Farmout agreement: a story short but not always sweet
A commonly used instrument in the oil and gas industry is the farmout agreement, whose informality can often trap the unwary. Farmout describes a transaction where the owner of an oil and gas lease (the farmor) agrees to an assignment of a part of a lease to the farmee, who agrees to drill a well to a certain depth or condition in exchange for a royalty convertible to a working interest in that part of the lease to be assigned. The agreement provisions include a description of the activities and performance required of the farmee, the rights that may be earned by the farmee and retained by the farmor, and the assignment of these rights to the farmee. The author discusses these provisions in detail, and presents a checklist to help in preparing farmouts in terms of the definition of rights and obligations.
- OSTI ID:
- 6318636
- Journal Information:
- Natur. Res. Environ.; (United States), Journal Name: Natur. Res. Environ.; (United States) Vol. 1:2; ISSN NRENE
- Country of Publication:
- United States
- Language:
- English
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CONTRACTS
DRILLING
GEOLOGIC DEPOSITS
INCOME
LAND LEASING
LEASES
LEASING
LEGAL ASPECTS
MINERAL RESOURCES
NATURAL GAS DEPOSITS
PETROLEUM DEPOSITS
RESOURCES
ROYALTIES
TAXES
WELL DRILLING