Noble 10-Q 2008 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period endedJune 30, 2008

OR

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

For the transition period from                    to                    

Commission file number: 001-31306

NOBLE CORPORATION

(Exact name of registrant as specified in its charter)

Cayman Islands (State or other jurisdiction of incorporation or organization)	98-0366361 (I.R.S. employer identification number)
13135 South Dairy Ashford, Suite 800 Sugar Land, Texas (Address of principal executive offices)	77478 (Zip code)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ Accelerated filero Non-accelerated filero Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yeso Noþ

Number of Ordinary Shares outstanding at July 31, 2008: 269,130,192

TABLE OF CONTENTS

	PAGE
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS		3
Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007		3
Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2007		4
Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007		5
Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2008		6
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2008 and 2007		7
Notes to Consolidated Financial Statements		8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		28
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		40
ITEM 4. CONTROLS AND PROCEDURES		41
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS		41
ITEM 1A. RISK FACTORS		42
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		43
ITEM 6. EXHIBITS		43
SIGNATURES		44
INDEX TO EXHIBITS		45
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)

	June 30,			December 31,
	2008			2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	320,964		$	161,058
Accounts receivable		560,923			613,115
Insurance receivables		—			39,066
Prepaid expenses		51,529			20,721
Other current assets		36,499			26,231
Total current assets		969,915			860,191
PROPERTY AND EQUIPMENT
Drilling equipment and facilities		6,794,897			6,354,782
Other		97,515			80,169
		6,892,412			6,434,951
Accumulated depreciation		(1,753,263	)		(1,639,035	)
		5,139,149			4,795,916
OTHER ASSETS		243,256			219,899
	$	6,352,320		$	5,876,006
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	27,958		$	10,334
Accounts payable		172,805			198,395
Accrued payroll and related costs		97,623			115,914
Taxes payable		102,814			85,641
Interest payable		9,465			9,951
Other current liabilities		53,551			72,537
Total current liabilities		464,216			492,772
LONG-TERM DEBT		701,507			774,182
DEFERRED INCOME TAXES		254,521			240,621
OTHER LIABILITIES		94,237			65,705
		1,514,481			1,573,280
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		(5,313	)		(5,596	)
SHAREHOLDERS’ EQUITY
Ordinary shares-par value $0.10 per share; 400,000 shares authorized; 269,157 and 268,223 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		26,916			26,822
Capital in excess of par value		686,641			683,697
Retained earnings		4,139,866			3,602,870
Accumulated other comprehensive loss		(10,271	)		(5,067	)
		4,843,152			4,308,322
	$	6,352,320		$	5,876,006

See accompanying notes to the consolidated financial statements.

3

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
OPERATING REVENUES
Contract drilling services	$	783,280		$	657,504		$	1,581,114		$	1,234,419
Reimbursables		20,964			28,608			53,422			59,751
Labor contract drilling services		8,218			39,165			39,149			75,720
Engineering, consulting and other		479			722			681			2,533
		812,941			725,999			1,674,366			1,372,423
OPERATING COSTS AND EXPENSES
Contract drilling services		256,436			212,050			492,388			408,892
Reimbursables		17,831			24,608			47,292			52,154
Labor contract drilling services		6,547			32,454			31,884			60,857
Engineering, consulting and other		—			7,255			—			11,296
Depreciation and amortization		87,836			68,323			170,735			132,388
Selling, general and administrative		19,667			20,302			40,940			34,528
Gain on disposal of assets, net		(35,521	)		—			(35,521	)		—
		352,796			364,992			747,718			700,115
OPERATING INCOME		460,145			361,007			926,648			672,308
OTHER INCOME (EXPENSE)
Interest expense, net of amount capitalized		(721	)		(1,231	)		(1,831	)		(2,735	)
Interest income and other, net		1,580			512			4,709			1,670
INCOME BEFORE INCOME TAXES		461,004			360,288			929,526			671,243
INCOME TAX PROVISION		(85,286	)		(70,257	)		(169,620	)		(130,892	)
NET INCOME	$	375,718		$	290,031		$	759,906		$	540,351
NET INCOME PER SHARE:
Basic	$	1.41		$	1.09		$	2.85		$	2.03
Diluted	$	1.40		$	1.08		$	2.83		$	2.01

See accompanying notes to the consolidated financial statements.

4

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	759,906		$	540,351
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		170,735			132,388
Impairment loss on assets		—			5,400
Deferred income tax provision		13,900			6,324
Share-based compensation expense		18,471			16,903
Pension contributions		(17,445	)		(16,705	)
Gain on disposal of assets, net		(35,521	)		—
Other, net		7,761			9,426
Other changes in current assets and liabilities:
Accounts receivable		52,192			(88,627	)
Hurricane insurance receivables		17,319			—
Other current assets		(42,632	)		14,325
Accounts payable		(7,994	)		(20,960	)
Other current liabilities		(1,179	)		33,243
Net cash from operating activities		935,513			632,068
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		(310,770	)		(323,338	)
Other capital expenditures		(161,546	)		(216,452	)
Major maintenance expenditures		(52,577	)		(39,370	)
Accrued capital expenditures		(17,596	)		22,173
Hurricane insurance receivables		21,747			—
Proceeds from disposal of assets		39,134			3,284
Net cash from investing activities		(481,608	)		(553,703	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank credit facilities		—			220,000
Payments on bank credit facilities		(50,000	)		(85,000	)
Payments of other long-term debt		(5,076	)		(4,730	)
Net proceeds from employee stock transactions		10,558			13,560
Dividends paid		(222,910	)		(10,788	)
Repurchases of ordinary shares		(26,571	)		(120,687	)
Net cash from financing activities		(293,999	)		12,355
NET INCREASE IN CASH AND CASH EQUIVALENTS		159,906			90,720
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		161,058			61,710
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	320,964		$	152,430

See accompanying notes to the consolidated financial statements.

5

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

(Unaudited)

													Accumulated
							Capital in						Other			Total
	Ordinary						Excess of			Retained			Comprehensive			Shareholders’
	Shares			Par Value			Par Value			Earnings			Loss			Equity
Balance at December 31, 2007		268,223		$	26,822		$	683,697		$	3,602,870		$	(5,067	)	$	4,308,322
Share-based compensation:
Share-based compensation		1,084			108			18,363			—			—			18,471
Contribution to employee benefit plans		9			1			579			—			—			580
Exercise of stock options		813			82			17,689			—			—			17,771
Restricted shares surrendered for withholding taxes or forfeited		(379	)		(38	)		(7,175	)		—			—			(7,213	)
Repurchases of ordinary shares		(593	)		(59	)		(26,512	)		—			—			(26,571	)
Net income		—			—			—			759,906			—			759,906
Dividends paid ($0.83 per share)		—			—			—			(222,910	)		—			(222,910	)
Other comprehensive loss, net		—			—			—			—			(5,204	)		(5,204	)
Balance at June 30, 2008		269,157		$	26,916		$	686,641		$	4,139,866		$	(10,271	)	$	4,843,152

See accompanying notes to the consolidated financial statements.

6

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended June 30,
	2008			2007
NET INCOME	$	375,718		$	290,031
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		(3,999	)		1,790
Foreign currency forward contract activity		(1,250	)		(222	)
Pension plan actuarial loss		—			(5,580	)
Amortization of deferred pension plan amounts		190			397
Other comprehensive loss		(5,059	)		(3,615	)
COMPREHENSIVE INCOME	$	370,659		$	286,416

	Six Months Ended June 30,
	2008			2007
NET INCOME	$	759,906		$	540,351
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		(4,064	)		2,552
Foreign currency forward contract activity		(1,556	)		(1,051	)
Pension plan actuarial loss		—			(5,580	)
Amortization of deferred pension plan amounts		416			784
Other comprehensive loss		(5,204	)		(3,295	)
COMPREHENSIVE INCOME	$	754,702		$	537,056

See accompanying notes to the consolidated financial statements.

7

NOBLE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated, dollar amounts in tables are in thousands, except per share amounts.)

NOTE 1 — BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Noble Corporation (“Noble” or, together with its consolidated subsidiaries, unless the context requires otherwise, the “Company”, “we”, “our” and words of similar import) have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) as they pertain to Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The unaudited financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal recurring nature. The Consolidated Balance Sheet at December 31, 2007 presented herein is derived from the December 31, 2007 audited consolidated financial statements. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

On July 27, 2007, Noble’s Board of Directors approved what is commonly referred to in the United States as a “two-for-one stock split” of Noble’s ordinary shares effected in the form of a 100 percent stock dividend to members (shareholders) of record on August 7, 2007. The stock dividend was distributed on August 28, 2007 when shareholders of record were issued one additional ordinary share for each ordinary share held. All share and per share data included in the unaudited condensed consolidated financial statements and accompanying notes have been adjusted to reflect the stock split for all periods presented.

Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentations. We believe these reclassifications are immaterial as they do not have a material impact on our financial position, results of operations or cash flows. In our Consolidated Balance Sheet at December 31, 2007, we had previously included inventories as a separate caption. As our inventories consist of spare parts, materials and supplies held for consumption, rather than for sale to third parties, we have included this amount in other current assets. At December 31, 2007, inventories totaled approximately $4 million. In our Consolidated Statement of Cash Flows for the six months ended June 30, 2008, we present separately impairment loss on assets and pension contributions when reconciling net income to net cash from operating activities. We reclassified these amounts in our Consolidated Statement of Cash Flows for the six months ended June 30, 2007 to be consistent with our 2008 presentation, which resulted in a $5 million and $17 million reclassification in the 2007 period for impairment loss on assets and pension contributions, respectively. Previously, these amounts had been included in depreciation, amortization and impairment and other, net, respectively, in the reconciliation of net income to net cash from operating activities.

8

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

NOTE 2 — NET INCOME PER SHARE

The following table reconciles the basic and diluted average shares outstanding for net income per share computations (amounts in thousands, except per share data):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
Weighted-average shares outstanding — basic		266,464		265,927		266,458		266,521
Effect of potentially dilutive shares:
Stock options and awards		2,730		2,813		2,428		2,646
Weighted-average shares outstanding — diluted		269,194		268,740		268,886		269,167
Net income — basic and diluted	$	375,718	$	290,031	$	759,906	$	540,351
Net income per share:
Basic	$	1.41	$	1.09	$	2.85	$	2.03
Diluted	$	1.40	$	1.08	$	2.83	$	2.01

Only those items having a dilutive impact on our basic net income per share are included in diluted net income per share. For the three months ended June 30, 2008 and 2007, stock options and awards totaling 0.2 million and 0.4 million shares, respectively, were excluded from the diluted net income per share calculation as they were not dilutive. For the six months ended June 30, 2008 and 2007, stock options and awards totaling 0.2 million and 1.1 million shares, respectively, were excluded from the diluted net income per share calculation as they were not dilutive.

NOTE 3 — PROPERTY AND EQUIPMENT

Interest is capitalized on construction-in-progress at the weighted average cost of debt outstanding during the period of construction. Capitalized interest was $12 million and $24 million for the three and six months ended June 30, 2008, respectively, and $13 million and $25 million for the three and six months ended June 30, 2007, respectively.

Certain of our rigs operating in the U.S. Gulf of Mexico sustained damage in 2005 as a result of Hurricanes Katrina and Rita. All damaged rigs returned to work by April 2006. Our insurance receivables at December 31, 2007 relating to claims for hurricane damage were $39 million. During the first quarter of 2008, we received $39 million as final settlement of all remaining hurricane-related claims and receivables for physical damage and loss of hire.

NOTE 4 — ASSET DISPOSALS

During the second quarter of 2008, we sold our North Sea labor contract drilling services business to Seawell Holding UK Limited (“Seawell”) for $35 million plus working capital. This sale included labor contracts covering 11 platform operations in the United Kingdom sector of the North Sea. In connection with this transaction, we recognized a gain of $35 million, net of closing costs, which includes approximately $5 million in cumulative currency translation adjustments.

