grommetI disagree with your take on the financing. No bank out there will lend you a dime unless it is intended for the development of a field, with the proper field development approval by the BERR. All exploration and delineation drilling must be done prior to that. That delineation is done at the energy company’s cost. Whether it’s financed from internal free CF or equity financings is the energy company’s issue. A bank doesn't care if you are a producer. They only care if your CF from production can pay off the loan. If it can then you get debt financed. If not then you don't get anything.
Durango is a small field that will be sacrificed by BUK to fund their future exploration over the next couple of years. But you can’t expect it to fully pay for a string of US$10mm (net) wells one after the other as Durango will have its own operating costs to deal with and will start declining probably after the 1st year of production. Also I believe the field will start being taxed sometime in the 2nd year of production. I can’t remember what the taxes and royalties are for gas in the UK, but for oil & condensates it’s at a 50% clip. So the majority of the net CF will come in the 1st full year. N. Piper will take a lot longer than a year to fully delineate if it works out.
Just b/c you have production doesn’t mean anything. It’s the amount of free CF that the production gives you against your operating budget that means everything if you are looking to pay for everything internally. Durango will definitely help pay for a chunk of the costs, but won’t solely be able to cover all of them. Especially if the company is going to drill some other prospects at the same time as they drill N. Piper, if the 1st well is a success. By drilling the Aspen prospect after N. Piper tells you they do not want to be a single asset company after Durango.
Once they bring on Wherry and/or NW Hewett to increase their CF further they will be in a better situation to internally pay for everything.