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

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

Commission file number: 000-53604

NOBLE CORPORATION

Switzerland (State or other jurisdiction of incorporation or organization)		98-0619597 (I.R.S. employer identification number)

Dorfstrasse 19A, Baar, Switzerland 6430
(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: 41 (41) 761-65-55

Title of each class		Name of each exchange on which registered
Shares, Par Value 4.80 CHF Per Share		New York Stock Exchange

Commission file number: 001-31306

NOBLE CORPORATION

Cayman Islands (State or other jurisdiction of incorporation or organization)		98-0366361 (I.R.S. employer identification number)

P.O. Box 309 GT, Ugland House S. Church Street, Georgetown, Grand Cayman Islands, BWI
(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code: (345) 949-8080

Title of each class		Name of each exchange on which registered
N/A		N/A

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether each 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 filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Number of shares outstanding at April 30, 2010: Noble Corporation (Switzerland) — 255,840,260

Noble Corporation, a Cayman Islands company and a wholly owned subsidiary of Noble Corporation, a Swiss corporation, meets the conditions set forth in General Instructions H(1) (a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format contemplated by paragraphs (b) and (c) of General Instruction H(2) of Form 10-Q.

 

 

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Noble Corporation (Noble-Swiss) Financial Statements:
Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009			3
Consolidated Statement of Income for the three months ended March 31, 2010 and 2009			4
Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009			5
Consolidated Statement of Shareholders’ Equity for the three months ended March 31, 2010			6
Consolidated Statement of Comprehensive Income for the three months ended March 31, 2010 and 2009			7
Noble Corporation (Noble-Cayman) Financial Statements:
Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009			8
Consolidated Statement of Income for the three months ended March 31, 2010 and 2009			9
Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and 2009			10
Consolidated Statement of Shareholder Equity for the three months ended March 31, 2010			11
Consolidated Statement of Comprehensive Income for the three months ended March 31, 2010 and 2009			12
Notes to Combined Consolidated Financial Statements			13
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3 Quantitative and Qualitative Disclosures About Market Risk			41
Item 4 Controls and Procedures			42
PART II OTHER INFORMATION
Item 1 Legal Proceedings			43
Item 1A Risk Factors			43
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 6 Exhibits			43
SIGNATURES			44
Index to Exhibits			45
Exhibit 3.1
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 31.3
Exhibit 32.1
Exhibit 32.2
Exhibit 32.3
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

This combined Quarterly Report on Form 10-Q is separately filed by Noble Corporation, a Swiss corporation (“Noble-Swiss”), and Noble Corporation, a Cayman Islands company (“Noble-Cayman”). Information in this filing relating to Noble-Cayman is filed by Noble-Swiss and separately by Noble-Cayman on its own behalf. Noble-Cayman makes no representation as to information relating to Noble-Swiss (except as it may relate to Noble-Cayman) or any other affiliate or subsidiary of Noble-Swiss. Since Noble-Cayman meets the conditions specified in General Instructions H(1)(a) and (b) to Form 10-Q, it is permitted to use the reduced disclosure format for wholly owned subsidiaries of reporting companies. Accordingly, Noble-Cayman has omitted from this report the information called for by Item 3 (Quantitative and Qualitative Disclosures about Market Risk) of Part I of Form 10-Q and the following items of Part II of Form 10-Q: Item 2 (Unregistered Sales of Equity Securities and Use of Proceeds), Item 3 (Defaults upon Senior Securities) and Item 4 (Submission of Matters to a Vote of Security Holders).

This report should be read in its entirety as it pertains to each Registrant. Except where indicated, the Consolidated Financial Statements and the Notes are combined. References in this Quarterly Report on Form 10-Q to “Noble,” the “Company,” “we,” “us,” “our” and words of similar meaning refer collectively to Noble-Swiss and its consolidated subsidiaries, including Noble-Cayman, after March 26, 2009 and to Noble-Cayman and its consolidated subsidiaries for periods through March 26, 2009. Noble-Swiss became a successor registrant to Noble-Cayman pursuant to Rule 12g-3 of the Securities Exchange Act of 1934, as amended, as a result of a series of transactions described in Note 1 to Item 1, Part I of this Quarterly Report on Form 10-Q.

PART I. FINANCIAL INFORMATION

Item 1.		Financial Statements

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		March 31,				December 31,
		2010				2009
ASSETS
Current assets
Cash and cash equivalents		$	847,710			$	735,493
Accounts receivable			622,213				647,454
Prepaid expenses and other current assets			122,017				100,243
Total current assets			1,591,940				1,483,190
Property and equipment
Drilling equipment and facilities			8,979,100				8,666,750
Other			151,319				143,477
			9,130,419				8,810,227
Accumulated depreciation			(2,265,497	)			(2,175,775	)
			6,864,922				6,634,452
Other assets			277,240				279,254
Total assets		$	8,734,102			$	8,396,896
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	249,847			$	197,800
Accrued payroll and related costs			89,824				100,167
Taxes payable			80,013				68,760
Other current liabilities			62,543				67,220
Total current liabilities			482,227				433,947
Long-term debt			750,987				750,946
Deferred income taxes			299,787				300,231
Other liabilities			146,564				123,340
Total liabilities			1,679,565				1,608,464
Commitments and contingencies
Shareholders’ equity
Shares; 261,926 shares and 261,975 shares outstanding			1,118,742				1,130,607
Treasury shares, at cost; 6,115 shares and 3,750 shares			(242,459	)			(143,031	)
Additional paid-in capital			11,389				—
Retained earnings			6,227,512				5,855,737
Accumulated other comprehensive loss			(60,647	)			(54,881	)
Total shareholders’ equity			7,054,537				6,788,432
Total liabilities and shareholders’ equity		$	8,734,102			$	8,396,896

