Noble 10-Q 2008 Q3 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 ended September 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	77478
Sugar Land, Texas	(Zip code)
(Address of principal executive offices)

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 Exchange Act). Yeso Noþ

Number of Ordinary Shares outstanding at October 31, 2008: 263,936,894

TABLE OF CONTENTS

	PAGE
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS		3
Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007		3
Consolidated Statements of Income for the three and nine months ended September 30, 2008 and 2007		4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007		5
Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2008		6
Consolidated Statements of Comprehensive Income for the three and nine months ended September 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		42
ITEM 1A. RISK FACTORS		42
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		45
ITEM 6. EXHIBITS		45
SIGNATURES		46
INDEX TO EXHIBITS		47
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)

	September 30,			December 31,
	2008			2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	213,653		$	161,058
Accounts receivable		662,178			613,115
Insurance receivables		—			39,066
Prepaid expenses		40,110			20,721
Other current assets		48,514			26,231
Total current assets		964,455			860,191
PROPERTY AND EQUIPMENT
Drilling equipment and facilities		7,115,513			6,354,782
Other		100,961			80,169
		7,216,474			6,434,951
Accumulated depreciation		(1,821,411	)		(1,639,035	)
		5,395,063			4,795,916
OTHER ASSETS		251,639			219,899
	$	6,611,157		$	5,876,006
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	25,352		$	10,334
Accounts payable		305,718			198,395
Accrued payroll and related costs		94,814			115,914
Taxes payable		70,030			85,641
Interest payable		7,434			9,951
Other current liabilities		51,808			72,537
Total current liabilities		555,156			492,772
LONG-TERM DEBT		701,519			774,182
DEFERRED INCOME TAXES		296,250			240,621
OTHER LIABILITIES		100,637			65,705
		1,653,562			1,573,280
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		(5,101	)		(5,596	)
SHAREHOLDERS’ EQUITY
Ordinary shares-par value $0.10 per share; 400,000 shares authorized; 263,807 and 268,223 shares issued and outstanding at September 30, 2008 and December 31, 2007, respectively		26,381			26,822
Capital in excess of par value		439,679			683,697
Retained earnings		4,511,660			3,602,870
Accumulated other comprehensive loss		(15,024	)		(5,067	)
		4,962,696			4,308,322
	$	6,611,157		$	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						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
OPERATING REVENUES
Contract drilling services	$	835,198		$	718,756		$	2,416,312		$	1,953,175
Reimbursables		18,087			31,478			71,509			91,229
Labor contract drilling services		8,197			40,622			47,346			116,342
Engineering, consulting and other		499			420			1,180			2,953
		861,981			791,276			2,536,347			2,163,699
OPERATING COSTS AND EXPENSES
Contract drilling services		253,729			227,276			746,117			636,168
Reimbursables		16,494			27,675			63,786			79,829
Labor contract drilling services		5,410			32,324			37,294			93,181
Engineering, consulting and other		—			6,073			—			17,369
Depreciation and amortization		92,671			77,992			263,406			210,380
Selling, general and administrative		16,027			24,617			56,967			59,145
Hurricane losses and recoveries, net		10,000			1,600			10,000			1,600
Gain on disposal of assets, net		—			—			(35,521	)		—
		394,331			397,557			1,142,049			1,097,672
OPERATING INCOME		467,650			393,719			1,394,298			1,066,027
OTHER INCOME (EXPENSE)
Interest expense, net of amount capitalized		(601	)		(9,146	)		(2,432	)		(11,881	)
Interest income and other, net		2,304			6,954			7,013			8,624
INCOME BEFORE INCOME TAXES		469,353			391,527			1,398,879			1,062,770
INCOME TAX PROVISION		(86,831	)		(73,247	)		(256,451	)		(204,139	)
NET INCOME	$	382,522		$	318,280		$	1,142,428		$	858,631
NET INCOME PER SHARE:
Basic	$	1.44		$	1.19		$	4.30		$	3.22
Diluted	$	1.43		$	1.18		$	4.26		$	3.19
DIVDENDS PER SHARE	$	0.04		$	0.04		$	0.87		$	0.12
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic		264,746			266,684			265,883			266,575
Diluted		267,041			269,476			268,266			269,270

See accompanying notes to the consolidated financial statements.

4

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,142,428		$	858,631
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		263,406			210,380
Impairment loss on assets		—			10,189
Hurricane losses and recoveries, net		10,000			1,600
Deferred income tax provision		14,102			13,197
Share-based compensation expense		28,274			25,951
Pension contributions		(17,445	)		(37,615	)
Gain on disposal of assets, net		(35,521	)		—
Other, net		(3,935	)		22,427
Other changes in current assets and liabilities:
Accounts receivable		(49,063	)		(111,363	)
Hurricane insurance receivables		17,319			—
Other current assets		(43,891	)		18,535
Accounts payable		(2,406	)		(36,914	)
Other current liabilities		8,397			20,367
Net cash from operating activities		1,331,665			995,385
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		(563,349	)		(541,976	)
Other capital expenditures		(243,843	)		(330,707	)
Major maintenance expenditures		(72,918	)		(69,756	)
Accrued capital expenditures		92,719			55,940
Hurricane insurance receivables		21,747			—
Proceeds from disposal of assets		39,134			4,643
Net cash from investing activities		(726,510	)		(881,856	)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term debt borrowing		—			685,000
Short-term debt payment		—			(685,000	)
Borrowings on bank credit facilities		—			220,000
Payments on bank credit facilities		(50,000	)		(120,000	)
Payments of other long-term debt		(7,682	)		(7,158	)
Net proceeds from employee stock transactions		10,070			24,713
Dividends paid		(233,638	)		(21,528	)
Repurchases of ordinary shares		(271,310	)		(120,687	)
Net cash from financing activities		(552,560	)		(24,660	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		52,595			88,869
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		161,058			61,710
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	213,653		$	150,579

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		1,145			114			28,160			—			—			28,274
Contribution to employee benefit plans		10			1			621			—			—			622
Exercise of stock options		848			86			18,019			—			—			18,105
Tax benefit of stock option exercised		—			—			4,895			—			—			4,895
Restricted shares surrendered for withholding taxes or forfeited		(454	)		(46	)		(7,989	)		—			—			(8,035	)
Repurchases of ordinary shares		(5,965	)		(596	)		(287,724	)		—			—			(288,320	)
Net income		—			—			—			1,142,428			—			1,142,428
Dividends paid ($0.87 per share)		—			—			—			(233,638	)		—			(233,638	)
Other comprehensive loss, net		—			—			—			—			(9,957	)		(9,957	)
Balance at September 30, 2008		263,807		$	26,381		$	439,679		$	4,511,660		$	(15,024	)	$	4,962,696

See accompanying notes to the consolidated financial statements.

6

NOBLE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

	Three Months Ended September 30,
	2008			2007
NET INCOME	$	382,522		$	318,280
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		(4,259	)		2,225
Foreign currency forward contract activity		(663	)		1,414
Amortization of deferred pension plan amounts		169			504
Other comprehensive income (loss)		(4,753	)		4,143
COMPREHENSIVE INCOME	$	377,769		$	322,423

	Nine Months Ended September 30,
	2008			2007
NET INCOME	$	1,142,428		$	858,631
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Foreign currency translation adjustments		(8,323	)		4,777
Foreign currency forward contract activity		(2,219	)		363
Pension plan actuarial loss		—			(5,580	)
Amortization of deferred pension plan amounts		585			1,288
Other comprehensive income (loss)		(9,957	)		848
COMPREHENSIVE INCOME	$	1,132,471		$	859,479

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 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 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.

