<PAGE>   1
                                                                   EXHIBIT 10.12

                          TRANSITION SERVICES AGREEMENT

     This Transition Services Agreement (this "Agreement") is entered into as of
April 14, 2000, between Weatherford International, Inc., a Delaware corporation
("Weatherford"), and Grant Prideco, Inc., a Delaware corporation, on behalf of
itself and each of its Affiliates (collectively, "Grant Prideco").

                               W I T N E S S E T H

     WHEREAS, Weatherford and Grant Prideco are parties to the Distribution
Agreement and other related agreements; and

     WHEREAS, Weatherford and Grant Prideco desire for Weatherford and its
Affiliates to provide certain services to Grant Prideco;

     NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Weatherford and Grant Prideco, each on behalf of itself and its
Affiliates, hereby covenant and agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

     All capitalized terms or other defined terms used but not defined in this
Agreement are used in this Agreement with the following meanings:

     "AFFILIATE" means, with respect to Weatherford or Grant Prideco, any
Person, that directly or indirectly, is in control of, is controlled by,
controls or is under common control of Weatherford or Grant Prideco, as the case
may be. For purposes of this definition, control shall include the ownership of
50% or more of the legal or beneficial interest in any Person or the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise. A
Person who is an Affiliate shall only be considered an Affiliate for so long as
that Person meets the definition of an Affiliate. An officer, director, general
partner, managing member or trustee of a Person or Affiliate of such Person
shall not be considered to be an Affiliate unless such Person is under the
direct or indirect control or common control of Weatherford or Grant Prideco, as
the case may be. For purposes of clarity, neither Weatherford nor Grant Prideco
shall be considered to be an Affiliate of the other, nor shall National Oilwell,
Grey Wolf Inc. or any other company in which a director or officer of
Weatherford is also a director, officer or shareholder be considered an
Affiliate of Weatherford unless Weatherford itself controls such company.

     "BUSINESS DAY" shall mean any day other than a Saturday, Sunday or other
day on which commercial banks in Houston, Texas are authorized or required to
close.

     "CLOSING DATE" shall mean the effective date of the Distribution Agreement
or such other date as the parties shall agree to in writing.



<PAGE>   2

     "DISTRIBUTION AGREEMENT" shall mean that certain Distribution Agreement
dated as of March 20, 2000, by and between Weatherford and Grant Prideco, as the
same may be amended or otherwise modified from time to time pursuant to the
terms thereof.

     "GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.

     "PERSON" shall mean an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.

                                   ARTICLE II
                              WEATHERFORD SERVICES

     2.1 SERVICES. Weatherford agrees to provide, or cause its Affiliates to
provide, the services described below to Grant Prideco:

         (a) Treasury Services. Weatherford will provide, or cause to be
provided, the treasury services set forth on ANNEX A (the "Treasury Services").
Weatherford will allocate to Grant Prideco a proportional amount of the costs
and expenses of Weatherford's Treasury Department to the extent they relate to
matters associated with the Treasury Services. Grant Prideco agrees to pay
Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the Treasury Services.

         (b) Insurance and Risk Management Services. Weatherford will provide,
or cause to be provided, the insurance and risk management services set forth on
ANNEX B (the "Insurance and Risk Management Services"). Weatherford will
allocate to Grant Prideco a proportional amount of the costs and expenses of
Weatherford's Risk Management Department to the extent they relate to matters
associated with the Insurance and Risk Management Services. Grant Prideco agrees
to pay Weatherford for such proportional amount and for all additional costs,
fees, expenses, penalties, taxes and interest incurred by Weatherford relating
to the provision of the Insurance and Risk Management Services. Grant Prideco
shall be solely responsible for, and shall reimburse Weatherford for, the amount
of any retentions, deductibles or any other payments for any claims relating to
Grant Prideco.

