellation.
     (c) The Escrow Agent shall not be required to inquire or make any investigation beyond the bounds of this Escrow Agreement in delivering all or any of the Deposit Shares.
     5.  Certain Agreements of the Company and Executive .
     (a) The Company agrees with Executive to give the Escrow Agent prompt notice in accordance with Section 4(b) of this Escrow Agreement in the event of vesting of all or any of the Deposit Shares pursuant to the Restricted Stock Agreement.
     (b) Executive acknowledges (i) that the disposition of the Deposit Shares pursuant to Section 4(b) of this Escrow Agreement may be made upon the unilateral action of the Committee, (ii) that even in the event Executive disagrees with the Committee’s notice or makes objection to the Escrow Agent with respect thereto, the Escrow Agent shall nevertheless be required to dispose of the Deposit Shares in accordance with the Committee’s notice and (iii) that any claim or remedy with respect to any dispute Executive has concerning the delivery of all or any of the Deposit Shares to the Company pursuant to this Escrow Agreement or otherwise concerning the Restricted Stock Agreement shall be raised only against the Company so long as the Escrow Agent acts in good faith.
     (c) The Company and Executive hereby jointly and severally agree to indemnify, defend and hold harmless the Escrow Agent from and against any and all losses, damages, liabilities and expenses that may be incurred by the Escrow Agent arising out of or in connection with its performance of its duties as Escrow Agent hereunder in accordance with the terms hereof, including any legal costs and expenses of defending itself against any claims or liabilities, including, without limitation, its good faith disbursement of Deposit Shares pursuant to this Escrow Agreement.

A-2

 

     6.  Escrow Agent .
     (a) The Escrow Agent shall not be required to use its own funds in the performance of any of its duties, or in the exercise of any of its rights or powers, with respect to the Deposit Shares.
     (b) The Escrow Agent may confer with its counsel with respect to any question relating to its duties or responsibilities hereunder and it shall not be liable for any act done or omitted by it in good faith on advice of counsel. It shall be protected in acting upon any certificate, statement, request, consent, agreement or other instrument whatsoever (not only as to its due execution or the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which it shall in good faith believe to be valid and to have been signed or presented by a proper person or persons. The Escrow Agent shall not be bound by any notice of a claim, or demand with respect thereto, or any waiver, modification, amendment, termination or rescission of this Escrow Agreement, unless in writing received by it, and if the duties of the Escrow Agent herein are affected, unless it shall have given its prior written consent thereto. The Escrow Agent shall not be liable or responsible for anything done or omitted to be done by it in good faith, it being understood that its liability hereunder shall be limited solely to gross negligence or willful misconduct on its part.
     7.  Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
     (a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Chief Executive Officer
Fax: 281-491-2398
With a copy to:
Chairman of Compensation Committee
c/o Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Fax: 281-276-6316
     (b) If to Executive, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The address and number, if any, set forth opposite
Executive’s signature on the Restricted Stock Agreement

A-3

 

     (c) If to the Escrow Agent, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Escrow — Restricted Stock Award
Fax: 281-276-6316
Any party may at any time give to the others notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified will be deemed to be the address of such party for the purposes of giving notice hereunder.
     8.  Assignment; Binding Effect . This Escrow Agreement is not assignable by the Escrow Agent and shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, personal representatives, successors and permitted assigns.
     9.  Governing Law . This Escrow Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by Federal law of the United States or by the laws of the Cayman Islands.
     10.  Termination . This Escrow Agreement shall be terminated only upon the delivery of all the Deposit Shares either to Executive as Vested Shares or to the Company as Forfeited Shares, as the case may be, in accordance with the provisions hereof.

A-4

 

IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of the date first above written.
         
    NOBLE CORPORATION
 
       
 
  By:    
 
       
    Name:
    Title:
 
       
 
       
     
    Name of Executive:
 
       
    NOBLE CORPORATION,
as Escrow Agent
 
       
 
  By:    
 
       
    Name:
    Title:

A-5

 

