n 2007, Noble reaped the rewards of a well defined and executed strategy. With little exposure to the U.S. Gulf shelf, our international jackup operations, coupled with a healthy dose of deepwater capability, made 2007 our best year ever. Today, our direction is clear and Noble is positioned to continue to take advantage of an exciting market and achieve top-tier performance in the years ahead. During 2007 we continued to sharpen our strategy, increased our commitment to deepwater and the premium jackup markets, strengthened our relationships with our customers, exited our technology and North Sea platform businesses and enhanced our hiring, training and development programs. These actions heightened our performance during the year and, more importantly, strengthen our competitive position for the future.

Driving this performance through a favorable market are Noble’s great assets, strong customer relationships, a solid balance sheet and most importantly, Noble’s talented and dedicated employees who are the foundation of what is Noble. This combination led to our record-setting results for 2007 which included:

• Revenues of $3 billion and net income of $1.2 billion, or $4.48 per fully diluted share.

• Contract drilling margins of approximately 68 percent, up from 63 percent in 2006.

• Cash flow from operating activities of $1.4 billion, up 43 percent from $989 million generated the previous year.

• Significant investments in building and upgrading our fleet, with capital spending of $1.3 billion for the year.

• Outstanding financial flexibility, with Noble ending the year with a 15.4 percent debt-to-capital ratio, ensuring we are prepared to act expeditiously to grow our fleet should the right opportunity present itself.

• Value delivered for our shareholders through share repurchases and increased dividends. For the year, we repurchased 4.2 million shares for a total of $178 million, or about 13 percent of our cash flow from operating activities.

Achieving this level of performance requires the commitment of every person at Noble. I am particularly grateful to our crews offshore who worked more than 13 million man hours in 2007, nearly one million more hours than in the previous record-setting year. From the North Sea to West Africa, from the Gulf of Mexico to the Middle East and India, from Canada to Brazil, Noble’s team consistently went the extra mile for our customers.

The Form 10-K that follows this letter provides much more detailed information about our financial performance and I encourage you to review it fully. What is clear is that Noble ended 2007 in an excellent competitive position, equipped to make the most of the opportunities we see ahead.

Going Where the Work Is

Investors who have followed us for some time know we have transformed our Company several times since our founding in 1921, each time emerging stronger and more competitive. Some of these changes have been small and have gone largely unnoticed with the passage of time; yet other changes were more obvious, such as the strategic move away from the volatility of the U.S. gas markets toward the focus we have today as a leading global offshore driller. Noble’s push to be a force in developing the world’s deepwater potential began with our Noble EVA-4000™ upgrades in the 1990s and solidly established us as a leader in that emerging market. The wisdom of moving in that direction is now all the more clear. Our initiative in 2006 to install enhanced moorings on our U.S. deepwater moored fleet further demonstrates our long-term commitment to this business.

Noble was one of the first drillers to work in the Gulf of Mexico, with the Company’s first offshore well having been drilled there in 1935. Since that time the U.S. Gulf has become a major supplier of oil and gas to America. The deepwater U.S. Gulf of Mexico is, and will continue to be, of strategic importance to the U.S. and Noble for years to come. In 2007, we continued to strengthen our deepwater position with the delivery of the newbuild semisubmersible Noble Clyde Boudreaux, which is working for Shell in the U.S. Gulf of Mexico.

The Boudreaux is the first of a series of new deepwater assets we expect to add in the coming years. Capable of working in waters up to 10,000 feet, this unit significantly extends our reach in this very important market. The Boudreaux will be joined in the U.S. Gulf of Mexico by the Noble Danny Adkins which is scheduled for delivery in 2009. Additionally, we announced in 2007 an agreement with Marathon to build the Noble Jim Day which is scheduled for delivery late next year. These new units will enhance our status as a leading driller in the region.

Operators signaled their continuing commitment to drilling in the U.S. Gulf of Mexico last year by placing more than $2.9 billion in high bids for 723 tracts off the coasts of Mississippi, Alabama and Louisiana. It was the largest total of high bids ever for a Gulf lease sale since 1983, when the U.S. Minerals Management Service conducted an initial sale of tracts across the entire Gulf.

Drilling in the deepwater Gulf is not easy, but Noble’s Gulf of Mexico team and our deepwater assets are up to the challenge. In 2007, Noble’s Gulf of Mexico team was honored with the prestigious U.S. Department of Interior’s Minerals Management Service (MMS) National Safety Award for Excellence (SAFE). Presented annually, the SAFE award recognizes outstanding performance in safety and environmental protection. We have recently been notified that we are a finalist for the SAFE award again this year. As a further testament to the hard work and dedication of his team, the leader of our U.S. Gulf of Mexico operations, Mark Burns, was named Contractor of the Year by the International Association Of Drilling Contractors. Time and again, we have proven we know how to work successfully in deepwater.

Deepwater advances are also driving the market in Brazil. In that market, Petrobras expects much of its planned growth to come from deepwater and ultra-deepwater. Noble has had a strong presence in Brazil for more than 17 years. The recent discoveries of Tupi and Jupiter Fields are expected to peak deepwater interest and investment in Brazil during 2008 and beyond. Noble is well positioned to provide the necessary support to Petrobras and others as the pursuit of hydrocarbons offshore Brazil continues to expand.

There is also deepwater potential in the waters offshore Mexico and Noble will proudly lead the way in developing this important resource. The region’s first deepwater rig, the Noble Max Smith, will commence its contract to PEMEX when it arrives there in the third quarter of 2008.

