Executive Overview
We are a leading offshore drilling contractor for the oil and gas industry. We perform contract drilling services with our fleet of 62 offshore drilling units located worldwide, including the Middle East, India, the U.S. Gulf of Mexico, Mexico, the North Sea, Brazil, and West Africa. Our fleet count includes four rigs currently under construction.
Economic Outlook
While the global macro environment improved during the second quarter 2009 compared to the previous two quarters, the worldwide economy remains uncertain. Oil prices strengthened during the quarter to reach the $60 to $70 per barrel range; however, prices continue to be volatile. Various economic indicators also continue to be mixed, leading to broad concern about length of the economic recovery. In spite of higher oil prices, we have not seen a substantial increase in demand for offshore drilling services. Demand remains high in the deepwater market segment, but there is little contract activity across the midwater or shallow water segments. In particular, dayrates for jackup units have decreased up to fifty percent in most regions and utilization has dropped significantly. While we believe that the risk for early contract terminations of, or defaults under, existing contracts has decreased, that risk has not been eliminated. We believe the contracting environment will continue to be challenging throughout the remainder of 2009. If the global economy continues to improve and oil prices stabilize, we hope to see increased demand for contract drilling services in 2010. However, due to the introduction of newbuild jackup units into the market, it is possible that dayrates for jackup units may not improve from current levels and could decline further as more units compete for available jobs. We cannot be certain of the future price of oil or when the global economy will recover. However, we believe that the current reduced demand for hydrocarbons is largely a result of the global financial crisis and that an economic recovery combined with the continued natural decline of worldwide hydrocarbon basins will be positive factors for the demand for future contract drilling services. We continue to believe we are well positioned within the industry. Furthermore, our liquidity and financial strength may create potential rig acquisition opportunities for us.
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. Our results of operations depend on activity in the oil and gas production and development 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 greater demand for our services and lower oil and gas prices result in reduced demand for our services.
Demand for our services is also a function of the worldwide supply of mobile offshore drilling units. Industry sources report that a total of 69 newbuild jackups and 96 deepwater newbuilds are scheduled to enter service worldwide between 2009 and 2012. A significant number of these units, particularly among the jackup units, reportedly do not have a contractual commitment from a customer and are referred to in the offshore drilling industry as "being built on speculation." 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.
We cannot predict the future level of demand for our drilling services or future conditions in the offshore contract drilling industry. Decreases in commodity prices or the level of demand for our drilling services or increases in the supply of drilling rigs in the market could have an adverse effect on our results of operations.
Results and Strategy
In the second quarter of 2009, we recognized net income of $392 million, or $1.49 per diluted share, on total revenues of $899 million. The average dayrate across our worldwide fleet increased to $198,270 for the second quarter of 2009 from $194,308 in the first quarter of 2009. Fleetwide average utilization was 84 percent in the second quarter of 2009, as compared to 86 percent in the first quarter of 2009. Daily contract drilling services costs increased to $57,332 for the second quarter of 2009 from $53,646 for the first quarter of 2009. As a result, our contract drilling services margin decreased slightly to 71 percent in the second quarter of 2009 from 72 percent in the first quarter of 2009.

Our long-standing business strategy continues to be the active expansion of our worldwide offshore drilling and deepwater capabilities through upgrades and modifications, acquisitions, and the deployment of our drilling assets in important geological areas. We have also actively expanded our offshore drilling and deepwater capabilities in recent years through the construction of new rigs. During the second quarter of 2009, we continued our expansion strategy as indicated by the following activities:
• we completed construction on the Noble Scott Marks, an F&G JU-2000E enhanced premium independent leg cantilevered jackup, which left the shipyard in the second quarter of 2009 and is expected to begin operations in the third quarter of 2009;

• construction continued on three newbuild ultra-deepwater semisubmersibles, the Noble Danny Adkins and the Noble Dave Beard, which are scheduled for delivery in the fourth quarter of 2009, and the Noble Jim Day, which is scheduled for delivery in the second quarter of 2010; and

• construction continued on one dynamically positioned, ultra-deepwater, harsh environment Globetrotter-class drillship, which is scheduled to be delivered in the second half of 2011.

Contract Drilling Services Backlog
We maintain a backlog (as defined below) of commitments for contract drilling
services. The following table sets forth as of June 30, 2009 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        2009 (1)        2010         2011         2012         2013-2017
                                                                (In millions)
Contract Drilling Services
Semisubmersibles/Drillships
(2)                            $ 8,084      $      910      $ 1,963      $ 1,627      $ 1,158      $     2,426
Jackups/Submersibles (3)         1,553             832          551          169            1                -

Total (4) (5)                  $ 9,637      $    1,742      $ 2,514      $ 1,796      $ 1,159      $     2,426


Percent of Available
Operating Days Committed
(6)                                                 75 %         42 %         24 %         13 %              7 %

(1) Represents a six-month period beginning July 1, 2009.

(2) Our drilling contracts with Petrobras provide an opportunity for us to earn performance bonuses based on 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 generally 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 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 an amount equal to 75 percent of potential performance bonuses for periods after the estimated completion of such upgrade projects. Our backlog for semisubmersibles/drillships includes approximately $367 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 June 30, 2009 index-based dayrates for periods subsequent to the initial firm dayrate period.