Exhibit 10.24
NOBLE CORPORATION
TIME-VESTED RESTRICTED STOCK AGREEMENT
     THIS AGREEMENT, made as of the       day of           , 20_ _, by and between NOBLE CORPORATION, a Cayman Islands exempted company limited by shares (the “Company”), and                                                                (“Executive”);
W I T N E S S E T H:
     WHEREAS, the committee (the “Committee”) acting under the Company’s 1991 Stock Option and Restricted Stock Plan, as amended (the “Plan”), has determined that it is desirable to award shares of time-vested restricted stock to Executive under the Plan; and
     WHEREAS, pursuant to the Plan, the Committee has determined that the shares of time-vested restricted stock so awarded shall be subject to the restrictions, terms and conditions of this Agreement;
     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
     1.  Time-Vested Restricted Stock Award . On the terms and conditions and subject to the restrictions, including forfeiture, hereinafter set forth, the Company hereby makes to Executive a time-vested restricted stock award (the “Award”) of an aggregate of ___ ordinary shares (the “Restricted Shares”), par value U.S.$0.10 per share (“Ordinary Shares”), of the Company. The Award is made effective as of the date hereof (the “Effective Date”). The Restricted Shares shall be issued to Executive, subject to forfeiture as herein provided, without the payment of any cash consideration by Executive. A certificate representing the Restricted Shares shall be issued in the name of Executive as of the Effective Date and delivered to Executive on the Effective Date or as soon thereafter as practicable. Executive shall cause the certificate representing the Restricted Shares, upon receipt thereof by Executive, to be deposited, together with stock powers and any other instrument of transfer reasonably requested by the Company duly endorsed in blank, with the Company pursuant to an escrow agreement substantially in the form of Exhibit A hereto (the “Escrow Agreement”). The Restricted Shares shall be delivered to the Executive upon vesting or assigned and transferred to and reacquired and canceled by the Company upon forfeiture, as hereinafter set forth, and in accordance with the terms and conditions of the Escrow Agreement. Unless and until the Restricted Shares are delivered to Executive upon vesting, the Restricted Shares shall not be sold, assigned, transferred, discounted, exchanged, pledged or otherwise encumbered or disposed of by Executive in any manner.

1

 

     2.  Vesting/Forfeiture .
     (a) Except as set forth in Section 3 of this Agreement, (i) the Award shall not be fully vested immediately but shall be subject to forfeiture in accordance with the restricted periods determined by the Committee and set forth on Schedule I hereto and (ii) the termination of the forfeiture provisions applicable to the Restricted Shares shall be conditioned upon the continuous employment of Executive by the Company or an Affiliate from the date of this Agreement to the applicable date of vesting.
     (b) The shares shall vest in Executive in accordance with the restricted periods set forth on Schedule I hereto, and Executive shall be entitled to have delivered to him a new certificate, without the legend referenced in Section 10 of this Agreement, for the number of such vested Ordinary Shares.
     (c) If the employment of Executive by the Company or an Affiliate terminates at any time except on account of (i) death or Disability of Executive or (ii) a Change in Control (as defined in Section 3(c)) of the Company, then, subject to Section 3(b), any Restricted Shares subject to this Award that have not theretofore vested shall be forfeited and automatically transferred to and reacquired and canceled by the Company. Transfer of employment without interruption of service between or among the Company and any of its subsidiaries shall not be considered a termination of employment.
     3.  Acceleration of Vesting and Termination of Forfeiture Provisions .
     (a) The vesting of this Award and the termination of the forfeiture provisions hereof are subject to acceleration upon the occurrence of (i) the death or Disability of Executive or (ii) a Change in Control of the Company (whether with or without termination of employment of Executive by the Company or an Affiliate). Upon the occurrence of any of the events specified in (i) or (ii) of this subsection (a), (A) all the Restricted Shares then subject to the Award shall immediately become vested and shall no longer be subject to any forfeiture provisions of this Agreement, and (B) Executive shall be entitled to have delivered to him a new certificate, without the legend referenced in Section 10 of this Agreement, for the number of such vested Ordinary Shares.
     (b) Notwithstanding anything contained herein to the contrary, the Committee shall have the right 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 on such terms and conditions as the Committee may, in writing, deem appropriate.
     (c) For purposes of this Agreement, the following term shall have the indicated meaning:
     Change in Control: The term “Change in Control” means (i) a determination by the Committee that any person or group (as defined in Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) has become the direct or indirect beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50 percent of the Voting Stock of the Company; (ii) the Company is merged or amalgamated with or into or consolidated with another corporation and, immediately after giving effect to the merger,

2

 