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				Nine Months Ended
	September 30,				September 30,
	2008		2007		2008		2007
Weighted-average shares outstanding — basic		264,746		266,684		265,883		266,575
Effect of potentially dilutive shares:
Stock options and awards		2,295		2,792		2,383		2,695
Weighted-average shares outstanding — diluted		267,041		269,476		268,266		269,270
Net income — basic and diluted	$	382,522	$	318,280	$	1,142,428	$	858,631
Net income per share:
Basic	$	1.44	$	1.19	$	4.30	$	3.22
Diluted	$	1.43	$	1.18	$	4.26	$	3.19

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 September 30, 2008 and 2007, stock options and awards totaling 0.2 million and 0.7 million shares, respectively, were excluded from the diluted net income per share calculation as they were not dilutive. For the nine months ended September 30, 2008 and 2007, stock options and awards totaling 0.2 million and 0.7 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 $11 million and $35 million for the three and nine months ended September 30, 2008, respectively, and $13 million and $38 million for the three and nine months ended September 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, which we received during the first quarter of 2008 as final settlement of all remaining hurricane-related claims and receivables for physical damage and loss of hire for Hurricanes Katrina and Rita.

Certain of our rigs operating in the U.S. Gulf of Mexico sustained damage during the third quarter of 2008 as a result of Hurricanes Ike and Gustav. All damaged rigs have subsequently returned to work. During the third quarter of 2008, we recorded a $10 million charge for the non-reimbursable portion of rig damages for our rigs that sustained damage as a result of Hurricane Ike.

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 included 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 September 30, 2008 and December 31, 2007:

	September 30,			December 31,
	2008			2007
Credit Facility	$	50,000		$	100,000
6.95% Senior Notes due 2009		149,996			149,987
7.50% Senior Notes due 2019		201,695			201,695
5.875% Senior Notes due 2013		299,828			299,800
Project Financing — Thompson Notes		25,352			33,034
Total Debt		726,871			784,516
Current Maturities		(25,352	)		(10,334	)
Long-term Debt	$	701,519		$	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.

The 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 September 30, 2008, we had $50 million in borrowings and no letters of credit outstanding, leaving $550 million available under the Credit Facility.

At September 30, 2008 and December 31, 2007, the weighted average interest rate for outstanding borrowings under the Credit Facility was 3.4 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 September 30, 2008, the reserves for uncertain tax positions increased to $89 million (net of related tax benefits of $4 million). The increase in uncertain tax positions at September 30, 2008 was primarily due to tax positions taken on returns filed in one of our foreign jurisdictions. If these reserves of $89 million are not realized, the provision for income taxes would be reduced by $63 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 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 September 30,
	2008						2007
	International			Domestic			International			Domestic
Service cost	$	1,030		$	1,574		$	910		$	1,665
Interest cost		1,057			1,615			959			1,495
Return on plan assets		(1,463	)		(2,228	)		(1,348	)		(1,650	)
Amortization of prior service cost		—			97			—			99
Amortization of transition obligation		35			—			18			—
Recognized net actuarial loss		16			88			251			380
Net pension expense	$	675		$	1,146		$	790		$	1,989

	Nine Months Ended September 30,
	2008						2007
	International			Domestic			International			Domestic
Service cost	$	3,871		$	4,721		$	3,845		$	4,995
Interest cost		3,557			4,844			3,131			4,485
Return on plan assets		(4,841	)		(6,682	)		(3,610	)		(4,950	)
Amortization of prior service cost		—			293			—			297
Amortization of transition obligation		121			—			139			—
Recognized net actuarial loss		96			262			359			1,140
Net pension expense	$	2,804		$	3,438		$	3,864		$	5,967

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.

During the nine months ended September 30, 2008, we contributed $17 million to our pension plans, and expect to contribute an additional $4 million during the remainder of 2008. The aggregate $21 million in contributions 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 the 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 September 30, 2008, our liability under the Restoration Plan totaled $10 million. During the third quarter of 2008, we purchased investments that closely correlate to the investment elections made by participants in the Restoration Plan in order to mitigate the impact of the phantom investment income and losses on our financial statements. The value of these investments held for our benefit totaled $10 million at September 30, 2008.

NOTE 8 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We periodically enter into derivative instruments to manage our exposure to fluctuations in interest rates and foreign currency exchange rates, and we may conduct hedging activities in future periods to mitigate such exposure. We have documented policies and procedures to monitor and control the use of derivative instruments. We do not engage in derivative transactions for speculative or trading purposes, nor are we a party to leveraged derivatives.

11

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

Hedge effectiveness is measured quarterly based on the relative cumulative changes in fair value between derivative contracts and the hedged item over time. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during the three or nine months ended September 30, 2008 and 2007 related to these derivative instruments.

Cash Flow Hedges

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 contracts settling monthly in Euros and British Pounds. During the third quarter of 2008, we settled all outstanding forward contracts related to our North Sea operations.

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2008			2007			2008			2007
Net unrealized gain at beginning of period	$	663		$	2,166		$	2,219		$	3,217
Activity during period:
Settlement of forward contracts outstanding at beginning of period		(663	)		(939	)		(2,219	)		(2,450	)
Net unrealized gain on outstanding forward contracts		—			2,353			—			2,813
Net unrealized gain at end of period	$	—		$	3,580		$	—		$	3,580

Fair Value Hedges

During the third quarter of 2008, we entered into a firm commitment for the construction of a newbuild drillship. The drillship will be constructed in two phases, with the second phase being installation and commissioning of the topside equipment. The contract for this second phase of construction is denominated in Euros, and in order to mitigate the risk of fluctuations in foreign currency exchange rates, we entered into forward contracts to purchase Euros. As of September 30, 2008, the aggregate notional amount of the forward contracts was 80 million Euros. Each forward contract settles in connection with required payments per the contract. We are accounting for these forward contracts as fair value 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/liabilities or Other assets/liabilities, depending on when the forward contract is expected to be settled. Gains and losses from these fair value hedges are recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged. The fair market value of these outstanding forward contracts, which are included in Other current liabilities and Other liabilities, totaled approximately $3.8 million at September 30, 2008.

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:

	September 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
Assets—
Marketable securities	$	12,592	$	12,592	$	—	$	—	$	—	$	—
Liabilities—
Forward contracts	$	3,802	$	—	$	3,802	$	—	$	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 September 30, 2008) and a customs bond in the amount of 970 million Indian Rupees (or $21 million at September 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 is seeking the return or cancellation of its previously posted custom bond and bank guarantees, but no hearing has been scheduled. 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.

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

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.

Certain of our international income tax returns have been examined for the 2002 through 2004 periods and audit claims have been assessed for approximately $96 million (including interest and penalties). We believe audit claims of an additional $17 million to $19 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 October 31, 2008, there were approximately 39 of these lawsuits in which we are one of many defendants. 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 filed a preliminary objection to our originating summons and the proceeding. On October 21, 2008, the High Court dismissed the objection as being without merit and scheduled for argument our originating summons on December 17, 2008. We intend to 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 of Mexico. We maintain 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 of Mexico windstorms and a 45-day waiting period for all other perils.

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

On September 12, 2008, Hurricane Ike passed through the oil and gas fields of the U.S. Gulf of Mexico causing damage to certain of our rigs. The $200 million aggregate insurance limit available to our rigs operating in the U.S. Gulf of Mexico was sufficient to cover the loss, with the exception of the physical damage deductible and the loss of hire waiting period.

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. Our protection and indemnity policy has 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 $1.1 billion at September 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. The news release disclosed 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 underway. 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 September 30, 2008.

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

We are currently operating four jackup rigs offshore Nigeria under extensions of temporary import permits that allow the rigs to remain in Nigeria through November 28, 2008. 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 adopted additional measures intended to enhance FCPA compliance procedures. Further measures may be required once the investigation concludes.

