NABORS INDUSTRIES LTD | 2013 | FY | 3

Note 2 Revision of Prior Period Financial Statements

        Our Investments in Unconsolidated Affiliates (Note 11) included our equity interest in NFR Energy LLC, now known as Sabine Oil & Gas LLC ("Sabine") through the third quarter of 2012. We disposed of our entire interest during the fourth quarter of 2012.

        We were recently informed by Sabine that it is restating its previously issued financial statements to correct errors identified with respect to the accounting for certain derivative financial transactions previously accounted for as cash flow hedges. These errors affect our historical earnings (losses) from unconsolidated affiliates and related income tax expense (benefit) recorded during certain periods in 2012 and earlier. These errors have no effect on our consolidated financial statements for 2013. They also have no effect on our balance sheet or shareholders' equity as of December 31, 2012 or subsequent periods, our income statement for the year ended December 31, 2013 or our cash flows from operating, investing or financing activities for any historical period.

        We assessed the materiality of these errors in accordance with the SEC's Staff Accounting Bulletin 99 and concluded that the previously issued annual financial statements were not materially misstated. However, the impact is material to the quarters ended March 31, 2012 and June 30, 2012. Accordingly, we have corrected these errors in the quarters and annual periods by revising our consolidated financial statements for the years 2012 and prior and restating the unaudited quarterly financial information (Note 22) for quarters ended March 31, 2012 and June 30, 2012. In addition, as a result of revising our prior years' consolidated financial statements, we have also corrected certain other immaterial items that had been previously recorded during the period identified, to reflect such items in the proper period. The effect of the adjustments was to increase our net income for the years ended December 31, 2012 and 2011 by $0.8 million and $4.8 million, respectively. The effect of these adjustments for periods prior to January 1, 2011 have been reflected as revisions to retained earnings as of December 31, 2010 in our consolidated statements of changes in equity.

        The tables below present the financial statement line items impacted by the revisions to our consolidated financial statements for the years ended December 31, 2012 and 2011.

        The effect on our consolidated statements of income (loss) is as follows:

 
   Year Ended December 31,  
 
   2012   2011  
(In thousands, except per share
amounts)
  As
Reported(1)		   Adjustment   Revised   As
Reported(1)		   Adjustment   Revised  

Earnings (losses) from unconsolidated affiliates

   $ (301,320 ) $ 12,602   $ (288,718 ) $ 56,647   $ 28,801   $ 85,448  

Total revenues and other income

     6,604,868     12,602     6,617,470     6,090,066     28,801     6,118,867  

Direct costs

     4,368,702     (1,596 )   4,367,106     3,736,910     1,596     3,738,506  

Total costs and other deductions

     6,342,106     (1,596 )   6,340,510     5,602,018     1,596     5,603,614  

Income (loss) from continuing operations before income taxes

     262,762     14,198     276,960     488,048     27,205     515,253  

Deferred income tax expense (benefit)

     (115,413 )   13,405     (102,008 )   33,021     22,360     55,381  

Income tax expense (benefit)

     27,581     13,405     40,986     142,723     22,360     165,083  

Income (loss) from continuing operations, net of tax

     232,181     793     232,974     342,325     4,845     347,170  

Net income (loss)

     164,655     793     165,448     244,724     4,845     249,569  

Net income (loss) attributable to Nabors

     164,034     793     164,827     243,679     4,845     248,524  

Earnings (losses) per share:(2)

                                      

Basic from continuing operations

   $ 0.80   $ —   $ 0.80   $ 1.19   $ 0.02   $ 1.21  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Basic

   $ 0.57   $ —   $ 0.57   $ 0.85   $ 0.02   $ 0.87  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Diluted from continuing operations

   $ 0.79   $ —   $ 0.79   $ 1.17   $ 0.02   $ 1.18  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Diluted

   $ 0.56   $ —   $ 0.56   $ 0.83   $ 0.02   $ 0.85  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(1)
Amounts reflect the retrospective reclassification of the results of Peak as discontinued operations. Refer to Note 5—Assets Held for Sale and Discontinued Operations for additional information.

(2)
Earnings per share is computed independently for each of the columns presented. Therefore, the sum of the earnings per share may not equal the total revised.

        The effect on our consolidated statements of other comprehensive income (loss) is as follows:

 
   Year Ended December 31,  
 
   2012   2011  
(In thousands)
  As
Reported		   Adjustment   Revised   As
Reported		   Adjustment   Revised  

Net income (loss) attributable to Nabors

   $ 164,034   $ 793   $ 164,827   $ 243,679   $ 4,845   $ 248,524  

Comprehensive income (loss) attributable to Nabors

     274,365     793     275,158     222,891     4,845     227,736  

Comprehensive income (loss)

     275,297     793     276,090     223,751     4,845     228,596  

        While these adjustments had no impact on our overall cash flows from operating, investing or financing activities for any period, the presentation of certain line items within our operating activities in our consolidated statements of cash flow was revised and is as follows:

 
   Year Ended December 31,  
 
   2012   2011  
(In thousands)
  As
Reported		   Adjustment   Revised   As
Reported		   Adjustment   Revised  

Net income (loss) attributable to Nabors

   $ 164,034   $ 793   $ 164,827   $ 243,679   $ 4,845   $ 248,524  

Deferred income tax expense (benefit)

     (145,147 )   13,405     (131,742 )   (34,739 )   22,360     (12,379 )

Equity in (earnings) losses of unconsolidated affiliates, net of dividends

     312,319     (12,602 )   299,717     (132,388 )   (28,801 )   (161,189 )

Trade accounts payable and accrued liabilities

     (223,199 )   (1,596 )   (224,795 )   517,615     1,596     519,211  

 

                                      
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net cash provided by operating activities

     1,562,705     —     1,562,705     1,456,487     —     1,456,487  
                           
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

        The effect on our consolidated statements of changes in equity is as follows:

 
   Year Ended December 31,  
 
   2011   2010  
(In thousands)
  As
Reported		   Adjustment   Revised   As
Reported		   Adjustment   Revised  

Retained earnings

   $ 3,956,364   $ (793 ) $ 3,955,571   $ 3,707,881   $ (5,638 ) $ 3,702,243  

Total equity

     5,601,217     (793 )   5,600,424     5,342,863     (5,638 )   5,337,225  

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