amalgamation or consolidation, less than 50 percent of the outstanding voting securities entitled to vote generally in the election of directors or persons who serve similar functions of the surviving or resulting entity are then beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) in the aggregate by (x) the members of the Company immediately prior to such merger, amalgamation or consolidation, or (y) if a record date has been set to determine the members of the Company entitled to vote on such merger, amalgamation or consolidation, the members of the Company as of such record date; (iii) the Company either individually or in conjunction with one or more subsidiaries of the Company, sells, conveys, transfers or leases, or the subsidiaries of the Company sell, convey, transfer or lease, all or substantially all of the property of the Company and the subsidiaries of the Company, taken as a whole (either in one transaction or a series of related transactions), including Capital Stock of the subsidiaries of the Company, to any Person (other than a Wholly Owned Subsidiary); (iv) the liquidation or dissolution of the Company; or (v) the first day on which a majority of the individuals who constitute the board of directors of the Company are not Continuing Directors. For purposes of this definition, “Voting Stock” means, with respect to any Person, securities of any class or classes of Capital Stock in such Person entitling the holders thereof (whether at all times or at the times that such class of Capital Stock has voting power by reason of the happening of any contingency) to vote in the election of members of the board of directors (or comparable body) of such Person; “Person” means any individual, corporation, limited liability company, partnership, joint venture, joint stock company, unincorporated organization or government or any agency or political subdivision thereof; “Capital Stock” in any Person means any and all shares, interests, participations or other equivalents in the equity interest (however designated) in such Person and any rights (other than debt securities convertible into an equity interest), warrants or options to acquire an equity interest in such Person; “Wholly Owned Subsidiary” means any subsidiary of the Company of which 100 percent of the total Voting Stock (other than directors’ qualifying shares) is at the time owned by the Company, either directly or indirectly through ownership of one or more subsidiaries of the Company; and “Continuing Director” means an individual who (A) is a member of the board of directors of the Company and (B) either (I) was a member of the board of directors of the Company on the Effective Date or (II) whose nomination for election or election to the board of directors of the Company was approved by a vote of at least 66-2/3 percent of the Continuing Directors who were members of the board of directors of the Company at the time of such nomination or election.
     4.  Escrow Agreement . In accordance with Section 20(b) of the Plan, the Committee has approved the form of Escrow Agreement and prescribed its use hereunder in order to enforce the restrictions, terms and conditions applicable to the Restricted Shares.
     5.  Rights as Member . Upon the issuance of a certificate or certificates representing the Restricted Shares to Executive, Executive shall become the owner thereof for all purposes and shall have all rights as a member of the Company, including, without limitation, voting rights and the right to receive dividends and distributions, with respect to the Restricted Shares, subject to the forfeiture provisions hereof and the following provisions of this Section 5. If the Company shall pay or declare a dividend or make a distribution of any kind, whether due to a reorganization, recapitalization or otherwise, with respect to the Ordinary Shares constituting the Restricted Shares, then the Company shall pay or make such dividend or other distribution with respect to the Restricted Shares.
     6.  Agreements Regarding Withholding Taxes .

3

 

     (a) Executive may elect, within 30 days of the Effective Date and on notice to the Company, to realize income for United States federal income tax purposes equal to the fair market value of the Restricted Shares on the date of award, which shall be the Effective Date. In such event, Executive shall make arrangements satisfactory to the Committee to pay in the year of such award any United States federal, state or local taxes required to be withheld with respect to such shares. If Executive fails to make such payments, the Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct in the year of such award any United States federal, state or local taxes of any kind required by law to be withheld with respect to such Ordinary Shares.
     (b) (i) No later than the date of the lapse of the restrictions on any of the Restricted Shares set forth herein, Executive will pay to the Company or its subsidiaries, or make arrangements satisfactory to the Committee regarding payment of, any United States federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Shares with respect to which such restrictions have lapsed.
     (ii) Executive shall, to the extent permitted by law, have the right to deliver to the Company or its subsidiaries Restricted Shares to which Executive shall be entitled upon the vesting thereof (or other Ordinary Shares owned by Executive), valued at the fair market value of such shares at the time of such delivery to the Company or its subsidiaries, to satisfy the obligation of Executive under Section 6(b)(i) of this Agreement.
     (iii) If Executive does not otherwise satisfy the obligation of Executive under Section 6(b)(i) of this Agreement, then the Company and its subsidiaries shall, to the extent permitted by law, have the right to deduct from any payments of any kind otherwise due to Executive any United States federal, state or local taxes of any kind required by law to be withheld with respect to the Restricted Shares with respect to which the restrictions on the Restricted Shares set forth herein have lapsed.
     7.  Non-Assignability . The Award is not assignable or transferable by Executive.
     8.  Newly-Issued Ordinary Shares . The Ordinary Shares awarded to Executive as the Restricted Shares shall be newly-issued Ordinary Shares of the Company.
     9.  Capital Adjustments . If any of the following events shall occur at any time while the Award is outstanding and any Restricted Shares have not either become vested or been forfeited, the following adjustments shall be made in the number of Ordinary Shares then constituting the Restricted Shares under the Award, as appropriate:
     (a) Share Dividend or Split; Combination. If the Company pays a dividend on its outstanding Ordinary Shares in Ordinary Shares or subdivides its outstanding Ordinary Shares into a greater number of Ordinary Shares, the number of Ordinary Shares then subject to the Award shall be proportionately increased. Conversely, if the outstanding Ordinary Shares are combined into a smaller number of Ordinary Shares, the number of Ordinary Shares then subject to the Award shall be proportionately reduced. An adjustment made pursuant to this Section 9(a) shall become effective

4

 

