The Western Business Unit Bakersfield drilling department of Chevron, U.S.A. Production Company developed a drilling performance incentive contract that was implemented during 1994 in the Lost Hills field of California. The performance incentive contract (PIC) financially rewarded all of the drilling contractor’s rig employees for outperforming pre-established drilling performance goals.

The key elements of the performance incentive program are: 1) Goals that trigger incentives are based on cost categories that are controllable by the drilling team; 2) Goals were established using a database of past years performance; 3) Goals that are not achieved negatively impact the incentive earned in an effort to deter repeated errors; 4) Accidents that occur on the job negatively impact the incentive earned; 6) Administration of the program is not time consuming.

The results of using an incentive contract in the Lost Hills drilling program are; 1) Time and cost of operations are reduced; 2) The results are measurable and repeatable; 3) A team environment develops in which ideas are shared and acted upon by crew members and supervisory personnel.

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