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

(In thousands, except per share amounts)

(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Operating revenues
Contract drilling services		$	808,646			$	872,397
Reimbursables			24,233				16,678
Labor contract drilling services			7,761				6,934
Other			211				142
			840,851				896,151
Operating costs and expenses
Contract drilling services			254,431				240,856
Reimbursables			19,743				14,083
Labor contract drilling services			5,888				4,376
Depreciation and amortization			115,857				92,984
Selling, general and administrative			21,971				17,717
(Gain)/loss on asset disposal/involuntary conversion, net			—				12,034
			417,890				382,050
Operating income			422,961				514,101
Other income (expense)
Interest expense, net of amount capitalized			(465	)			(521	)
Interest income and other, net			3,626				1,072
Income before income taxes			426,122				514,652
Income tax provision			(55,396	)			(100,357	)
Net income		$	370,726			$	414,295
Net income per share
Basic		$	1.44			$	1.58
Diluted		$	1.43			$	1.58

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Cash flows from operating activities
Net income		$	370,726			$	414,295
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			115,857				92,984
(Gain)/loss on asset disposal/involuntary conversion, net			—				12,034
Deferred income tax provision			(444	)			4,545
Share-based compensation expense			8,100				8,400
Pension contributions			(1,574	)			(1,290	)
Other changes in assets and liabilities:
Accounts receivable			25,241				11,939
Other current assets			(25,625	)			(26,267	)
Other assets			(6,162	)			(10,665	)
Accounts payable			(2,429	)			23,711
Other current liabilities			(1,367	)			17,236
Other liabilities			21,611				912
Net cash from operating activities			503,934				547,834
Cash flows from investing activities
New construction			(141,404	)			(135,576	)
Other capital expenditures			(179,044	)			(89,505	)
Major maintenance expenditures			(18,316	)			(25,639	)
Change in accrued capital expenditures			54,476				(47,259	)
Net cash from investing activities			(284,288	)			(297,979	)
Cash flows from financing activities
Payments of other long-term debt			—				(172,700	)
Proceeds from options exercised			2,443				177
Dividends/par value reduction payments paid			(11,935	)			(10,470	)
Repurchases of employee shares			(9,285	)			(5,563	)
Repurchases of shares			(88,652	)			(60,867	)
Net cash from financing activities			(107,429	)			(249,423	)
Net increase in cash and cash equivalents			112,217				432
Cash and cash equivalents, beginning of period			735,493				513,311
Cash and cash equivalents, end of period		$	847,710			$	513,743

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

(In thousands)

(Unaudited)

																						Accumulated
										Additional												Other				Total
		Shares								Paid-in				Retained				Treasury				Comprehensive				Shareholders’
		Balance				Par Value				Capital				Earnings				Shares				Loss				Equity
Balance at December 31, 2009			261,975			$	1,130,607			$	—			$	5,855,737			$	(143,031	)		$	(54,881	)		$	6,788,432
Share-based compensation
Share-based compensation			2				11				8,089				—				—				—				8,100
Contribution to employee benefit plans			1				2				16				—				—				—				18
Exercise of stock options			118				511				1,932				—				—				—				2,443
Tax benefit of stock options exercised			—				—				456				—				—				—				456
Restricted shares surrendered for withholding taxes or forfeited			(170	)			(739	)			896				1,334				(10,776	)			—				(9,285	)
Repurchases of shares			—				—								—				(88,652	)			—				(88,652	)
Net income			—				—								370,726				—				—				370,726
Dividends/par value reduction payments paid			—				(11,650	)							(285	)			—				—				(11,935	)
Other comprehensive income (loss), net			—				—								—				—				(5,766	)			(5,766	)
Balance at March 31, 2010			261,926			$	1,118,742			$	11,389			$	6,227,512			$	(242,459	)		$	(60,647	)		$	7,054,537

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		Three Months Ended
		March 31
		2010				2009
Net income		$	370,726			$	414,295
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			(4,480	)			(1,127	)
Settlements and gain (loss) on foreign currency forward contracts			(1,925	)			194
Amortization of deferred pension plan amounts			639				852
Other comprehensive loss, net			(5,766	)			(81	)
Comprehensive income		$	364,960			$	414,214