as of the record date in the case of a dividend and shall become effective immediately after the effective date in the case of a subdivision or combination.
     (b) Recapitalization or Reorganization. In case of any recapitalization or reclassification of the Ordinary Shares, or any merger, amalgamation or consolidation of the Company with or into one or more other corporations, or any sale of all or substantially all the assets of the Company, as a result of which the holders of the Ordinary Shares receive other stock, securities or property in lieu of or in addition to, but on account of, their Ordinary Shares, the Company shall make or cause to be made lawful and adequate provision whereby, upon the vesting of the Award after the record date for the determination of the holders of Ordinary Shares entitled to receive such other stock, securities or property, the Executive shall receive, in addition to the Ordinary Shares with respect to which the Award has vested, the shares of stock, securities or other property which would have been allocable to such Ordinary Shares had the Award vested immediately prior to such record date. The subdivision or combination of Ordinary Shares at any time outstanding into a greater or smaller number of Ordinary Shares shall not be deemed to be a recapitalization or reclassification of the Ordinary Shares for the purposes of this Section 9(b).
     10.  Legend . Each certificate representing Restricted Shares shall conspicuously set forth on the face or back thereof, in addition to any legends required by applicable law or other agreement, a legend in substantially the following form:
THE ORDINARY SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THE TERMS OF THE NOBLE CORPORATION 1991 STOCK OPTION AND RESTRICTED STOCK PLAN 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                                           , 200___. A COPY OF SUCH PLAN AND AGREEMENT IS ON FILE IN THE OFFICES OF THE CORPORATION.
     11.  Defined Terms; Plan Provisions . Unless the context clearly indicates otherwise, the capitalized terms used (and not otherwise defined) in this Agreement shall have the meanings assigned to them under the provisions of the Plan. By execution of this Agreement, Executive agrees that the Award and the Restricted Shares shall be governed by and subject to all applicable provisions of the Plan. This Agreement is subject to the Plan, and the Plan shall govern where there is any inconsistency between the Plan and this Agreement.
     12.  Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by Federal law of the United States or by the laws of the Cayman Islands.
     13.  Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

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     14.  Entire Agreement; Amendment . This Agreement, together with any Schedules and Exhibits and any other writings referred to herein or delivered pursuant hereto, constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, between the parties with respect to the subject matter hereof. To the fullest extent provided by applicable law, this Agreement may be amended, modified and supplemented by mutual consent of the parties hereto at any time, with respect to any of the terms contained herein, in such manner as may be agreed upon in writing by such parties.
     15.  Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers:
     (a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Chief Executive Officer
Fax: 281-491-2398
With a copy to:
Chairman of Compensation Committee
c/o Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Fax: 281-276-6316
     (b) If to Executive, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The address and number, if any, set forth opposite
Executive’s signature below
Either party may at any time give to the other notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified will be deemed to be the address of such party for the purposes of giving notice hereunder.
     16.  Severability . If any provision of this Agreement is held to be unenforceable, this Agreement shall be considered divisible and such provision shall be deemed inoperative to the extent it is deemed unenforceable, and in all other respects this Agreement shall remain in full force and effect; provided, however, that if any such provision may be made enforceable by limitation thereof, then such provision shall be deemed to be so limited and shall be enforceable to the maximum extent permitted by applicable law.

6

 

     17.  Counterparts . This Agreement may be executed by the parties hereto in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same agreement. Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all, the parties hereto.
     18.  Descriptive Headings. The descriptive headings herein are inserted for convenience of reference only, do not constitute a part of this Agreement, and shall not affect in any manner the meaning or interpretation of this Agreement.
     19.  Gender . Pronouns in masculine, feminine and neuter genders shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa, unless the context otherwise requires.
     20.  References . The words “this Agreement,” “herein,” “hereof,” “hereby,” “hereunder” and words of similar import refer to this Agreement as a whole and not to any particular subdivision unless expressly so limited. Whenever the words “include,” “includes” and “including” are used in this Agreement, such words shall be deemed to be followed by the words “without limitation.”

7

 

     IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the date first above written.
         
  NOBLE CORPORATION
  		 
  By:      
  Name:      
  Title:      
 
     
Address and fax number, if any:
   
 
   
 
  Name of Executive:
13135 S. Dairy Ashford, Suite 800
   
Sugar Land, Texas 77478
   
Fax: 281-276-6316
   

8

 

SCHEDULE I
NOBLE CORPORATION
RESTRICTED PERIODS
FOR AWARD OF TIME-VESTED RESTRICTED STOCK
     The Committee has determined that the following specified restricted time periods shall be applicable to the Award of Restricted Shares represented hereby:
1.   Restricted Periods.
  (i)   One-third of the awarded shares shall vest and no longer be subject to forfeiture on the first anniversary of the Effective Date (or if such date is not a business day, the business day immediately preceding such date); and
 
  (ii)   One-third of the awarded shares shall vest and no longer be subject to forfeiture on the second anniversary of the Effective Date (or if such date is not a business day, the business day immediately preceding such date); and
 
  (iii)   One-third of the awarded shares shall vest and no longer be subject to forfeiture on the third anniversary of the Effective Date (or if such date is not a business day, the business day immediately preceding such date).

