CHICAGO (Bloomberg) ? Nabors Industries Ltd., an oil driller whose shares surged last week on buyout speculation, said fourth-quarter profit rose 31 percent to $276 million as rig demand surged.

Net income increased to 97 cents from $210.6 million, or 64 cents a share, a year earlier, the company, based in Hamilton, Bermuda, and run from Houston, said in a statement yesterday. Revenue climbed 27 percent to $1.33 billion.

Drillers are reaping record profits amid an exploration boom that drove North American rig activity to a 21-year high in 2006. Oil producers are expected to boost drilling expenditures by 9 percent world-wide this year to a record $292 billion, said James Crandell, a Lehman Brothers analyst.

?Exxon and the other major oil companies have been drilling a lot of wells and that?s going to continue for the foreseeable future,? said Gene Pisasale, who helps manage $25 billion at Mercantile Bankshares Corp. in Baltimore.

The US Securities and Exchange Commission has started an ?informal inquiry? into Nabors? stock-options practices and the company said yesterday that it plans to ?cooperate fully with any SEC review?.

Nabors also said its outside directors have hired counsel to assist in their options investigation. The company began reviewing its own options practices in December after the Wall Street Journal questioned more than 25 million options granted to chief executive officer Gene Isenberg over 19 years.

Shares of Nabors, the world?s largest onshore oil and natural-gas driller, jumped 7.5 percent last week amid renewed speculation the company may be a buyout target. Nabors was the subject of similar rumours last year, after Isenberg raised the prospect of a leveraged buyout during an October conference call. Nabors received orders for eight new rigs during the quarter, including two that will be hauled by helicopter to Alaska?s North Slope to explore for oil.

Across the US and Canada, there was an average of 2,159 oil- and gas-drilling rigs active in the fourth quarter, up 5.3 percent from 2,050 a year earlier, according to Baker Hughes.

Nabors owns almost 600 land-based drilling rigs. The company also has 65 offshore rigs and 800 workover and well-servicing rigs that operate in the US, Canada, Central and South America, the Middle East and Africa. Workover rigs are used to extract oil from mature fields.

The quarterly earnings report was released after the close of regular trading on US stock markets. The shares fell 25 cents to $30.59 in after-hours trading.

The company recorded a $12.3 million pretax charge during the quarter for retirement of older rigs in Canada and the US, and a $4 million gain from an insurance settlement related to 2005 hurricane damage.