Related- Party Transactions

12 Months Ended

Dec. 31, 2011

Related-Party Transactions [Abstract]

Related-Party Transactions

Note 17    Related-Party Transactions

The Company and Nabors Delaware entered into an agreement with Eugene M. Isenberg, the Chairman of our Board of Directors, on February 2, 2012 but effective December 31, 2011, pursuant to which:

• Mr. Isenberg voluntarily terminated both his employment with the Company and his Employment Agreement, and forwent any right to payment in connection with such termination, including a possible payment of $100 million in connection with the Company’s appointment of a new chief executive officer on October 28, 2011, which Mr. Isenberg could have treated as a constructive termination under his employment agreement;

• Mr. Isenberg will continue as Chairman of the Board, but will not stand for reelection as a director when his term expires in June 2012; at that time, he will be appointed Chairman Emeritus for a three-year term, which will be extended for additional one-year terms unless terminated by him or by the Company, and receive cash compensation equal to other nonemployee directors;

• Nabors Delaware will pay $6,600,000 into an escrow account, which will bear interest at the guaranteed rate of 6% per annum compounded daily and will be distributed either to Mr. Isenberg’s estate or to the trustees of his revocable trust;

• Mr. Isenberg ceases participation in the Company’s benefit plans and forfeits any benefits available to him thereunder (including forfeiture of the balance in his deferred bonus account), except as stated below or otherwise required by law:

• he and his spouse continue to participate in medical, dental and life insurance coverage until either receives equivalent coverage and benefits under the plans and programs of a subsequent employer or their death;

• he remains entitled to distribution of vested account balances in the Company’s 401(k) plan and its Deferred Compensation Plan;

• he retains certain benefits under the split-dollar life insurance agreements in effect between him and Nabors Delaware

• all of Mr. Isenberg’s stock option and restricted stock awards were already fully vested and remain subject to the applicable plans and agreements governing them; and

• Mr. Isenberg waives all claims or other liabilities related to his Employment Agreement or his termination of employment, and the Company waives certain claims against Mr. Isenberg.

Nabors and certain key employees, including Messrs. Isenberg and Petrello, entered into split-dollar life insurance agreements, pursuant to which we pay a portion of the premiums under life insurance policies with respect to these individuals and, in some instances, members of their families. These agreements provide that we are reimbursed for the premium payments upon the occurrence of specified events, including the death of an insured individual. We will not be reimbursed for the premium payments paid on behalf of Mr. Isenberg as provided by the agreement entered into on February 2, 2012. Any recovery of premiums paid by Nabors could be limited to the cash surrender value of the policies under certain circumstances. As such, the values of these policies are recorded at their respective cash surrender values in our consolidated balance sheets. We have made premium payments to date totaling $6.3 million related to these policies. The cash surrender value of these policies of approximately $5.8 million and $9.5 million is included in other long-term assets in our consolidated balance sheets as of December 31, 2011 and 2010, respectively.

Under the Sarbanes-Oxley Act of 2002, the payment of premiums by Nabors under the agreements with Messrs. Isenberg and Petrello could be deemed to be prohibited loans by us to these individuals. Consequently, we have paid no premiums related to our agreements with these individuals since the adoption of the Sarbanes-Oxley Act.

In the ordinary course of business, we enter into various rig leases, rig transportation and related oilfield services agreements with our unconsolidated affiliates at market prices. Revenues from business transactions with these affiliated entities totaled $218.4 million, $271.6 million and $327.3 million for the years ended December 31, 2011, 2010 and 2009, respectively. Expenses from business transactions with these affiliated entities totaled $.9 million, $3.4 million and $9.8 million for the years ended December 31, 2011, 2010 and 2009, respectively. Additionally, we had accounts receivable from these affiliated entities of $110.7 million and $97.8 million as of December 31, 2011 and 2010, respectively. We had accounts payable to these affiliated entities of $46.1 million and $12.7 million as of December 31, 2011 and 2010, respectively, and long-term payables with these affiliated entities of $.8 million as of each of December 31, 2011 and 2010, which are included in other long-term liabilities.

In addition to the equity investment in our unconsolidated U.S. oil and gas joint venture, in April 2010 we purchased $20.0 million face value of NFR Energy LLC’s 9.75% senior notes. These notes mature in 2017 with interest payable semi-annually on February 15 and August 15. During 2011 and 2010, we recognized $2.0 million and $1.4 million, respectively, in interest income from these notes.

We own an interest in Shona Energy Company, LLC (“Shona”), a company of which Mr. Payne, an independent member of our Board of Directors, is the Chairman and Chief Executive Officer. During the first quarter of 2010, we purchased shares of Shona’s preferred stock and warrants to purchase additional common shares for $.9 million, which we had accounted for under the cost method of accounting. During 2011, Shona became a public company in Canada, with voting common shares listed on the TSX Venture Exchange. As of December 31, 2011, we held a minority interest of approximately 7.55% of the issued and outstanding common shares of Shona. The fair value of this equity security investment is $10.5 million.