I-1

 

EXHIBIT A
NOBLE CORPORATION
ESCROW AGREEMENT
FOR TIME-VESTED RESTRICTED STOCK AWARD
     THIS ESCROW AGREEMENT, made as of the ____ day of ______, 20__, by and among Noble Corporation, a Cayman Islands exempted company limited by shares (the “Company”), ______ (“Executive”), and the Company, as escrow agent (the “Escrow Agent”), pursuant to a Restricted Stock Agreement dated of even date herewith (the “Restricted Stock Agreement”) between the Company and Executive;
W I T N E S S E T H:
     WHEREAS, the Company and Executive desire the Escrow Agent to serve as Escrow Agent for the Deposit Shares (as hereinafter defined) as contemplated by Section 1 of the Restricted Stock Agreement, and the Escrow Agent is willing to serve as Escrow Agent pursuant to the provisions hereof; and
     WHEREAS, the Restricted Stock Agreement requires that an Escrow Agreement in the form hereof be entered into by the parties hereto;
     NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
     1.  Defined Terms . Each capitalized term used herein and not otherwise defined shall have the meaning accorded thereto in the Restricted Stock Agreement.
     2.  Deposit of Shares . In order to enforce the restrictions, terms and conditions, including forfeiture, applicable to the Award of Restricted Shares to Executive pursuant to the Restricted Stock Agreement, concurrent with the signing of the Restricted Stock Agreement, Executive has deposited or caused to be deposited with the Escrow Agent the Restricted Shares, together with stock powers duly endorsed in blank by Executive. The shares so deposited with the Escrow Agent and such stock powers are referred to herein collectively as the “Deposit Shares.” The Deposit Shares shall be registered in the name of Executive.
     3.  Term . The Deposit Shares shall be held by the Escrow Agent in accordance with the terms of this Agreement from the date of deposit until the Deposit Shares have been disposed of by Escrow Agent in accordance with this Agreement.

A-1

 

     4.  Disposition of the Deposit Shares .
     (a) Upon receipt by the Escrow Agent at any time of joint written instructions from the Committee and Executive, the Escrow Agent will deliver the Deposit Shares in accordance with such instructions.
     (b) Upon receipt by Escrow Agent of the Committee’s notice that (i) a number of the Restricted Shares specified in such notice has been forfeited by Executive (the “Forfeited Shares”) and the Company is entitled to delivery of the Forfeited Shares pursuant to the Restricted Stock Agreement and (ii) the certificate representing the Deposit Shares, together with the stock powers duly endorsed in blank by Executive, should be delivered to the Company, Escrow Agent shall promptly deliver the certificate representing the Deposit Shares and such stock powers to the Company. If the number of the Forfeited Shares is less than the number of the Deposit Shares then held in escrow hereunder, then the Company shall cause a new certificate to be issued for the remaining number of Deposit Shares represented by the certificate delivered to the Company and returned to the Escrow Agent to be held pursuant to the terms of this Escrow Agreement.
     (c) Upon receipt by Escrow Agent of the Committee’s notice that (i) a number of the Restricted Shares specified in such notice has become vested in Executive (the “Vested Shares”) and Executive is entitled to delivery of the Vested Shares pursuant to the Restricted Stock Agreement and (ii) the certificate representing the Deposit Shares should be delivered to Executive, Escrow Agent shall promptly deliver the certificate representing the Vested Shares to Executive. If the number of the Vested Shares is less than the number of the Deposit Shares then held in escrow hereunder, then Executive shall cause a new certificate to be issued for the remaining number of Deposit Shares represented by the certificate delivered to Executive and returned to the Escrow Agent to be held pursuant to the terms of this Escrow Agreement.
     (d) The Escrow Agent shall not be required to inquire or make any investigation beyond the bounds of this Escrow Agreement in delivering all or any of the Deposit Shares.
     5.  Certain Agreements of the Company and Executive .
     (a) The Company agrees with Executive to give the Escrow Agent prompt notice in accordance with Section 4(c) of this Escrow Agreement in the event of vesting of all or any of the Deposit Shares pursuant to the Restricted Stock Agreement.
     (b) Executive acknowledges (i) that the disposition of the Deposit Shares pursuant to Section 4(b) or 4(c) of this Escrow Agreement may be made upon the unilateral action of the Committee, (ii) that even in the event Executive disagrees with the Committee’s notice or makes objection to the Escrow Agent with respect thereto, the Escrow Agent shall nevertheless be required to dispose of the Deposit Shares in accordance with the Committee’s notice and (iii) that any claim or remedy with respect to any dispute Executive has concerning the delivery of all or any of the Deposit Shares to the Company pursuant to this Escrow Agreement or otherwise concerning the Restricted Stock Agreement shall be raised only against the Company so long as the Escrow Agent acts in good faith.

A-2

 