         (c) Tax Services. Weatherford will provide general tax supervision and
oversight and assistance relating to the tax accounting of Grant Prideco,
including assistance with the preparation and filing of the state, federal and
foreign tax returns and assistance with the maintenance of tax records
(collectively, the "Tax Services"). Weatherford will allocate to Grant Prideco a
proportional amount of the costs and expenses of Weatherford's Tax Department to
the extent they relate to matters associated with the Tax Services, including
the costs of the preparation and filing of state, federal and foreign tax
returns. Grant Prideco agrees to pay Weatherford for such proportional amount
and for all additional costs, fees, expenses, penalties, taxes and interest
incurred by Weatherford relating to the provision of the Tax Services.


                                       2
<PAGE>   3


         (d) Management Information Systems Services. Weatherford will provide
the management information system services set forth on ANNEX C (the "MIS
Services"). Weatherford will allocate to Grant Prideco a proportional amount of
the costs and expenses of Weatherford's MIS Department to the extent they relate
to matters associated with the MIS Services. Grant Prideco agrees to pay
Weatherford for such proportional amount and for all additional costs, fees,
expenses, penalties, taxes and interest incurred by Weatherford relating to the
provision of the MIS Services.

         (e) Accounting Services. Weatherford will make its Accounting
Department available to Grant Prideco on a reasonable basis (the "Accounting
Services", and, collectively with the Treasury Services, the Insurance and Risk
Management Services, the Legal Services, the Tax Services and the MIS Services,
the "Services"). Weatherford will allocate to Grant Prideco a proportional
amount of the costs and expenses of Weatherford's Accounting Department to the
extent they relate to matters associated with the Accounting Services. Grant
Prideco agrees to pay Weatherford for such proportional amount and for all
additional costs, fees and expenses incurred by Weatherford relating to the
provision of the Accounting Services.

     2.2 EARLY TERMINATION OF SERVICES. With respect to any Service (or portion
thereof) that Grant Prideco no longer requires Weatherford (or its Affiliates)
to perform, Grant Prideco shall promptly notify Weatherford that such Service
(or portion thereof) is no longer required, and 30 Business Days following
receipt by Weatherford of such notice, such Service (or portion thereof) will no
longer be provided by Weatherford (or its Affiliates) under this Agreement and
Weatherford will have no further obligation with respect thereto.

     2.3 MANAGEMENT FEE AND REIMBURSEMENT. Weatherford will prepare and submit
to Grant Prideco a monthly statement of account and invoice setting forth in
reasonable detail the amounts owed by Grant Prideco for the Services pursuant to
this Agreement for the immediately preceding month and the method and basis of
their calculation. In consideration for Weatherford's agreement to provide and
administer the Services under this Agreement, Grant Prideco also agrees to pay
to Weatherford a management fee equal to 10% of the total amount of the
proportional amount of the costs and expenses of the various Weatherford
departments allocated to Grant Prideco. Such management fee shall be added to
each monthly statement of account and invoice sent to Grant Prideco. Grant
Prideco agrees to pay to Weatherford, by wire transfer in immediately available
U.S. funds, all amounts owed and due under this Agreement within 30 days of
receipt of such monthly statement of account and invoice. Interest at the rate
of 10% per annum, compounded monthly, will accrue and will be payable with
respect to any amounts due and not paid by Grant Prideco until such amounts, and
any interest thereon, have been paid.

     2.4 ADJUSTMENTS. All costs, expenses and fees associated with the Services
are subject to change and adjustment based upon changes in Weatherford's
internal cost structure and the cost of outside services utilized by
Weatherford.

     2.5 TERM AND TERMINATION. Subject to the provisions of Section 2.2 hereof,
the term of this Agreement shall commence on the Closing Date and shall continue
until, and terminate on, the first anniversary following the Closing Date. The
termination of this Agreement shall not release (i) either party from its
liability to the other party under this Agreement arising from a


                                       3
<PAGE>   4


breach of this Agreement, (ii) either party from its rights and obligations
under Article III or (iii) Grant Prideco from its payment obligations under
Sections 2.1 and 2.3.

