"But, the problem is they need cash frm a farmin to drill Auriga-1 & increase the resource size."
I disagree Ya. With a PRRT of 40% and then income tax rates of 30% on the remaining profit, The government will be effectively funding 58% of the cost of drilling the well if the drilling is left until such time as the project is up and running and paying tax.
If you drill upfront you still get to claim the cost as a deduction but have to wait 3 to 5 years before the savings in tax payable show up in cash flow.
Doesn't mean you would never drill upfront, just means you need to take the timing of the tax cash flows into account when making your decision.
Regards
SP
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