     (c) The Company and Executive hereby jointly and severally agree to indemnify, defend and hold harmless the Escrow Agent from and against any and all losses, damages, liabilities and expenses that may be incurred by the Escrow Agent arising out of or in connection with its performance of its duties as Escrow Agent hereunder in accordance with the terms hereof, including any legal costs and expenses of defending itself against any claims or liabilities, including, without limitation, its good faith disbursement of Deposit Shares pursuant to this Escrow Agreement.
     6.  Escrow Agent .
     (a) The Escrow Agent shall not be required to use its own funds in the performance of any of its duties, or in the exercise of any of its rights or powers, with respect to the Deposit Shares.
     (b) The Escrow Agent may confer with its counsel with respect to any question relating to its duties or responsibilities hereunder and it shall not be liable for any act done or omitted by it in good faith on advice of counsel. It shall be protected in acting upon any certificate, statement, request, consent, agreement or other instrument whatsoever (not only as to its due execution or the validity and effectiveness of its provisions, but also as to the truth and acceptability of any information therein contained) which it shall in good faith believe to be valid and to have been signed or presented by a proper person or persons. The Escrow Agent shall not be bound by any notice of a claim, or demand with respect thereto, or any waiver, modification, amendment, termination or rescission of this Escrow Agreement, unless in writing received by it, and if the duties of the Escrow Agent herein are affected, unless it shall have given its prior written consent thereto. The Escrow Agent shall not be liable or responsible for anything done or omitted to be done by it in good faith, it being understood that its liability hereunder shall be limited solely to gross negligence or willful misconduct on its part.
     7.  Notices . All notices and other communications hereunder shall be in writing and shall be deemed given if directed in the manner specified below, to the parties at the following addresses and numbers
     (a) If to the Company, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Chief Executive Officer
Fax: 281-491-2398
With a copy to:
Chairman of Compensation Committee
c/o Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Fax: 281-276-6316

A-3

 

     (b) If to Executive, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
The address and number, if any, set forth opposite
Executive’s signature on the Restricted Stock Agreement
     (c) If to the Escrow Agent, when delivered by hand, confirmed fax or mail (registered or certified mail with postage prepaid) to:
Noble Corporation
13135 S. Dairy Ashford, Suite 800
Sugar Land, Texas 77478
Attention: Escrow — Restricted Stock Award
Fax: 281-276-6316
Any party may at any time give to the others notice in writing of any change of address of the party giving such notice and from and after the giving of such notice the address or addresses therein specified will be deemed to be the address of such party for the purposes of giving notice hereunder.
     8.  Assignment; Binding Effect . This Escrow Agreement is not assignable by the Escrow Agent and shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, personal representatives, successors and permitted assigns.
     9.  Governing Law . This Escrow Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Texas, without regard to the principles of conflicts of laws thereof, except to the extent Texas law is preempted by Federal law of the United States or by the laws of the Cayman Islands.
     10.  Termination . This Escrow Agreement shall be terminated only upon the delivery of all the Deposit Shares either to Executive as Vested Shares or to the Company as Forfeited Shares, as the case may be, in accordance with the provisions hereof.

A-4

 

     IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of the date first above written.
             
    NOBLE CORPORATION    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:        
 
           
         
    Name of Executive:    
 
           
    NOBLE CORPORATION,    
    as Escrow Agent    
 
           
 
  By:        
 
  Name:  
 
   
 
  Title:        

A-5

 

Exhibit 10.30
AMENDMENT NO. 2 TO THE
NOBLE DRILLING CORPORATION
401(k) SAVINGS RESTORATION PLAN
     Pursuant to the provisions of Section 4.1 thereof, the Noble Drilling Corporation 401(k) Savings Restoration Plan (the “Plan”) is hereby amended to add a new Section 5.7 to the Plan immediately following Section 5.6 to read as follows:
     Section 5.7 Shares Limitation . Any provision of this Plan to the contrary notwithstanding, the sum of (i) the number of ordinary shares of Noble Corporation that may be distributed to Participants or their beneficiaries pursuant to the Plan and (ii) the number of shares of Noble Drilling Corporation common stock that may be distributed to Participants or their beneficiaries pursuant to the Plan shall not exceed 200,000 shares.
     IN WITNESS WHEREOF, this Amendment has been executed by Noble Drilling Corporation on behalf of all Employers to be effective this 25th day of February, 2003.
             
    NOBLE DRILLING CORPORATION    
 
           
 
  By:   /s/ JULIE J. ROBERTSON
 
Title: Senior Vice President — Administration 		   

 

 

Exhibit 10.31
AMENDMENT NO. 3 TO THE
NOBLE DRILLING CORPORATION
401(k) SAVINGS RESTORATION PLAN
     Pursuant to the provisions of Section 4.1 thereof, the Noble Drilling Corporation 401(k) Savings Restoration Plan (the “Plan”) is hereby amended in the following respects only:
     Effective for Plan Years commencing on or after January 1, 2005, Section 3.1 of the Plan is hereby amended by restatement in its entirety to read as follows:
     Section 3.1 Deferral Election . Subject to such conditions, limitations and procedures as the Committee may prescribe from time to time for the purposes of this Plan, during the Election Period for each Plan Year an Eligible Employee may elect to have the payment of (i) the Applicable 401(k) Amount (as defined below), (ii) up to 19% of the Basic Compensation (as defined in the 401(k) Plan but determined without regard to the maximum amount of compensation that may be taken into account under Section 401(a)(17) of the Internal Revenue Code) otherwise payable by an Employer to him or her for such year, and (iii) all or any portion of any bonus otherwise payable by an Employer to him or her for such year, deferred for future payment by such Employer in such manner and at such time or times permitted under Plan Section 3.5 as shall be specified by such Eligible Employee in such election. For the purposes of this Section, “Applicable 401(k) Amount” means, with respect to an Eligible Employee for a Plan Year commencing on or after January 1, 2005, an amount equal to (i) the Basic Compensation (as defined in the 401(k) Plan but determined without regard to the maximum amount of compensation that may be taken into account under Section 401(a)(17) of the Internal Revenue Code) otherwise payable by an Employer to him or her for such year, multiplied by the contribution percentage that is in effect for such Eligible Employee under the 401(k) Plan at the end of the Election Period for such year (or for the 2005 Plan Year, the contribution percentage that is in effect for such Eligible Employee on January 1, 2005), reduced by the lesser of (ii) the applicable dollar amount (as defined in Section 402(g)(1)(B) of the Internal Revenue Code) for such year, or (iii) the dollar amount of any 401(k) Plan contribution limitation for such year imposed by the 401(k) Plan Committee during the Election Period for such year. All elections made pursuant to this Plan Section 3.1 shall be made in writing on a form prescribed by and filed with the Committee and shall be irrevocable.
     IN WITNESS WHEREOF, this Amendment has been executed by Noble Drilling Corporation on behalf of all Employers on this 9th day of March, 2005.
             
