A farmout agreement is used when the "farmor" agrees to assign acreage to the "farmee" in return for the "farmee" performing specified drilling and testing obligations, with the "farmor" also reserving an interest in the acreage assigned and in the production from the wells drilled by the second company.
Farmout Agreement - Short Form
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Multi-State
Control #:
US-OG-224
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Word;
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Description
Definition and meaning
A Farmout Agreement (Short Form) is a legal document between two parties, known as the 'Farmor' and 'Farmee.' This agreement establishes the terms under which the Farmee can explore and potentially produce oil and gas from the Farmor's mineral interests. The Farmor usually holds the rights to certain oil and gas leases, while the Farmee is typically responsible for the drilling and operational activities. This agreement outlines each party's responsibilities and the expectations regarding the development of the specified mineral interests.
How to complete a form
Completing a Farmout Agreement (Short Form) involves several steps:
- Identify the Parties: Clearly state the names and addresses of both the Farmor and the Farmee.
- Describe the Acreage: Include accurate details of the oil and gas leases or mineral interests involved in the agreement.
- Outline Obligations: Specify the obligations of the Farmee regarding the Test Well, including timelines for drilling and completion or abandonment duties.
- Commitment and Information Exchange: Ensure there is a section for the delivery of reports and information between the parties.
- Sign and Date: Both parties must sign and date the agreement to make it a legally binding document.
Key components of the form
The Farmout Agreement (Short Form) includes essential components that ensure clarity and legality:
- Parties Involved: Clearly identified names and roles of the Farmor and Farmee.
- Acreage Description: Detailed location and description of the oil and gas interests being farmed out.
- Obligations Regarding the Test Well: Clear expectations concerning drilling responsibilities and completion timelines.
- Reports and Information Sharing: Requirements for submitting progress reports and other relevant data.
- Commitment Clause: Agreement on future assignments of rights upon completion of obligations.
Who should use this form
This form is essential for:
- Individuals or companies that own mineral rights and wish to lease them to another party for exploration.
- Operators looking to develop oil and gas resources without holding full ownership of the mineral rights.
- Legal professionals assisting clients in creating agreements concerning oil and gas operations.
Benefits of using this form online
Utilizing an online platform to download the Farmout Agreement (Short Form) offers several advantages:
- Accessibility: Users can access the form anytime and anywhere with an internet connection.
- Easy Updates: Online platforms often ensure the documents are up-to-date with current laws and regulations.
- Guidance: Many online services provide step-by-step instructions for completing the form correctly.
- Cost-Effective: Downloading forms online may be more affordable than obtaining them through traditional legal services.
Common mistakes to avoid when using this form
When completing a Farmout Agreement, users should be aware of these common pitfalls:
- Neglecting to Detail Obligations: Failing to clearly outline the responsibilities of each party can lead to misunderstandings.
- Incorrect Acreage Descriptions: Providing inaccurate or incomplete information about the mineral interests may lead to legal disputes.
- Forgetting Signatures: Not obtaining necessary signatures or dates can invalidate the agreement.
- Assuming Legal Terminology is Clear: Using jargon without explanations can confuse parties unfamiliar with legal terms.
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FAQ
An oil and gas farmout agreement is an agreement by the owner of an oil and gas lease (the farmor) to assign all or part of the working interest in that lease to another party (the farmee), who agrees to drill a well and do testing on the property in exchange for the opportunity to earn a formal assignment of
1. n. Oil and Gas Business The point at which all costs of leasing, exploring, drilling and operating have been recovered from production of a well or wells as defined by contractual agreement.
Ordinarily, the Farmor has already undertaken some exploration, and seeks another party to share the costs of undertaking further exploration or completing it.Often, Farm-in/Farm-out Agreements specify that more than one interest (or percentage) is transferred at various stages of exploration.
'Farm-in' expenditure is incurred when an entity in this line of business acquires a PI from another entity(s) in oil/gas block(s) and becomes part of the PSC entered into with the Central Government.
Farm-In Agreement means an agreement whereby a Person agrees, among other things, to pay all or a share of the drilling, completion or other expenses of one or more wells or perform the drilling, completion or other operation on such well or wells as all or a part of the consideration provided in exchange for an
The farm-down model, otherwise known as asset rotation or build-sell-operate, involves utilities selling stakes in green power assets to institutional investors seeking long-term, stable yield. In the case of renewable energy, revenues for such projects have, until now, been underpinned by guaranteed subsidies.
The farm-down model, otherwise known as asset rotation or build-sell-operate, involves utilities selling stakes in green power assets to institutional investors seeking long-term, stable yield. In the case of renewable energy, revenues for such projects have, until now, been underpinned by guaranteed subsidies.