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		March 31,				December 31,
		2010				2009
ASSETS
Current assets
Cash and cash equivalents		$	837,181			$	726,225
Accounts receivable			622,213				647,454
Due from affiliate			296,196				191,004
Other current assets			120,348				99,206
Total current assets			1,875,938				1,663,889
Property and equipment
Drilling equipment and facilities			8,979,100				8,666,750
Other			123,071				115,414
			9,102,171				8,782,164
Accumulated depreciation			(2,265,304	)			(2,175,775	)
			6,836,867				6,606,389
Other assets			277,239				279,139
Total assets		$	8,990,044			$	8,549,417
LIABILITIES AND SHAREHOLDER EQUITY
Current liabilities
Accounts payable		$	249,792			$	197,712
Accrued payroll and related costs			87,515				99,372
Taxes payable			71,027				61,577
Other current liabilities			62,309				67,246
Total current liabilities			470,643				425,907
Long-term debt			750,987				750,946
Deferred income taxes			299,787				300,231
Other liabilities			146,564				123,137
Total liabilities			1,667,981				1,600,221
Commitments and contingencies
Shareholder equity
Ordinary shares; 261,246 shares outstanding			26,125				26,125
Capital in excess of par value			368,374				368,374
Retained earnings			6,988,211				6,609,578
Accumulated other comprehensive loss			(60,647	)			(54,881	)
Total shareholder equity			7,322,063				6,949,196
Total liabilities and shareholder equity		$	8,990,044			$	8,549,417

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Operating revenues
Contract drilling services		$	808,646			$	872,397
Reimbursables			24,233				16,678
Labor contract drilling services			7,761				6,934
Other			211				142
			840,851				896,151
Operating costs and expenses
Contract drilling services			252,781				240,856
Reimbursables			19,743				14,083
Labor contract drilling services			5,888				4,376
Depreciation and amortization			115,664				92,984
Selling, general and administrative			15,888				17,625
(Gain)/loss on asset disposal/involuntary conversion, net			—				12,034
			409,964				381,958
Operating income			430,887				514,193
Other income (expense)
Interest expense, net of amount capitalized			(465	)			(521	)
Interest income and other, net			3,607				1,072
Income before income taxes			434,029				514,744
Income tax provision			(55,396	)			(100,357	)
Net income		$	378,633			$	414,387

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Cash flows from operating activities
Net income		$	378,633			$	414,387
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization			115,664				92,984
(Gain)/loss on asset disposal/involuntary conversion, net			—				12,034
Deferred income tax provision			(444	)			4,545
Share-based compensation expense			—				8,400
Pension contributions			(1,574	)			(1,290	)
Other changes in assets and liabilities:
Accounts receivable			25,241				11,939
Due from affiliates, net			(105,192	)			—
Other current assets			(24,993	)			(26,267	)
Other assets			(6,276	)			(10,750	)
Accounts payable			(2,396	)			23,619
Other current liabilities			(5,418	)			17,236
Other liabilities			21,814				912
Net cash from operating activities			395,059				547,749
Cash flows from investing activities
New construction			(141,404	)			(135,576	)
Other capital expenditures			(178,859	)			(89,505	)
Major maintenance expenditures			(18,316	)			(25,639	)
Change in accrued capital expenditures			54,476				(47,259	)
Net cash from investing activities			(284,103	)			(297,979	)
Cash flows from financing activities
Payments of other long-term debt			—				(172,700	)
Employee stock transactions			—				(5,386	)
Dividends/par value reduction payments paid			—				(10,470	)
Repurchases of ordinary shares			—				(60,867	)
Net cash from financing activities			—				(249,423	)
Net increase in cash and cash equivalents			110,956				347
Cash and cash equivalents, beginning of period			726,225				513,311
Cash and cash equivalents, end of period		$	837,181			$	513,658

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(In thousands)

(Unaudited)

																		Accumulated
										Capital in								Other				Total
		Shares								Excess of				Retained				Comprehensive				Shareholders’
		Balance				Par Value				Par Value				Earnings				Loss				Equity
Balance at December 31, 2009			261,246			$	26,125			$	368,374			$	6,609,578			$	(54,881	)		$	6,949,196
Net income															378,633								378,633
Other comprehensive loss, net																			(5,766	)			(5,766	)
Balance at March 31, 2010			261,246			$	26,125			$	368,374			$	6,988,211			$	(60,647	)		$	7,322,063

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(In thousands)

(Unaudited)

		Three Months Ended
		March 31,
		2010				2009
Net income		$	378,633			$	414,387
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments			(4,480	)			(1,127	)
Gain (loss) on forward currency forward contracts			(1,925	)			194
Amortization of deferred pension plan amounts			639				852
Other comprehensive loss, net			(5,766	)			(81	)
Comprehensive income		$	372,867			$	414,306

See accompanying notes to the consolidated financial statements.