For the three and nine months ended September 30, 2008, we incurred legal fees and related costs of $2 million and $14 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.

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

NOTE 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 nine months ended September 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 September 30,
	2008							2007
	Contract							Contract
	Drilling							Drilling
	Services		Other			Total		Services		Other			Total
Revenues from external customers	$	852,519	$	9,462		$	861,981	$	743,391	$	47,885		$	791,276
Depreciation and amortization		90,923		1,748			92,671		75,627		2,365			77,992
Segment operating income (loss)		466,377		1,273			467,650		393,949		(230	)		393,719
Interest expense, net of amount capitalized		581		20			601		1,056		8,090			9,146
Income tax provision (benefit)		75,179		11,652			86,831		73,463		(216	)		73,247
Segment profit (loss)		392,224		(9,702	)		382,522		318,595		(315	)		318,280
Total assets (at end of period)		6,197,987		413,170			6,611,157		5,122,966		385,947			5,508,913
Capital expenditures		347,207		8,010			355,217		338,502		24,777			363,279

	Nine Months Ended September 30,
	2008						2007
	Contract						Contract
	Drilling						Drilling
	Services		Other		Total		Services		Other			Total
Revenues from external customers	$	2,475,096	$	61,251	$	2,536,347	$	2,018,041	$	145,658		$	2,163,699
Depreciation and amortization		258,344		5,062		263,406		203,544		6,836			210,380
Segment operating income		1,354,405		39,893		1,394,298		1,064,587		1,440			1,066,027
Interest expense, net of amount capitalized		2,184		248		2,432		3,398		8,483			11,881
Income tax provision (benefit)		247,619		8,832		256,451		210,893		(6,754	)		204,139
Segment profit		1,109,827		32,601		1,142,428		849,888		8,743			858,631
Total assets (at end of period)		6,197,987		413,170		6,611,157		5,122,966		385,947			5,508,913
Capital expenditures		849,226		30,884		880,110		840,168		102,271			942,439

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

NOTE 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 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. We do not expect SFAS No. 162 to have a material impact on our financial position or results of operations.

In October 2008, the FASB issued FSP FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance. The application of FSP FAS 157-3 did not have a material affect on our consolidated financial statements.

NOTE 13 — SUBSEQUENT EVENT

On October 31, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on November 12, 2008, with a distribution date of December 1, 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 September 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 September 30, 2008 was $300 million.

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

19

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	63,253		$	332		$	27		$	150,041		$	—		$	213,653
Accounts receivable		—			19,123			7,414			635,641			—			662,178
Insurance receivables		—			—			—			—			—			—
Prepaid expenses		—			959			105			39,046			—			40,110
Accounts receivable from affiliates		115,943			—			575,229			961,230			(1,652,402	)		—
Other current assets		5,541			52			20			105,172			(62,271	)		48,514
Total current assets		184,737			20,466			582,795			1,891,130			(1,714,673	)		964,455
PROPERTY AND EQUIPMENT
Drilling equipment and facilities		—			1,812,371			113,592			5,189,550			—			7,115,513
Other		—			225			—			100,736			—			100,961
		—			1,812,596			113,592			5,290,286			—			7,216,474
Accumulated depreciation		—			(105,749	)		(68,948	)		(1,646,714	)		—			(1,821,411	)
		—			1,706,847			44,644			3,643,572			—			5,395,063
NOTES RECEIVABLE FROM AFFILIATES		511,835			20,963			44,159			1,741,721			(2,318,678	)		—
INVESTMENTS IN AFFILIATES		5,061,494			6,403,915			3,370,046			—			(14,835,455	)		—
OTHER ASSETS		3,135			5,644			6,547			236,313			—			251,639
	$	5,761,201		$	8,157,835		$	4,048,191		$	7,512,736		$	(18,868,806	)	$	6,611,157
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt	$	—		$	27,756		$	—		$	25,352		$	(27,756	)	$	25,352
Accounts payable		—			4,972			11,211			289,535			—			305,718
Accrued payroll and related costs		17,021			205			9,735			67,853			—			94,814
Taxes payable		—			8,846			—			61,184			—			70,030
Interest payable		10,677			16,270			14,551			451			(34,515	)		7,434
Accounts payable to affiliates		—			1,652,402			—			—			(1,652,402	)		—
Other current liabilities		—			4			1			51,803			—			51,808
Total current liabilities		27,698			1,710,455			35,498			496,178			(1,714,673	)		555,156
LONG-TERM DEBT		349,828			—			351,691			—			—			701,519
NOTES PAYABLE TO AFFILIATES		414,300			1,207,421			120,000			576,957			(2,318,678	)		—
DEFERRED INCOME TAXES		—			8,977			13,045			274,228			—			296,250
OTHER LIABILITIES		6,679			30,234			3,858			59,866			—			100,637
		798,505			2,957,087			524,092			1,407,229			(4,033,351	)		1,653,562
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST		—			—			—			(5,101	)		—			(5,101	)
SHAREHOLDERS’ EQUITY
Ordinary shares-par value $0.10 per share		26,381			—			—			—			—			26,381
Capital in excess of par value		439,679			1,279,983			870,744			1,270,234			(3,420,961	)		439,679
Retained earnings		4,511,660			3,920,765			2,652,730			4,855,398			(11,428,893	)		4,511,660
Accumulated other comprehensive income (loss)		(15,024	)		—			625			(15,024	)		14,399			(15,024	)
		4,962,696			5,200,748			3,524,099			6,110,608			(14,835,455	)		4,962,696
	$	5,761,201		$	8,157,835		$	4,048,191		$	7,512,736		$	(18,868,806	)	$	6,611,157

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 September 30, 2008
(In thousands)
(Unaudited)

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	69,695		$	14,583		$	779,920		$	(29,000	)	$	835,198
Reimbursables		—			277			41			17,769			—			18,087
Labor contract drilling services		—			—			—			8,197			—			8,197
Engineering, consulting and other		—			(10	)		—			509			—			499
		—			69,962			14,624			806,395			(29,000	)		861,981
OPERATING COSTS AND EXPENSES
Contract drilling services		5,294			10,536			6,171			260,728			(29,000	)		253,729
Reimbursables		—			254			34			16,206			—			16,494
Labor contract drilling services		—			—			—			5,410			—			5,410
Engineering, consulting and other		—			—			—			—			—			—
Depreciation and amortization		—			9,185			1,930			81,556			—			92,671
Selling, general and administrative		2,328			1,634			460			11,605			—			16,027
Hurricane losses and recoveries, net		—			—			—			10,000			—			10,000
Gain on disposal of assets, net		—			—			—			—			—			—
		7,622			21,609			8,595			385,505			(29,000	)		394,331
OPERATING INCOME (LOSS)		(7,622	)		48,353			6,029			420,890			—			467,650
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		393,270			343,368			71,773			—			(808,411	)		—
Interest expense, net of amount capitalized		(5,047	)		(10,138	)		(6,388	)		8,975			11,997			(601	)
Interest income and other, net		2,352			1			—			11,948			(11,997	)		2,304
INCOME BEFORE INCOME TAXES		382,953			381,584			71,414			441,813			(808,411	)		469,353
INCOME TAX (PROVISION) BENEFIT		(431	)		2,176			(2,613	)		(85,963	)		—			(86,831	)
NET INCOME	$	382,522		$	383,760		$	68,801		$	355,850		$	(808,411	)	$	382,522

