<PAGE>

                                                                     EXHIBIT 4.7

                               [TODCO LETTERHEAD]

_____________, 2004

[INSERT NAME]
[INSERT ADDRESS]

Dear ____________:

Effective as of ___________ (the "Award Date"), TODCO (the "Company") hereby
grants to you a nonqualified option ("Option") to purchase __________ shares of
Class A Common Stock of the Company ("Common Stock") in accordance with the
TODCO Long-Term Incentive Plan (the "Plan"). Your award is more fully described
in the attached Appendix A, Terms and Conditions of Nonqualified Stock Option
Award.

The price at which you may purchase the shares of Common Stock covered by the
Option is _______ per share ("Exercise Price"). Unless otherwise provided in the
attached Appendix A, your Option will expire on ________________ ("Expiration
Date"), and will become exercisable in installments as follows (the "Schedule"):

<TABLE>
<CAPTION>
PERIOD BEGINNING                       NUMBER OF SHARES PURCHASABLE
-------------------------------------------------------------------
<S>                                    <C>
______________, 2004
______________, 2005
______________, 2006
</TABLE>

You must be in continuous employment with the Company or its Subsidiary (as
defined in the Plan) from the Award Date through each date on which your Option
becomes exercisable in order for your Option to become exercisable on such date.

Your award is subject to the terms and conditions set forth in the enclosed
Plan, any additional terms and conditions set forth in the attached Appendix A
and the Prospectus for the Plan, and any rules and regulations adopted by the
Executive Compensation Committee of the Company's Board of Directors.

This award letter and the attachments contain the formal terms and conditions of
your award and accordingly should be retained in your files for future
reference.

Very truly yours,

Jan Rask
President and Chief Executive Officer

<PAGE>

Enclosures

<PAGE>

                                   APPENDIX A
                                 TO AWARD LETTER
                                      DATED
                               [_________________]

                             TERMS AND CONDITIONS OF
                    EMPLOYEE NONQUALIFIED STOCK OPTION AWARD

The nonqualified stock option (the "Option") granted to you by TODCO (the
"Company") to purchase Class A Common Stock of the Company ("Common Stock") is
subject to the terms and conditions set forth in the TODCO Long-Term Incentive
Plan (the "Plan"), any rules and regulations adopted by the Executive
Compensation Committee of the Company's Board of Directors (the "Committee"),
any additional terms and conditions set forth in this Appendix A which forms a
part of the attached award letter to you (the "Award Letter") and the enclosed
Prospectus for the Plan. Any terms used in this Appendix A and not defined in
the Award Letter or this Appendix A have the meanings set forth in the Plan. In
the event there is an inconsistency between the terms of the Plan and this
Appendix A, the terms of the Plan will control.

1.       EXERCISE PRICE

         You may purchase the Shares of Common Stock covered by the Option for
the Exercise Price stated in your Award Letter.

2.       TERM OF OPTION

         Your Option expires on the Expiration Date stated in your Award Letter.
         However, your Option will terminate prior to the Expiration Date as
         provided in paragraph 6 of this Appendix A upon the occurrence of one
         of the events described in that paragraph. Regardless of the provisions
         of paragraph 6, in no event can your Option be exercised after the
         Expiration Date, except that an Option which is outstanding on the date
         of your death shall remain outstanding and exercisable until the later
         of (i) one year after your death, or (ii) the Expiration Date.

3.       EARN-OUT OF OPTION

         (a)      Unless it becomes exercisable on an earlier date as provided
                  in paragraphs 6 and 7 below, your Option will become
                  exercisable in installments as set forth in the Schedule in
                  your Award Letter.

         (b)      The number of shares covered by each installment will be in
                  addition to the number of shares which previously became
                  exercisable.

<PAGE>

         (c)      To the extent your Option has become exercisable, you may
                  exercise the Option as to all or any part of the shares
                  covered by the Option, at any time on or before the date the
                  Option expires or terminates.

