How is drilling overhead calculated?
Drilling overhead is normally charged to wells that are sustaining some type of drilling or completion work. Drilling overhead is expressed as a “per well per month” rate, but the application is based on drilling days during a month. For example, a well spud on January 31 would be charged 1/31st of the monthly rate, while a well spud on February 28 in a non-leap year would be charged 1/28th of the monthly rate. Another way to prorate the rate would be to divide the number of days in a month into the drilling well rate, then multiply the daily rate by the number of drilling days. If work is suspended, for whatever reason, for a period of up to fourteen days and then drilling or completion work is continued then overhead may be charged for the suspended time. If, however, the suspension is for a period of fifteen days or more overhead is not chargeable for the suspended period.
