Drilling for Dollars for Drilling: Financing the Production and Explorations of Hydrocarbons
Authors: Flores I.D. 
Published: December 2007

Drilling for Dollars for Drilling: Financing the Production and Explorations Production and Explorations of Hydrocarbons
American Institute of Mining, Metallurgical, and Petroleum Engineers, Inc.
This paper was prepared for the 49th Annual Fall Meeting of the Society of Petroleum Engineers of AIME, to be held in Houston, Texas, Oct. 6–9, 1974. Permission to copy is restricted to an abstract of not more than 300 words. illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon request to the Editor of the appropriate journal provided agreement to give proper credit is made. provided agreement to give proper credit is made. Discussion of this paper is invited. Three copies of any discussion should be sent to the Society of Petroleum Engineers office. Such discussions may be presented at the above meeting and, with the paper, may be considered for publication in one of the two SPE magazines.

Abstract
The independent oil and gas company is playing an ever increasing role in the search playing an ever increasing role in the search for new energy reserves. With the increasing complexity of exploring for hydrocarbons and the associated higher costs, it is incumbent upon the independent to develop an effective financing plan. A survey of various alternatives for financing an exploration program is examined, including public offerings program is examined, including public offerings of securities by conventional petroleum companies as well as newly established venture-oriented companies, drilling funds, interest-free loans and prepayments, joint ventures, and long-term borrowings from financial institutions. An awareness of the various financing techniques will hopefully facilitate the independent's long-range planning, development and financing of an exploration program.

Introduction
The full impact of the energy shortage reached crisis proportions in 1974 and energy development was established as a national priority. Of significance to this new national priority. Of significance to this new national endeavor, the independent oil and gas industry and non-petroleum related investors have been largely responsible for whatever degree of self-sufficiency in energy the U. S. maintains today. For instance, in 1972, the oil and gas industry spent approximately $2.73 billion for domestic drilling on and off shore. Of this amount, the independent segment of the industry accounted for approximately $1.81 billion or more than 66% of the total drilling expenditures while the major integrated oil companies spent approximately $919.6 million or a little more than 33% of the total. In 1973, independents drilled 76% of the new-field discoveries, new-pay openers, and extension wells in the U.S. In the first quarter of 1974, independents accounted for nearly 90% of all wells drilled domestically. Thus, the independent is a vital component in the overall search for new energy reserves.
How then does the independent finance its exploration program ? Where are the sources and what techniques are currently being used?
For purposes of our discussion, examination of financing methods and techniques is not divided into separate categories of production financing and exploration financing. production financing and exploration financing.