Discontinued Operations

12 Months Ended

Dec. 31, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Note 4     Discontinued Operations

During 2010, we began actively marketing our oil and gas assets in Canada and Colombia, including our 49.7% and then 50.0% ownership interests in our investments of Remora and SMVP, respectively. All of these assets are included in our Oil and Gas operating segment.

In June 2011, the equity owners of SMVP dissolved the partnership and a proportionate share of the assets and liabilities were conveyed to us in exchange for our ownership interest. The exchange was not a material transaction to us and we accounted for it as a business combination. We continue to market these assets for sale, and believe that they are properly reflected in our assets held for sale balances at December 31, 2011.

In April 2011, we sold some of our wholly owned oil and gas assets in Colombia to an unrelated third party. We received proceeds of $89.2 million from this sale and recognized a gain of approximately $39.6 million. Additionally during the second quarter of 2011, Remora completed sales of its oil and gas assets in Colombia. Remora received gross proceeds of approximately $333.1 million from these sales and has made cash distributions to us in the amount of $143.0 million, with a final distribution expected upon dissolution of the joint venture.

During the fourth quarter of 2011, we announced our intention to dispose of a significant portion of our oil and gas portfolio in an expeditious and prudent manner, and accordingly, reclassified the carrying value of our wholly owned U.S. oil and gas assets to assets held for sale at December 31, 2011. During the fourth quarter of 2011, we also determined that one of our Canadian subsidiaries that provides logistic services for onshore drilling using helicopter and fixed-wing aircraft met the accounting criteria of assets held for sale. Based on quoted market prices, the carrying value of the assets was adjusted to its fair value, resulting in an impairment of $7.9 million, which is included in discontinued operations for the year ended December 31, 2011. We reclassified the adjusted carrying value of these assets to assets held for sale at December 31, 2011.

On December 14, 2011, we sold our 25% working interest in the Cat Canyon and West Cat Canyon fields in Santa Barbara County, California. We received proceeds of approximately $71.6 million from the sale and recognized a gain of approximately $7.2 million.

At December 31, 2011, our assets held for sale included suspended wells that have capitalized costs for more than one year. Specifically, on the north slope of Alaska, five wells, including two drilled in 2007, one drilled in 2008 and two drilled in 2010, were suspended with total capitalized costs of $42.8 million. Further drilling is needed over the area to determine if the discovery holds sufficient quantities of reserves to justify future investment of infrastructure. One well remains in the process of drilling with total capitalized costs of $12.1 million at December 31, 2011.

At December 31, 2011, our consolidated balance sheet included a current liability of discontinued operations of $54.3 million that is included in other liabilities and a noncurrent liability of discontinued operations of $71.4 million that is included in other long-term liabilities.

The operating results from the assets discussed above for all periods presented are retroactively presented and accounted for as discontinued operations in the accompanying audited consolidated statements of income (loss) and the respective accompanying notes to the consolidated financial statements. Our condensed statements of income (loss) from discontinued operations for each operating segment for the years ended December 31, 2011, 2010 and 2009 were as follows:

	Year Ended December 31,
Condensed Statements of Income — Oil and Gas Operating segment	2011			2010			2009
	(In thousands)
Operating revenues and Earnings (losses) from unconsolidated affiliates
Oil and Gas	$	125,654	(1)	$	37,615		$	(57,864	)(2)
Income (loss) from discontinued operations
Income (loss) from discontinued operations	$	18.660		$	(26,139	)	$	(81,678	)
Impairment on wholly owned assets		(255,046	)(3)		(192,179	)(4)		(205,897	)(5)
Gain (loss) on disposal of assets		46,811			—			—
Less: income tax expense (benefit)		(98,181	)		(62,028	)		(85,431	)
Income (loss) from discontinued operations, net of tax	$	(91,394	)	$	(156,290	)	$	(202,144	)

(1) Includes approximately $83 million of equity in earnings during 2011 for our proportionate share of Remora’s net income, inclusive of the gains recognized for asset sales during 2011.

(2) Includes our proportionate share of full-cost ceiling test writedowns of $47.8 million during 2009.

(3) Includes impairments of $255.0 million to write down the carrying value of our wholly owned oil and gas-centered assets, including $27.2 million related to an oil and gas financing receivable that was deemed uncollectible.

(4) Includes impairments of $192.2 million related to our wholly owned oil and gas assets. Of this total, $137.8 million represented writedowns to the carrying value of some acreage in the United States, which we currently do not have future plans to develop due to sustained low natural gas prices, and certain exploratory wells in Colombia, which we determined were uneconomical to develop in the foreseeable future. The remaining $54.3 million related to impairment of an oil and gas financing receivable was determined using discounted cash flow models, a Level 3 measurement, and involved assumptions based on estimated cash flows for proved and probable reserves, undeveloped acreage value, and current and expected natural gas prices.

(5) Includes impairments totaling $205.9 million to some of our wholly owned oil and gas assets. We recognized an impairment of $149.1 million to a financing receivable as a result of commodity price deterioration and the lower price environment lasting longer than expected. The prolonged period of lower prices significantly reduced demand for future gas production and development in the Barnett Shale area of north central Texas and influenced our decision not to expend capital to develop on some of the undeveloped acreage. Annual impairment tests on our U.S. wholly owned oil and gas properties resulted in impairment charges of $56.8 million to write down the carrying value of some acreage that we do not have future plans to develop.

	Year Ended December 31,
Condensed Statements of Income — Other Operating Segments	2011			2010			2009
	(In thousands)
Operating revenues and Earnings (losses) from unconsolidated affiliates
Other Operating Segments	$	29,713		$	29,739		$	28,751
Income (loss) from discontinued operations
Income (loss) from discontinued operations	$	(210	)	$	1,059		$	(1,636	)
Goodwill impairment		—			—			(14,689	)(6)
Impairment of long-lived assets		(7,853	)		(7,460	)(7)		—
Gain (loss) on disposal of assets		—			—			—
Less: income tax expense (benefit)		(2,017	)		(1,601	)		140
Income (loss) from discontinued operations, net of tax	$	(6,046	)	$	(4,800	)	$	(16,465	)

(6) Includes $14.7 million to impair the remaining goodwill balance of Nabors Blue Sky Ltd. as a result of our annual goodwill impairment tests. We determined the impairment charge was necessary due to the continued downturn in the oil and gas industry in Canada and the lack of certainty regarding eventual recovery in the value of these operations.

(7) Includes $7.5 million of impairment to our aircraft and some drilling equipment during the year ended December 31, 2010. These impairment charges resulted from annual impairment tests on long-lived assets.

Additional discussion of our policy pertaining to the calculations of our annual impairment tests, including any impairment to goodwill, is set forth in Note 2 — Summary of Significant Accounting Policies. A further protraction of lower commodity prices or an inability to sell these assets in a timely manner could result in recognition of future impairment charges.