U.S. LAND DRILLING

Results for U.S. Land Drilling increased throughout the year and culminated with a fourth quarter annualized run rate that bodes well for 2011. This momentum resulted from a ramp-up in drilling in oil- and liquids-rich areas which more than offset a decline in dry gas areas. In response to this ongoing trend, this unit continued to relocate rigs from weaker dry gas regions to the preeminent oil plays, most notably the Bakken where Nabors is the dominant player with more than 40 rigs. By year end, this unit’s working rig count had climbed from 138 to 185.

Our new rigs continue to set drilling records, and demand for them remains strong, as evidenced by our securing of long-term contracts for 26 new rigs and three economically equivalent upgrades. We are also upgrading much of the remainder of our fleet through the application of exclusive and proprietary technology developed by sister company Canrig – technology that allows these rigs to more closely replicate the performance of new AC rigs. The addition of ROCKIT© technology is improving rate of penetration during directional drilling while the DrillSmart™ automatic driller is improving rate of penetration in the vertical section. Another technological advancement, jointly developed with a major customer, is reducing sticking problems, thus improving well bore stability and contributing to lower drilling costs.

Safety improved in this unit with the total recordable incident rate dropping from 1.94 to 1.69 even as man hours increased from 9.4 million to 12.5 million. The most notable contributor to this improvement was the initiation of peer review, a new program requiring operating managers in one area to evaluate safety performance of other areas.

Nabors Drilling USA expects to see further improvement in results in 2011 despite weak gas prices. Primary drivers are the continued redeployment of rigs into the oil- and liquids-rich shales and the rollout of new rigs, some of which were designed for specific applications in certain areas. Our new B-series rig is ideal for the Bakken Shale and will continue to be deployed there on a large scale. We are also developing a new S-series rig for the Marcellus Shale that addresses the weight restrictions in that area, and we are looking at a new pad design that more easily accommodates simultaneous operations.