9

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

NOTE 5 — DEBT

Long-term debt consists of the following at June 30, 2008 and December 31, 2007:

	June 30,			December 31,
	2008			2007
Credit Facility	$	50,000		$	100,000
6.95% Senior Notes due 2009		149,993			149,987
7.50% Senior Notes due 2019		201,695			201,695
5.875% Senior Notes due 2013		299,819			299,800
Project Financing — Thompson Notes		27,958			33,034
Total Debt		729,465			784,516
Current Maturities		(27,958	)		(10,334	)
Long-term Debt	$	701,507		$	774,182

We have a $600 million unsecured credit facility (the “Credit Facility”), which was originally scheduled to mature on March 15, 2012. During the first quarter of 2008, the term of the Credit Facility was extended for an additional one-year period to March 15, 2013. During this one-year extension period, the total amount available under the Credit Facility will be $575 million, but we have the right to seek an increase of the total amount available to $600 million. We may, subject to certain conditions, request that the term of the Credit Facility be further extended for an additional one-year period. Our subsidiary, Noble Drilling Corporation (“Noble Drilling”), has guaranteed the obligations under the Credit Facility. Pursuant to the terms of the Credit Facility, we may, subject to certain conditions, elect to increase the amount available to an amount not to exceed $800 million.

Our Credit Facility provides us with the ability to issue up to $150 million in letters of credit. While our issuance of letters of credit does not increase our borrowings outstanding, it does reduce the amount available. At June 30, 2008, we had $50 million in borrowings and $99 million in letters of credit outstanding, leaving $451 million available under our Credit Facility.

At June 30, 2008 and December 31, 2007, the weighted average interest rate for outstanding borrowings under the Credit Facility was 2.7 percent and 5.2 percent, respectively.

NOTE 6 — INCOME TAXES

At December 31, 2007, the reserves for uncertain tax positions totaled $61 million (net of related tax benefits of $7 million). At June 30, 2008, the reserves for uncertain tax positions increased to $88 million (net of related tax benefits of $4 million). The increase in uncertain tax positions at June 30, 2008 was primarily due to tax positions taken on returns filed in one of our foreign jurisdictions. If these reserves of $88 million are not realized, the provision for income taxes would be reduced by $62 million and equity would be directly increased by $26 million.

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

10

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 — EMPLOYEE BENEFIT PLANS

Pension costs include the following components:

	Three Months Ended June 30,
	2008						2007
	International			Domestic			International			Domestic
Service cost	$	1,421		$	1,573		$	1,665		$	1,665
Interest cost		1,249			1,614			1,152			1,495
Return on plan assets		(1,686	)		(2,227	)		(1,131	)		(1,650	)
Amortization of prior service cost		—			98			—			99
Amortization of transition obligation		43			—			67			—
Recognized net actuarial loss		40			87			54			380
Net pension expense	$	1,067		$	1,145		$	1,807		$	1,989

	Six Months Ended June 30,
	2008						2007
	International			Domestic			International			Domestic
Service cost	$	2,841		$	3,147		$	2,935		$	3,330
Interest cost		2,500			3,229			2,172			2,990
Return on plan assets		(3,378	)		(4,454	)		(2,262	)		(3,300	)
Amortization of prior service cost		—			196			—			198
Amortization of transition obligation		86			—			121			—
Recognized net actuarial loss		80			174			108			760
Net pension expense	$	2,129		$	2,292		$	3,074		$	3,978

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

We have contributed an aggregate of $17 million to our pension plans in 2008, which represents the total contributions expected to be made in 2008, subject to applicable law.

We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan has no assets, and amounts “contributed” to the Restoration Plan are kept by us for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, we have a liability to employees for amounts originally contributed plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, benefit should phantom investment losses occur. At June 30, 2008, our liability under the Restoration Plan totaled $12 million.

NOTE 8 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We periodically enter into derivative instruments to manage our cash flow 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, and we typically maintain forward currency contracts settling monthly in Euros and British Pounds. The Euro-denominated forward contracts settling in the remainder of 2008 represent approximately 21 percent of our forecasted Euro requirements. The British Pound-denominated forward contracts settling in the remainder of 2008 represent approximately 9 percent of our forecasted British Pound requirements. The notional amount of forward contracts outstanding at June 30, 2008 was approximately 3 million Euros and 2 million British Pounds. The aggregate notional amount of these forward contracts, expressed in U.S. Dollars, was $7 million at June 30, 2008.

11

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

All of the above foreign currency forward contracts were accounted for as cash flow hedges under Statement of Financial Accounting Standards (“SFAS”) No. 133,Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS No. 133”). The fair market value of those derivative instruments is included in Other current assets or Other current liabilities with the cumulative unrealized gain or loss included in Accumulated other comprehensive loss in our Consolidated Balance Sheets. The fair market value of outstanding foreign currency forward contracts was approximately $1 million at June 30, 2008. 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 to hedge ineffectiveness in our Consolidated Statements of Income during the three months or six months ended June 30, 2008 and 2007 related to these derivative instruments.

The balance of the net unrealized gain related to our foreign currency forward contracts included in Accumulated other comprehensive loss and related activity is as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Net unrealized gain at beginning of period	$	1,913		$	2,388		$	2,219		$	3,217
Activity during period:
Settlement of forward contracts outstanding at beginning of period		( 1,295	)		(903	)		(1,850	)		(1,935	)
Net unrealized gain on outstanding foreign currency forward contracts		45			681			294			884
Net unrealized gain at end of period	$	663		$	2,166		$	663		$	2,166

NOTE 9 — FAIR VALUE OF FINANCIAL INSTRUMENTS

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157,Fair Value Measurements(“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. Instead, its application will be made pursuant to other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. On February 6, 2008, the FASB issued FASB Staff Position FAS 157-2,Partial Deferral of the Effective Date of Statement 157, which deferred the effective date for one year for certain nonfinancial assets and liabilities, except those recognized or disclosed at fair value on a recurring basis. These nonfinancial items include reporting units measured at fair value in a goodwill impairment test and nonfinancial assets and liabilities assumed in a business combination.

We adopted SFAS No. 157 effective January 1, 2008 for financial assets and liabilities measured on a recurring basis. There was no impact for the partial adoption of SFAS No. 157 on our consolidated financial statements. We do not expect the application of SFAS No. 157 to our nonfinancial assets and liabilities to have any material effect on our consolidated financial statements.

12

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 table presents the carrying amount and estimated fair value of our financial instruments recognized at fair value on a recurring basis:

June 30, 2008

December 31, 2007

Estimated Fair Value

Measurements

Quoted

Significant

Prices in

Other

Significant

Active

Observable

Unobservable

Carrying

Markets

Inputs

Inputs

Carrying

Estimated

Amount

(Level 1)

(Level 2)

(Level 3)

Amount

Fair Value

Derivative Instruments —

Foreign currency forward contracts

$

663

$

—

$

663

$

—

$

2,219

$

2,219

The derivative instruments have been valued using actively quoted prices and quotes obtained from the counterparties to the derivative instruments. Our cash and cash equivalents, accounts receivable and accounts payable are by their nature short-term. As a result, the carrying values included in the accompanying Consolidated Balance Sheets approximate fair value.

In February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Liabilities(“SFAS No. 159”). SFAS No. 159 permits entities to measure eligible assets and liabilities at fair value. We adopted SFAS No. 159 effective January 1, 2008, and we did not elect the fair value option for our financial instruments. Accordingly, there was no impact to our consolidated financial statements as a result of this adoption.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

Noble Asset Company Limited (“NACL”), a wholly-owned, indirect subsidiary of Noble, was named one of 21 parties served a Show Cause Notice (“SCN”) issued by the Commissioner of Customs (Prev.), Mumbai, India (the “Commissioner”) in August 2003. The SCN concerned alleged violations of Indian customs laws and regulations regarding one of our jackups. The Commissioner alleged certain violations to have occurred before, at the time of, and after NACL acquired the rig from the rig’s previous owner. In the purchase agreement for the rig, NACL received contractual indemnification against liability for Indian customs duty from the rig’s previous owner. In connection with the export of the rig from India in 2001, NACL posted a bank guarantee in the amount of 150 million Indian Rupees (or $3 million at June 30, 2008) and a customs bond in the amount of 970 million Indian Rupees (or $23 million at June 30, 2008), both of which remain in place. In March 2005, the Commissioner passed an order against NACL and the other parties cited in the SCN seeking (i) to invoke the bank guarantee posted on behalf of NACL as a fine, (ii) to demand duty of (a) $19 million plus interest related to a 1997 alleged import and (b) $22 million plus interest related to a 1999 alleged import, provided that the duty and interest demanded in (b) would not be payable if the duty and interest demanded in (a) were paid by NACL, and (iii) to assess a penalty of $500,000 against NACL. NACL appealed the order of the Commissioner to the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”). At a hearing on April 5, 2006, CESTAT upheld NACL’s appeal and overturned the Commissioner’s March 2005 order against NACL in its entirety. CESTAT thereafter issued its written judgment dated August 8, 2006 upholding NACL’s appeal on all grounds and setting aside the duty demand, interest, fine and penalty. The Commissioner filed an appeal in the Bombay High Court challenging the order passed by CESTAT. In August 2008, the Division Bench of the Bombay High Court dismissed the Commissioner’s appeal of CESTAT’s order. NACL will seek the return or cancellation of its previously posted custom bond and bank guarantees. NACL continues to pursue contractual indemnification against liability for Indian customs duty and related costs and expenses against the rig’s previous owner in arbitration proceedings in London, which proceedings the parties have temporarily stayed pending further developments in the Indian proceeding. We do not believe the ultimate resolution of this matter will have a material adverse effect on our financial position, results of operations or cash flows.

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

13

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

Certain of our international income tax returns have been examined for the 2002 through 2004 periods and audit claims have been assessed for approximately $114 million (including interest and penalties). We believe audit claims of an additional $22 million to $26 million attributable to other business tax returns may be assessed against us. We have contested, or intend to contest, most of the audit findings, including through litigation if necessary, and we do not believe that there is greater than 50 percent likelihood that additional taxes will be incurred. Accordingly, no accrual has been made for such amounts.

We are from time to time a party to various lawsuits that are incidental to our operations in which the claimants seek an unspecified amount of monetary damages for personal injury, including claims purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At July 31, 2008, there were approximately 38 of these lawsuits in which we are one of many defendants. One lawsuit is scheduled for trial in 2008. These lawsuits have been filed in the states of Louisiana, Mississippi and Texas. Exposure related to these lawsuits is not currently determinable. We intend to defend vigorously against the litigation.

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

During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels”, within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these letters apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels”. Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. On January 24, 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. NIMASA and the Minister of Transportation have filed a preliminary objection to our originating summons and the proceeding. A ruling on the preliminary objection is scheduled for October 2008. We intend to oppose the preliminary objection and take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.

We maintain certain insurance coverage against specified marine liabilities, including liability for physical damage to our drilling rigs, and loss of hire on certain of our rigs. Our March 2008 insurance program renewal included an annual aggregate coverage limit of $200 million applicable to our drilling units operating in the U.S. Gulf of Mexico for physical damage and loss of hire on certain units resulting from named windstorm perils. This aggregate coverage limit may not fully insure our losses in the event that one or more named windstorms damage our drilling units in the U.S. Gulf of Mexico. The reduced coverage does not apply to our units in the Mexican portion of the Gulf of Mexico. We presently have five semisubmersibles and three submersibles in the U.S. Gulf. We maintained a $10 million deductible on our marine hull and machinery coverage, and loss of hire coverage is subject to a 60 day waiting period deductible for named U.S. Gulf windstorms and a 45 day waiting period for all other perils. If one or more future significant weather-related events occur in the Gulf of Mexico or in any other geographic area in which we operate, we may experience further increases in insurance costs, additional coverage restrictions or unavailability of certain insurance products.

