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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Permalink Reply by Rob Rotz on January 18, 2013 at 1:59am

All i can say is if Artex is going to play with oxford for the porpose of screwing us yet to be HBP landowners then they will be put on the MHD list .. "Most Hated Driller " list.  I have heard roumors from locals that the Oxford biggs need body gards to travel around their HBP sites, i guess Artex should look for a good company like Black water to keep them safe.  They are keeping many families from realizing life changing money and i think its going to get ugly real soon,  just talk im hearing in the local "grocery stores".. good luck Artex.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 4:39am

"They are keeping many families from realizing life changing money..."

That's a bit dramatic.  They aren't holding these people at gunpoint and forcing them to withdraw their life savings.  People signed leases, wells were drilled, life keeps going.  Some people got lucky as all Hell because the timing worked out for them.  Others didn't.  That's sort of how life works.

Mike MurphyPermalink Reply by Mike Murphy on January 18, 2013 at 5:20am

this is not a site to have childish arguements if u people want to argue like children private message each other and dont waste are time ......the landowners signed on the dotted line now they must live with what they signed .....shoulkd have had an oil and gas attorney reveiw their contracts and oil at over 90 a barrel is pretty good money from shallow wells .....from what i see at this point the utica is not a big payer way over in licking or ashland and surrounding counties that far west......if it was a good pay zone the big boys would be over there collecting up acreage .......

Permalink Reply by Rob Rotz on January 18, 2013 at 5:25am

Ladies and Gentlemen,  i started this discussion because i wanted to know what Farmout was and if it was good for us oxford landowners,  if you cant comment on that then go away.  i could give two --its about licking or ashland....

Mike MurphyPermalink Reply by Mike Murphy on January 18, 2013 at 5:27am

what county  are u speaking about

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on January 18, 2013 at 5:49am

Hey, I answered your question.  Hell, I was the first one to answer it.  Unfortunately I have a bit of a troll who follows me around and harasses me because, hey why not?  So I'm sorry your discussion went off the rails.  I hope that the answers you've been given help clarify the concept of the farmout.

Permalink Reply by Carl Finley on January 18, 2013 at 6:35am
New to this forum but i live close to the eichelberger well and in the loop on some of its gossip. Devon recently came back in and welded a new cap on this well and put a pressure gauge on the top of it because the old cap was faulty causing the cap to have bubbles coming out around it. Isnt that interesting to all involved with land near a dry hole with no pressure which yesterday Devon annonced as a wet gas well! This is all confusing to me as a landowner near this well!
Permalink Reply by James Brink, Esq. on January 18, 2013 at 7:01am

I'll answer your question.  A farmout is generally used by a lessee when, for whatever reason, it cannot develop a lease prior to the expiration or to meet a drilling obligation.  The lessee would assign the right to drill and operate a well or wells on the lease to another operator and retain a percentage override or some other revenue sharing arrangement.  Once a well is drilled on the lease, the lease is HBP.  If a unit has been formed, then the leases in the unit will also be HBP.  I noticed some discussion about lessor consent to a farmout.  Unless there is specific language in a lease prohibiting assignment without consent, the lessee will be free to assign the entire lease or a portion of it as a farmout.

Permalink Reply by Brian Powers on January 18, 2013 at 9:53am

HH- Farmouts assign risk from the current lease holder to a third party. It's a good way for development to proceed in an area with the finacial risk spread among many companies. The assignor of the farm-out typically can "back-in" to a net working interest in a farmed out lease after specific milestones are met. The inverse of Farm-out is to Farm-In, where my company may want to establish a stake in an area in which they mave not have any leases of their own.

 

Far from being win-lose, many farm outs are done domestically and internationally that become win-win for all, particularly in more prolific or immature basins.

 

Brian

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