22

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	36,351		$	15,448		$	682,505		$	(15,548	)	$	718,756
Reimbursables		—			83			267			31,128			—			31,478
Labor contract drilling services		—			—			—			40,622			—			40,622
Engineering, consulting and other		—			—			—			420			—			420
		—			36,434			15,715			754,675			(15,548	)		791,276
OPERATING COSTS AND EXPENSES
Contract drilling services		5,320			8,546			6,113			222,845			(15,548	)		227,276
Reimbursables		—			62			266			27,347			—			27,675
Labor contract drilling services		—			—			—			32,324			—			32,324
Engineering, consulting and other		—			—			—			6,073			—			6,073
Depreciation and amortization		—			6,539			1,515			69,938			—			77,992
Selling, general and administrative		3,676			1,010			327			19,604			—			24,617
Hurricane losses and recoveries, net		—			—			—			1,600			—			1,600
		8,996			16,157			8,221			379,731			(15,548	)		397,557
OPERATING INCOME (LOSS)		(8,996	)		20,277			7,494			374,944			—			393,719
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		387,937			365,727			202,504			—			(956,168	)		—
Interest expense, net of amount capitalized		(61,970	)		(11,213	)		(6,448	)		11,734			58,751			(9,146	)
Interest income and other, net		920			1			—			64,784			(58,751	)		6,954
INCOME BEFORE INCOME TAXES		317,891			374,792			203,550			451,462			(956,168	)		391,527
INCOME TAX (PROVISION) BENEFIT		389			1,426			(21,862	)		(53,200	)		—			(73,247	)
NET INCOME	$	318,280		$	376,218		$	181,688		$	398,262		$	(956,168	)	$	318,280

23

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	185,769		$	38,875		$	2,267,968		$	(76,300	)	$	2,416,312
Reimbursables		—			1,177			200			70,132			—			71,509
Labor contract drilling services		—			—			—			47,346			—			47,346
Engineering, consulting and other		—			(8	)		1			1,187			—			1,180
		—			186,938			39,076			2,386,633			(76,300	)		2,536,347
OPERATING COSTS AND EXPENSES
Contract drilling services		17,639			29,017			19,022			756,739			(76,300	)		746,117
Reimbursables		—			1,011			188			62,587			—			63,786
Labor contract drilling services		—			—			—			37,294			—			37,294
Engineering, consulting and other		—			—			—			—			—			—
Depreciation and amortization		—			25,314			5,342			232,750			—			263,406
Selling, general and administrative		7,532			4,621			1,381			43,433			—			56,967
Hurricane losses and recoveries, net		—			—			—			10,000			—			10,000
Gain on disposal of assets, net		—			—			—			(35,521	)		—			(35,521	)
		25,171			59,963			25,933			1,107,282			(76,300	)		1,142,049
OPERATING INCOME (LOSS)		(25,171	)		126,975			13,143			1,279,351			—			1,394,298
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		1,180,153			1,046,513			361,425			—			(2,588,091	)		—
Interest expense, net of amount capitalized		(18,430	)		(30,684	)		(19,164	)		27,117			38,729			(2,432	)
Interest income and other, net		6,703			1			—			39,038			(38,729	)		7,013
INCOME BEFORE INCOME TAXES		1,143,255			1,142,805			355,404			1,345,506			(2,588,091	)		1,398,879
INCOME TAX (PROVISION) BENEFIT		(827	)		6,205			(3,873	)		(257,956	)		—			(256,451	)
NET INCOME	$	1,142,428		$	1,149,010		$	351,531		$	1,087,550		$	(2,588,091	)	$	1,142,428

24

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
OPERATING REVENUES
Contract drilling services	$	—		$	103,977		$	43,922		$	1,851,413		$	(46,137	)	$	1,953,175
Reimbursables		—			439			722			90,068			—			91,229
Labor contract drilling services		—			—			—			116,342			—			116,342
Engineering, consulting and other		—			6			—			2,947			—			2,953
		—			104,422			44,644			2,060,770			(46,137	)		2,163,699
OPERATING COSTS AND EXPENSES
Contract drilling services		16,030			21,554			20,767			623,954			(46,137	)		636,168
Reimbursables		—			369			716			78,744			—			79,829
Labor contract drilling services		—			—			—			93,181			—			93,181
Engineering, consulting and other		—			—			400			16,969			—			17,369
Depreciation and amortization		—			19,311			4,048			187,021			—			210,380
Selling, general and administrative		9,912			2,967			973			45,293			—			59,145
Hurricane losses and recoveries, net		—			—			—			1,600			—			1,600
		25,942			44,201			26,904			1,046,762			(46,137	)		1,097,672
OPERATING INCOME (LOSS)		(25,942	)		60,221			17,740			1,014,008			—			1,066,027
OTHER INCOME (EXPENSE)
Equity earnings in affiliates (net of tax)		957,702			892,272			448,099			—			(2,298,073	)		—
Interest expense, net of amount capitalized		(75,105	)		(34,885	)		(20,496	)		34,312			84,293			(11,881	)
Interest income and other, net		1,007			3			—			91,907			(84,293	)		8,624
INCOME BEFORE INCOME TAXES		857,662			917,611			445,343			1,140,227			(2,298,073	)		1,062,770
INCOME TAX (PROVISION) BENEFIT		969			9,516			(24,158	)		(190,466	)		—			(204,139	)
NET INCOME	$	858,631		$	927,127		$	421,185		$	949,761		$	(2,298,073	)	$	858,631

25

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,142,428		$	1,149,010		$	351,531		$	1,087,550		$	(2,588,091	)	$	1,142,428
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		—			25,314			5,342			232,750			—			263,406
Hurricane losses and recoveries, net		—			—			—			10,000			—			10,000
Deferred income tax provision		—			—			549			13,553			—			14,102
Share-based compensation expense		28,274			—			—			—			—			28,274
Equity earnings in affiliates		(1,180,153	)		(1,046,513	)		(361,425	)		—			2,588,091			—
Pension contributions		—			—			—			(17,445	)		—			(17,445	)
Gain on disposal of assets, net		—			—			—			(35,521	)		—			(35,521	)
Other, net		1,697			5,621			43			(11,296	)		—			(3,935	)
Other changes in current assets and liabilities:
Accounts receivable		—			3,777			2,285			(55,125	)		—			(49,063	)
Hurricane insurance receivables		—			—			—			17,319			—			17,319
Other current assets		(2,067	)		3			92			(41,919	)		—			(43,891	)
Accounts payable		—			(568	)		6,433			(8,271	)		—			(2,406	)
Other current liabilities		23,576			15,940			(4,531	)		(26,588	)		—			8,397
Net cash from operating activities		13,755			152,584			319			1,165,007			—			1,331,665
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		—			(563,349	)		—			—			—			(563,349	)
Other capital expenditures		—			—			(2,503	)		(241,340	)		—			(243,843	)
Major maintenance expenditures		—			—			(2,889	)		(70,029	)		—			(72,918	)
Accrued capital expenditures		—			—			—			92,719			—			92,719
Hurricane insurance receivables		—			—			—			21,747			—			21,747
Notes receivable from affiliates		—			—			—			(300,000	)		300,000			—
Repayments from affiliates		—			—			—			21,065			(21,065	)		—
Proceeds from disposal of assets		—			—			—			39,134			—			39,134
Net cash from investing activities		—			(563,349	)		(5,392	)		(436,704	)		278,935			(726,510	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on bank credit facilities		(50,000	)		—			—			—			—			(50,000	)
Payments of other long-term debt		—			—			—			(7,682	)		—			(7,682	)
Advances (to) from affiliates		281,832			432,162			5,027			(719,021	)		—			—
Repayment of notes to affiliates		—			(21,065	)		—			—			21,065			—
Notes payable to affiliates		300,000			—			—			—			(300,000	)		—
Net proceeds from employee stock transactions		10,070			—			—			—			—			10,070
Dividends paid		(233,638	)		—			—			—			—			(233,638	)
Repurchases of ordinary shares		(271,310	)		—			—			—			—			(271,310	)
Net cash from financing activities		36,954			411,097			5,027			(726,703	)		(278,935	)		(552,560	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		50,709			332			(46	)		1,600			—			52,595
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		12,544			—			73			148,441			—			161,058
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	63,253		$	332		$	27		$	150,041		$	—		$	213,653