14

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

We carry protection and indemnity insurance covering marine third party liability exposures, which also includes coverage for employer’s liability resulting from personal injury to our offshore drilling crews. Since February 2004, our protection and indemnity policy has had a standard deductible of $1 million per occurrence, and we retain $5 million of claims in the aggregate beyond the standard deductible.

In connection with our 2008 and future capital expenditure programs, we had entered into certain commitments, including shipyard and purchase commitments, of approximately $729 million at June 30, 2008.

Internal Investigation

In June 2007, we announced that we were conducting an internal investigation of our Nigerian operations, focusing on the legality under the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and local laws of our Nigerian affiliate’s reimbursement of certain expenses incurred by our customs agents in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigerian waters, including permits that are necessary for our drilling units to operate in Nigerian waters. We also announced that the audit committee of Noble’s Board of Directors had engaged a leading law firm with significant experience in investigating and advising on FCPA matters to lead the investigation as independent outside counsel. The scope of the investigation also includes our dealings with customs agents and customs authorities in certain parts of the world other than Nigeria in which we conduct our operations, as well as dealings with other types of local agents in Nigeria and such other parts of the world. There can be no assurance that evidence of additional potential FCPA violations may not be uncovered through the investigation.

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

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

The independent outside counsel appointed by the audit committee to perform the internal investigation recently made a presentation of the results of its investigation to the DOJ and the SEC. The SEC and the DOJ have begun to review these results and information gathered by the independent outside counsel in the course of the investigation. Neither the SEC nor the DOJ has indicated what action it may take, if any, against us or any individual, or whether it may request that the audit committee’s independent outside counsel conduct further investigation. Therefore, we consider the internal investigation to be ongoing and cannot predict when it will conclude. Furthermore, we cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date in our internal investigation, we have not determined that any potential liability that may result is probable or remote or can be reasonably estimated. As a result, we have not made any accrual in our consolidated financial statements at June 30, 2008.

15

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

We are currently operating five jackup rigs offshore Nigeria. Four of these rigs have obtained extensions of temporary imports that permit the rigs to remain in Nigeria through November 28, 2008. The fifth rig has obtained a fresh temporary import permit that will permit the rig to remain in Nigeria through July 1, 2009. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria after expiration of the current terms of the temporary import permits. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. We cannot predict what impact this may have on any such contract or our business in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there.

Notwithstanding that the internal investigation is ongoing, we have concluded that certain changes to our FCPA compliance program would provide us greater assurance that our assets are not used, directly or indirectly, to make improper payments, including customs payments, and that we are in compliance with the FCPA’s record-keeping requirements. Although we have had a long-standing published policy requiring compliance with the FCPA and broadly prohibiting any improper payments by us to foreign or domestic officials, we have since the commencement of the internal investigation adopted, and may adopt additional, intermediate measures intended to enhance FCPA compliance procedures. Additional measures may be required once the investigation concludes.

For the three and six months ended June 30, 2008, we incurred legal fees and related costs of $4 million and $11 million, respectively, related to the internal investigation. It is anticipated that additional costs will be incurred in future periods, but the amount of these costs cannot be presently determined.

16

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

NOTE 11 — SEGMENT AND RELATED INFORMATION

Beginning in the fourth quarter of 2007, we report our international and domestic contract drilling operations as a single reportable segment: Contract Drilling Services. The consolidation into one reportable segment reflects how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consist largely of major international and government owned/controlled oil and gas companies throughout the world. Our contract drilling services segment conducts contract drilling operations in the Middle East, India, the U.S. Gulf of Mexico, Mexico, the North Sea, Brazil and West Africa.

We evaluate the performance of our operating segment primarily based on operating revenues and net income. Summarized financial information of our reportable segment for the three and six months ended June 30, 2008 and 2007 is shown in the following table. The “Other” column includes results of labor contract drilling services, engineering and consulting services, other insignificant operations and corporate related items. All prior period amounts have been reclassified to conform to the current presentation.

	Three Months Ended June 30,
	2008						2007
	Contract						Contract
	Drilling						Drilling
	Services		Other		Total		Services		Other			Total
Revenues from external customers	$	803,390	$	9,551	$	812,941	$	677,736	$	48,263		$	725,999
Depreciation and amortization		86,636		1,200		87,836		66,108		2,215			68,323
Segment operating income		424,227		35,918		460,145		363,114		(2,107	)		361,007
Interest expense, net of amount capitalized		610		111		721		976		255			1,231
Income tax provision (benefit)		83,641		1,645		85,286		74,043		(3,786	)		70,257
Segment profit		340,731		34,987		375,718		287,829		2,202			290,031
Total assets (at end of period)		5,774,924		577,396		6,352,320		4,775,543		417,725			5,193,268
Capital expenditures		274,252		16,653		290,905		305,896		36,586			342,482

	Six Months Ended June 30,
	2008							2007
	Contract							Contract
	Drilling							Drilling
	Services		Other			Total		Services		Other			Total
Revenues from external customers	$	1,622,577	$	51,789		$	1,674,366	$	1,274,650	$	97,773		$	1,372,423
Depreciation and amortization		167,421		3,314			170,735		127,917		4,471			132,388
Segment operating income		888,028		38,620			926,648		670,637		1,671			672,308
Interest expense, net of amount capitalized		1,603		228			1,831		2,342		393			2,735
Income tax provision (benefit)		172,440		(2,820	)		169,620		137,430		(6,538	)		130,892
Segment profit		717,603		42,303			759,906		531,292		9,059			540,351
Total assets (at end of period)		5,774,924		577,396			6,352,320		4,775,543		417,725			5,193,268
Capital expenditures		502,019		22,874			524,893		501,666		77,494			579,160

17

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

NOTE 12 — ACCOUNTING PRONOUNCEMENTS

In December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements — An Amendment of ARB No. 51(“SFAS No. 160”). SFAS No. 160 establishes new accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements. The amount of net income attributable to a noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS No. 160 requires that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, this statement requires that a parent recognize a gain or loss when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosures regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. We do not expect the adoption of SFAS No. 160 to have a material impact on our financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141(R),Business Combinations(“SFAS No. 141(R)”). SFAS No. 141(R) will significantly change the accounting for business combinations. Under SFAS No. 141(R), the acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment for certain specific items, including:

• transaction costs will generally be expensed as incurred;

• contingent consideration will be recognized at fair value on the acquisition date;

• acquired contingent liabilities will be recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies;

• fair value of the purchase price, including the issuance of equity securities, will be determined on the acquisition date (closing) instead of announcement date;

• restructuring costs associated with a business combination will generally be expensed subsequent to the acquisition date; and

• changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally will affect income tax expense.

SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008, and earlier adoption is prohibited. This standard will change our accounting treatment for business combinations on a prospective basis.

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(“SFAS No. 161”). SFAS No. 161 requires entities with derivative instruments to disclose information to enable financial statement users to understand how and why the entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact, if any, that SFAS No. 161 will have on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities(“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years and interim periods beginning after December 15, 2008. We are currently evaluating the impact, if any, that FSP EITF 03-6-1 will have on our consolidated financial statements.

18

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

In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The new standard becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. SFAS No. 162 is not expected to have a material impact on our consolidated financial position or results of operations.

NOTE 13 — SUBSEQUENT EVENT

On August 1, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on August 13, 2008, with a distribution date of August 29, 2008.

NOTE 14 — GUARANTEES OF REGISTERED SECURITIES

Noble and Noble Holding (U.S.) Corporation (“NHC”), a wholly-owned subsidiary of Noble, are guarantors for certain debt securities issued by Noble Drilling. These debt securities consist of Noble Drilling’s 6.95% Senior Notes due 2009 and its 7.50% Senior Notes due 2019 (the “ND Notes”), which had outstanding principal balances at June 30, 2008 of $150 million and $202 million, respectively. Noble Drilling is an indirect, wholly-owned subsidiary of Noble and a direct, wholly-owned subsidiary of NHC. Noble’s and NHC’s guarantees of the ND Notes are full and unconditional. In December 2005, Noble Drilling Holding LLC (“NDH”), an indirect wholly-owned subsidiary of Noble, became a co-obligor on (and effectively a guarantor of) the ND Notes.

In connection with the 2006 issuance of Noble’s 5.875% Senior Notes due 2013 (the “Noble Notes”), Noble Drilling guaranteed the payment of the Noble Notes. Noble Drilling’s guarantee of the Noble Notes is full and unconditional. The outstanding principal balance of the Noble Notes at June 30, 2008 was $300 million.

19

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
June 30, 2008
(In thousands)
(Unaudited)

The following consolidating financial statements of Noble, NHC and NDH combined, Noble Drilling and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting. Certain reclassifications have been made to amounts in prior period financial statements to conform to current period presentations.

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	128,084		$	210		$	29		$	192,641		$	—		$	320,964
Accounts receivable		—			23,580			7,481			529,862			—			560,923
Insurance receivables		—			—			—			—			—			—
Prepaid expenses		—			1,037			173			50,319			—			51,529
Accounts receivable from affiliates		156,258			—			580,116			706,835			(1,443,209	)		—
Other current assets		3,677			36			—			91,459			(58,673	)		36,499
Total current assets		288,019			24,863			587,799			1,571,116			(1,501,882	)		969,915
PROPERTY AND EQUIPMENT
Drilling equipment and facilities		—			1,980,804			112,961			4,701,132			—			6,794,897
Other		—			225			—			97,290			—			97,515
		—			1,981,029			112,961			4,798,422			—			6,892,412
Accumulated depreciation		—			(97,686	)		(67,540	)		(1,588,037	)		—			(1,753,263	)
		—			1,883,343			45,421			3,210,385			—			5,139,149
NOTES RECEIVABLE FROM AFFILIATES		511,835			20,963			44,159			1,598,923			(2,175,880	)		—
INVESTMENTS IN AFFILIATES		4,668,224			4,901,214			3,298,273			—			(12,867,711	)		—
OTHER ASSETS		3,312			6,530			6,330			227,084			—			243,256
	$	5,471,390		$	6,836,913		$	3,981,982		$	6,607,508		$	(16,545,473	)	$	6,352,320
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		$	27,094		$	—		$	27,958		$	(27,094	)	$	27,958
Accounts payable		—			5,892			6,134			160,779			—			172,805
Accrued payroll and related costs		—			331			11,745			85,547			—			97,623
Taxes payable		—			8,472			—			94,342			—			102,814
Interest payable		6,273			15,193			19,080			498			(31,579	)		9,465
Accounts payable to affiliates		—			1,440,733			—			2,476			(1,443,209	)		—
Other current liabilities		—			340			403			52,808			—			53,551
Total current liabilities		6,273			1,498,055			37,362			424,408			(1,501,882	)		464,216
LONG-TERM DEBT		349,819			—			351,688			—			—			701,507
NOTES PAYABLE TO AFFILIATES		264,300			1,214,623			120,000			576,957			(2,175,880	)		—
DEFERRED INCOME TAXES		—			4,795			14,298			235,428			—			254,521
OTHER LIABILITIES		7,846			30,234			3,961			52,196			—			94,237
		628,238			2,747,707			527,309			1,288,989			(3,677,762	)		1,514,481
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		—			—			—			(5,313	)		—			(5,313	)
SHAREHOLDERS’ EQUITY
Ordinary shares-par value $0.10 per share		26,916			—			—			—			—			26,916
Capital in excess of par value		686,641			552,236			870,744			834,555			(2,257,535	)		686,641
Retained earnings		4,139,866			3,536,970			2,583,929			4,499,548			(10,620,447	)		4,139,866
Accumulated other comprehensive income (loss)		(10,271	)		—			—			(10,271	)		10,271			(10,271	)
		4,843,152			4,089,206			3,454,673			5,323,832			(12,867,711	)		4,843,152
	$	5,471,390		$	6,836,913		$	3,981,982		$	6,607,508		$	(16,545,473	)	$	6,352,320

