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Nabors: Less Drilling in Oklahoma, Arkansas; 'Dismal' in Canada

Nabors Industries Ltd., the largest land driller in the world, has "recently" begun to see a weakening in several of its U.S. Lower 48 operating areas and is uncertain how much it will affect industry rig counts and rates, CEO Gene Isenberg said Wednesday. A "significant" reduction in spot market rates is likely in some areas, but any contraction in North American gas drilling is likely to be "shallow and brief."

Excluding Alaska, where operations are expected to be strong, Canadian operations will be "dismal," declining by 20% in 2007, "where rapidly weakening market conditions during the quarter were compounded by the weather-induced delays that inhibited the start of the winter drilling season," said Isenberg. U.S. activity and prices will see a "smaller downturn" this year.

"To date we have seen the number of idle rigs in our fleet increase from 11 at the end of the third quarter to 41 at the end of January 2007," said Isenberg. "Nearly half of these rigs are located in Oklahoma and western Arkansas, with the balance spread across our other 10 operating districts. Our East Texas, North Texas and Rocky Mountain districts are currently the least affected."

Isenberg said that despite the "muted results" in the last three months of 2006 and "a more tempered outlook for 2007, we still expect to achieve another record year, generally in-line with the more than 20% increase implied by consensus estimates. This healthy outlook stems from the limited downside in our U.S. land drilling unit, new rig deployments, and the magnitude of price increases yet to be realized throughout our international, U.S. offshore and Alaskan rig operations."

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