NOBLE CORPORATION (NOBLE-SWISS) AND SUBSIDIARIES
NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

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

Note 1 — Basis of Presentation

On March 26, 2009, we completed a series of transactions that effectively changed the place of incorporation of our parent holding company from the Cayman Islands to Switzerland. As a result of these transactions, Noble-Cayman, our former publicly-traded parent holding company, became a direct, wholly-owned subsidiary of Noble-Swiss, our current publicly-traded parent company. Noble-Swiss’ principal asset is 100% of the shares of Noble-Cayman. Noble-Cayman has no public equity outstanding after March 26, 2009. The consolidated financial statements of Noble-Swiss include the accounts of Noble-Cayman, and Noble-Swiss conducts substantially all of its business through Noble-Cayman and its subsidiaries. In connection with these transactions, we relocated our principal executive offices, executive officers and selected personnel to Geneva, Switzerland.

The accompanying unaudited consolidated financial statements of Noble-Swiss and Noble-Cayman 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 disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) 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 statement 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 Sheets at December 31, 2009 presented herein are derived from the December 31, 2009, 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, 2009, filed by both Noble-Swiss and Noble-Cayman. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Certain amounts in prior periods have been reclassified to conform to the current year presentation.

Note 2 — Share Data

Share capital

The following is a detail of Noble-Swiss’ share capital as of March 31, 2010, and December 31, 2009, (in thousands).

		March 31,				December 31,
		2010				2009
Shares outstanding and trading			255,811				258,225
Treasury shares			6,115				3,750
Total shares outstanding			261,926				261,975
Treasury shares held for share-based compensation plans			14,340				14,291
Total shares issued			276,266				276,266
Par value (in CHF)			4.80				4.85

Shares issued by Noble-Swiss at March 31, 2010, totalled 276.3 million shares and include 6.1 million shares held in treasury and 14.3 million shares held by a wholly-owned subsidiary. Treasury shares are recorded at cost, and include shares repurchased pursuant to our approved share repurchase program discussed below and shares surrendered by employees for taxes payable upon the vesting of restricted stock. Our Board of Directors is authorized to issue up to a maximum of 414.4 million shares without additional shareholder approval and without conditions regarding use.

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

Our Board of Directors may further increase Noble-Swiss’ share capital through the issuance of up to 138.1 million conditionally authorized registered shares without obtaining additional shareholder approval. The issuance of these conditionally authorized registered shares is subject to certain conditions regarding their use.

Treasury shares/share repurchases

Share repurchases were made pursuant to the share repurchase program that our Board of Directors authorized and adopted. Subsequent to our 2009 Swiss migration, all shares repurchased under our share repurchase program are held in treasury. During the three months ended March 31, 2010, we repurchased 2.1 million shares under this plan. At March 31, 2010, 10.8 million shares remained available under this authorization. Treasury shares held at March 31, 2010 include 5.9 million shares repurchased under our share repurchase program and 0.2 million shares surrendered by employees for taxes payable upon the vesting of restricted stock.

Earnings per share

We have determined that our unvested share-based payment awards, which include restricted shares and restricted units, contain non-forfeitable rights to dividends and are considered participating securities and should be included in the computation of earnings per share pursuant to the “two-class” method. The “two-class” method allocates undistributed earnings between common shares and participating securities. The diluted earnings per share calculation under the “two-class” method also includes the dilutive effect of potential share issuances in connection with stock options. The dilutive effect of stock options is determined using the treasury stock method.

The following table sets forth the computation of basic and diluted net income per share for Noble-Swiss.

		Three Months Ended
		March 31,
		2010				2009
Allocation of net income
Basic
Net income		$	370,726			$	414,295
Earnings allocated to unvested share-based payment awards			(3,476	)			(3,461	)
Net income to common shareholders — basic		$	367,250			$	410,834
Diluted
Net income		$	370,726			$	414,295
Earnings allocated to unvested share-based payment awards			(3,461	)			(3,454	)
Net income to common shareholders — diluted		$	367,265			$	410,841
Weighted average shares outstanding — basic			255,122				259,266
Incremental shares issuable from assumed exercise of stock options			1,099				564
Weighted average shares outstanding — diluted			256,221				259,830
Weighted average unvested share-based payment awards			2,381				2,188
Earnings per share
Basic		$	1.44			$	1.58
Diluted		$	1.43			$	1.58

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 March 31, 2010 and 2009, stock options totaling approximately 0.4 million and 1.6 million, respectively were excluded from the diluted net income per share as they were not dilutive.

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

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 $13 million and $15 million for the three months ended March 31, 2010 and 2009, respectively.

During the first quarter of 2009, we recognized a charge of $12 million related to the Noble Fri Rodli, a submersible that has been cold stacked since October 2007. We recorded the charge as a result of a decision to evaluate disposition alternatives for this rig. As of March 31, 2010, the rig had not been disposed of, but was removed from our rig count effective March 31, 2009.

Note 4 — Accounts Receivable

During the second quarter of 2009, we reached an agreement with one of our customers in the U.S. Gulf of Mexico regarding outstanding receivables owed to us, which totaled approximately $62 million at March 31, 2010. The customer has conveyed to us an overriding royalty interest (“ORRI”) as security for the outstanding receivables and has agreed to a payment plan to repay all past due amounts. Amounts received by us pursuant to the ORRI will be applied to the customer’s payment obligations under the payment plan. We have agreed that we will not sell, assign or otherwise dispose of the ORRI as long as the customer meets its payment obligations and complies with the terms of the agreement, which runs through June 2011. As of March 31, 2010, the customer has met its payment obligations under the agreement. The customer has a right to reacquire the ORRI at the end of the term of the agreement, or earlier, subject to certain conditions, which include the customer being current on all payment obligations.