20

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
December 31, 2007
(In thousands)
(Unaudited)

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	12,544		$	—		$	73		$	148,441		$	—		$	161,058
Accounts receivable		—			22,900			9,699			580,516			—			613,115
Insurance receivables		—			—			—			39,066			—			39,066
Prepaid expenses		—			858			82			19,781			—			20,721
Accounts receivable from affiliates		419,197			—			576,239			—			(995,436	)		—
Other current assets		3,474			160			135			65,154			(42,692	)		26,231
Total current assets		435,215			23,918			586,228			852,958			(1,038,128	)		860,191
PROPERTY AND EQUIPMENT
Drilling equipment and facilities		—			1,665,102			111,089			4,578,591			—			6,354,782
Other		—			170			—			79,999			—			80,169
		—			1,665,272			111,089			4,658,590			—			6,434,951
Accumulated depreciation		—			(82,964	)		(64,947	)		(1,491,124	)		—			(1,639,035	)
		—			1,582,308			46,142			3,167,466			—			4,795,916
NOTES RECEIVABLE FROM AFFILIATES		511,835			20,963			44,159			1,462,786			(2,039,743	)		—
INVESTMENTS IN AFFILIATES		3,881,341			4,906,292			3,010,249			—			(11,797,882	)		—
OTHER ASSETS		3,666			6,847			3,953			205,433			—			219,899
	$	4,832,057		$	6,540,328		$	3,690,731		$	5,688,643		$	(14,875,753	)	$	5,876,006
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		$	25,886		$	—		$	10,334		$	(25,886	)	$	10,334
Accounts payable		—			5,540			4,778			188,077			—			198,395
Accrued payroll and related costs		—			421			13,131			102,362			—			115,914
Taxes payable		—			2,114			—			83,527			—			85,641
Interest payable		4,122			6,847			15,200			588			(16,806	)		9,951
Accounts payable to affiliates		—			1,171,782			—			(176,346	)		(995,436	)		—
Other current liabilities		—			3			487			72,047			—			72,537
Total current liabilities		4,122			1,212,593			33,596			280,589			(1,038,128	)		492,772
LONG-TERM DEBT		399,800			—			351,682			22,700			—			774,182
NOTES PAYABLE TO AFFILIATES		114,300			1,228,486			120,000			576,957			(2,039,743	)		—
DEFERRED INCOME TAXES		—			4,795			12,496			223,330			—			240,621
OTHER LIABILITIES		5,513			23,266			1,689			35,237			—			65,705
		523,735			2,469,140			519,463			1,138,813			(3,077,871	)		1,573,280
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		—			—			—			(5,596	)		—			(5,596	)
SHAREHOLDERS’ EQUITY
Ordinary shares-par value $0.10 per share		26,822			—			—			—			—			26,822
Capital in excess of par value		683,697			1,279,983			870,744			792,645			(2,943,372	)		683,697
Retained earnings		3,602,870			2,791,205			2,301,199			3,767,848			(8,860,252	)		3,602,870
Accumulated other comprehensive income (loss)		(5,067	)		—			(675	)		(5,067	)		5,742			(5,067	)
		4,308,322			4,071,188			3,171,268			4,555,426			(11,797,882	)		4,308,322
	$	4,832,057		$	6,540,328		$	3,690,731		$	5,688,643		$	(14,875,753	)	$	5,876,006

21

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2008
(In thousands)
(Unaudited)

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	75,805		$	10,702		$	734,773		$	(38,000	)	$	783,280
Reimbursables		—			406			39			20,519			—			20,964
Labor contract drilling services		—			—			—			8,218			—			8,218
Engineering, consulting and other		—			2			1			476			—			479
		—			76,213			10,742			763,986			(38,000	)		812,941
OPERATING COSTS AND EXPENSES
Contract drilling services		6,413			9,427			6,294			272,302			(38,000	)		256,436
Reimbursables		—			312			38			17,481			—			17,831
Labor contract drilling services		—			—			—			6,547			—			6,547
Engineering, consulting and other		—			—			—			—			—			—
Depreciation and amortization		—			8,521			1,773			77,542			—			87,836
Selling, general and administrative		2,496			1,502			461			15,208			—			19,667
Gain on disposal of assets, net		—			—			—			(35,521	)		—			(35,521	)
		8,909			19,762			8,566			353,559			(38,000	)		352,796
OPERATING INCOME (LOSS)		(8,909	)		56,451			2,176			410,427			—			460,145
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		388,556			331,407			126,112			—			(846,075	)		—
Interest expense, net of amount capitalized		(6,043	)		(10,209	)		(6,388	)		8,949			12,970			(721	)
Interest income and other, net		2,415			—			—			12,135			(12,970	)		1,580
INCOME BEFORE INCOME TAXES		376,019			377,649			121,900			431,511			(846,075	)		461,004
INCOME TAX (PROVISION) BENEFIT		(301	)		531			(251	)		(85,265	)		—			(85,286	)
NET INCOME	$	375,718		$	378,180		$	121,649		$	346,246		$	(846,075	)	$	375,718

22

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended June 30, 2007
(In thousands)
(Unaudited)

				NHC and NDH Noble			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	41,065		$	15,393		$	621,664		$	(20,618	)	$	657,504
Reimbursables		—			216			229			28,163			—			28,608
Labor contract drilling services		—			—			—			39,165			—			39,165
Engineering, consulting and other		—			—			—			722			—			722
		—			41,281			15,622			689,714			(20,618	)		725,999
OPERATING COSTS AND EXPENSES
Contract drilling services		5,407			6,504			7,418			213,339			(20,618	)		212,050
Reimbursables		—			192			226			24,190			—			24,608
Labor contract drilling services		—			—			—			32,454			—			32,454
Engineering, consulting and other		—			—			—			7,255			—			7,255
Depreciation and amortization		—			6,494			1,349			60,480			—			68,323
Selling, general and administrative		4,252			991			316			14,743			—			20,302
		9,659			14,181			9,309			352,461			(20,618	)		364,992
OPERATING INCOME (LOSS)		(9,659	)		27,100			6,313			337,253			—			361,007
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		306,848			280,447			130,767			—			(718,062	)		—
Interest expense, net of amount capitalized		(7,527	)		(11,829	)		(6,631	)		11,853			12,903			(1,231	)
Interest income and other, net		77			2			—			13,336			(12,903	)		512
INCOME BEFORE INCOME TAXES		289,739			295,720			130,449			362,442			(718,062	)		360,288
INCOME TAX (PROVISION) BENEFIT		292			4,068			(2,053	)		(72,564	)		—			(70,257	)
NET INCOME	$	290,031		$	299,788		$	128,396		$	289,878		$	(718,062	)	$	290,031

23

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2008
(In thousands)
(Unaudited)

				NHC and NDH				Noble			Other			Consolidating
	Noble			Combined				Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	116,074			$	24,292		$	1,488,048		$	(47,300	)	$	1,581,114
Reimbursables		—			900				159			52,363			—			53,422
Labor contract drilling services		—			—				—			39,149			—			39,149
Engineering, consulting and other		—			2				1			678			—			681
		—			116,976				24,452			1,580,238			(47,300	)		1,674,366
OPERATING COSTS AND EXPENSES
Contract drilling services		12,345			18,481				12,851			496,011			(47,300	)		492,388
Reimbursables		—			757				154			46,381			—			47,292
Labor contract drilling services		—			—				—			31,884			—			31,884
Engineering, consulting and other		—			—				—			—			—			—
Depreciation and amortization		—			16,129				3,412			151,194			—			170,735
Selling, general and administrative		5,204			2,987				921			31,828			—			40,940
Gain on disposal of assets, net		—			—		��		—			(35,521	)		—			(35,521	)
		17,549			38,354				17,338			721,777			(47,300	)		747,718
OPERATING INCOME (LOSS)		(17,549	)		78,622				7,114			858,461			—			926,648
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		786,883			703,145				289,652			—			(1,779,680	)		—
Interest expense, net of amount capitalized		(13,383	)		(20,546	)			(12,776	)		18,141			26,733			(1,831	)
Interest income and other, net		4,351			—				—			27,091			(26,733	)		4,709
INCOME BEFORE INCOME TAXES		760,302			761,221				283,990			903,693			(1,779,680	)		929,526
INCOME TAX (PROVISION) BENEFIT		(396	)		4,029				(1,260	)		(171,993	)		—			(169,620	)
NET INCOME	$	759,906		$	765,250			$	282,730		$	731,700		$	(1,779,680	)	$	759,906

24

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
Six Months Ended June 30, 2007
(In thousands)
(Unaudited)

				NHC and NDH			Noble				Other		Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	67,626		$	28,474		$	1,168,908		$	(30,589	)	$	1,234,419
Reimbursables		—			356			455			58,940			—			59,751
Labor contract drilling services		—			—			—			75,720			—			75,720
Engineering, consulting and other		—			6			—			2,527			—			2,533
		—			67,988			28,929			1,306,095			(30,589	)		1,372,423
OPERATING COSTS AND EXPENSES
Contract drilling services		10,710			13,007			14,654			401,110			(30,589	)		408,892
Reimbursables		—			307			451			51,396			—			52,154
Labor contract drilling services		—			—			—			60,857			—			60,857
Engineering, consulting and other		—			—			—			11,296			—			11,296
Depreciation and amortization		—			12,772			2,933			116,683			—			132,388
Selling, general and administrative		6,236			1,958			646			25,688			—			34,528
		16,946			28,044			18,684			667,030			(30,589	)		700,115
OPERATING INCOME (LOSS)		(16,946	)		39,944			10,245			639,065			—			672,308
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		569,765			526,533			245,526			—			(1,341,824	)		—
Interest expense, net of amount capitalized		(13,134	)		(23,672	)		(13,959	)		22,489			25,541			(2,735	)
Interest income and other, net		86			2			—			27,123			(25,541	)		1,670
INCOME BEFORE INCOME TAXES		539,771			542,807			241,812			688,677			(1,341,824	)		671,243
INCOME TAX (PROVISION) BENEFIT		580			8,091			(2,327	)		(137,236	)		—			(130,892	)
NET INCOME	$	540,351		$	550,898		$	239,485		$	551,441		$	(1,341,824	)	$	540,351

25

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2008
(In thousands)
(Unaudited)