                                   ARTICLE III
           ALLOCATION OF LIABILITY; RELATIONSHIP; DELEGATION OF DUTY

     3.1 WAIVER AND INDEMNIFICATION. GRANT PRIDECO HEREBY WAIVES ANY AND ALL
CLAIMS AGAINST WEATHERFORD, ITS AFFILIATES AND THEIR RESPECTIVE DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS (THE "WEATHERFORD PARTIES") FOR DAMAGES RESULTING
FROM PERFORMANCE OF, ERROR OR DELAY IN PERFORMANCE, ATTEMPTING TO PERFORM OR
FAILING TO PERFORM, ANY RESPONSIBILITIES HEREUNDER, OR ANY DAMAGES OF ANY KIND
RELATED THERETO, INCLUDING CLAIMS ARISING AS A RESULT OF THE EXPRESS NEGLIGENCE
OF SUCH PERSONS UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL MISCONDUCT OF SUCH
PERSONS. FURTHER, GRANT PRIDECO HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD THE
WEATHERFORD PARTIES HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, DAMAGES,
CAUSES OF ACTION AND LEGAL LIABILITIES ARISING OUT OF, IN CONNECTION WITH, OR AS
AN INCIDENT TO, THIS AGREEMENT OR ANY ACT OR OMISSION IN THE PERFORMANCE BY SUCH
PERSONS OF THEIR RESPONSIBILITIES HEREUNDER, INCLUDING DAMAGES, CAUSES OF ACTION
AND LEGAL LIABILITIES ARISING AS A RESULT OF THE NEGLIGENCE OF SUCH PERSONS,
UNLESS SUCH DAMAGES RESULTED FROM THE WILLFUL MISCONDUCT OF SUCH PERSONS SEEKING
INDEMNIFICATION.

     3.2 LIMITATION ON WARRANTIES AND CONSEQUENTIAL DAMAGES. NONE OF THE
WEATHERFORD PARTIES MAKES ANY WARRANTIES OR REPRESENTATIONS REGARDING SERVICES
PROVIDED PURSUANT TO THIS AGREEMENT OTHER THAN THOSE EXPRESSED IN THIS AGREEMENT
AND NONE OF THE WEATHERFORD PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF
MERCHANTABILITY OR OF FITNESS FOR A PARTICULAR PURPOSE. SUCH SERVICES ARE
FURNISHED ON AN "AS IS" BASIS, AND NONE OF THE WEATHERFORD PARTIES ASSUMES ANY
RESPONSIBILITY FOR ANY DAMAGE OR LOSS (INCLUDING, WITHOUT LIMITATION, ANY
CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES OR LOST PROFITS) ARISING OUT OF,
RESULTING FROM OR CAUSED BY SERVICES FURNISHED.

     3.3 EXPRESS NEGLIGENCE. THE INDEMNITIES SET FORTH IN THIS ARTICLE III ARE
INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS
TERMS AND SCOPE THEREOF NOTWITHSTANDING TEXAS' EXPRESS NEGLIGENCE RULE OR ANY
SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF
THE SIMPLE OR GROSS NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR
OTHER FAULT OR STRICT LIABILITY OF ANY OF THE WEATHERFORD PARTIES.


                                       4
<PAGE>   5


     3.4 INDEPENDENT CONTRACTOR. UNLESS OTHERWISE AGREED BY THE PARTIES WITH
RESPECT TO LEGAL SERVICES, IN PERFORMING THE SERVICES HEREUNDER, GRANT PRIDECO
AND WEATHERFORD ACKNOWLEDGE AND AGREE THAT THE WEATHERFORD PARTIES AND THEIR
REPRESENTATIVES SHALL BE CONSIDERED INDEPENDENT CONTRACTORS WITH RESPECT TO
GRANT PRIDECO AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE EMPLOYEES,
AGENTS, PARTNERS OR JOINT VENTURERS OF GRANT PRIDECO. ADDITIONALLY, WEATHERFORD
SHALL HAVE THE AUTHORITY AND RESPONSIBILITY TO SELECT THE MEANS, MANNER AND
METHOD OF PERFORMING THE SERVICES REQUIRED TO BE CAUSED TO BE PERFORMED BY IT
HEREUNDER.