Note 5 — Debt

Long-term debt consisted of the following at March 31, 2010 and December 31, 2009:

		March 31,				December 31,
		2010				2009
5.875% Senior Notes due 2013		$	299,883			$	299,874
7.375% Senior Notes due 2014			249,409				249,377
7.50% Senior Notes due 2019			201,695				201,695
Credit Facility			—				—
Long-term debt		$	750,987			$	750,946

We have a $600 million unsecured bank credit facility (the “Credit Facility”), which contains various covenants, including a debt to total tangible capitalization covenant that limits this ratio to 0.60. As of March 31, 2010, our ratio of debt to total tangible capitalization was 0.09.

Fair Value of Debt

Fair value represents the amount at which an instrument could be exchanged in a current transaction between willing parties. The estimated fair value of our senior notes was based on the quoted market prices for similar issues or on the current rates offered to us for debt of similar remaining maturities. The following table presents the estimated fair value of our long-term debt as of March 31, 2010 and December 31, 2009.

		March 31, 2010								December 31, 2009
		Carrying				Estimated				Carrying				Estimated
		Value				Fair Value				Value				Fair Value
5.875% Senior Notes due 2013		$	299,883			$	321,239			$	299,874			$	325,398
7.375% Senior Notes due 2014			249,409				283,704				249,377				282,105
7.50% Senior Notes due 2019			201,695				230,995				201,695				231,015

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

Note 6 — Income Taxes

At December 31, 2009, the reserves for uncertain tax positions totaled $98 million (net of related tax benefits of $7 million). At March 31, 2010, the reserves for uncertain tax positions totaled $104 million (net of related tax benefits of $8 million). If the March 31, 2010 reserves are not realized, the provision for income taxes would be reduced by $83 million and equity would be directly increased by $21 million.

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

Note 7 — Employee Benefit Plans

Pension costs include the following components:

		Three Months Ended March 31,
		2010								2009
		Non-U.S.				U.S.				Non-U.S.				U.S.
Service cost		$	1,116			$	1,912			$	748			$	1,574
Interest cost			1,266				1,957				1,022				1,615
Return on plan assets			(1,366	)			(2,392	)			(1,271	)			(2,227	)
Amortization of prior service cost			—				57				—				98
Amortization of transition obligation			18				—				17				—
Recognized net actuarial loss			181				705				57				87
Net pension expense		$	1,215			$	2,239			$	573			$	1,147

The Pension Protection Act of 2006 requires that pension plans fund towards a target of at least 100 percent by the end of 2011 and increases the amount we are allowed to contribute to our U.S. pension plans in the near term. During the three months ended March 31, 2010, we made contributions to our pension plans totaling $2 million. We expect minimum funding of our pension plans to total approximately $16 million during 2010.

We sponsor the Noble Drilling Corporation 401(k) Savings Restoration Plan (“Restoration Plan”). The Restoration Plan is a nonqualified, unfunded employee benefit plan under which certain highly compensated employees may elect to defer compensation in excess of amounts deferrable under our 401(k) savings plan. The Restoration Plan has no assets, and amounts withheld for 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 withheld plus phantom investment income or less phantom investment losses. We are at risk for phantom investment income and, conversely, we benefit should phantom investment losses occur. At both March 31, 2010 and December 31, 2009, our liability under the Restoration Plan totaled $8 million. We have 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 $8 million at both March 31, 2010 and December 31, 2009.

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.

Hedge effectiveness is evaluated based on the matching of critical terms between derivative contracts and the hedged item. Any change in fair value resulting from ineffectiveness is recognized immediately in earnings. We did not recognize a gain or loss due to hedge ineffectiveness in our Consolidated Statements of Income during the three months ended March 31, 2010 and 2009 related to these derivative instruments.

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

Cash Flow Hedges

Our North Sea and Brazil operations have a significant amount of their cash operating expenses payable in local currencies. We typically maintain forward contracts settling monthly in their respective local currencies to mitigate certain exchange exposure. The forward contract settlements in the remainder of 2010 represent approximately 44 percent of these forecasted local currency requirements. The notional amount of the forward contracts outstanding, expressed in U.S. Dollars, was approximately $95 million at March 31, 2010.

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

		Three Months Ended
		March 31,
		2010				2009
Net unrealized gain at beginning of period		$	417			$	—
Activity during period:
Settlement of forward contracts during period			(287	)			—
Net unrealized gain/(loss) on outstanding forward contracts			(1,638	)			194
Net unrealized gain/(loss) at end of period		$	(1,508	)		$	194

Fair Value Hedges

During 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 March 31, 2010, the aggregate notional amount of the forward contracts was 50 million Euros. Each forward contract settles in connection with required payments under the construction contract. We are accounting for these forward contracts as fair value hedges. The fair market value of these 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 would be recognized in earnings currently along with the change in fair value of the hedged item attributable to the risk being hedged, if any portion was found to be ineffective. The fair market value of these outstanding forward contracts, which are included in “Other current liabilities” and “Other liabilities,” totaled approximately $5 million at March 31, 2010 and $0.8 million at December 31, 2009. No amounts related to fair value hedges were recognized in the income statement for the three months ended March 31, 2010 and 2009.

