INTERNATIONAL

A strong fourth quarter supports our conviction that we reached the bottom of the current cycle in our International unit during 2010 and will see steadily improving results going forward. However, funding issues in Mexico, delays in rig contract renewals in Saudi Arabia and generally slower activity in other key markets combined to drive down results for the year. These drivers were partially offset by stringent cost reduction efforts and incremental rig deployments in several markets.

The total recordable incident rate remained low despite an increase in man hours worked. This unit also rolled out its Hands On safety initiative which is significantly reducing hand and finger injuries, historically the most common incidents reported.

We anticipate increased rig utilization in 2011, but approximately $90 million in first and second quarter expenses will result in a year that is slightly below 2010. These expenses are the result of coincident downtime for four jack-ups due to scheduled dry docking and regulatory upgrades and for six land rigs to upgrade for gas drilling. The repricing of three of these jack-ups at lower market rates is also contributing to the decline.

Expansion into new markets will accelerate in 2011, primarily Iraq where as many as 10 incremental rigs are expected to deploy. Rigs will also return to work in many venues, with incremental rig deployments in Gabon, Algeria, Papua New Guinea and offshore India.

To streamline the organization and move it closer to key markets and customers, this unit is relocating its operational headquarters along with key members of its management team to Dubai.

Nabors Drilling International continues to work with sister company Canrig to deploy proprietary technologies to enhance the performance and efficiency of our rigs. Those include ROCKIT® systems, which improve rate of penetration during directional drilling, and equipment condition monitoring, which reduces fuel costs and improves maintenance. This unit is also collaborating with Ryan and Superior to provide directional drilling and pressure pumping services in international markets.