4.       EXERCISE OF OPTION

         Subject to the limitations set forth in this Appendix A and in the
         Plan, your Option may be exercised by written notice provided to the
         Company as set forth below. Such written notice shall (a) state the
         number of shares of Common Stock with respect to which your Option is
         being exercised and (b) be accompanied by a wire transfer, cashier's
         check, cash or money order payable to TODCO in the full amount of the
         Exercise Price for any shares of Common Stock being acquired and any
         appropriate withholding taxes (as provided in paragraph 8 of this
         Appendix), or by other consideration in the form and manner approved by
         the Committee pursuant to paragraphs 5 and 8 of this Appendix. If any
         law or regulation requires the Company to take any action with respect
         to the shares specified in such notice, the time for delivery thereof,
         which would otherwise be as promptly as possible, shall be postponed
         for the period of time necessary to take such action. You shall have no
         rights of a shareholder with respect to shares of Common Stock subject
         to your Option unless and until such time as your Option has been
         exercised and ownership of such shares of Common Stock has been
         transferred to you.

5.       SATISFACTION OF EXERCISE PRICE

         (a)      PAYMENT OF CASH OR COMMON STOCK. Your Option may be exercised
                  by payment in cash (including check, bank draft, money order
                  or wire transfer payable to the Company), in Common Stock, in
                  a combination of cash and Common Stock or in such other manner
                  as the Committee in its discretion may provide.

         (b)      PAYMENT OF COMMON STOCK. The fair market value of any shares
                  of Common Stock tendered as all or part of the Exercise Price
                  shall be the average of the high and low prices of the Common
                  Stock as reported on the New York Stock Exchange Composite
                  Tape for the date of exercise. The certificates evidencing
                  shares of Common Stock tendered must be duly endorsed or
                  accompanied by appropriate stock powers. Only stock
                  certificates issued solely in your name may be tendered in
                  exercise of your Option. Fractional shares may not be tendered
                  in satisfaction of the Exercise Price; any portion of the
                  Exercise Price which is in excess of the aggregate fair market
                  value of the number of whole shares tendered must be paid in
                  cash. If a certificate tendered in exercise of the Option
                  evidences more shares than are required pursuant to the
                  immediately preceding sentence for satisfaction of the portion
                  of the Exercise Price being paid in Common Stock, an
                  appropriate replacement certificate will be issued to you for
                  the number of excess shares.

<PAGE>

6.       TERMINATION OF EMPLOYMENT

         (a)      GENERAL. The following rules apply to your Option in the event
                  of your death, disability, retirement, or other termination of
                  employment.

                  (i)      TERMINATION OF EMPLOYMENT. If your employment
                           terminates for any reason other than death,
                           disability, retirement, or for the convenience of the
                           Company (as those terms are used below), your Option
                           will terminate 60 days after termination of your
                           employment. Following the termination of your
                           employment, no additional portions of your Option
                           will become exercisable, and your Option will be
                           limited to the number of shares of Common Stock which
                           you were entitled to purchase under the Option on the
                           date of the termination of your employment.

                  (ii)     RETIREMENT. If your employment terminates by reason
                           of retirement (under a retirement program of the
                           Company or one of its subsidiaries or otherwise as
                           determined by the Committee), your Option will
                           terminate three years after the date of your
                           retirement. Following your retirement, no additional
                           portions of your Option will become exercisable, and
                           your Option will be limited to the number of shares
                           of Common Stock which you were entitled to purchase
                           under the Option on the date of your retirement.

                  (iii)    DEATH OR DISABILITY. If your employment terminates by
                           reason of death or disability (as determined by the
                           Committee), your Option will become fully
                           exercisable, and will remain exercisable until the
                           Expiration Date.

                  (iv)     CONVENIENCE OF THE COMPANY. If your employment is
                           terminated for the convenience of the Company (as
                           determined by the Committee) or if you retire for the
                           convenience of the Company (as determined by the
                           Committee), your Option will become fully exercisable
                           and will remain exercisable until the Expiration
                           Date.