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

Note 9 — Fair Value of Financial Instruments

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

						March 31, 2010												December 31, 2009
						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		$	8,213			$	8,213			$	—			$	—			$	8,483			$	8,483
Forward contracts		$	1,608			$	—			$	1,608			$	—			$	654			$	654
Liabilities —
Forward contracts		$	7,867			$	—			$	7,867			$	—			$	1,002			$	1,002

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.

Note 10 — Commitments and Contingencies

Noble Asset Company Limited (“NACL”), our wholly-owned, indirect subsidiary, 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 March 31, 2010) and a customs bond in the amount of 970 million Indian Rupees (or $22 million at March 31, 2010), 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. In November 2008, the Commissioner filed a Special Leave Petition, an Appeal in the Supreme Court of India, appealing the order of the Bombay High Court. NACL has filed an Affidavit-in-reply opposing admission of the Appeal in the Supreme Court of India, and is seeking the return or cancellation of its previously posted custom bond and bank guarantee. 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.

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

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.

Certain of our non-U.S. income tax returns have been examined for the 2002 through 2004 periods and audit claims have been assessed for approximately $192 million (including interest and penalties), primarily in Mexico. We do not believe we owe these amounts and are defending our position. However, we expect increased audit activity in Mexico and anticipate the tax authorities will issue additional assessments and continue to pursue legal actions for all audit claims. We believe additional audit claims in the range of $24 to $26 million attributable to other business tax returns may be assessed against us. We have contested, or intend to contest, 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 injuries purportedly resulting from exposure to asbestos on drilling rigs and associated facilities. At March 31, 2010, 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 laws 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. In January 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. In February 2009, NIMASA filed suit against us in the Federal High Court of Nigeria seeking collection of the cabotage surcharge. In August 2009, the court issued a favorable ruling in response to our originating summons stating that drilling operations do not fall within the cabotage laws and that drilling rigs are not vessels for purposes of those laws. The court also issued an injunction against the defendants prohibiting their interference with our drilling rigs or drilling operations. NIMASA has appealed the court’s ruling, although the court dismissed NIMASA’s lawsuit filed against us in February 2009. 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.

NIMASA had also informed the Nigerian Content Division of its position that we are not in compliance with the cabotage laws. The Nigerian Content Division makes determinations of companies’ compliance with applicable local content regulations for purposes of government contracting, including contracting for services in connection with oil and gas concessions where the Nigerian national oil company is a partner. The Nigerian Content Division had barred us from participating in new tenders as a result of NIMASA’s allegations. The Division has reversed its actions based on the favorable Federal High Court ruling. However, no assurance can be given with respect to our ability to bid for future work in Nigeria until our dispute with NIMASA is resolved.

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

We maintain certain insurance coverage against specified marine perils, including liability for physical damage to our drilling rigs, and loss of hire on certain of our rigs. The damage caused in 2005 and 2008 by Hurricanes Katrina, Rita and Ike to oil and gas assets situated in the U.S. Gulf of Mexico has negatively impacted the energy insurance market, resulting in more restricted and more expensive coverage. Beginning March 1, 2009, we elected to self insure U.S. named windstorm physical damage and loss of hire exposures due to the high cost of coverage for these perils. This self insurance applies only to our units in the U.S. portion of the Gulf of Mexico. We presently have six semisubmersibles and two submersibles in the U.S. Gulf of Mexico. Our rigs located in the Mexican portion of the Gulf of Mexico remain covered by commercial insurance for windstorm damage up to the declared value of each unit. We maintain physical damage deductibles of $25 million per occurrence for rigs located in the U.S., Mexico, Brazil, Singapore and the North Sea and $15 million per occurrence for rigs operating in West Africa, the Middle East, India, and the Mediterranean Sea. The loss of hire coverage applies only to our rigs operating under contract with a dayrate equal to or greater than $200,000 a day and is subject to a 45-day waiting period for each unit and each occurrence.

Although we maintain insurance in the geographic areas in which we operate, pollution, reservoir damage and environmental risks generally are not fully insurable. Our insurance policies and contractual rights to indemnity may not adequately cover our losses or may have exclusions of coverage for some losses. We do not have insurance coverage or rights to indemnity for all risks, including loss of hire insurance on most of the rigs in our fleet. Uninsured exposures may include war risk, activities prohibited by U.S. laws and regulations, radiation hazards, certain loss or damage to property on board our rigs and losses relating to terrorist acts or strikes. If a significant accident or other event occurs and is not fully covered by insurance or contractual indemnity, it could adversely affect our financial position, results of operations or cash flows. There can be no assurance that those parties with contractual obligations to indemnify us will necessarily be financially able to indemnify us against all these risks.