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	759,906		$	765,250		$	282,730		$	731,700		$	(1,779,680	)	$	759,906
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		—			16,129			3,412			151,194			—			170,735
Deferred income tax provision		—			—			1,802			12,098			—			13,900
Share-based compensation expense		18,471			—			—			—			—			18,471
Equity earnings in affiliates		(786,883	)		(703,145	)		(289,652	)		—			1,779,680			—
Pension contribution		—			—			—			(17,445	)		—			(17,445	)
Gain on disposal of assets, net		—			—			—			(35,521	)		—			(35,521	)
Other, net		2,687			6,962			1,168			(3,056	)		—			7,761
Other changes in current assets and liabilities:
Accounts receivable		—			(680	)		2,218			50,654			—			52,192
Hurricane insurance receivables		—			—			—			17,319			—			17,319
Other current assets		(203	)		(59	)		44			(42,414	)		—			(42,632	)
Accounts payable		—			352			1,356			(9,702	)		—			(7,994	)
Other current liabilities		2,151			14,951			2,410			(20,691	)		—			(1,179	)
Net cash from operating activities		(3,871	)		99,760			5,488			834,136			—			935,513
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		—			(310,770	)		—			—			—			(310,770	)
Other capital expenditures		—			—			(1,872	)		(159,674	)		—			(161,546	)
Major maintenance expenditures		—			—			(2,091	)		(50,486	)		—			(52,577	)
Accrued capital expenditures		—			—			—			(17,596	)		—			(17,596	)
Hurricane insurance receivables		—			—			—			21,747			—			21,747
Notes receivable from affiliates		—			—			—			(150,000	)		150,000			—
Repayments from affiliates		—			—			—			13,260			(13,260	)		—
Proceeds from sales of property and equipment		—			—			—			39,134			—			39,134
Net cash from investing activities		—			(310,770	)		(3,963	)		(303,615	)		136,740			(481,608	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on bank credit facilities		(50,000	)		—			—			—			—			(50,000	)
Payments of other long-term debt		—			—			—			(5,076	)		—			(5,076	)
Advances (to) from affiliates		258,334			224,480			(1,569	)		(481,245	)		—			—
Repayment of notes to affiliates		—			(13,260	)		—			—			13,260			—
Notes payable to affiliates		150,000			—			—			—			(150,000	)		—
Net proceeds from employee stock transactions		10,558			—			—			—			—			10,558
Dividends paid		(222,910	)		—			—			—			—			(222,910	)
Repurchases of ordinary shares		(26,571	)		—			—			—			—			(26,571	)
Net cash from financing activities		119,411			211,220			(1,569	)		(486,321	)		(136,740	)		(293,999	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		115,540			210			(44	)		44,200			—			159,906
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		12,544			—			73			148,441			—			161,058
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	128,084		$	210		$	29		$	192,641		$	—		$	320,964

26

NOBLE CORPORATION AND OTHER SUBSIDIARIES
CONSOLIDATING STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2007
(In thousands)
(Unaudited)

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	540,351		$	550,898		$	239,485		$	551,441		$	(1,341,824	)	$	540,351
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		—			12,772			2,933			116,683			—			132,388
Impairment loss on assets		—			—			—			5,400			—			5,400
Deferred income tax provision		—			3,157			618			2,549			—			6,324
Share-based compensation expense		16,903			—			—			—			—			16,903
Equity earnings in affiliates		(569,765	)		(526,533	)		(245,526	)		—			1,341,824			—
Pension contribution		—			—			—			(16,705	)		—			(16,705	)
Other		(370	)		(180	)		3,249			6,727			—			9,426
Other changes in current assets and liabilities:
Accounts receivable		—			(8,133	)		(3,563	)		(76,931	)		—			(88,627	)
Other current assets		(2	)		(356	)		(487	)		15,170			—			14,325
Accounts payable		(14,158	)		(1,367	)		912			(6,347	)		—			(20,960	)
Other current liabilities		—			(344	)		(3,699	)		37,286			—			33,243
Net cash from operating activities		(27,041	)		29,914			(6,078	)		635,273			—			632,068
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		—			(215,181	)		—			(108,157	)		—			(323,338	)
Other capital expenditures		—			—			(6,084	)		(210,368	)		—			(216,452	)
Major maintenance expenditures		—			(1,439	)		—			(37,931	)		—			(39,370	)
Accrued capital expenditures		—			13,113			—			9,060			—			22,173
Proceeds from sales of property and equipment		—			—			—			3,284			—			3,284
Notes receivable from affiliates		—			—			—			(25,700	)		25,700			—
Repayments of notes receivable from affiliates		—			—			—			11,565			(11,565	)		—
Net cash from investing activities		—			(203,507	)		(6,084	)		(358,247	)		14,135			(553,703	)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on bank credit facilities		135,000			—			85,000			—			—			220,000
Payments on bank credit facilities		—			—			(85,000	)		—			—			(85,000	)
Payments of other long-term debt		—			—			—			(4,730	)		—			(4,730	)
Advances (to)/from affiliates		28,166			185,226			12,191			(225,583	)		—			—
Notes payable to affiliates		25,700			—			—			—			(25,700	)		—
Repayment of notes payable to affiliates		—			(11,565	)		—			—			11,565			—
Net proceeds from employee stock transactions		13,560			—			—			—			—			13,560
Dividends paid		(10,788	)		—			—			—			—			(10,788	)
Repurchases of ordinary shares		(120,687	)		—			—			—			—			(120,687	)
Net cash from financing activities		70,951			173,661			12,191			(230,313	)		(14,135	)		12,355
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		43,910			68			29			46,713			—			90,720
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,458			36			—			59,216			—			61,710
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	46,368		$	104		$	29		$	105,929		$	—		$	152,430

27

ITEM 2. 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 June 30, 2008, and our results of operations for the three and six months ended June 30, 2008 and 2007. The following discussion should be read in conjunction with the condensed consolidated financial statements and related notes contained in this report on Form 10-Q and the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.

Beginning in the fourth quarter of 2007, we report our international and domestic contract drilling operations as a single reportable segment: Contract Drilling Services. The consolidation into one reportable segment reflects how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil industry. The mobile offshore drilling units comprising our offshore rig fleet operate in a single, global market for contract drilling services and are often redeployed globally due to changing demands of our customers, which consist largely of major international and government owned/controlled oil and gas companies throughout the world. The “Other” category in our segment-based discussions includes the results of labor contract drilling services, engineering and consulting services, other insignificant operations and corporate related items. All prior year information has been reclassified to conform to the current year presentation of segments. See Note 11 of our Notes to Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q.

FORWARD-LOOKING STATEMENTS

This report on Form 10-Q 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, backlog, plans and objectives of management for future operations, foreign currency requirements, 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 be 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 referenced or described in “Item 1A. Risk Factors” of Part II included herein, and in our other filings with the U.S. Securities and Exchange Commission (“SEC”). We cannot control such risks and uncertainties, 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 and uncertainties when you are evaluating us.

EXECUTIVE OVERVIEW

We are a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our fleet of 62 offshore drilling units located worldwide, including the U.S. Gulf of Mexico, the Middle East, India, Mexico, the North Sea, Brazil, and West Africa.

In the second quarter of 2008, we recognized net income of $376 million, or $1.40 per diluted share, on total revenues of $813 million. The average dayrate across our worldwide fleet increased to $167,002 from $163,772 in the first quarter of 2008. Fleetwide average utilization was 90 percent in the second quarter of 2008 as compared to 94 percent in the prior quarter. Daily contract drilling services costs increased to $54,674 for the second quarter of 2008 from $48,434 for the first quarter. As a result, our contract drilling services margin decreased to 67.3 percent from 70.4 percent in the first quarter of 2008.

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 have also actively expanded our offshore drilling and deepwater capabilities in recent years through the construction of new rigs. During the second quarter of 2008, we continued our active expansion strategy as indicated by the following activities:

• we continued construction on three newbuild ultra-deepwater semisubmersibles, theNoble Dave Beard,Noble Danny AdkinsandNoble Jim Day, which are scheduled for delivery in the first quarter of 2009, the second quarter of 2009 and the fourth quarter of 2009, respectively; and

• we continued construction on two F&G JU-2000E enhanced premium independent leg cantilevered jackups, theNoble Hans DeulandNoble Scott Marks, which are scheduled for delivery in the third quarter of 2008 and the second quarter of 2009, respectively.

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Newbuild capital expenditures during the three and six months ended June 30, 2008 totaled $176 million and $311 million, respectively.

Additionally, we continued to refine our focus on our core business of contract drilling services. During the second quarter of 2008, we closed on the sale of our North Sea platform drilling business to Seawell Holding UK Limited. We recognized a gain of $35 million in connection with this transaction.

Demand for drilling services depends on a variety of economic and political factors, including worldwide demand for oil and gas, the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing, the level of production of non-OPEC countries and the policies of various governments regarding exploration and development of their oil and gas reserves. Demand for our services is also a function of the worldwide supply of mobile offshore drilling units. Industry sources report that 11 newbuild jackup rigs and two new deepwater semisubmersibles entered service during the first half of 2008. A total of 60 newbuild jackups and 40 deepwater newbuilds are reportedly scheduled to enter service worldwide during the remainder of 2008 and 2009. Many of these rigs are being built by market speculators, and while a majority of the deepwater rigs have secured commitments, more than half of the newbuild jackups are currently not contracted. The introduction of non-contracted rigs into the marketplace could have an adverse affect on the level of demand for our services or the dayrates we are able to achieve.

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 average Brent oil price was $72.47 per barrel during 2007, or 11 percent higher than the average Brent oil price of $65.15 per barrel during 2006, following a 20 percent increase over 2005. The average Brent oil price increased further in the first half of 2008, averaging $109.17 per barrel.

U.S. natural gas prices reached a 20-year high in 2005, averaging $8.81 per thousand cubic feet (average Henry Hub monthly spot price). Natural gas prices moderated during 2007 and 2006, averaging $6.98 and $6.74 per thousand cubic feet, respectively. At June 30, 2008, the Henry Hub monthly spot price was $12.69 per thousand cubic feet, which represents an increase of 100 percent over the spot price of $6.36 per thousand cubic feet at June 30, 2007. We do not have significant exposure to the U.S. natural gas markets because we have only three mobile offshore drilling units (two contracted submersibles and one cold stacked submersible) currently deployed in the shallow waters of the U.S. Gulf of Mexico. However, the moderation of natural gas prices during 2007 and 2006 caused some competitors to move jackup rigs from the U.S. Gulf of Mexico market to various international markets, and these actions may increase competition within those markets.

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 or increases in the supply of drilling rigs into the market could have an adverse effect on our results of operations.

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CONTRACT DRILLING SERVICES BACKLOG

We maintain a backlog (as defined below) of commitments for contract drilling services. The following table sets forth as of June 30, 2008 the amount of our contract drilling services backlog and the percent of available operating days committed for the periods indicated:

			Year Ending December 31,
	Total		2008(1)			2009			2010			2011			2012-2016
	(In thousands)
Contract Drilling Services Backlog
Semisubmersibles/Drillships(2)	$	9,043,000	$	729,000		$	1,738,000		$	1,833,000		$	1,493,000		$	3,250,000
Jackups/Submersibles		2,923,000		1,020,000			1,525,000			309,000			69,000			—
Total	$	11,966,000	$	1,749,000		$	3,263,000		$	2,142,000		$	1,562,000		$	3,250,000
Percent of Available Operating Days Committed(3)				89	%		68	%		31	%		19	%		8	%

(1)	Represents a six-month period beginning July 1, 2008.
(2)	Our drilling contracts with Petroleo Brasileiro S.A. (“Petrobras”) provide an opportunity for us to earn performance bonuses based on absence of downtime experienced for our rigs operating offshore Brazil. With respect to our semisubmersibles operating offshore Brazil, we have included in our backlog amounts an amount equal to 75 percent of potential performance bonuses for such semisubmersibles, which amount is based on and consistent with our historical earnings of performance bonuses for these rigs. With respect to our drillships operating offshore Brazil, we (a) have not included in our backlog amounts any performance bonuses for periods prior to the commencement of certain upgrade projects planned for 2010 and 2011, which projects are designed to enhance the reliability and operational performance of our drillships, and (b) have included in our backlog amounts an amount equal to 75 percent of potential performance bonuses for periods after the estimated completion of such upgrade projects. Our backlog amount for semisubmersibles/drillships includes approximately $347 million attributable to these performance bonuses.
(3)	Percentages take into account additional capacity from the estimated dates of deployment of our newbuild rigs that are scheduled to commence operations during 2008 and 2009.