26

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

				NHC and NDH			Noble			Other			Consolidating
	Noble			Combined			Drilling			Subsidiaries			Adjustments			Total
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	858,631		$	927,127		$	421,185		$	949,761		$	(2,298,073	)	$	858,631
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		—			19,311			4,048			187,021			—			210,380
Impairment loss on assets		—			—			400			9,789			—			10,189
Deferred income tax provision		—			4,794			382			8,021			—			13,197
Share-based compensation expense		25,951			—			—			—			—			25,951
Equity earnings in affiliates		(957,702	)		(892,272	)		(448,099	)		—			2,298,073			—
Pension contributions		—			—			—			(37,615	)		—			(37,615	)
Other, net		618			67			(743	)		24,085			—			24,027
Other changes in current assets and liabilities:
Accounts receivable		—			(7,882	)		(3,380	)		(100,101	)		—			(111,363	)
Other current assets		1			654			647			17,233			—			18,535
Accounts payable		(17,305	)		(1,510	)		1,804			(19,903	)		—			(36,914	)
Other current liabilities		7,909			(4,306	)		(7,987	)		24,751			—			20,367
Net cash from operating activities		(81,897	)		45,983			(31,743	)		1,063,042			—			995,385
CASH FLOWS FROM INVESTING ACTIVITIES
New construction		—			(428,517	)		—			(113,459	)		—			(541,976	)
Other capital expenditures		—			(52	)		(7,927	)		(322,728	)		—			(330,707	)
Major maintenance expenditures		—			(2,407	)		(914	)		(66,435	)		—			(69,756	)
Accrued capital expenditures		—			(6,334	)		—			62,274			—			55,940
Proceeds from disposal of assets		—			—			—			4,643			—			4,643
Notes receivable from affiliates		—			—			—			(750,350	)		750,350			—
Repayments of notes receivable from affiliates		—			—			—			702,526			(702,526	)		—
Net cash from investing activities		—			(437,310	)		(8,841	)		(483,529	)		47,824			(881,856	)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term debt borrowing		685,000			—			—			—			—			685,000
Short-term debt payment		(685,000	)		—			—			—			—			(685,000	)
Borrowings on bank credit facilities		135,000			—			85,000			—			—			220,000
Payments on bank credit facilities		(35,000	)		—			(85,000	)		—			—			(120,000	)
Payments of other long-term debt		—			—			—			(7,158	)		—			(7,158	)
Advances (to)/from affiliates		32,995			408,939			40,631			(482,565	)		—			—
Notes payable to affiliates		750,350			—			—			—			(750,350	)		—
Repayment of notes payable to affiliates		(685,000	)		(17,526	)		—			—			702,526			—
Net proceeds from employee stock transactions		24,713			—			—			—			—			24,713
Dividends paid		(21,528	)		—			—			—			—			(21,528	)
Repurchases of ordinary shares		(120,687	)		—			—			—			—			(120,687	)
Net cash from financing activities		80,843			391,413			40,631			(489,723	)		(47,824	)		(24,660	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,054	)		86			47			89,790			—			88,869
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,458			36			—			59,216			—			61,710
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	1,404		$	122		$	47		$	149,006		$	—		$	150,579

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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 September 30, 2008, and our results of operations for the three and nine months ended September 30, 2008 and 2007. The following discussion should be read in conjunction with the 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. These forward-looking statements speak only as of the date of this report on Form 10-Q and we undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law. 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 risk factors and other 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 63 offshore drilling units located worldwide, including the Middle East, India, the U.S. Gulf of Mexico, Mexico, the North Sea, Brazil, and West Africa. Our fleet count includes five rigs currently under construction.

Economic Outlook

The global financial crisis created an environment of uncertainty during the third quarter of 2008 that has continued in the fourth quarter of 2008, and it has raised concerns that the worldwide economy may enter into a prolonged recessionary period. Deterioration in the worldwide economy could result in reduced demand for crude oil and natural gas, exploration and production activity and demand for offshore drilling services. The financial crisis has created significant reductions in available capital and liquidity from banks and other providers of credit, which may limit our access to capital used to fund operations and capital expenditures in the future and may adversely affect our customers’ and lenders’ ability to fulfill their obligations to us. Other possible negative impacts include a decline in dayrates for new contracts and a slowing in the pace of new contract activity.

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Demand for our drilling services generally 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 19 newbuild jackup rigs and five new deepwater newbuilds entered service during the first nine months of 2008, and a total of 52 newbuild jackups and 35 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.

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.

Results and Strategy

In the third quarter of 2008, we recognized net income of $383 million, or $1.43 per diluted share, on total revenues of $862 million. The average dayrate across our worldwide fleet increased to $177,683 from $167,002 in the second quarter of 2008. Fleetwide average utilization was 90 percent in the third quarter of 2008 and 90 percent in the prior quarter. Daily contract drilling services costs decreased to $53,979 for the third quarter of 2008 from $54,674 for the second quarter. As a result, our contract drilling services margin increased to 70 percent from 67 percent in the second 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 third 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;

• we completed construction and took delivery of the F&G JU-200E enhanced premium independent leg cantilevered jackup, theNoble Hans Deul;

• we continued construction on the F&G JU-2000E enhanced premium independent leg cantilevered jackup,Noble Scott Marks, which is scheduled for delivery in the second quarter of 2009; and

• we entered into agreements for the construction of a new, dynamically positioned, ultra-deepwater, harsh environmentGlobetrotter-class drillship capable of working in up to 10,000 feet of water, which is scheduled to be delivered in the second half of 2011.

Newbuild capital expenditures during the three and nine months ended September 30, 2008 totaled $252 million and $563 million, respectively.

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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 September 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)	$	9,182,000	$	384,000		$	1,760,000		$	2,005,000		$	1,676,000		$	3,357,000
Jackups/Submersibles(3)		2,923,000		523,000			1,767,000			505,000			128,000			—
Total(4)	$	12,105,000	$	907,000		$	3,527,000		$	2,510,000		$	1,804,000		$	3,357,000
Percent of Available Operating Days Committed (5)				92	%		74	%		39	%		23	%		8	%

(1)	Represents a three-month period beginning October 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 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 $346 million attributable to these performance bonuses.
(3)	Our drilling contracts with Pemex Exploracion y Produccion (“Pemex”) for certain jackups operating offshore in Mexico are subject to price review and adjustment of the rig dayrate. Presently, contracts for five jackups have dayrates indexed to the world average of the highest dayrates published by ODS-Petrodata. After an initial firm dayrate period, the dayrates are generally adjusted quarterly based on formulas calculated from the index. Our contract drilling services backlog has been calculated using the September 30, 2008 index-based dayrates for periods subsequent to the initial firm dayrate period.
(4)	Pemex has the ability to cancel early its drilling contracts with us on 30 days or less notice without Pemex making an early termination payment. We currently have 12 rigs contracted to Pemex in Mexico, and our backlog includes approximately $1.6 billion related to such contracts at September 30, 2008.
(5)	Percentages take into account additional capacity from the estimated dates of deployment of our newbuild rigs that are scheduled to commence operations during the balance of 2008 and 2009.

