Apparatus and method for drilling perforations in well casing and drainholes into a subterranean formation around a well are provided. A tool body on tubing directs a mechanical cutter or jet bit to the casing. A hole is cut in casing and a rotary detent mechanism may be used to drill additional holes through casing to enable alignment of a jet bit with the holes for drilling drainholes without removing apparatus from the well. Disposable nozzles in a guide channel or nozzles on the tool body may be used for drilling through casing.