The use of foam as a drilling fluid was developed to meet a special set of conditions under which other common drilling fluids had failed. Foam drilling is defined as the process of making boreholes by utilizing foam as the circulating fluid. When compared with conventional drilling, underbalanced or foam drilling has several advantages. These advantages include: avoidance of lost circulation problems, minimizing damage to pay zones, higher penetration rates and bit life. Foams are usually characterized by the quality, the ratio of the volume of gas, and the total foam volume. Obtaining dependable pressure profiles for aerated (gasified) fluids and foam is more difficult than for single phase fluids, since in the former ones the drilling mud contains a gas phase that is entrained within the fluid system. The primary goal of this study is to expand the knowledge-base of the hydrodynamic phenomena that occur in a foam drilling operation. In order to gain a better understanding of foam drilling operations, a hydrodynamic model is developed and run at different operating conditions. For this purpose, the flow of foam through the drilling system is modeled by invoking the basic principles of continuum mechanics and thermodynamics. The model was designed to allow gas and liquid flow at desired volumetric flow rates through the drillstring and annulus. Parametric studies are conducted in order to identify the most influential variables in the hydrodynamic modeling of foam flow.