    NOBLE DRILLING CORPORATION    
 
           
 
  By:   /s/ JULIE J. ROBERTSON
 
Title: Senior Vice President — Administration 		   

 

 

Exhibit 10.32
AMENDMENT NO. 2 TO THE
NOBLE DRILLING CORPORATION
RETIREMENT RESTORATION PLAN
     Pursuant to the provisions of Section 7 thereof, the Noble Drilling Corporation Retirement Restoration Plan (the “Plan”) is hereby amended in the following respects only:
      FIRST : The last sentence of Section 4 of the Plan is hereby amended by restatement in its entirety to read as follows:
For purposes of this Plan, (i) the value of benefits and the amounts payable under alternate forms of benefits shall be determined using the actuarial assumptions being used under the Retirement Plan for such purposes, and (ii) the portion of James C. Day’s salary that is paid to him in the form of shares of Noble Drilling Corporation common stock or ordinary shares of Noble Corporation shall be included in the compensation that is taken into account in determining the amount of benefits payable to or with respect to Mr. Day under the Plan.
      SECOND : Section 5 of the Plan is hereby amended by restatement in its entirety to read as follows:
     Section 5. Payment of Benefits . The benefits payable to a Participant or beneficiary of a Participant under this Plan shall be paid or commence being paid, as the case may be, concurrently with the payment or the commencement of the payment of benefits to such Participant or beneficiary under the Retirement Plan, and shall be paid to such Participant or beneficiary in cash (i) in a single lump sum payment, (ii) in installments over a period of up to five years, or (iii) in any form provided for under the Retirement Plan, such form of distribution to be determined by the Committee in its absolute discretion.
     IN WITNESS WHEREOF, this Amendment has been executed by Noble Drilling Corporation on behalf of all Employers on this 28th day of June, 2004, to be effective as of July 1, 2004.
             
    NOBLE DRILLING CORPORATION    
 
           
 
  By:   /s/ JULIE J. ROBERTSON
 
Title: Senior Vice President — Administration 		   

 

 

Exhibit 21.1
NOBLE CORPORATION SUBSIDIARIES (as of March 2, 2006)
     
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 Investment Capital AS (1)
  Norway
Noble Drilling Corporation (2)
  Delaware
Maurer Technology Incorporated (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 AG (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
Noble Carl Norberg LLC (7)
  Delaware
Triton Engineering Services Company (7)
  Delaware
WELLDONE Engineering GmbH (8)
  Germany
Noble (Middle East) Limited (9)
  Cayman Islands
International Directional Services Ltd. (9)
  Bermuda
Noble Asset Company Limited (9)
  Cayman Islands
Noble Asset (U.K.) Limited (9)
  Cayman Islands
Noble Contracting GmbH (9)
  Switzerland
Noble Drilling (Nigeria) Ltd. (9)
  Nigeria
Noble Drilling (Paul Wolff) Ltd. (9)
  Cayman Islands
Noble Drilling (TVL) Ltd. (9)
  Cayman Islands
Noble Enterprises Limited (9)
  Cayman Islands
Noble International Finance Company (9)
  Cayman Islands
Noble International Limited (9)
  Cayman Islands
Noble Mexico Limited (9)
  Cayman Islands
Noble-Neddrill International Limited (9)
  Cayman Islands
Noble Drilling (N.S.) Limited (9)
  U.K.
Noble Drilling (Denmark) ApS (9)
  Denmark
Noble Campeche Limited (9)
  Cayman Islands
Noble Drilling (Carmen) Limited (9)
  Cayman Islands
Noble Gene Rosser Limited (9)
  Cayman Islands
Noble Mexico Services Limited (9)
  Cayman Islands
Noble Offshore Contracting Limited (9)
  Cayman Islands
Noble Offshore Mexico Limited (9)
  Cayman Islands
Sedco Dubai LLC (10)
  Dubai
Noble Brasil Investimentos e Participacoes Ltda. (11)
  Brazil
Noble Drilling (Norway) AS (12)
  Norway
Noble Drilling Services (Norge) AS (12)
  Norway
Noble John Sandifer LLC (13)
  Delaware
Noble Drilling (Jim Thompson) Inc. (13)
  Delaware
Noble (Gulf of Mexico) Inc. (13)
  Delaware
Noble Drilling Exploration Company (13)
  Delaware
Noble Asset Mexico LLC (13)
  Delaware
Noble Bill Jennings LLC (13)
  Delaware
Noble Johnnie Hoffman LLC (13)
  Delaware
Noble Leonard Jones LLC (13)
  Delaware
Noble Drilling (Canada) Ltd. (14)
  Alberta

