A drilling contractor is a company that provides the rig, crew, and equipment needed to drill a well. Rather than owning and operating rigs themselves, oil and gas companies, utility developers, and other organizations hire drilling contractors to handle the physical work of boring into the earth. The contractor is responsible for keeping the rig running safely, managing the crew on site, and maintaining all the associated equipment.
What a Drilling Contractor Actually Does
The core job is straightforward: drill a well to the specifications set by whoever hired them, known in the industry as the “operator.” The operator decides where to drill, how deep, and what formations to target. The drilling contractor handles the execution, bringing in the rig, assembling a trained crew, and managing day-to-day operations on site.
Beyond just drilling, the contractor is responsible for ensuring that all tools, equipment, facilities, and other items used in operations are maintained in safe, serviceable condition. That includes routine inspections of hydraulic systems, drill bits, hoisting equipment, and power units before and after every job. The contractor also manages the logistics of transporting rigs, crews, pumps, and supplies to and from job sites, which often means maintaining a fleet of trucks and trailers.
Not Just Oil and Gas
While the oil and gas industry is the most visible employer of drilling contractors, the work extends into several other sectors. Geotechnical drilling contractors bore into the ground to test soil and rock conditions before construction projects. Environmental drilling contractors install monitoring wells to track groundwater contamination. Water well drilling contractors drill and service wells for drinking water, irrigation, and industrial use. Some firms specialize in one sector; others offer a mix of geotechnical, environmental, and water well services under one roof.
The equipment, safety standards, and contract structures differ across these sectors, but the basic relationship is the same: someone needs a hole drilled, and they hire a specialized company with the rig and expertise to do it.
How Drilling Contracts Are Structured
The way a drilling contractor gets paid depends on the type of contract, and each structure shifts risk differently between the contractor and the operator.
Daywork contracts pay the contractor a set rate for each 24-hour period of work, with the operator directing operations. If the rig is on location but not actively drilling (called standby time), the rate drops. The contractor may also receive lump-sum payments for specific tasks like mobilizing the rig to the site and demobilizing afterward. This is the lowest-risk arrangement for the contractor, since they’re paid for time regardless of how smoothly the drilling goes.
Footage contracts pay a set price per foot of hole drilled. This gives the contractor an incentive to drill efficiently, but it also exposes them to more risk. If the crew hits an impenetrable rock formation, loses circulation, or encounters abnormal pressure, the contract typically switches to a daywork rate for the duration of the problem. Standby and shutdown time are also compensated at day rates.
Turnkey contracts pay a single stipulated price for drilling a well to a specified depth or target formation, with payment due only when the work is complete. The contractor assumes the most risk here because they control all drilling operations and absorb any cost overruns. Like footage contracts, turnkey agreements usually include provisions to switch to day rates in specific problem situations, with rates that may vary for operating time, standby, and repairs.
Who Works on the Rig
A drilling contractor employs and manages the entire crew on site. The hierarchy on a typical land rig runs from entry-level laborers to the contractor’s top representative.
- Tool pusher: The contractor’s lead representative on site, responsible for all drilling and non-drilling operations on and around the rig. This person serves as the main point of contact between the drilling contractor and the operator’s representative (often called the “company man”).
- Driller: Operates the drilling equipment and leads each crew rotation on the rig floor.
- Derrickman: Ranks second in the drill crew behind the driller. Historically one of the most physically demanding and dangerous positions, working high up on the rig structure to handle drill pipe. Most modern rigs now use automated pipe-handling equipment to reduce this risk.
- Roughnecks: Experienced crew members who work on the rig floor or up on the derrick, tending to engines and pumps, and coupling or uncoupling stands of drill pipe during operations.
- Skilled technicians: Mechanics, electricians, crane operators, and welders who keep specialized rig equipment running.
- Roustabouts: Entry-level laborers who unload supplies, haul materials, and maintain the rig site. These positions are sometimes available as summer internships for engineering students.
Safety Standards and Accreditation
Safety performance is one of the primary criteria operators use when selecting a drilling contractor. The industry tracks injuries using the Total Recordable Incident Rate, or TRIR, which measures the number of recordable injuries and illnesses per 200,000 work hours. The Bureau of Safety and Environmental Enforcement publishes annual benchmarks so companies can compare their performance against industry averages. A contractor with a low TRIR has a significant competitive advantage when bidding for work.
The International Association of Drilling Contractors (IADC), a nonprofit trade association that has served the industry for over 80 years, runs an accreditation program called RigPass. This is a standardized safety orientation program for all oil and gas operations, onshore or offshore, that confirms personnel have met baseline safety and training requirements defined by industry professionals. Programs are independently audited and accredited on a three-year cycle, with instructor certification renewed every five years. The entire accreditation system is ISO 9001:2015 certified.
Insurance and Liability Requirements
Drilling is inherently risky work, and contractors carry substantial insurance to cover equipment damage, worker injuries, vehicle accidents, and environmental contamination. The coverage requirements vary by state and by operator, but the dollar amounts are significant.
At a minimum, most operations require $1 million in general liability coverage, $1 million in workers’ compensation per accident, and $1 million in environmental coverage. In practice, those minimums rarely satisfy the operators writing the checks. In Texas’s Permian Basin, most operators require $5 to $10 million in general liability. In Alaska, where remote locations and environmental sensitivity raise the stakes, general liability minimums start at $5 million, and environmental coverage near pristine wilderness areas can reach $25 million or more. California requires at least $2 million in environmental coverage, with many areas demanding $10 million or more due to aquifer protection concerns.
On top of these base policies, major operators routinely require excess and umbrella coverage of $25 to $100 million for drilling and completion operations. Contractors also carry “control of well” insurance, which covers blowouts and related disasters, typically at $10 million or more for active drilling operations.
Major Offshore Drilling Contractors
The largest drilling contractors operate fleets of rigs worth billions of dollars. As of the end of 2023, China Oilfield Services Ltd. (COSL) held the title of largest offshore rig contractor with 67 managed units. Advanced Energy Systems (ADES) ranked second with 46 rigs, and Valaris came third with 45. These companies deploy rigs across the globe, from shallow-water jackups to deepwater drillships capable of operating in thousands of feet of water.
Onshore, the landscape is more fragmented, with hundreds of smaller contractors operating regional fleets alongside major players. The size of a contractor’s fleet, the types of rigs they own, and their geographic reach all factor into which jobs they can bid on and win.