DEFINITION of 'Day rate (oil drilling)'

In oil production, a day rate is the amount a drilling contractor gets paid by the oil company for a day of operating a drilling rig. The companies and the contractors usually agree on a flat fee per contract, so the day rate is determined by dividing the total amount by the number of days in the contract.

BREAKING DOWN 'Day rate (oil drilling)'

Day rate fluctuations, which can be wide, are used by investors as an indicator of the health of the drilling market. For example, if day rates fall, investors can take it as a sign to exit their positions.

 

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