NEW YORK (Bloomberg) — Bermuda-based Nabors Industries Ltd., the world's largest onshore oil and natural-gas driller, said it expects its active rig count to drop by 40 to 50 starting next year because of the slumping natural-gas market.

The estimated reduction for the company is based on the total rigs in the industry dropping by 300 in 2009, Gene Isenberg, Nabors chief executive officer, told analysts and investors yesterday on an earnings conference call. Nabors owns about 1,225 land-based rigs and offshore vessels.

The lost rigs are "a probability; that's not a certainty," he said.

Isenberg said the company, which reported quarterly earnings yesterday after the close of regular US stock market trading, plans to cut working capital spending by at least $400 million over the next 18 months. Nabors will reduce expenditures that are "not underpinned by term contract commitments or contain other assurances of good and relatively rapid returns," Isenberg said in yesterday's report, citing the global credit crunch.

"We are curtailing discretionary capital expenditures with the expectation that both measures will generate substantial free cash flow beginning next year," Isenberg said on the call.

Isenberg said that a number of people are suggesting, as does the price of gas, that rig usage for gas projects in North America "won't be as robust as we previously projected, or even as robust as what we're doing now."

Natural-gas futures are down about 50 percent from a 30- month closing-high of $13.577 per million British thermal units on July 3.

Nabors would likely do any required upkeep necessary to maintain the 40-50 rigs that might be shelved, Byron Pope, an analyst at Tudor, Pickering, Holt & Co. Securities Inc., said in a telephone interview.

"Those rigs would still be officially marketed," said Pope, who has a "accumulate" rating on the stock and doesn't own any. "But in a market where overall US rig count is lower, it would be very difficult for Nabors to find work for those 40 rigs."

As a result, Nabors would likely not raid them for spare parts and would instead sit them on the sidelines until they can be used again, Pope said.

Spending cuts by exploration and production companies could lead to a drop of 400 rigs in the US from today's levels beginning in 2009, James Crandell, an analyst at Barclays Capital, said in note to clients this month.

Nabors said third-quarter profit fell 3.5 percent to $210.3 million on a one-time investment charge and hurricane damages.