A water based drilling fluid for use in drilling a subterranean well through a subterranean formation that swells in the presence of water, the drilling fluid is formulated to include: an aqueous based continuous phase; a weight material; an optional shale hydration inhibition agent and a shale encapsulator. The shale encapsulator has the formula: in which x and y have a value so that the molecular weight of the cation is in the range of about 10,000 to about 200,000 AMU; A is selected from C1-C6 alkyl, C2-C6 ether or C2-C6 amide; R, R′ and R″ are independently selectable C1-C3 alkyl; and B− is a charge balancing anion to the quatenary amine. The shale hydration inhibition agent and the shale encapsulator may be present in sufficient concentrations to reduce the swelling of the subterranean formation in the presence of water. Conventional additives may be included into the formulation of the drilling fluid, including: fluid loss control agents, alkaline reserve and other pH control agents, bridging agents, lubricants, anti-bit balling agents, corrosion inhibition agents, surfactants, solids suspending agents, and mixtures and combinations of these and other similar additives.