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 currently has a standard deductible of $10 million per occurrence.

In connection with our capital expenditure program, we had outstanding commitments, including shipyard and purchase commitments of approximately $912 million at March 31, 2010.

We have entered into employment agreements with certain of our executive officers, as well as certain other employees. These agreements become effective upon a change of control of Noble-Swiss (within the meaning set forth in the agreements) or a termination of employment in connection with or in anticipation of a change of control, and remain effective for three years thereafter. These agreements provide for compensation and certain other benefits under such circumstances.

Internal Investigation

Since June 2007, we have been conducting, with the assistance of independent outside counsel engaged by our audit committee, an internal investigation relating to our Nigerian operations. The investigation has focused on the legality under 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. The scope of the investigation has also included 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 or violations of other laws or regulations may not be uncovered through the investigation.

We voluntarily contacted the SEC and the U.S. Department of Justice (“DOJ”) to advise them of the independent investigation. 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.

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

The independent outside counsel appointed by the audit committee to perform the internal investigation made a presentation of the results of its investigation to the DOJ and the SEC in June 2008. Since June 2008, the SEC and the DOJ have reviewed these results and information gathered by the independent outside counsel in the course of the investigation. We consider the matter to be ongoing and cannot predict (a) when it will conclude, (b) whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or (c) if a proceeding is opened, what potential sanctions, penalties or other remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date, we believe it is probable that we will have to pay an amount to settle this matter with the DOJ and SEC, however, we are not in a position to estimate any potential liability that may result and, as a result, we have not made any accrual in our consolidated financial statements at March 31, 2010.

Notwithstanding that the investigation is ongoing, we 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 U.S. officials, we adopted additional measures intended to enhance FCPA compliance procedures. Further measures may be required once the investigation matter is concluded.

We are currently operating three jackup rigs offshore Nigeria. The temporary import permits covering two of these rigs expired in November 2008 and we have pending applications to renew these permits. However, as of April 30, 2010, the Nigerian customs office had not acted on our applications. We have obtained a temporary import permit for the third rig which was imported into the country in 2009. We continue to seek to avoid material disruption to our Nigerian operations; however, there can be no assurance that we will be able to obtain new permits or further extensions of permits necessary to continue the operation of our rigs in Nigeria. 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. In any case, we also could be subject to actions by Nigerian customs for import duties and fines for these two rigs, as well as other drilling rigs that operated in Nigeria in the past. We cannot predict what impact these events 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.

Note 11 — Segment and Related Information

We report our contract drilling operations as a single reportable segment: Contract Drilling Services. The consolidation of our contract drilling operations into one reportable segment is attributable to how we manage our business, and the fact that all of our drilling fleet is dependent upon the worldwide oil and gas 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 non-U.S. and government owned/controlled oil and gas companies throughout the world. Our contract drilling services segment currently conducts contract drilling operations in the Middle East, India, the U.S. Gulf of Mexico, Mexico, the North Sea, Brazil, Libya and West Africa.

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

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 months ended March 31, 2010 and 2009 is shown in the following table. The “Other” column includes results of labor contract drilling services and corporate related items.

		Three Months Ended March 31,
		2010												2009
		Contract												Contract
		Drilling												Drilling
		Services				Other				Total				Services				Other				Total
Revenues from external customers		$	832,160			$	8,691			$	840,851			$	888,680			$	7,471			$	896,151
Depreciation and amortization			113,173				2,684				115,857				90,898				2,086				92,984
Segment operating income			423,944				(983	)			422,961				513,636				465				514,101
Interest expense, net of amount capitalized			58				407				465				190				331				521
Income tax provision			55,592				(196	)			55,396				100,145				212				100,357
Segment profit			372,036				(1,310	)			370,726				413,420				875				414,295
Total assets (at end of period)			7,882,139				851,963				8,734,102				6,805,467				497,836				7,303,303
Capital expenditures			335,583				3,181				338,764				239,735				10,985				250,720

Note 12 — Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (the “FASB”), issued guidance which expanded disclosures that a reporting entity provides about transfers of financial assets and its effect on the financial statements. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition or results of operations or financial disclosures.

Also in June 2009, the FASB issued guidance that revises how an entity evaluates variable interest entities. This guidance is effective for annual and interim reporting periods beginning after November 15, 2009. The adoption of this guidance did not have a material impact on our financial condition or results of operations and cash flows.

In October 2009, the FASB issued guidance that impacts the recognition of revenue in multiple-deliverable arrangements. The guidance establishes a selling-price hierarchy for determining the selling price of a deliverable. The goal of this guidance is to clarify disclosures related to multiple-deliverable arrangements and to align the accounting with the underlying economics of the multiple-deliverable transaction. This guidance is effective for fiscal years beginning on or after June 15, 2010. We are in the process of evaluating this guidance but do not believe this guidance will have a material impact on our financial condition or results of operations and cash flows.