     3.5 DELEGATION OF DUTY. In the performance of their respective obligations
under this Agreement, Weatherford and its Affiliates may act directly or through
agents, counsel (in-house or outside) or other persons, may delegate the
performance of functions and may consult with agents, counsel (in-house or
outside) and other persons. None of Weatherford or any of its Affiliates will be
liable for the default or misconduct of any persons employed, consulted or
engaged thereby. Weatherford and its Affiliates will be entitled to conclusively
rely for all purposes upon any notice, document, correspondence, request or
directive received by it from Grant Prideco, or any officer or director of Grant
Prideco, and shall not be obligated to inquire (a) as to the authority or power
of any person executing or presenting any such notice, document, correspondence,
request or directive, or (b) as to the truthfulness of any statements set forth
therein.

                                   ARTICLE IV
                                 MISCELLANEOUS

     4.1 AUDIT RIGHT. Upon reasonable prior written request, Grant Prideco
shall have the right to audit Weatherford's calculations, and schedules thereto,
of the costs and expenses for the services provided hereunder. Upon the request
of Grant Prideco, Weatherford shall provide Grant Prideco with copies of
invoices relating to any third party costs and expenses relating to the
Services.

     4.2 COMPLETE AGREEMENT; AMENDMENT. This Agreement, including the Annexes
and other writings referred to herein or delivered pursuant hereto, constitutes
the entire agreement between Weatherford and Grant Prideco with respect to the
subject matter hereof and supersedes all other agreements, representations,
warranties, statements, promises and understandings, whether oral or written,
with respect to the subject matter hereof. This Agreement may not be amended,
altered or modified except by a writing signed by duly authorized officers of
Weatherford and Grant Prideco.

     4.3 NOTICES. All notices under this Agreement must be in writing and
delivered by personal service; certified or registered mail, postage prepaid,
return receipt requested; nationally-recognized overnight courier, courier
charges prepaid; or facsimile transmission


                                       5
<PAGE>   6


(followed by telephone confirmation of receipt), to Weatherford or Grant
Prideco, as applicable, at the addresses herein set forth.

<TABLE>

<S>                 <C>
          The addresses for notices are as follows:

                   Weatherford International, Inc.
                   515 Post Oak Boulevard, Suite 600
                   Houston, Texas  77027
                   Attention:       General Counsel
                   Facsimile:       (713) 693-4484
                   Confirm:         (713) 693-4102

                   Grant Prideco, Inc.
                   1450 Lake Robbins Dr., Suite 600
                   The Woodlands, Texas  77380
                   Attention:       President
                   Facsimile:       (281) 297-8569
                   Confirm:         (281) 297-8500

                   With a copy to:

                   Fulbright & Jaworski L.L.P.
                   1301 McKinney, Suite 5100
                   Houston, Texas  77010-3095
                   Attention:       Charles L. Strauss
                   Facsimile:       (713) 651-5246
                   Confirm:         (713) 651-5535
</TABLE>

All notices, demands and requests will be effective upon actual receipt or, in
the case of delivery by facsimile transmission, the completion of such
transmission during the normal business hours of the recipient. Rejection or
other refusal to accept or the inability to deliver because of changed address
of which no notice was given as provided herein will be deemed to be receipt of
the notice, demand or request sent. By giving to the other party at least 10
Business Days' written notice thereof, a party and its respective permitted
successors and permitted assigns will have the right from time to time and at
any time during the term of this Agreement to change their respective addresses
for notices and each will have the right to specify as its address for notices
any other address within the United States of America.

     4.4 SEVERABILITY. Any provision hereof that is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction will not invalidate or render unenforceable such provision in any
other jurisdiction.

     4.5 ASSIGNMENT; OTHER BENEFITS. This Agreement will be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and


                                       6
<PAGE>   7


permitted assigns. Neither party to this Agreement may assign its rights under
this Agreement without the prior written consent of the other party; provided,
however, Weatherford may assign any of its rights and obligations under this
Agreement to any Weatherford Affiliate, of which Weatherford beneficially owns
or controls at least 50% of the equity or other interests of such Affiliate,
without the consent of Grant Prideco.

     4.6 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the internal laws of the State of Texas, without reference to
or the application of the rules of conflicts of laws set forth in such laws.

