Explain a FARMOUT AGREEMENT

What does it mean that Artex Oil was granted a Farmout Agreement from Oxford Oil ?  Is that good or bad news for the Oxford leased people ?

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0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 17, 2013 at 10:33am

Artex will drill a well or number of wells on Oxford leases, pay Oxford a royalty per well, will not typically pay a per acre price and will foot the bill for all operations.  At least that's how these traditionally work.  It's a way for Oxford to HBP some acreage without spending its own cash.

Permalink Reply by Rob Rotz on January 17, 2013 at 11:03am

so in your opinion they were brought in to continue oxfords plan to drill useless shallow wells to help hold as many of oxfords properties as possible because oxford cant keep up and could lose lots of acerage?or were they brought in to drill deep horizontals because they are more suited for that ?  if its to help hold land owners that would be an awful pr move by Oxford.  i hope Artex would not stoop that low. 

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 17, 2013 at 5:46pm

Bad in the sense that their leases won't expire.  Still trying to find the good...

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 17, 2013 at 5:49pm

Well Artex gets free land to drill, which makes a conventional well closer to profitable.  But the real deal comes when Oxford eventually sells the deep rights.  I assume as part of the package Artex gets a cut of the deeps from Oxford, thus making a marginal Clinton well seem like a worthy place to allocate capital.  This increases Artex's position, gives them essentially free money from the deeps and allows them to continue to grow their resource base which I assume they think will eventually be more profitable.  For a busted company like Oxford this was the best way to keep people under their lousy lease.  It's a win for both companies.

Permalink Reply by Harry E. Rose on January 17, 2013 at 3:37pm

Joe, If he did not want to sell, could he not JV with someone as another option?

Permalink Reply by Harry E. Rose on January 17, 2013 at 4:30pm

I understand. Explained very well. Thanks.

Permalink Reply by Rob Rotz on January 18, 2013 at 4:14am

Jodi,

 

if you know the connection other than the two owners are on the board of the OOGA and came up with a plan to hold thousands of acres to in turn make hundreds of millions of dollars and leave us little land owners out i would love to hear it.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 4:36am

I'm sure there's a relationship between all of these people.  I don't know any of them so why the Hell are you asking me?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 3:44am

I personally think the geology in Licking is attractive.  A lot of people have held that view for a few years now.  Oxford obviously agreed.  The added bonus is that Licking has had a few nice oil fields so drilling there isn't entirely nat gas based.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 17, 2013 at 5:52pm

That article doesn't mention any IP rates or give any indication of how much NG was recovered.  You'd be hard pressed to drill a well out that way and not get any gas from one of the formations.  Now profitable gas?  That's a different story.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 3:44am

You post an article that has the word "disappointment" in the headline in regards to a well.  Then you tell us that the well was great and that we're all idiots for believing otherwise.  You're calling me a used care salesman?  Lady, you are the undisputed queen not getting it.  Maybe you should let your "assistant" do some of the posting for you here.  I assume she has the ability to understand complicated things like cause/effect and normal human interaction.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 3:55am

The chip on your shoulder has a chip on its shoulder.  I suppose your insightful "the well was a massive disappointment" revelation somehow invalidates my point that, you know, the well was a disappointment.  No matter.  Sorry that you're a self loather and that you insist on simply making things up as you go along.  That, however, is not my problem.

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