In January 2010, the FASB issued guidance relating to the disclosure of the fair value of assets. This guidance calls for additional information to be given regarding the transfer of items in and out of respective categories. In addition, it requires additional disclosures regarding the purchase, sales, issuances, and settlements of assets that are classified as level three within the FASB fair value hierarchy. This guidance is effective for annual and interim periods beginning on or after December 15, 2009. These additional disclosures did not have a significant impact on our financial disclosures or our financial condition.

In February 2010, the FASB issued guidance that clarifies the disclosure of subsequent events for SEC registrants. Under this guidance an SEC registrant can disclose the company has considered subsequent events through the date of filing with the SEC as opposed to specifically stating the date to which subsequent events were considered. This guidance is effective upon the issuance of the guidance. Our adoption of this guidance did not have a material impact on our financial disclosures or financial condition.

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

Note 13 — Guarantees of Registered Securities

Noble-Cayman and Noble Holding (U.S.) Corporation (“NHC”), each a wholly-owned subsidiary of Noble-Swiss are guarantors of Noble Drilling Corporation’s (“NDC”) 7.50% Senior Notes due 2019. The outstanding principal balance of the 7.50% Senior Notes at March 31, 2010 was $202 million. NDC is an indirect, wholly-owned subsidiary of Noble-Swiss and a direct, wholly-owned subsidiary of NHC. Noble-Cayman’s and NHC’s guarantees of the 7.50% Senior Notes are full and unconditional. In December 2005, Noble Drilling Holding LLC (“NDH”), an indirect wholly-owned subsidiary of Noble-Swiss, became a co-obligor on (and effectively a guarantor of) the 7.50% Senior Notes.

In connection with our worldwide internal restructuring completed during 2009, Noble Drilling Services 6 LLC (“NDS6”), an indirect wholly-owned subsidiary of Noble-Swiss, became a co-obligor on (and effectively a guarantor of) the 7.50% Senior Notes.

In connection with the issuance of Noble-Cayman’s 5.875% Senior Notes due 2013, NDC guaranteed the payment of the 5.875% Senior Notes. In connection with our 2009 worldwide internal restructuring, Noble Holding International Limited (“NHIL”), an indirect wholly-owned subsidiary of Noble-Cayman and Noble-Swiss, also guaranteed the payment of the 5.875% Senior Notes. NDC’s and NHIL’s guarantees of the 5.875% Senior Notes are full and unconditional. The outstanding principal balance of the 5.875% Senior Notes at March 31, 2010 was $300 million.

In November 2008, NHIL issued $250 million principal amount of 7.375% Senior Notes due 2014, which are fully and unconditionally guaranteed by Noble-Cayman. The outstanding principal balance of the 7.375% Senior Notes at March 31, 2010 was $249 million.

As of March 31, 2010, the 7.5% Senior Notes due 2019 and the 5.875% Senior Notes due 2013 each had less than 300 record holders and the duties of NHC, NDH, NDC and NDS6 to file reports under the Securities Exchange Act of 1934 were suspended.

The following consolidating financial statements of Noble-Cayman, NHIL, and all other subsidiaries present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.

Subsidiary Balance Sheet

NOBLE CORPORATION (NOBLE-CAYMAN) AND SUBSIDIARIES

(in thousands)

										Other
		Noble-								Subsidiaries				Consolidating
		Cayman				NHIL				of Noble				Adjustments				Total
ASSETS
Current assets
Cash and cash equivalents		$	209			$	—			$	836,972			$	—			$	837,181
Accounts receivable			—				—				622,213				—				622,213
Accounts receivable from affiliates			—				246,699				413,777				(364,280	)			296,196
Prepaid expenses and other current assets			1,823				—				158,463				(39,938	)			120,348
Total current assets			2,032				246,699				2,031,425				(404,218	)			1,875,938
Property and equipment
Drilling equipment, facilities and other			—				—				9,102,171				—				9,102,171
Accumulated depreciation			—				—				(2,265,304	)			—				(2,265,304	)
Total property and equipment, net			—				—				6,836,867				—				6,836,867
Notes receivable from affiliates			3,507,062				—				129,900				(3,636,962	)			—
Investments in affiliates			4,635,473				4,409,718				—				(9,045,191	)			—
Other assets			2,520				1,645				273,074				—				277,239
Total assets		$	8,147,087			$	4,658,062			$	9,271,266			$	(13,086,371	)		$	8,990,044
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued liabilities		$	11,032			$	35,539			$	464,010			$	(39,938	)		$	470,643
Accounts payable to affiliates			364,280				—				—				(364,280	)			—
Total current liabilities			375,312				35,539				464,010				(404,218	)			470,643
Long-term debt			299,883				249,408				201,696				—				750,987
Notes payable to affiliates			129,900				—				3,507,062				(3,636,962	)			—
Other liabilities			19,929				—				426,422				—				446,351
Total liabilities			825,024				284,947				4,599,190				(4,041,180	)			1,667,981
Commitments and contingencies
Shareholders’ Equity			7,322,063				4,373,115				4,672,076				(9,045,191	)			7,322,063
Total liabilities and shareholders’ equity		$	8,147,087			$	4,658,062			$	9,271,266			$	(13,086,371	)		$	8,990,044