     4.7 WAIVER. No consent or waiver, express or implied, by a party hereto to
or of any breach or default by the other party hereto in the performance by such
other party of its obligations hereunder will be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party
hereunder. Failure on the part of a party to complain of any act or failure to
act of the other party or to declare the other party in default, irrespective of
how long such failure continues, will not constitute a waiver by such party of
its rights hereunder. The giving of consent by a party in any one instance will
not limit or waive the necessity to obtain such party's consent in any future
instance.

     4.8 TERMINOLOGY. All personal pronouns used in this Agreement, whether used
in the masculine, feminine or neuter gender, will include all other genders; and
the singular will include the plural and vice versa. The headings of the
Articles and Sections of this Agreement are included for convenience only and
will not be deemed to constitute part of this Agreement or to affect the
construction hereof or thereof.

     4.9 FORCE MAJEURE. Except for the obligation of Grant Prideco to make
payments hereunder when due and the indemnification obligations arising
hereunder, neither party shall be liable for delays in performance or for
non-performance, directly occasioned or caused by Force Majeure. Force Majeure
means any event beyond the reasonable control of the party claiming to be
affected thereby, including, without limitation, acts of God, storms, floods,
war, fire, strikes, lockouts or differences with workers, acts of the public
enemy, insurrections, riots or rules or regulations of any Governmental
Authority asserting jurisdiction or control, compliance with which makes
continuance of operations impossible. Inability of either party to secure funds
shall not be regarded as Force Majeure. Upon the occurrence of Force Majeure,
the party affected shall give prompt notice thereof to the other party and
shall, at its cost and expense, do all things reasonable to remove or mitigate
its effect.

     4.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will for all purposes be deemed an original, but all
of which together will constitute one and the same agreement.

     4.11 FURTHER ASSURANCES. Each party hereto agrees to do all acts and things
and to make, execute and deliver such written instruments, as will from time to
time be reasonably required to carry out the terms and provisions of this
Agreement.


                                       7
<PAGE>   8


     4.12 ARBITRATION. The parties hereto agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.





                                       8
<PAGE>   9


     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth in the introduction to this Agreement.

                             WEATHERFORD INTERNATIONAL, INC.



                             By: /s/ Curtis W. Huff
                                -----------------------------------
                                     Curtis W. Huff
                                     Executive Vice President, Chief Financial
                                     Officer,  General Counsel and Secretary


                             GRANT PRIDECO, INC.



                             By: /s/ John C. Coble
                                -----------------------------------
                                     John C. Coble
                                     President



                                       9
<PAGE>   10


                                                                         ANNEX A

                                TREASURY SERVICES

Letters of Credit

Weatherford Treasury will continue to maintain certain letters of credit that
are outstanding as of the date of this Agreement, a list of which is attached
hereto. As such letters of credit are required to be renewed, Grant Prideco
shall be required to cause replacement letters of credit to be issued; provided,
however, if the circumstances under which the letters of credit were initially
issued prohibit Weatherford or Grant Prideco from having a replacement letter of
credit issued, Weatherford shall cause such letters of credit to be renewed at
Grant Prideco's sole expense. Grant Prideco also shall cause there to be issued
to Weatherford within 90 days following the Closing Date a letter of credit from
a financial institution acceptable to Weatherford backing up any liability that
Weatherford may have with respect to any letter of credit issued by Weatherford
or any of its affiliates for Grant Prideco or any of its affiliates.

Guarantees

There are certain guarantees outstanding as of the date of this Agreement, a
list of which is attached hereto. As such leases with underlying guarantees are
required to be renewed, Grant Prideco shall be required to cause a replacement
guarantee to be issued, except for the SGD 6,500,000 line of credit in the name
of Grant Prideco (Singapore) Pte. Ltd. with Standard Chartered Bank, in which
Weatherford will release its guarantee not sooner than 60 days following the
Closing Date.

Miscellaneous

Other miscellaneous treasury services historically provided by Weatherford on
behalf of Grant Prideco that may be reasonably requested by Grant Prideco and
not unduly burdensome on Weatherford.



                                      A-1