This report discusses the current state of drilling underbalanced by industry. Underbalanced drilling is generally achieved by introducing a gas into the drilling fluid. This can range from air drilling (no liquid) to aerated fluids containing only a small percent of gas. Much of the paper is dedicated to discussing the advantages and limitations. The principle advantages are increased productivity through minimizing formation damage and increased penetration rate. The main disadvantage is the absence of adequate modeling to achieve and maintain the underbalanced condition. This report also discusses the various methods of achieving an underbalanced condition.