Legal Definitions - drilling contract

A drilling contract is an agreement between a drilling contractor and the owner or lessor of mineral rights. The contract outlines the rights and responsibilities of both parties. The more control the owner retains over the contractor, the more liable they are for any damages caused by the drilling.

A daywork drilling contract is when the lease operator hires a drilling rig and workers and pays based on the time spent drilling. The lease operator has broad control over the contractor, but also assumes broad liability for any damages caused by the drilling.

A footage drilling contract is when the drilling contractor is paid a set amount per foot drilled and has control over how to do the work. The contractor assumes most liabilities and risks of unexpected delays.

A turnkey drilling contract is when the drilling contractor promises to perform specific functions for an agreed price. The lease operator has little to no control over the contractor and assumes little to no liability for damages caused by the drilling.

For example, if a drilling company enters into a daywork drilling contract with an oil company, the oil company has control over the drilling operations and assumes liability for any damages caused by the drilling. On the other hand, if the drilling company enters into a turnkey drilling contract, they assume most of the risks and liabilities associated with the drilling operations.