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. If worldwide economic conditions continue to deteriorate, it is possible that some customers that have entered into letters of intent will not enter into signed drilling contracts. 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 or decline to enter into a drilling contract after executing a letter of intent. As a result, our backlog as of any particular date may not be indicative of our actual operating results for the subsequent 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. The news release disclosed 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 underway. 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 September 30, 2008.

We are currently operating four jackup rigs offshore Nigeria under extensions of temporary import permits that allow the rigs to remain in Nigeria through November 28, 2008. 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 adopted additional measures intended to enhance FCPA compliance procedures. Further measures may be required once the investigation concludes.

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RESULTS OF OPERATIONS

For the Three Months Ended September 30, 2008 and 2007

General

Net income for the three months ended September 30, 2008 (the “Current Quarter”) was $383 million, on operating revenues of $862 million, compared to net income for the three months ended September 30, 2007 (the “Comparable Quarter”) of $318 million, on operating revenues of $791 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 table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the three months ended September 30, 2008 and 2007:

	Average Rig
	Utilization(1)						Operating Days(2)							Average Dayrates
	Three Months Ended						Three Months Ended							Three Months Ended
	September 30,						September 30,							September 30,
											%							%
	2008			2007			2008		2007		Change			2008		2007		Change
Jackups		91	%		95	%		3,444		3,532		-2	%	$	150,350	$	126,342		19	%
Semisubmersibles >6,000’(3)		95	%		99	%		613		636		-4	%		329,586		282,807		17	%
Semisubmersibles <6,000’(4)		100	%		100	%		276		276		—	%		237,674		178,403		33	%
Drillships		67	%		87	%		184		241		-24	%		214,758		130,019		65	%
Submersibles		67	%		68	%		184		188		-2	%		55,117		63,812		-14	%
Total		90	%		94	%		4,701		4,873		-4	%	$	177,683	$	147,501		20	%

(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.

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Contract Drilling Services

The following table sets forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the three months ended September 30, 2008 and 2007:

	Three Months Ended
	September 30,				Change
	2008		2007		$			%
Operating Revenues:
Contract drilling services	$	835,198	$	718,756	$	116,442			16	%
Reimbursables (1)		17,227		24,234		(7,007	)		-29	%
Other		94		401		(307	)		-77	%
	$	852,519	$	743,391	$	109,128			15	%
Operating Costs and Expenses:
Contract drilling services	$	253,729	$	227,276	$	26,453			12	%
Reimbursables (1)		15,604		20,820		(5,216	)		-25	%
Other		—		7		(7	)		-100	%
Depreciation and amortization		90,923		75,627		15,296			20	%
Selling, general and administrative		15,886		24,112		(8,226	)		-34	%
Hurricane losses and recoveries, net		10,000		1,600		8,400			525	%
		386,142		349,442		36,700			11	%
Operating Income	$	466,377	$	393,949	$	72,428			18	%

(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 Current Quarter as compared to the Comparable Quarter were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $147 million, while fewer operating days reduced revenues approximately $31 million.

Average dayrates increased 20 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 32 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 Walker, Noble Roy ButlerandNoble Carl Norbergspent an aggregate of 267 days stacked during the Current Quarter. The aggregate number of stacked days in the Comparable Quarter was 63 days. These decreases in operating days were partially offset by increased operating days of 64 days for the enhanced premium jackupNoble Roger Lewis, which was added to the fleet in September 2007.

Operating Costs and Expenses.Contract drilling services operating costs and expenses increased 12 percent for the Current Quarter over the Comparable Quarter. Newbuild rigs, including the recently completedNoble Roger Lewis,added $4 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 $8 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 a $5 million increase in maintenance expenses and a $2 million increase in crew rotation costs.

The increase in depreciation and amortization in the Current Quarter over the Comparable Quarter was primarily due to depreciation on newbuilds added to the fleet and additional depreciation related to other capital expenditures on our fleet since the Comparable Quarter.

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Selling, general and administrative expenses decreased $8 million in the Current Quarter as compared to the Comparable Quarter. The decrease between periods was primarily driven by a $3 million reduction in costs incurred in the internal investigation of our Nigerian operations, and $3 million in severance costs related to executive departures during the Comparable Quarter. The remaining $2 million decrease was primarily due to reductions in information technology related expenses.

Hurricane losses and recoveries, net for the Current Quarter relate to a charge of $10 million, which represents our deductible under our insurance program, for certain of our rigs operating in the U.S. Gulf of Mexico which sustained damage as a result of Hurricane Ike. All damaged rigs have subsequently returned to work.

Other

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

	Three Months Ended
	September 30,					Change
	2008		2007			$			%
Operating Revenues:
Labor contract drilling services	$	8,197	$	40,622		$	(32,425	)		-80	%
Reimbursables (1)		860		7,244			(6,384	)		-88	%
Engineering, consulting and other		405		19			386			**
	$	9,462	$	47,885		$	(38,423	)		-80	%
Operating Costs and Expenses:
Labor contract drilling services	$	5,410	$	32,324		$	(26,914	)		-83	%
Reimbursables (1)		890		6,855			(5,965	)		-87	%
Engineering, consulting and other		—		6,066			(6,066	)		-100	%
Depreciation and amortization		1,748		2,365			(617	)		-26	%
Selling, general and administrative		141		505			(364	)		-72	%
		8,189		48,115			(39,926	)		-83	%
Operating Income	$	1,273	$	(230	)	$	1,503			**

**	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 third quarter of 2007 related to our North Sea labor contract drilling services 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 drilling services business and the return of theNoble Kolskayato its owner.

Engineering, consulting and other expenses decreased $6 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. The Comparable Quarter included $6 million in costs associated with the sale of this non-core asset. 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 $9 million primarily due to lower debt levels in the Current Quarter than the Comparable Quarter primarily as a result of short-term borrowings during the Comparable Quarter which contributed $8 million in interest expense in the Comparable Quarter. The short-term borrowings were used to repay an inter-company loan in connection with the dissolution of a wholly-owned subsidiary. Capitalized interest for the Current Quarter was $11 million as compared to $13 million for the Comparable Quarter.

Interest income and other, net.Interest income decreased $5 million in the Current Quarter from the Comparable Quarter primarily as a result of the investment of proceeds from the short-term borrowings described above during the Comparable Quarter which contributed $6 million in interest income in the Comparable Quarter.

Income Tax Provision.The income tax provision increased $14 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 approximately $15 million, offset by a lower effective tax rate of 18.5 percent in the Current Quarter compared to 18.7 percent in the Comparable Quarter, which decreased income tax expense by approximately $1 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 Nine Months Ended September 30, 2008 and 2007

General

Net income for the nine months ended September 30, 2008 (the “Current Period”) was $1.1 billion, on operating revenues of $2.5 billion, compared to net income for the nine months ended September 30, 2007 (the “Comparable Period”) of $859 million, on operating revenues of $2.2 billion.

Rig Utilization, Operating Days and Average Dayrates

The following table sets forth the average rig utilization, operating days and average dayrates for our rig fleet for the nine months ended September 30, 2008 and 2007:

	Average Rig
	Utilization(1)						Operating Days(2)							Average Dayrates
	Nine Months Ended						Nine Months Ended							Nine Months Ended
	September 30,						September 30,							September 30,
											%							%
	2008			2007			2008		2007		Change			2008		2007		Change
Jackups		94	%		97	%		10,525		10,598		-1	%	$	147,554	$	113,770		30	%
Semisubmersibles >6,000’(3)		95	%		100	%		1,822		1,732		5	%		314,612		276,590		14	%
Semisubmersibles <6,000’(4)		100	%		85	%		822		694		18	%		210,695		174,836		21	%
Drillships		67	%		94	%		548		766		-28	%		160,066		119,959		33	%
Submersibles		66	%		88	%		545		717		-24	%		53,161		76,953		-31	%
Total		91	%		96	%		14,262		14,507		-2	%	$	169,419	$	134,639		26	%

(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.