All of our contract drilling services backlog consists of commitments we believe to be firm. Our contract drilling services backlog reported above reflects estimated future revenues attributable to both signed drilling contracts and letters of intent. A letter of intent is generally subject to customary conditions, including the execution of a definitive drilling contract. We calculate backlog for any given unit and period by multiplying the full contractual operating dayrate for such unit by the number of days remaining in the period. The reported contract drilling services backlog does not include amounts representing revenues for mobilization, demobilization and contract preparation, which are not expected to be significant to our contract drilling services revenues, amounts constituting reimbursables from customers or amounts attributable to uncommitted option periods under drilling contracts or letters of intent.

The amount of actual revenues earned and the actual periods during which revenues are earned may be different than the backlog amounts and backlog periods set forth in the table above due to various factors, including, but not limited to, shipyard and maintenance projects, unplanned downtime, weather conditions and other factors that result in applicable dayrates lower than the full contractual operating dayrate. In addition, amounts included in the backlog may change because drilling contracts may be varied or modified by mutual consent or customers may exercise early termination rights contained in some of our drilling contracts. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the succeeding periods for which the backlog is calculated.

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INTERNAL INVESTIGATION

In June 2007, we announced that we were conducting an internal investigation of our Nigerian operations, focusing on the legality under the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), and local laws of our Nigerian affiliate’s reimbursement of certain expenses incurred by our customs agents in connection with obtaining and renewing permits for the temporary importation of drilling units and related equipment into Nigerian waters, including permits that are necessary for our drilling units to operate in Nigerian waters. We also announced that the audit committee of Noble’s Board of Directors had engaged a leading law firm with significant experience in investigating and advising on FCPA matters to lead the investigation as independent outside counsel. The scope of the investigation also includes our dealings with customs agents and customs authorities in certain parts of the world other than Nigeria in which we conduct our operations, as well as dealings with other types of local agents in Nigeria and such other parts of the world. There can be no assurance that evidence of additional potential FCPA violations may not be uncovered through the investigation.

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

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

The independent outside counsel appointed by the audit committee to perform the internal investigation recently made a presentation of the results of its investigation to the DOJ and the SEC. The SEC and the DOJ have begun to review these results and information gathered by the independent outside counsel in the course of the investigation. Neither the SEC nor the DOJ has indicated what action it may take, if any, against us or any individual, or whether it may request that the audit committee’s independent outside counsel conduct further investigation. Therefore, we consider the internal investigation to be ongoing and cannot predict when it will conclude. Furthermore, we cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date in our internal investigation, we have not determined that any potential liability that may result is probable or remote or can be reasonably estimated. As a result, we have not made any accrual in our consolidated financial statements at June 30, 2008.

We are currently operating five jackup rigs offshore Nigeria. Four of these rigs have obtained extensions of temporary imports that permit the rigs to remain in Nigeria through November 28, 2008. The fifth rig has obtained a fresh temporary import permit that will permit the rig to remain in Nigeria through July 1, 2009. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria after expiration of the current terms of the temporary import permits. If we cannot obtain a new permit or an extension necessary to continue operations of any rig, we may need to cease operations under the drilling contract for such rig and relocate such rig from Nigerian waters. We cannot predict what impact this may have on any such contract or our business in Nigeria. Furthermore, we cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how any such changes may impact our business there.

Notwithstanding that the internal investigation is ongoing, we have concluded that certain changes to our FCPA compliance program would provide us greater assurance that our assets are not used, directly or indirectly, to make improper payments, including customs payments, and that we are in compliance with the FCPA’s record- keeping requirements. Although we have had a long-standing published policy requiring compliance with the FCPA and broadly prohibiting any improper payments by us to foreign or domestic officials, we have since the commencement of the internal investigation adopted, and may adopt additional, intermediate measures intended to enhance FCPA compliance procedures. Additional measures may be required once the investigation concludes.

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RESULTS OF OPERATIONS

For the Three Months Ended June 30, 2008 and 2007

General

Net income for the three months ended June 30, 2008 (the “Current Quarter”) was $376 million, on operating revenues of $813 million, compared to net income for the three months ended June 30, 2007 (the “Comparable Quarter”) of $290 million, on operating revenues of $726 million.

Rig Utilization, Operating Days and Average Dayrates

Operating revenues and operating costs and expenses for our contract drilling services segment are dependent on three primary metrics — rig utilization, operating days and dayrates. The following tables set forth the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended June 30, 2008 and 2007:

	Average Rig						Operating Days(2)							Average Dayrates
	Utilization(1)						Three Months Ended							Three Months Ended
	Three Months Ended						June 30,							June 30,
	June 30,										%							%
	2008			2007			2008		2007		Change			2008		2007		Change
Jackups		93	%		98	%		3,481		3,553		-2	%	$	147,081	$	112,804		30	%
Semisubmersibles >6,000’(3)		90	%		100	%		572		555		3	%		323,830		285,758		13	%
Semisubmersibles <6,000’(4)		100	%		87	%		273		239		14	%		192,416		169,283		14	%
Drillships		67	%		100	%		182		273		-33	%		131,174		128,874		2	%
Submersibles (5)		67	%		100	%		182		273		-33	%		53,039		82,137		-35	%
Total		90	%		98	%		4,690		4,893		-4	%	$	167,002	$	134,364		24	%

(1)	Information reflects our policy of reporting on the basis of the number of actively marketed rigs in our fleet excluding newbuild rigs under construction.
(2)	Information reflects the number of days that our rigs were operating under contract.
(3)	These units have water depth ratings of 6,000 feet or greater.
(4)	These units have water depth ratings of less than 6,000 feet.
(5)	Beginning in October 2007, one of our three submersibles, theNoble Fri Rodli, was cold stacked.

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Contract Drilling Services

The following tables set forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the three months ended June 30, 2008 and 2007:

	Three Months Ended
	June 30,				Change
	2008		2007		$			%
Operating Revenues:
Contract drilling services	$	783,280	$	657,504	$	125,776			19	%
Reimbursables (1)		19,646		19,856		(210	)		-1	%
Other		464		376		88			23	%
	$	803,390	$	677,736	$	125,654			19	%
Operating Costs and Expenses:
Contract drilling services	$	256,436	$	212,050	$	44,386			21	%
Reimbursables (1)		16,565		16,706		(141	)		-1	%
Other		—		15		(15	)		-100	%
Depreciation and amortization		86,636		66,108		20,528			31	%
Selling, general and administrative		19,526		19,743		(217	)		-1	%
		379,163		314,622		64,541			21	%
Operating Income	$	424,227	$	363,114	$	61,113			17	%

(1) We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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.Contract drilling services revenue increases for the three months ended June 30, 2008 as compared to the same period in 2007 were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $160 million, while fewer operating days reduced revenues approximately $34 million.

Average dayrates increased 24 percent in the Current Quarter as compared to the Comparable Quarter. Higher average dayrates were received across all rig categories, except for our submersible rigs, which were impacted by weakening demand in the shallow waters of the U.S. Gulf of Mexico.

The decrease in operating days in the Current Quarter as compared to the Comparable Quarter was primarily due to downtime of certain rigs in the Current Quarter. Unpaid shipyard days increased 171 days in the Current Quarter as compared to the Comparable Quarter, as theNoble Roy Butler, Noble Max SmithandNoble George McLeodeach spent time in the shipyard during the Current Quarter for rig modifications and regulatory inspections, and theNoble Roger Easonis completing repairs for fire damage suffered in November 2007. Additionally, theNoble Fri Rodli, Noble Don WalkerandNoble Carl Norbergspent an aggregate of 205 days stacked during the Current Quarter. These decreases in operating days were partially offset by increased operating days for two newbuilds, the ultra-deepwater semisubmersibleNoble Clyde Boudreauxand the enhanced premium jackupNoble Roger Lewis, which were added to the fleet in June and September 2007, respectively.

Operating Costs and Expenses.Contract drilling services operating costs and expenses increased 21 percent for the three months ended June 30, 2008 over the same period in 2007. Newbuild rigs, including theNoble Clyde BoudreauxandNoble Roger Lewis,added $23 million of operating costs in the Current Quarter. Excluding the effect of these rigs, our labor costs increased $14 million in the Current Quarter over the Comparable Quarter due to higher compensation, including retention programs designed to retain key rig and operations personnel. The remaining $7 million of the operating cost increase in the Current Quarter over the Comparable Quarter was primarily due to increases in costs of daily rig operations, including catering, fuel, crew rotation, maintenance and safety and training costs.

The increase in depreciation and amortization in the Current Quarter over the Comparable Quarter was primarily due to depreciation on theNoble Clyde BoudreauxandNoble Roger Lewisand additional depreciation related to other capital expenditures on our fleet since the Comparable Quarter.

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Selling, general and administrative expenses remained primarily unchanged for the Current Quarter as compared to the Comparable Quarter. The Current Quarter expenses include approximately $4 million of costs incurred in the internal investigation of our Nigerian operations, while the Comparable Quarter includes severance costs related to executive departures.

Other

The following table sets forth the operating revenues and the operating costs and expenses for our other services for the three months ended June 30, 2008 and 2007:

	Three Months Ended
	June 30,						Change
	2008			2007			$			%
Operating Revenues:
Labor contract drilling services	$	8,218		$	39,165		$	(30,947	)		-79	%
Reimbursables (1)		1,318			8,752			(7,434	)		-85	%
Engineering and consulting		—			346			(346	)		-100	%
Other		15			—			15			*	*
	$	9,551		$	48,263		$	(38,712	)		-80	%
Operating Costs and Expenses:
Labor contract drilling services	$	6,547		$	32,454		$	(25,907	)		-80	%
Reimbursables (1)		1,266			7,902			(6,636	)		-84	%
Engineering, consulting and other		—			7,240			(7,240	)		-100	%
Depreciation and amortization		1,200			2,215			(1,015	)		-46	%
Selling, general and administrative		141			559			(418	)		-75	%
Gain on disposal of assets, net		(35,521	)		—			35,521			*	*
		(26,367	)		50,370			(76,737	)		*	*
Operating Income	$	35,918		$	(2,107	)	$	38,025			*	*

**	Not a meaningful percentage.
(1)	We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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.Our labor contract drilling services revenues decreased primarily due to the sale of our North Sea labor contract drilling services business in April 2008. Additionally, during the second quarter of 2008, we returned the jackupNoble Kolskaya, operated under a bareboat charter, to its owner. The drilling contract for theNoble Kolskayahad been terminated and the jackup had been warm stacked since February 2008. Revenues during the second quarter of 2007 related to our North Sea labor contract business andNoble Kolskayawere $32 million.

Operating Costs and Expenses.Labor contract drilling services costs and expenses decreased due to the sale of our North Sea labor contract business and the return of theNoble Kolskayato its owner.

Engineering, consulting and other expenses decreased $7 million in the Current Quarter over the Comparable Quarter due to the sale of the rotary steerable assets and intellectual property of our Noble Downhole Technology Ltd. (“Downhole Technology”) subsidiary in November 2007. We no longer conduct engineering and consulting operations.

The decrease in depreciation and amortization was primarily due to lower depreciation expense on theNoble Kolskayaduring the Current Quarter.

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Other Items

Interest Expense.Interest expense, net of amount capitalized decreased $0.5 million primarily due to lower debt levels in the Current Quarter than the Comparable Quarter. Capitalized interest for the Current Quarter was $12 million as compared to $13 million for the Comparable Quarter.

Interest income and other, net.Interest income increased $1 million in the Current Quarter over the Comparable Quarter primarily as a result of higher cash and cash equivalent balances during the Current Quarter.

Income Tax Provision.The income tax provision increased $15 million primarily due to higher pre-tax earnings in the Current Quarter over the Comparable Quarter. The higher pre-tax earnings increased income tax expense by $20 million, offset by a lower effective tax rate of 18.5 percent in the Current Quarter compared to 19.5 percent in the Comparable Quarter, which decreased income tax expense by approximately $5 million. The lower effective tax rate in the Current Quarter resulted primarily from higher pre-tax earnings of non-U.S. owned assets, which generally have a lower statutory tax rate.