 

 

NOBLE CORPORATION SUBSIDIARIES (as of March 2, 2006)
     
SUBSIDIARY NAME   INCORPORATED OR ORGANIZED IN:
Triton Engineering Services Company, S.A. (15)
  Venezuela
Triton International, Inc. (15)
  Delaware
Noble Drilling International (Cayman) Ltd. (16)
  Cayman Islands
Maregem AS (17)
  Norway
Noble do Brasil Ltda. (18)
  Brazil
372733 Alberta Inc. (19)
  Alberta
Bawden Drilling Inc. (19)
  Delaware
Bawden Drilling International Ltd. (19)
  Bermuda
Noble International Services Ltd. (19)
  Bermuda
Triton Drilling Services Nigeria Limited (20)
  Nigeria
Triton International de Mexico, S.A. de C.V. (20)
  Mexico
Noble Drilling (Nederland) B.V. (21)
  The Netherlands
Noble Drilling Asset (M.E.) Ltd. (22)
  Cayman Islands
Noble Rochford Drilling (North Sea) Ltd. (22)
  Cayman Islands
TSIA International (Antilles) N.V. (22)
  The Netherlands Antilles
Arktik Drilling Limited, Inc. (23)
  Bahamas
Noble Drilling International Ltd. (24)
  Bermuda
Noble Drilling International Services Pte Ltd. (24)
  Singapore
Noble Drilling (Malaysia) Sdn. Bhd. (24)
  Malaysia
Noble Drilling Arabia Limited (25)
  Saudi Arabia
Noble Drilling de Venezuela C.A. (25)
  Venezuela
Noble Offshore de Venezuela C.A. (25)
  Venezuela
Noble Drilling (U.K.) Ltd. (26)
  U.K.
Noble Drilling (Land Support) Limited (26)
  U.K.
Noble Operating (M.E.) Ltd. (27)
  Cayman Islands
Resolute Insurance Group Ltd. (28)
  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 Drilling Holding LLC
 
10   Joint venture (owned 49% by Noble Drilling Holding LLC)
 
11   99% owned by Noble Drilling Holding Limited AG, 1% owned by Noble Drilling Holding LLC
 
12   100% owned by Noble Drilling (Denmark) Holding ApS
 
13   100% owned by Noble Drilling (U.S.) Inc.
 
14   100% owned by Noble Drilling International Inc.
 
15   100% owned by Triton Engineering Services Company
 
16   95% owned by Noble Drilling International Inc., 5% owned by Noble Drilling (U.S.) Inc.
 
17   99% owned by Noble Drilling Services Norge AS
 
18   99% owned by Noble Drilling Holding LLC, 1% owned by Noble Asset Company Limited
 
19   100% owned by Noble Drilling (Canada) Ltd.
 
20   100% owned by Triton International, Inc.
 
21   100% owned by Noble Drilling (Denmark) ApS
 
22   100% owned by Noble Asset Company Limited
 
23   Joint venture (owned 82% by Noble Asset Company Limited)
 
24   100% owned by Noble Enterprises Limited (70% in the case of Noble Drilling (Malaysia) Sdn. Bhd.)
 
25   100% owned by Noble International Limited
 
26   100% owned by Noble Drilling (N.S.) Limited
 
27   100% owned by Noble Drilling Asset (M.E.) Ltd.
 
28   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. 333-131885) 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 13, 2006 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.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
March 13, 2006

 

 

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 13, 2006
/s/ JAMES C. DAY
James C. Day
Chairman of the Board and Chief Executive Officer of Noble Corporation

 

 

EXHIBIT 31.2
I, Bruce W. Busmire, 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 13, 2006
/s/ BRUCE W. BUSMIRE
Bruce W. Busmire
Senior Vice President and Chief Financial Officer, Treasurer and Controller 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, 2005, as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, James C. Day, Chairman of the Board and Chief Executive 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 13, 2006  /s/ JAMES C. DAY    
  James C. Day   
  Chairman of the Board and Chief Executive Officer 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, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bruce W. Busmire, Senior Vice President and Chief Financial Officer, Treasurer and Controller 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 13, 2006  /s/ BRUCE W. BUSMIRE    
  Bruce W. Busmire   
  Senior Vice President and Chief Financial Officer, Treasurer and Controller of Noble Corporation