                  (v)      ADJUSTMENTS BY THE COMMITTEE. The Committee may, in
                           its sole discretion, exercised before or after your
                           termination of employment, declare all or any portion
                           of your Option immediately exercisable and/or permit
                           all or any part of your Option to remain exercisable
                           for such period designated by it after the time when
                           the Option would have otherwise terminated as
                           provided in the applicable portion of this paragraph
                           6(a), but not beyond the Expiration Date of your
                           Option.

         (b)      COMMITTEE DETERMINATIONS. The Committee shall have absolute
                  discretion to determine the date and circumstances of
                  termination of your employment, and its determination shall be
                  final, conclusive and binding upon you.

<PAGE>

7.       CHANGE IN CONTROL

         Notwithstanding the provisions of paragraphs 3 and 6, upon the
         occurrence of a Change in Control (as defined in the Plan), your Option
         will immediately become fully exercisable and will remain exercisable
         until the Expiration Date.

8.       TAX CONSEQUENCES AND WITHHOLDING

         (a)      You should consult the TODCO Long-Term Incentive Plan
                  Prospectus for a general summary of the federal income tax
                  consequences of your Option based on currently applicable
                  provisions of the Internal Revenue Code (the "Code") and
                  related regulations. The summary does not discuss state and
                  local tax laws, which may differ from the federal tax law. For
                  these reasons, you are urged to consult your own tax advisor
                  regarding the application of the tax laws to your particular
                  situation.

         (b)      The Option is not intended to be an "incentive stock option,"
                  as defined in Section 422 of the Code.

         (c)      You must make arrangements satisfactory to the Company to
                  satisfy any applicable federal, state or local withholding tax
                  liability arising from the grant or exercise of your Option.
                  You can either make a cash payment to the Company of the
                  required amount or you can elect to satisfy your withholding
                  obligation by having the Company retain shares of Common Stock
                  having a value equal to the amount of your withholding
                  obligation from the shares otherwise deliverable to you upon
                  the exercise of your Option. You may not elect to have the
                  Company withhold shares of Common Stock having a value in
                  excess of the minimum statutory withholding tax liability. If
                  you fail to satisfy your withholding obligation in a time and
                  manner satisfactory to the Company, the Company shall have the
                  right to withhold the required amount from your salary or
                  other amounts payable to you.

9.       RESTRICTIONS ON RESALE

         There are no restrictions imposed by the Plan on the resale of shares
         of Common Stock acquired under the Plan. However, under the provisions
         of the Securities Act of 1933 (the "Securities Act") and the rules and
         regulations of the Securities and Exchange Commission (the "SEC"),
         resales of shares acquired under the Plan by certain officers and
         directors of the Company who may be deemed to be "affiliates" of the
         Company must be made pursuant to an appropriate effective registration
         statement filed with the SEC, pursuant to the provisions of Rule 144
         issued under the Securities Act, or pursuant to another exemption from
         registration provided in the Securities Act. At the present time, the
         Company does not have a currently effective registration statement
         pursuant to which such resales may be made by affiliates. There are no
         restrictions imposed by the SEC on the resale of shares acquired under
         the Plan by persons who are not affiliates of the Company.

<PAGE>

10.      EFFECT ON OTHER BENEFITS

         Income recognized by you as a result of exercise of the Option will not
         be included in the formula for calculating benefits under any of the
         Company's retirement and disability plans or any other benefit plans.

If you have any questions regarding your Option or would like to obtain
additional information about the Plan or the Committee, please contact the
Company's General Counsel, TODCO, 2000 W. Sam Houston Parkway South, Suite 800,
Houston, Texas 77042 (telephone (713) 278-6000). Your Award Letter and this
Appendix A contain the formal terms and conditions of your award and accordingly
should be retained in your files for future reference.