For the Six Months Ended June 30, 2008 and 2007

General

Net income for the six months ended June 30, 2008 (the “Current Period”) was $760 million, on operating revenues of $1.7 billion, compared to net income for the six months ended June 30, 2007 (the “Comparable Period”) of $540 million, on operating revenues of $1.4 billion.

Rig Utilization, Operating Days and Average Dayrates

The following tables set forth the average rig utilization, operating days and average dayrates for our rig fleet for the six months ended June 30, 2008 and 2007:

	Average Rig
	Utilization(1)						Operating Days(2)							Average Dayrates
	Six Months Ended						Six Months Ended							Six Months Ended
	June 30,						June 30,							June 30,
											%							%
	2008			2007			2008		2007		Change			2008		2007		Change
Jackups		95	%		98	%		7,082		7,065		—	%	$	146,195	$	107,490		36	%
Semisubmersibles >6,000’(3)		95	%		100	%		1,209		1,096		10	%		307,019		273,023		12	%
Semisubmersibles <6,000’(4)		100	%		77	%		546		419		30	%		197,057		172,484		14	%
Drillships		67	%		97	%		364		525		-31	%		132,420		115,355		15	%
Submersibles (5)		66	%		97	%		361		529		-32	%		52,164		81,609		-36	%
Total		92	%		97	%		9,562		9,634		-1	%	$	165,356	$	128,137		29	%

(1)	Information reflects our policy of reporting on the basis of the number of actively marketed rigs in our fleet excluding newbuild rigs under construction.
(2)	Information reflects the number of days that our rigs were operating under contract.
(3)	These units have water depth ratings of 6,000 feet or greater.
(4)	These units have water depth ratings of less than 6,000 feet.
(5)	Beginning in October 2007, one of our three submersibles, theNoble Fri Rodli, was cold stacked.

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Contract Drilling Services

The following tables set forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the six months ended June 30, 2008 and 2007:

	Six Months Ended
	June 30,				Change
	2008		2007		$			%
Operating Revenues:
Contract drilling services	$	1,581,114	$	1,234,419	$	346,695			28	%
Reimbursables (1)		40,812		39,625		1,187			3	%
Other		651		606		45			7	%
	$	1,622,577	$	1,274,650	$	347,927			27	%
Operating Costs and Expenses:
Contract drilling services	$	492,388	$	408,892	$	83,496			20	%
Reimbursables (1)		35,318		33,645		1,673			5	%
Other		—		156		(156	)		-100	%
Depreciation and amortization		167,421		127,917		39,504			31	%
Selling, general and administrative		39,422		33,403		6,019			18	%
		734,549		604,013		130,536			22	%
Operating Income	$	888,028	$	670,637	$	217,391			32	%

(1) We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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.Contract drilling services revenue increases for the six months ended June 30, 2008 as compared to the same period in 2007 were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $359 million for the six months ended June 30, 2008, while fewer operating days reduced revenues approximately $12 million.

Average dayrates increased 29 percent in the Current Period as compared to the Comparable Period. Higher average dayrates were received across all rig categories, except for our submersible rigs, which were impacted by weakening demand in the shallow waters of the U.S. Gulf of Mexico.

The decrease in operating days in the Current Period as compared to the Comparable Period was primarily due to downtime of certain rigs in the Current Period. Unpaid shipyard days increased 184 days in the Current Period as compared to the Comparable Period, as theNoble Roy Butler, Noble Max Smith, Noble George McLeodandNoble Roy Rhodeseach spent time in the shipyard during the Current Period for rig modifications and regulatory inspections, and theNoble Roger Easonis completing repairs for fire damage suffered in November 2007. Additionally, theNoble Fri Rodli, Noble Don WalkerandNoble Carl Norbergspent an aggregate total of 296 days stacked during the Current Period. These decreases in operating days were partially offset by increased operating days for two newbuilds, the ultra-deepwater semisubmersibleNoble Clyde Boudreauxand the enhanced premium jackupNoble Roger Lewis, which were added to the fleet in June and September 2007, respectively.

Operating Costs and Expenses.Contract drilling services operating costs and expenses increased 20 percent for the Current Period over the Comparable Period. Newbuild rigs, including theNoble Clyde BoudreauxandNoble Roger Lewis,added $41 million of operating costs in the Current Period. Excluding the effect of these rigs, our labor costs increased $26 million in the Current Period over the Comparable Period due to higher compensation, including retention programs designed to retain key rig and operations personnel. The remaining $16 million of the operating cost increase in the Current Period over the Comparable Period was primarily due to increases in costs of daily rig operations, including catering, fuel, crew rotation, maintenance and safety and training costs.

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Depreciation and amortization increased in the Current Period over the Comparable Period due to depreciation on newbuilds added to the fleet, theNoble Clyde BoudreauxandNoble Roger Lewis, and additional depreciation related to other capital expenditures on our fleet since the Comparable Period.

Selling, general and administrative expenses increased $6 million in the Current Period over the Comparable Period primarily due to $11 million of costs incurred in the internal investigation of our Nigerian operations in the Current Period. This increase in costs was partially offset by decreases in severance costs related to executive departures in the Comparable Period and reductions in administrative information technology costs.

Other

The following table sets forth the operating revenues and the operating costs and expenses for our other services for the six months ended June 30, 2008 and 2007:

	Six Months Ended
	June 30,					Change
	2008			2007		$			%
Operating Revenues:
Labor contract drilling services	$	39,149		$	75,720	$	(36,571	)		-48	%
Reimbursables (1)		12,610			20,126		(7,516	)		-37	%
Engineering and consulting		—			1,927		(1,927	)		-100	%
Other		30			—		30			*	*
	$	51,789		$	97,773	$	(45,984	)		-47	%
Operating Costs and Expenses:
Labor contract drilling services	$	31,884		$	60,857	$	(28,973	)		-48	%
Reimbursables (1)		11,974			18,509		(6,535	)		-35	%
Engineering, consulting and other		—			11,140		(11,140	)		-100	%
Depreciation and amortization		3,314			4,471		(1,157	)		-26	%
Selling, general and administrative		1,518			1,125		393			35	%
Gain on disposal of assets, net		(35,521	)		—		35,521			*	*
		13,169			96,102		(82,933	)		-86	%
Operating Income	$	38,620		$	1,671	$	36,949			*	*

**	Not a meaningful percentage.
(1)	We record reimbursements from customers for out-of-pocket expenses as revenues and the related direct costs 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.Our labor contract drilling services revenues decreased primarily due to the sale of our North Sea labor contract drilling services business in April 2008. Additionally, during the second quarter of 2008, we returned the jackupNoble Kolskaya, operated under a bareboat charter, to its owner. The drilling contract for theNoble Kolskayahad been terminated and the jackup had been warm stacked since February 2008. Revenues during the Comparable Period related to our North Sea labor contract business andNoble Kolskayawere $61 million as compared to $22 million for the Current Period.

Engineering, consulting and other operating revenues decreased $2 million in the Current Period over the Comparable Period due to closure of the operations of our Triton Engineering Services, Inc. (“Triton”) subsidiary in March 2007 and the sale of the rotary steerable assets and intellectual property of our Downhole Technology subsidiary in November 2007. We no longer conduct engineering and consulting operations.

Operating Costs and Expenses.Labor contract drilling services costs and expenses decreased due to the sale of our North Sea labor contract business and the return of theNoble Kolskayato its owner.

Engineering, consulting and other expenses decreased $11 million due to the sale of the rotary steerable assets and intellectual property of Downhole Technology and the closure of the operations of Triton. The Comparable Period included $8 million of additional costs associated with the sale and closure of these non-core assets.

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The decrease in depreciation and amortization was primarily due to lower depreciation expense on theNoble Kolskayaduring the Current Period.

Other Items

Interest Expense.Interest expense, net of amount capitalized decreased $1 million primarily due to lower debt levels in the Current Period than the Comparable Period. Capitalized interest for the Current Period was $24 million as compared to $25 million for the Comparable Period.

Interest income and other, net.Interest income increased $3 million in the Current Period over the Comparable Period primarily as a result of higher cash and cash equivalent balances during the Current Period.

Income Tax Provision.The income tax provision increased $39 million primarily due to higher pre-tax earnings in the Current Period over the Comparable Period. The higher pre-tax earnings increased income tax expense by $50 million, offset by a lower effective tax rate of 18.2 percent in the Current Period compared to 19.5 percent in the Comparable Period, which decreased income tax expense by approximately $12 million. The lower effective tax rate in the Current Period resulted primarily from higher pre-tax earnings of non-U.S. owned assets, which generally have a lower statutory tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal capital resource in the Current Period was net cash from operating activities of $936 million, which compared to $632 million in the Comparable Period. The increase in net cash from operating activities in the Current Period was primarily attributable to higher net income. At June 30, 2008, we had cash and cash equivalents of $321 million and $451 million available under our bank credit facility described under “Credit Facilities and Long-Term Debt” below. We had working capital of $506 million and $367 million at June 30, 2008 and December 31, 2007, respectively. Total debt as a percentage of total debt plus shareholders’ equity was 13 percent at June 30, 2008 and 15 percent at December 31, 2007. Additionally, at June 30, 2008, we had a total contract drilling services backlog of approximately $12 billion. Our backlog reflects a commitment of 89% of operating days for the remainder of 2008 and 68% for 2009. See additional information regarding our backlog at “Contract Drilling Services Backlog.”

On February 2, 2007, Noble’s Board of Directors increased our share repurchase program authorization by 20 million shares, resulting in 30.5 million shares authorized for repurchase. During the three months ended March 31, 2008, we repurchased 0.6 million of our ordinary shares pursuant to this program at an average price of $44.81 per share for a total cost of $27 million. No shares were repurchased during the second quarter of 2008. During 2007, we repurchased 4.2 million of our ordinary shares at an average price of $42.31 per share for a total cost of $179 million. At June 30, 2008, 25.7 million shares remained available for repurchase under such authorization. Additional repurchases, if any, may be made on the open market or in private transactions at prices determined by us.

We have contributed an aggregate of $17 million to our pension plans in 2008, which represents the total contributions expected to be made in 2008, subject to applicable law.

In April 2008, Noble’s Board of Directors declared a special cash dividend of $0.75 per ordinary share. The special dividend was paid on May 16, 2008 to holders of record on April 30, 2008 and totaled approximately $202 million. Our quarterly cash dividend declaration, paid on May 30, 2008 to holders of record on May 14, 2008, was $0.04 per ordinary share, or approximately $43 million annualized.

On August 1, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on August 13, 2008, with a distribution date of August 29, 2008.

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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 our results of operations, financial condition, cash requirements, future business prospects, contractual restrictions and other factors deemed relevant by Noble’s Board of Directors.

Capital Expenditures

Capital expenditures totaled $525 million and $579 million for the six months ended June 30, 2008 and 2007, respectively.

We have five rigs under construction, resulting in capital expenditures for new construction in the Current Quarter and Current Period totaling $176 million and $311 million, respectively. Capital expenditures for new construction in the Current Period included $120 million for theNoble Danny Adkins, $96 million for theNoble Jim Dayand $61 million for theNoble Dave Beard. Additionally, the Current Period included $34 million for our remaining newbuilds, which includes theNoble Hans DeulandNoble Scott Marks, each of which is an F&G JU-2000E enhanced premium newbuild jackup under construction. Other capital expenditures totaled $162 million in the Current Period and included approximately $59 million for major upgrade projects. Major maintenance expenditures totaled $53 million in the Current Period.

Our capital expenditures and major maintenance expenditures for 2008 are budgeted at approximately $1.45 billion. In connection with our 2008 and future capital expenditure programs, we had entered into certain commitments, including shipyard and purchase commitments, of approximately $729 million outstanding at June 30, 2008.

