A method for producing an epoxy polyetherpolyol having 15 to 75 wt % epoxy comprising heating a polyol and catalyst to initiate condensation, removing water, introducing sufficient epoxy into the reaction mixture to give 15 to 75 wt % epoxy in the product. Generally, between 0.5 and 1.19 moles of water per mole of polyol are removed. In one embodiment at least 95 wt % of all of the polyol is introduced initially into the reaction zone. In another embodiment the condensation is terminated prior to 93 percent completion. Also provided are novel compositions suitable for drilling fluids, adhesives and coatings.