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.
A Travis Texas farm out agreement, providing for multiple wells with a dry hole earning an assignment, is a legal contract between an operating company with drilling rights (the "assignor") and a farmer or participating party (the "assignee"). This agreement outlines the terms and conditions under which the assignor grants the assignee the right to explore and drill multiple wells in the Travis Texas area. The primary objective of this farm out agreement is to transfer all or a portion of the working interest in a lease or prospect to the assignee. The assignee agrees to bear the drilling costs and risks associated with multiple wells, which may include both productive and non-productive outcomes, commonly referred to as dry holes. Key elements covered in this farm out agreement include: 1. Multiple Wells Provision: This agreement allows for the drilling of two or more wells within a specific area in Travis Texas. The assignee typically has the flexibility to choose the location and sequence of the wells to be drilled. 2. Dry Hole Earning: In the event that one or more of the drilled wells turn out to be non-productive (dry holes), the farm out agreement usually states that the assignee is still entitled to earn a working interest in the lease or prospect defined within the agreement. The specific terms of earning and assignment are detailed in the contract. 3. Assignment of Working Interest: Upon fulfilling the conditions set by the agreement, the assignor assigns a pre-determined working interest percentage to the assignee. This assignment often depends on the assignee covering a portion of the drilling and completion costs, leasehold expenses, and any other agreed-upon obligations. 4. Operating and Administrative Responsibilities: The farm out agreement may outline the assignor's role as the operator of the wells, responsible for managing the drilling operations, procurement of services, and handling administrative duties. The assignee may participate in decision-making processes and have the right to audit the operating costs associated with the wells. 5. Extension and Termination: The agreement may include provisions for extensions, allowing for additional time to fulfill obligations. Moreover, it may outline conditions for termination, such as failure to meet agreed monetary commitments or failure to prudently operate the wells. Types of Travis Texas Farm out Agreements Providing For Multiple Wells with Dry Hole Earning an Assignment can be classified based on the specific terms outlined in the contract. Some potential variations include: 1. Traditional Farm out Agreement: This is a standard farm out agreement where the assignee earns an assignment upon the successful completion of a well. 2. Dry Hole Farm out Agreement: In this scenario, the assignee still earns a working interest in the lease or prospect even if the drilled wells turn out to be dry holes, relieving them of some financial risk. 3. Partial Assignment Agreement: This type involves the assignor granting a partial assignment of working interest to the assignee, allowing for shared ownership and responsibilities in a productive or non-productive well scenario. Overall, a Travis Texas farm out agreement providing for multiple wells with dry hole earning an assignment offers a structured framework for oil and gas companies to collaborate, share risks, and explore the potential of hydrocarbon reserves in the area.A Travis Texas farm out agreement, providing for multiple wells with a dry hole earning an assignment, is a legal contract between an operating company with drilling rights (the "assignor") and a farmer or participating party (the "assignee"). This agreement outlines the terms and conditions under which the assignor grants the assignee the right to explore and drill multiple wells in the Travis Texas area. The primary objective of this farm out agreement is to transfer all or a portion of the working interest in a lease or prospect to the assignee. The assignee agrees to bear the drilling costs and risks associated with multiple wells, which may include both productive and non-productive outcomes, commonly referred to as dry holes. Key elements covered in this farm out agreement include: 1. Multiple Wells Provision: This agreement allows for the drilling of two or more wells within a specific area in Travis Texas. The assignee typically has the flexibility to choose the location and sequence of the wells to be drilled. 2. Dry Hole Earning: In the event that one or more of the drilled wells turn out to be non-productive (dry holes), the farm out agreement usually states that the assignee is still entitled to earn a working interest in the lease or prospect defined within the agreement. The specific terms of earning and assignment are detailed in the contract. 3. Assignment of Working Interest: Upon fulfilling the conditions set by the agreement, the assignor assigns a pre-determined working interest percentage to the assignee. This assignment often depends on the assignee covering a portion of the drilling and completion costs, leasehold expenses, and any other agreed-upon obligations. 4. Operating and Administrative Responsibilities: The farm out agreement may outline the assignor's role as the operator of the wells, responsible for managing the drilling operations, procurement of services, and handling administrative duties. The assignee may participate in decision-making processes and have the right to audit the operating costs associated with the wells. 5. Extension and Termination: The agreement may include provisions for extensions, allowing for additional time to fulfill obligations. Moreover, it may outline conditions for termination, such as failure to meet agreed monetary commitments or failure to prudently operate the wells. Types of Travis Texas Farm out Agreements Providing For Multiple Wells with Dry Hole Earning an Assignment can be classified based on the specific terms outlined in the contract. Some potential variations include: 1. Traditional Farm out Agreement: This is a standard farm out agreement where the assignee earns an assignment upon the successful completion of a well. 2. Dry Hole Farm out Agreement: In this scenario, the assignee still earns a working interest in the lease or prospect even if the drilled wells turn out to be dry holes, relieving them of some financial risk. 3. Partial Assignment Agreement: This type involves the assignor granting a partial assignment of working interest to the assignee, allowing for shared ownership and responsibilities in a productive or non-productive well scenario. Overall, a Travis Texas farm out agreement providing for multiple wells with dry hole earning an assignment offers a structured framework for oil and gas companies to collaborate, share risks, and explore the potential of hydrocarbon reserves in the area.