From time to time we consider possible projects that would require capital expenditures or other cash expenditures which are not included in our capital budget, and such unbudgeted capital or cash expenditures could be significant. In addition, we will continue to evaluate acquisitions of drilling units from time to time. Other factors that could cause actual capital expenditures to materially exceed planned capital expenditures include delays and cost overruns in shipyards (including costs attributable to labor shortages), shortages of equipment, latent damage or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions, and changes in design criteria or specifications during repair or construction.

We believe that our cash and cash equivalents, net cash from operating activities, available capacity under the bank credit facility, 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.

Credit Facilities and Long-Term Debt

We have a $600 million unsecured credit facility (the “Credit Facility”), which was originally scheduled to mature on March 15, 2012. During the first quarter of 2008, the term of the Credit Facility was extended for an additional one-year period to March 15, 2013. During this one-year extension period, the total amount available under the Credit Facility will be $575 million, but we have the right to seek an increase of the total amount available to $600 million. We may, subject to certain conditions, request that the term of the Credit Facility be further extended for an additional one-year period. Our subsidiary, Noble Drilling Corporation (“Noble Drilling”), has guaranteed the obligations under the Credit Facility. At June 30, 2008, we had $50 million in borrowings and $99 million of letters of credit outstanding under this facility, leaving $451 million remaining available thereunder.

In addition to letters of credit issued under the Credit Facility, we had letters of credit of $111 million and performance and tax assessment bonds totaling $252 million supported by surety bonds outstanding at June 30, 2008. Of the total $210 million in letters of credit outstanding at June 30, 2008, $159 million were issued to support bank bonds in connection with the temporary import extensions for our drilling units in Nigeria. Additionally, certain of our subsidiaries issue, from time to time, guarantees of the temporary import status of rigs or equipment imported into certain countries in which we operate. These guarantees are issued in lieu of payment of custom, value added or similar taxes in those countries.

Our debt decreased from $785 million (including current maturities of $10 million) at December 31, 2007 to $729 million (including current maturities of $28 million) at June 30, 2008, due to debt repayments under the Credit Facility of $50 million coupled with other debt repayments of $5 million. At June 30, 2008 and December 31, 2007, we had no off-balance sheet debt or other off-balance sheet arrangements. At June 30, 2008, we were in compliance with all our debt covenants.

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NEW ACCOUNTING PRONOUNCEMENTS

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities(“SFAS No. 161”). SFAS No. 161 requires entities with derivative instruments to disclose information to enable financial statement users to understand how and why the entity uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect the entity’s financial position, financial performance and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact, if any, that SFAS No. 161 will have on our consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities(“FSP EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards that contain nonforfeitable rights to dividends are participating securities and should be included in the computation of earnings per share pursuant to the two-class method. FSP EITF 03-6-1 is effective for fiscal years and interim periods beginning after December 15, 2008. We are currently evaluating the impact, if any, that FSP EITF 03-6-1 will have on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162,The Hierarchy of Generally Accepted Accounting Principles (“SFAS No. 162”). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. The new standard becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411. SFAS No. 162 is not expected to have a material impact on our consolidated financial position or results of operations.

ITEM 3. 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, as further described below.

Interest Rate Risk

We are subject to market risk exposure related to changes in interest rates on borrowings under the Credit Facility. Interest on borrowings under the Credit Facility is at an agreed upon percentage point spread over LIBOR. At June 30, 2008, there was $50 million outstanding under the Credit Facility. A change of one percent in the interest rate would cause a $0.5 million change in interest expense on an annual basis on this amount of borrowings.

Foreign Currency Risk

Although we conduct business globally, a substantial majority of the value of our foreign transactions are denominated in U.S. Dollars. With certain exceptions, typically involving national oil companies, we structure our drilling contracts entirely in U.S. Dollars to mitigate our exposure to fluctuations in foreign currencies. Other than trade accounts receivable and trade accounts payable, which mostly offset one another, we do not currently have material amounts of assets, liabilities, or financial instruments that are sensitive to foreign currency exchange rates.

We periodically enter into derivative instruments to manage our cash flow 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, and we typically maintain forward currency contracts settling monthly in Euros and British Pounds. The Euro-denominated forward currency contracts settling in the remainder of 2008 represent approximately 21 percent of our forecasted Euro requirements. The British Pound-denominated forward contracts settling in the remainder of 2008 represent approximately 9 percent of our forecasted British Pound requirements.

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The notional amount of forward contracts outstanding at June 30, 2008 was approximately 3 million Euros and 2 million British Pounds. The aggregate notional amount of these forward contracts, expressed in U.S. Dollars, was $7 million at June 30, 2008. The fair market value of outstanding forward contracts was $0.7 million at June 30, 2008. A one percent change in exchange rates for the Euro and British Pound would change the fair value of these forward contracts by approximately $0.1 million.

Market Risk

We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan has no assets, and amounts “contributed” to the Restoration Plan are kept by us for general corporate purposes. The investments selected by employees and associated returns are tracked on a phantom basis. Accordingly, we have a liability to employees for amounts originally contributed plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, benefit should phantom investment losses occur. At June 30, 2008, our liability under the Restoration Plan totaled $12 million. A one percent increase or decrease in the fair value of the phantom investments would increase or decrease our liability by $0.1 million.

ITEM 4. CONTROLS AND PROCEDURES

Noble’s Chairman of the Board, President and Chief Executive Officer, David W. Williams, and Noble’s Senior Vice President, Chief Financial Officer, Treasurer and Controller, Thomas L. Mitchell, have evaluated 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. Williams and Mr. Mitchell concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2008. 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 SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Subsequent to June 30, 2008, we converted certain financial applications to our new enterprise resource planning (“ERP”) system. As a result, several process level control procedures were changed in order to conform to the new ERP system. While we believe that the new ERP system will ultimately strengthen our internal control over financial reporting, there are inherent issues associated with transitioning to a new system and we could experience control and implementation issues that impact our financial reporting. In the event that such an issue occurs, we have manual procedures in place which would allow us to continue to record and report results from the new ERP system. No other changes in our internal control over financial reporting have occurred subsequent to June 30, 2008 which have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information regarding legal proceedings is set forth in the first five paragraphs in Note 10 to our condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

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ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors as previously disclosed in our Form 10-K for the year ended December 31, 2007 in response to Item 1A of Part I of Form 10-K, and in our Form 10-Q for the quarter ended March 31, 2008 in response to Item 1A to Part II of Form 10-Q, except to the extent the following item is updated or otherwise modified:

Our international operations involve additional risks not associated with U.S. Gulf of Mexico 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;

• seizure, nationalization or expropriation of property or equipment;

• foreign and U.S. monetary policy and foreign currency fluctuations and devaluations;

• the inability to repatriate income or capital;

• complications associated with repairing and replacing equipment in remote locations;

• piracy;

• import-export quotas, wage and price controls, imposition of trade barriers and other forms of government regulation and economic conditions that are beyond our control;

• 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 importing, exporting, equipping and operation of drilling units;

• repatriation of foreign earnings;

• currency exchange controls;

• 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.

Our ability to do business in a number of jurisdictions is subject to maintaining required licenses and permits and complying with applicable laws and regulations. We are operating drilling units offshore Nigeria under temporary import permits, and we may not be able to obtain temporary import permits in the future for these units necessary to continue uninterrupted operations in Nigerian waters for the duration of the units’ drilling contracts. We cannot predict what changes, if any, relating to temporary import permit policies and procedures may be established or implemented in Nigeria in the future, or how such changes may impact our business there. For additional information regarding our ongoing internal investigation of our Nigerian operations and the status of our temporary import permits in Nigeria, see “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Internal Investigation”. Changes in, compliance with, or our failure to comply with the laws and regulations of the countries where we operate, including Nigeria, may negatively impact our operations in those countries and could have a material adverse effect on our results of operations.

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During the fourth quarter of 2007, our Nigerian subsidiary received letters from the Nigerian Maritime Administration and Safety Agency (“NIMASA”) seeking to collect a two percent surcharge on contract amounts under contracts performed by “vessels”, within the meaning of Nigeria’s cabotage laws, engaged in the Nigerian coastal shipping trade. Although we do not believe that these letters apply to our ownership of drilling units, NIMASA is seeking to apply a provision of the Nigerian cabotage laws (which became effective on May 1, 2004) to our offshore drilling units by considering these units to be “vessels” within the meaning of those laws and therefore subject to the surcharge, which is imposed only upon “vessels”. Our offshore drilling units are not engaged in the Nigerian coastal shipping trade and are not in our view “vessels” within the meaning of Nigeria’s cabotage laws. On January 24, 2008, we filed an originating summons against NIMASA and the Minister of Transportation in the Federal High Court of Lagos, Nigeria seeking, among other things, a declaration that our drilling operations do not constitute “coastal trade” or “cabotage” within the meaning of Nigeria’s cabotage laws and that our offshore drilling units are not “vessels” within the meaning of those laws. NIMASA and the Minister of Transportation have filed a preliminary objection to our originating summons and the proceeding. A ruling on the preliminary objections is scheduled for October 2008. We intend to oppose the preliminary objection and take all further appropriate legal action to resist the application of Nigeria’s cabotage laws to our drilling units. The outcome of any such legal action and the extent to which we may ultimately be responsible for the surcharge is uncertain. If it is ultimately determined that offshore drilling units constitute vessels within the meaning of the Nigerian cabotage laws, we may be required to pay the surcharge and comply with other aspects of the Nigerian cabotage laws, which could adversely affect our operations in Nigerian waters and require us to incur additional costs of compliance.

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 and our results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth for the periods indicated certain information with respect to purchases by us of Noble’s ordinary shares:

						Total Number of		Maximum Number
						Shares Purchased		of Shares that May
	Total Number			Average		as Part of Publicly		Yet Be Purchased
	of Shares			Price Paid		Announced Plans		Under the Plans
Period	Purchased			per Share		or Programs (2)		or Programs (2)
April 2008		6,913	(1)	$	58.45		—		25,712,000
May 2008		483	(1)	$	54.81		—		25,712,000
June 2008		—		$	—		—		25,712,000

(1)

Acquired by surrender of ordinary shares to us by employees for withholding taxes payable upon the vesting of restricted stock.

(2)

No share repurchases were made in the quarter ended June 30, 2008 pursuant to the share repurchase plan, which Noble’s Board of Directors authorized and adopted and that we announced on January 31, 2002. On February 2, 2007, we announced that Noble’s Board of Directors had increased the share repurchase authorization by 20 million shares, resulting in 30.5 million shares authorized for repurchase. Our repurchase program has no date of expiration.

ITEM 6. EXHIBITS

The information required by this Item 6 is set forth in the Index to Exhibits accompanying this Quarterly Report on Form 10-Q and is incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements 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: August 8, 2008	By:	/s/ DAVID W. WILLIAMS
		David W. Williams
		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)
		/s/ THOMAS L. MITCHELL
		Thomas L. Mitchell
		Senior Vice President, Chief Financial Officer, Treasurer and Controller (Principal Financial and Accounting Officer)

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INDEX TO EXHIBITS

EXHIBIT
NUMBER		EXHIBIT
	10.1 *	Separation agreement between Noble Corporation and Robert D. Campbell dated May 13, 2008 (filed as exhibit 10.1 to Noble Corporation’s Current Report on Form 8-K filed on May 16, 2008 and incorporated herein by reference).
	31.1	Certification of David W. Williams Pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a).
	31.2	Certification of Thomas L. Mitchell Pursuant to the U.S. Securities Exchange Act of 1934, as amended, Rule 13a-14(a) or Rule 15d-14(a).
	32.1 +	Certification of David W. Williams Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2 +	Certification of Thomas L. Mitchell 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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