Farmout Agreement of July 10, 1991 (including all amendments to this agreement) between Exxon Corporation and Hunt Petroleum Corporation, which cover Green Canyon Blocks 209, 254, 297, 298 and 342. Farm agreements generally provide that the farmer assigns the defined quantum of interest in leases after farm-to-farm development: (1) drilling an oil and/or gas well to the defined depth or formation or (2) drilling an oil and/or gas well and obtaining economically viable production levels.  Farmout agreements are the second most common negotiated agreements in the oil and gas industry, behind oil and gas leasing.  For the farmer, the reasons for entering into a farmout agreement are the acquisition of production, the sharing of risks and the obtaining of geological information. Farmes often enter into farm agreements to obtain a surface position, or because they have to employ underutilized personnel or share risks, or because they want to obtain geological information.  A Farmout agreement differs from its Purchase and Sale Agreement (PSA) in that PSA calls for an exchange of funds or debts for the immediate transfer of assets, while the Farmout contract involves an exchange of asset transfer services. In addition, the transfer often takes place at a later stage, namely. B.dem the time when the “merit barrier” was reached.  A company may decide to enter into a farmout agreement with a third party if it wishes to maintain its interest in an exploration block or drilling surface, but does not wish to reduce its risk or does not have the money to carry out the transactions desirable for those interests. Farm agreements give producers a chance to win that they would not otherwise have access to. Government approval may be required before a farmout agreement can be reached.
Agreements and obligations arising from Section 8.01 (a) and (b) exist only to the extent necessary to facilitate the implementation of this transaction agreement, another final document or the Belin Trust Farm-Out Agreement. Farmout agreements are effective risk management instruments for small oil companies. Without them, some oil fields would simply remain untapped because of the high risks to which each operator is exposed. Farmout agreements work because the farmer usually receives a license once the field is developed and produces oil or gas, with the ability to turn royalties into some interest in the block`s work after being paid for the costs of drilling and producing the farm. This type of option is commonly known as the back-in after-payment (BIAPO) order. Farmout agreements are very popular with small oil and gas producers who own or own oil deposits, which are expensive or difficult to develop. One company that frequently uses this type of arrangement is Kosmos Energy (NYSE: KOS). Kosmos has the right to want off the coast of Ghana, but the cost and risk of developing these resources are high because they are underwater.
Farmout is the transfer of some or all of the interest rates of oil, natural gas or mineral gas to third parties for development. Interest can be in any agreed form, such as Z.B. exploration blocks or drilling surfaces. The third party, called “Farmee,” pays “the farmer” a sum of interest money in advance and also commits to spending money on an interest-specific activity, such as .B oil exploration block operation, spending financing, testing or drilling.