These deepwater regions clearly translate into opportunities for Noble. We currently have seven deepwater rigs with repricing opportunities between now and the end of 2009. At the same time, there continues to be strong demand for floating units in West Africa, Brazil, Southeast Asia, India, the Gulf of Mexico and the Mediterranean regions, all of which we are eyeing with interest. As a result, we believe there continues to be excellent potential for Noble in the deepwater markets of the world in the years ahead.

Jackups Remain Essential

Jackups continue to be the backbone of the offshore drilling business. This, coupled with a favorable product price environ- ment, continues to drive demand and create opportunities for jackups internationally.

In Mexico, Noble has a well established and unparalleled relationship with PEMEX. As of year end, we had 10 jackups working offshore Mexico. Of these, we have four independent leg cantilevered jackups that we are working to renew with PEMEX this year. Like many established fields around the world, production in the developed areas offshore Mexico declined last year. To offset this decline, we believe there is a clear and continuing need for jackups in the Mexico market.

In September 2007, we were proud to take delivery of the Noble Roger Lewis. The flagship of our Middle East operations, the Lewis is designed to drill wells in high-pressure/high-temperature environments up to 30,000 feet deep in water depths up to 400 feet. With more deck space, higher variable load and more cantilever reach than many other units operating today, the Lewis will continue to meet our customers’ needs and generate earnings for Noble for many years to come. This also enhances our position as the leading supplier of premium jackups in the Middle East, with a fleet that now includes 15 drilling units.

The North Sea also continues to offer outstanding drilling opportunities for Noble. Demand for our seven jackups and one semisubmersible working in the region remained strong throughout 2007. Rates in the area continue to be attractive, such as the one-year contract we recently signed on the Noble Julie Robertson at $198,000 a day, and a six-month contract extension on the Noble Ronald Hoope beginning in July 2008 at a rate of $207,000 per day.

A Look Ahead

Noble enjoys an enviable position in both international jackup and deepwater markets. Our overall fleet has about 82 percent of its days booked for the balance of 2008, 42 percent for 2009 and 17 percent for 2010.

Turning to our jackups, we have contracts covering approximately 79 percent of the available days this year, 33 percent for next year and 8 percent for 2010. This is similar to where we were at this time in 2007 in terms of total number of days contracted.

Overall, we are pleased with our competitive position as the Company enters 2008. Our outstanding fleet, coupled with an ambitious customer mix, will consistently deliver strong results. But it’s our top-flight team of dedicated professionals who truly differentiate us from our peers and ensure our success. They also help ensure we will generate consistent growth, leading margins and outstanding cash flow even in the face of economic uncertainty.

A Word about Growth

Operators and drillers would agree that the current business environment is different from earlier market cycles. That said, there are certain constants that make sense in any cycle. For example, maintaining financial flexibility has always been central to Noble’s strategy and we did not depart from that principle during 2007. In fact, we enhanced our financial position last year and began 2008 in what may be our strongest financial position yet.

From a financial and operational perspective, Noble has never been better positioned for growth. During the year we continued to enhance our financial flexibility by reducing our debt to total capitalization to 15 percent at year end. We also added liquidity by expanding our existing credit revolver from $300 million to $600 million last year. Looking ahead, the fundamentals of our business remain strong and we are taking steps to help ensure that we continue to drive long-term growth. In this regard, we are positioned to make investments in 2008 that we believe will help us better serve our consumers and deliver value to our investors for this cycle and the next.

Since the earliest days of our Company, Noble has recognized that the secret to our success is not our rigs, but the people who make them run. People are essential to our ability to compete. In 2007, we continued to work hard to ensure that we attract and retain the people we need to grow our business. Importantly, turnover among our top tier rig employees remained near historic lows. We also had a great year in terms of adding skilled team members to our ranks, with more than 1,100 people joining the Company in 2007.

Up to the Challenge

While Noble has never been better positioned for success than it is today, there are several challenges we face in 2008 that we simply must address. Our safety performance took a step back in 2007 and we must do better in 2008. We must live and breathe safety every day on every rig. I’m committed to make sure that Noble continues to be the absolute best in the business.

We also face challenges completing our newbuild program on time and within budget. As a result of the current building boom, our industry is stretched to capacity. Added to this are scarce shipyard resources and limits on the trained shipbuilding labor pool. These obstacles are not unique to Noble. To address this challenge, we have put teams in place working hand in hand with our shipyard partners and we are benefiting from our strong relationships with our key suppliers. Our goal is to manage our newbuild program better and smarter than our peers and get our rigs working for our customers as promised.

Growing and developing additional crews to meet future demand is also a challenge we are facing head-on. Our expectation is to see every newbuild fully staffed six to nine months before it leaves the yard. As a result, we expect to add more than 1,400 new members to our team in the next two years. After all, our customers hire Noble for who we are and the way we work, not just the assets we own. In 2008 we will redouble our recruiting efforts and I am confident we will hit our targets. We will also continue to offer incentive programs designed to retain our talented workforce.

As we look back at 2007, we are proud of what we accomplished and are excited about the challenges and opportunities we face in 2008. Noble is a solid company with an 87 year history of delivering results, and we don’t see this changing. Our culture, combined with our ability to execute, will lead to new high-water marks the Company will reach in the years to come.

In closing, I’d like to thank Bill Sears for his leadership as our interim CEO during the final months of 2007. His knowledge of our industry and leadership skills proved instrumental in directing the Company through our management change. I’d also like to thank our Board of Directors for their confidence and vision; our employees for their dedication, hard work and commitment to safety and integrity; our customers for the opportunity to earn their business and our shareholders for their continued support of Noble.