(4) Pemex has the ability to cancel its drilling contracts on 30 days or less notice without Pemex's making an early termination payment. We currently have 13 rigs contracted to Pemex in Mexico, and our backlog includes approximately $1.0 billion related to such contracts at June 30, 2009. Also, our drilling contracts generally give the customer an early termination right in the event we fail to meet certain performance standards, including downtime thresholds. While we do not currently anticipate any cancellations as a result of events that have occurred to date, clients may from time to time have the contractual right to do so, which is the case with the drilling contract for the Noble Roger Eason. However, we do not believe that the customer will terminate this contract.

(5) The Noble Scott Marks must be provided by September 30, 2009 or our customer has the right to terminate the contract. The Noble Danny Adkins must be delivered from the shipyard by January 1, 2010 or the customer has the right to terminate the contract. The drilling contract for the Noble Jim Day contains a termination right in the event the rig is not ready to commence operations by December 31, 2010. The drilling contract for the Noble Dave Beard gives the customer the right to terminate the contract if the rig did not commence operations by December 2008 and also gives the customer the right to apply a penalty for delay in delivery beyond October 24, 2009. The customer has not cancelled the contract.

(6) Percentages take into account additional capacity from the estimated dates of deployment of our newbuild rigs that are scheduled to commence operations during the remainder of 2009 through 2011.

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, reimbursable amounts 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 differ from 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 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. 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 our 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 that the other company was conducting an internal investigation into the FCPA implications of certain actions by a customs agent in Nigeria in connection with the temporary importation of that company's vessels into Nigeria. Our drilling units that conduct operations in Nigeria do so under temporary import permits, and management considered it prudent to review our own practices in this regard.
We voluntarily contacted the SEC and the U.S. Department of Justice ("DOJ") to advise them that an independent investigation was 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 made a presentation of the results of its investigation to the DOJ and the SEC in June 2008. The SEC and the DOJ have begun to review these results and information gathered by the independent outside counsel in the course of the investigation. Neither the SEC nor the DOJ has indicated what action it may take, if any, against us or any individual, or whether it may request that the audit committee's independent outside counsel conduct further investigation. Therefore, we consider the internal investigation to be ongoing and cannot predict when it will conclude. Furthermore, we cannot predict whether either the SEC or the DOJ will open its own proceeding to investigate this matter, or if a proceeding is opened, what potential remedies these agencies may seek. We could also face fines or sanctions in relevant foreign jurisdictions. Based on information obtained to date in our internal investigation, we have not determined that any potential liability that may result is probable or remote or can be reasonably estimated. As a result, we have not made any accrual in our consolidated financial statements at June 30, 2009.

We are currently operating two jackup rigs offshore Nigeria. The temporary import permits covering the rigs expired in November 2008 and we have pending applications to renew these permits. However, as of July 31, 2009, the Nigerian customs office had not acted on our applications. 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.
Notwithstanding that the internal 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 concludes.

Results of Operations
In the following discussion, we address the consolidated results of operations of Noble-Swiss. With the exception of nominal administrative expenses, the results of operations of Noble-Swiss are substantially identical to those of Noble-Cayman. The discussion related to operating revenues and costs and expenses is identical for, and applies to, both companies. Per share information relates only to Noble-Swiss.
For the Three Months Ended June 30, 2009 and 2008 General
Net income for the three months ended June 30, 2009 (the "Current Quarter") was $392 million, or $1.49 per diluted share, on operating revenues of $899 million, compared to net income for the three months ended June 30, 2008 (the "Comparable Quarter") of $376 million, or $1.39 per diluted share, on operating revenues of $813 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 June 30, 2009 and 2008:

                              Average Rig                            Operating                                     Average
                            Utilization (1)                          Days (2)                                      Dayrates
                          Three Months Ended             Three Months Ended                           Three Months Ended
                               June 30,                       June 30,                                     June 30,
                          2009             2008          2009           2008        % Change         2009           2008          % Change

Jackups                         80 %          93 %         3,076         3,481            -12 %    $ 157,381      $ 147,081               7 %
Semisubmersibles >
6000' (3)                       94 %          90 %           596           572              4 %      408,510        323,830              26 %
Semisubmersibles <
6000' (4)                      100 %         100 %           273           273              0 %      251,945        192,416              31 %
Drillships                     100 %          67 %           273           182             50 %      226,187        131,174              72 %
Submersibles (5)                88 %          67 %           161           182            -12 %       63,324         53,039              19 %


Total                           84 %          90 %         4,379         4,690             -7 %    $ 198,270      $ 167,002              19 %

(1) Information reflects our policy of reporting on the basis of the number of actively marketed rigs in our fleet excluding newbuild rigs under construction.

(2) Information reflects the number of days that our rigs were operating under contract.

(3) These units have water depth ratings of 6,000 feet or greater.

(4) These units have water depth ratings of less than 6,000 feet.

(5) Effective March 31, 2009, the Noble Fri Rodli, which had been cold stacked since October 2007, was removed from our rig fleet.

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 June 30, 2009 and 2008:

                                             Three Months Ended
                                                  June 30,                   Change
                                             2009          2008           $           %
     Operating revenues:
. . .