This paper introduces a robust observer-based output feedback control strategy that enables the generation of complex three-dimensional borehole trajectories created by directional drilling systems, while avoiding undesired transient behavior. The model-based controller relies on a set of nonlinear delay differential equations describing the borehole evolution. Herein, only local orientation measurements of the bottom hole assembly of the drilling system are employed. Controller and observer gains are synthesized by optimizing the location of the rightmost pole of the closed-loop dynamics, using a spectral approach for delay differential equations. Moreover, the strategy is extended to cope with the uncertainty of key system parameters in the directional drilling process. The effectiveness of the designed controller is tested in an illustrative benchmark study.