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Contract Drilling Services

The following table sets forth the operating revenues and the operating costs and expenses for our contract drilling services segment for the nine months ended September 30, 2008 and 2007:

	Nine Months Ended
	September 30,				Change
	2008		2007		$			%
Operating Revenues:
Contract drilling services	$	2,416,312	$	1,953,175	$	463,137			24	%
Reimbursables (1)		58,039		63,859		(5,820	)		-9	%
Other		745		1,007		(262	)		-26	%
	$	2,475,096	$	2,018,041	$	457,055			23	%
Operating Costs and Expenses:
Contract drilling services	$	746,117	$	636,168	$	109,949			17	%
Reimbursables (1)		50,922		54,465		(3,543	)		-7	%
Other		—		163		(163	)		-100	%
Depreciation and amortization		258,344		203,544		54,800			27	%
Selling, general and administrative		55,308		57,515		(2,207	)		-4	%
Hurricane losses and recoveries, net		10,000		1,600		8,400			**
		1,120,691		953,455		167,236			18	%
Operating Income	$	1,354,405	$	1,064,586	$	289,819			27	%

**	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.Contract drilling services revenue increases for the Current Period as compared to the Comparable Period were primarily driven by increases in average dayrates. Average dayrates increased revenues approximately $505 million for the Current Period, while fewer operating days reduced revenues approximately $42 million.

Average dayrates increased 26 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 216 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 Walker, Noble Roy ButlerandNoble Carl Norbergspent an aggregate total of 565 days stacked during the Current Period. The aggregate number of stacked days in the Comparable Period was 64 days. These decreases in operating days were partially offset by increased operating days of 418 days for two recently completed 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. Additionally, the Current Period had one more available operating day than the Comparable Period due to leap year, which added 54 more operating days in the Current Period.

Operating Costs and Expenses.Contract drilling services operating costs and expenses increased 17 percent for the Current Period over the Comparable Period. Newbuild rigs, including theNoble Clyde BoudreauxandNoble Roger Lewis,added $45 million of operating costs in the Current Period. Excluding the effect of these rigs, our labor costs increased $40 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 $25 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 a $9 million increase in crew rotation and transportation costs and a $3 million increase in maintenance expenses. Increases from period to period were also due to a lesser extent to increases in catering, fuel, 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,and additional depreciation related to other capital expenditures on our fleet since the Comparable Period.

Selling, general and administrative expenses decreased $2 million in the Current Period from the Comparable Period primarily due to a $6 million decrease in severance costs related to executive departures and a $2 million reduction in compensation expense on our Restoration Plan mark-to-market adjustment. This decrease in costs was partially offset by a $7 million increase in costs incurred in the internal investigation of our Nigerian operations.

Hurricane losses and recoveries, net for the Current Period relate to a charge of $10 million, which represents our deductible under our insurance program, for certain of our rigs operating in the U.S. Gulf of Mexico which sustained damage as a result of Hurricane Ike. All damaged rigs have subsequently returned to work.

Other

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

	Nine Months Ended
	September 30,					Change
	2008			2007		$			%
Operating Revenues:
Labor contract drilling services	$	47,346		$	116,342	$	(68,996	)		-59	%
Reimbursables (1)		13,470			27,370		(13,900	)		-51	%
Engineering, consulting and other		435			1,946		(1,511	)		-78	%
	$	61,251		$	145,658	$	(84,407	)		-58	%
Operating Costs and Expenses:
Labor contract drilling services	$	37,294		$	93,181	$	(55,887	)		-60	%
Reimbursables (1)		12,864			25,364		(12,500	)		-49	%
Engineering, consulting and other		—			17,206		(17,206	)		-100	%
Depreciation and amortization		5,062			6,836		(1,774	)		-26	%
Selling, general and administrative		1,659			1,630		29			2	%
Gain on disposal of assets, net		(35,521	)		—		(35,521	)		**
		21,358			144,217		(122,859	)		-85	%
Operating Income	$	39,893		$	1,441	$	38,452			**

**	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 Current Period related to our North Sea labor contract drilling services business andNoble Kolskayawere $22 million as compared to $93 million for the Comparable 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.

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

Engineering, consulting and other expenses decreased $17 million in the Current Period 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 $13 million of additional costs associated with the sale of these non-core assets.

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 $9 million due to lower debt levels in the Current Period than the Comparable Period primarily as a result of short-term borrowings during the Comparable Period which contributed $8 million in interest expense in the Comparable Period. The short-term borrowings were used to repay an inter-company loan in connection with the dissolution of a wholly-owned subsidiary. Capitalized interest for the Current Period was $35 million as compared to $38 million for the Comparable Period.

Interest income and other, net.Interest income decreased $2 million in the Current Period over the Comparable Period primarily as a result of the investment of the proceeds from the short-term borrowings described above during the Comparable Period which contributed $6 million in interest income during 2007. This decrease was partially offset by an average increase in cash and cash equivalent balances during the Current Period.

Income Tax Provision.The income tax provision increased $52 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 approximately $64 million, offset by a lower effective tax rate of 18.3 percent in the Current Period compared to 19.2 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 $1.3 billion, which compared to $995 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 September 30, 2008, we had cash and cash equivalents of $214 million and $550 million available under our bank credit facility described under “Credit Facilities and Long-Term Debt” below. We had working capital of $409 million and $367 million at September 30, 2008 and December 31, 2007, respectively. Total debt as a percentage of total debt plus shareholders’ equity was 13 percent at September 30, 2008 and 15 percent at December 31, 2007. Additionally, at September 30, 2008, we had a total contract drilling services backlog of approximately $12 billion. Our backlog reflects a commitment of 92 percent of operating days for the remainder of 2008 and 74 percent for 2009. See additional information regarding our backlog at “Contract Drilling Services Backlog.”

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. Our ability to issue long-term debt will be dependent on the availability of credit in the capital markets, which have been adversely impacted by the global financial and credit crisis and other factors beyond our control.

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 nine months ended September 30, 2008, we repurchased 6 million of our ordinary shares pursuant to this program at an average price of $48.33 per share for a total cost of $288 million. 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 September 30, 2008, 20 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.

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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.

On October 31, 2008, Noble’s Board of Directors declared a quarterly cash dividend of $0.04 per ordinary share payable to shareholders of record on November 12, 2008, with a distribution date of December 1, 2008.

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 $880 million and $942 million for the nine months ended September 30, 2008 and 2007, respectively.

We currently have five rigs under construction. Capital expenditures for new construction in the Current Quarter and the Current Period totaled $252 million and $563 million, respectively. Capital expenditures for new construction in the Current Period included $160 million for theNoble Danny Adkins, $151 million for theNoble Jim Day,$81 million for theNoble Dave Beardand $88 million for ourGlobetrotter-class drillship. Additionally, the Current Period included $83 million for our remaining newbuilds, which include theNoble Scott Marksand the recently completedNoble Hans Deul. Other capital expenditures totaled $244 million in the Current Period and included approximately $88 million for major upgrade projects. Major maintenance expenditures totaled $73 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 $1.1 billion outstanding at September 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.

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. The 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 September 30, 2008, we had $50 million in borrowings and no letters of credit outstanding under this facility, leaving $550 million remaining available.

We had letters of credit of $178 million and performance and tax assessment bonds totaling $328 million supported by surety bonds outstanding at September 30, 2008. Of the letters of credit outstanding at September 30, 2008, $134 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.

