Pension, Postretirement and Postemployment Benefits

12 Months Ended

Dec. 31, 2012

Pension, Postretirement and Postemployment Benefits

Pension, Postretirement and Postemployment Benefits

Note 16 Pension, Postretirement and Postemployment Benefits

Pension Plans

In conjunction with our acquisition of Pool Energy Services Co. (“Pool”) in November 1999, we acquired the assets and liabilities of a defined benefit pension plan, the Pool Company Retirement Income Plan (the “Pool Pension Plan”). Benefits under the Pool Pension Plan are frozen and participants were fully vested in their accrued retirement benefit on December 31, 1998.

Summarized information on the Pool Pension Plan is as follows:

	Pension Benefits
	2012			2011
	(In thousands)
Change in benefit obligation:
Benefit obligation at beginning of year	$	26,659		$	20,628
Remeasurement	—			1,517
Interest cost	1,116			1,198
Actuarial loss (gain)	2,107			3,975
Benefit payments	(677		)	(659		)
Benefit obligation at end of year (1)	$	29,205		$	26,659
Change in plan assets:
Fair value of plan assets at beginning of year	$	16,352		$	15,219
Actual (loss) returns on plan assets	1,598			480
Employer contributions	1,507			1,312
Benefit payments	(677		)	(659		)
Fair value of plan assets at end of year	$	18,780		$	16,352
Funded status:
Underfunded status at end of year	$	(10,425	)	$	(10,307	)
Amounts recognized in consolidated balance sheets:
Other long-term liabilities	$	(10,425	)	$	(10,307	)

(1) As of December 31, 2012 and 2011, the accumulated benefit obligation was the same as the projected benefit obligation.

	Year Ended December 31,
	2012			2011			2010
	(In thousands)
Components of net periodic benefit cost (recognized in our consolidated statements of income):
Interest cost	$	1,116		$	1,198		$	1,116
Expected return on plan assets	(1,086		)	(1,008		)	(909		)
Recognized net actuarial loss	1,034			628			457
Net periodic benefit cost	$	1,064		$	818		$	664
Weighted-average assumptions:
Weighted-average discount rates	3.75		%	4.25		%	5.50		%
Expected long-term rate of return on plan assets	6.50		%	6.50		%	6.50		%

For the years ended December 31, 2012, 2011 and 2010, the net actuarial loss amounts included in other comprehensive income (loss) were approximately $(12.7) million, $(12.1) million and $(6.7) million, respectively. There were no other components, such as prior service costs or transition obligations relating to pension costs recorded within other comprehensive income (loss) during 2011, 2010 and 2009.

The amount included in other comprehensive income (loss) that is expected to be recognized as a component of net periodic benefit cost during 2013 is approximately $1.1 million.

We analyze the historical performance of investments in equity and debt securities, together with current market factors such as inflation and interest rates to help us make assumptions necessary to estimate a long-term rate of return on plan assets. Once this estimate is made, we review the portfolio of plan assets and make adjustments thereto that we believe are necessary to reflect a diversified blend of investments in equity and debt securities that is capable of achieving the estimated long-term rate of return without assuming an unreasonable level of investment risk.

The following table sets forth, by level within the fair value hierarchy, the investments in the Pool Pension Plan as of December 31, 2012. The investments’ fair value measurement level within the fair value hierarchy is classified in its entirety based on the lowest level of input that is significant to the measurement.

	Fair Value as of December 31, 2012
	Level 1		Level 2		Level 3		Total
	(In thousands)
Assets: (1)
Cash	$	—	$	520	$	—	$	520
Short-term investments:
Available-for-sale equity securities (2)	—		10,361		—		10,361
Available-for-sale debt securities (3)	—		7,899		—		7,899
Total investments	—		18,260		—		18,260
Total	$	—	$	18,780	$	—	$	18,780

(1) Includes investments in collective trust funds that are valued based on the fair value of the underlying investments using quoted prices in active markets or other significant inputs that are deemed observable.

(2) Includes funds that invest primarily in U.S. common stocks and foreign equity securities.

(3) Includes funds that invest primarily in investment grade debt.

The measurement date used to determine pension measurements for the plan is December 31.

Our weighted-average asset allocations as of December 31, 2012 and 2011, by asset category are as follows:

	Pension Benefits
	2012		2011
Cash	3	%	2	%
Equity securities	55	%	56	%
Debt securities	42	%	42	%
Total	100	%	100	%

We invest plan assets based on a total return on investment approach, pursuant to which the plan assets include a diversified blend of investments in equity and debt securities toward a goal of maximizing the long-term rate of return without assuming an unreasonable level of investment risk. We determine the level of risk based on an analysis of plan liabilities, the extent to which the value of the plan assets satisfies the plan liabilities and our financial condition. Our investment policy includes target allocations approximating 55% investment in equity securities and 45% investment in debt securities. The equity portion of the plan assets represents growth and value stocks of small, medium and large companies. We measure and monitor the investment risk of the plan assets both on a quarterly basis and annually when we assess plan liabilities.

We expect to contribute approximately $.6 million to the Pool Pension Plan in 2013. This is based on the sum of (1) the minimum contribution for the 2012 plan year that will be made in 2012 and (2) the estimated minimum required quarterly contributions for the 2013 plan year. We made contributions to the Pool Pension Plan in 2012 and 2011 totaling $1.5 million and $1.3 million, respectively.

As of December 31, 2012, we expect that benefits to be paid in each of the next five years after 2012 and in the aggregate for the five years thereafter will be as follows:

	(In thousands)
2013	$	939
2014	1,055
2015	1,159
2016	1,237
2017	1,348
2018 - 2022	8,081
	$	13,819

Some of our employees are covered by defined contribution plans. Our contributions to the plans totaled $19.0 million and $22.9 million for the years ended December 31, 2012 and 2011, respectively. Nabors does not provide post-employment benefits to its employees, except for employees covered under the Pool Pension Plan.