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Our debt decreased from $785 million (including current maturities of $10 million) at December 31, 2007 to $727 million (including current maturities of $25 million) at September 30, 2008, due to debt repayments under the Credit Facility of $50 million coupled with other debt repayments of $8 million. At September 30, 2008 and December 31, 2007, we had no off-balance sheet debt or other off-balance sheet arrangements. At September 30, 2008, we were in compliance with all our debt covenants.

NEW ACCOUNTING PRONOUNCEMENTS

In March 2008, the Financial Accounting Standards Board (“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 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. We do not expect SFAS No. 162 to have a material impact on our financial position or results of operations.

In October 2008, the FASB issued FSP FAS 157-3,Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active(“FSP FAS 157-3”). FSP FAS 157-3 clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance. The application of FSP FAS 157-3 did not have a material affect on our consolidated financial statements.

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 September 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.

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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 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 contracts settling monthly in Euros and British Pounds. During the third quarter of 2008, we settled all outstanding forward contracts related to our North Sea operations.

During the third quarter of 2008, we entered into a firm commitment for the construction of a newbuild drillship. The drillship will be constructed in two phases, with the second phase being installation and commissioning of the topside equipment. The contract for this second phase of construction is denominated in Euros, and in order to mitigate the risk of fluctuations in foreign currency exchange rates, we entered into forward contracts to purchase Euros. As of September 30, 2008, the aggregate notional amount of the forward contracts was 80 million Euros. Each forward contract settles in connection with required payments per the contract. We are accounting for these forward contracts as fair value 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/liabilities or Other assets/liabilities, depending on when the forward contract is expected to be settled. Gains and losses from these fair value hedges are recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged. The fair market value of these outstanding forward contracts, which are included in Other current liabilities and Other liabilities, totaled approximately $3.8 million at September 30, 2008. A one percent change in the exchange rates for the Euro would change the fair value of these forward contracts by approximately $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 the 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 September 30, 2008, our liability under the Restoration Plan totaled $10 million. During the third quarter of 2008, we purchased investments that closely correlate to the investment elections made by participants in the Restoration Plan in order to mitigate the impact of the phantom investment income and losses on our financial statements. The value of these investments held for our benefit totaled $10 million at September 30, 2008.

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 September 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.

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During the quarter ended September 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 during the quarter ended September 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.

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 Forms 10-Q for the quarters ended March 31 and June 30, 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.

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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.

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 filed a preliminary objection to our originating summons and the proceeding. On October 21, 2008, the High Court dismissed the objection as being without merit and scheduled for argument our originating summons on December 17, 2008. We intend to 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.

The recent worldwide financial and credit crisis could lead to an extended worldwide economic recession and have a material adverse effect on our financial position, results of operations and cash flows.

The recent worldwide financial and credit crisis has reduced the availability of liquidity and credit to fund the continuation and expansion of industrial business operations worldwide. The shortage of liquidity and credit combined with recent substantial losses in worldwide equity markets could lead to an extended worldwide economic recession. A slowdown in economic activity caused by a recession would likely reduce worldwide demand for energy and demand for drilling services. If demand for drilling services declines, we could experience a decline in dayrates for new contracts and a slowing in the pace of new contract activity. Forecasted crude oil prices for the remainder of 2008 and for 2009 have declined substantially in the last month. Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices. Demand for our services is particularly sensitive to the level of exploration, development, and production activity of, and the corresponding capital spending by, oil and natural gas companies. Any prolonged reduction in oil and natural gas prices could result in lower levels of exploration, development and production activity. Lower levels of exploration activity could result in a corresponding decline in the demand for our drilling services, which could have a material adverse effect on our financial position, results of operations and cash flows. The financial crisis may also adversely affect the ability of shipyards to meet scheduled deliveries of our newbuilds and our ability to renew our fleet through new vessel construction projects and conversion projects.

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The global financial and credit crisis may have impacts on our liquidity and financial condition that we currently cannot predict.

The global financial and credit crisis and related instability in the global financial system may have an impact on our liquidity and financial condition, and we may face significant challenges if conditions in the financial markets do not improve. Our ability to access the capital markets or borrow money may be severely restricted at a time when we would like, or need, to access capital, which could have an adverse impact on our ability to react to changing economic and business conditions and to fund our operations and capital expenditures in the future. Approximately $150 million aggregate principal amount of our senior notes matures in 2009, and our ability to refinance this debt in the capital markets could be impaired if current market conditions continue or worsen. The credit crisis could also have an impact on our lenders or customers, causing them to fail to meet their obligations to us. While the ultimate outcome of the recent financial crisis and its impact on our future liquidity and financial condition cannot be predicted, we will continue to monitor it.

We are subject to changes in tax laws.

We are a Cayman Islands company and operate through various subsidiaries in numerous countries throughout the world including the United States. Consequently, we are subject to changes in tax laws, treaties or regulations or the interpretation or enforcement thereof in the U.S., the Cayman Islands or jurisdictions in which we or any of our subsidiaries operate or are resident.

In 2004, the U.S. Congress enacted legislation as part of the American Jobs Creation Act of 2004 (the “AJCA”) that tightened the rules regarding corporate inversion transactions, which legislation grandfathered companies that implemented an inversion transaction before March 4, 2003. Noble’s corporate inversion effected on April 30, 2002 was therefore grandfathered. Nevertheless, there has been activity in the U.S. Congress subsequent to the AJCA to enact legislation that would retroactively reverse the status of Noble under the law or otherwise cause us to be treated as a U.S. corporation. Congress may approve future tax legislation relating to Noble’s corporate inversion or otherwise affecting our status as a foreign corporation. Any such legislation could contain provisions that would subject Noble to U.S. Federal income tax as if Noble were a U.S. corporation. Payment of any such tax would reduce our net income. Legislation has also been proposed in Congress that would deny us the benefits under U.S. tax treaties with respect to certain intercompany transactions. We cannot predict what legislation, if any, relating to our corporate inversion, our status as a foreign corporation, or our eligibility for benefits under tax treaties may result from any future Congressional legislative activities.

Tax laws and regulations are highly complex and subject to interpretation. Consequently, we are subject to changing tax laws, treaties and regulations in and between countries in which we operate, including treaties between the United States and other nations. Our income tax expense is based upon our interpretation of the tax laws in effect in various countries at the time that the expense was incurred. If these laws, treaties or regulations change or if the U.S. Internal Revenue Service or other taxing authorities do not agree with our assessment of the effects of such laws, treaties and regulations, this could have a material adverse effect on us, including the imposition of a higher effective tax rate on our worldwide earnings or a reclassification of the tax impact of our significant corporate restructuring transactions.

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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(1)		or Programs(1)
July 2008		1,051	(2)	$	52.29	(2)		—		25,712,000
August 2008		3,540,916	(3)	$	49.19	(3)		3,537,000		22,175,000
September 2008		1,847,259	(4)	$	47.82	(4)		1,835,109		20,339,891

(1)	All share purchases were made in the open market and were pursuant to the share repurchase program, which Noble’s Board of Directors authorized and adopted and that we announced on January 31, 2002. Our repurchase program has no date of expiration.
(2)	Includes 1,051 ordinary shares at an average price of $52.29 per share acquired by surrender to us by employees for withholding taxes payable upon the vesting of restricted stock.
(3)	Includes 3,916 ordinary shares at an average price of $48.68 per share acquired by surrender to us by employees for withholding taxes payable upon the vesting of restricted stock. Shares repurchased pursuant to our share repurchase program were purchased at an average share price of $49.19 per share.
(4)	Includes 12,150 ordinary shares at an average price of $47.38 per share acquired by surrender to us by employees for withholding taxes payable upon the vesting of restricted stock. Shares repurchased pursuant to our share repurchase program were purchased at an average share price of $47.82 per share.

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: November 7, 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
	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.

+ Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K.

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