Farmout And Development Agreement

Like the previous model in 2004, the new version of the 2019 agreement deals with the transfer of part (but not all) of the property (known as “participation”) from an upstream oil and gas facility to another. The updated version provides for a more detailed development of important provisions reflecting recent practices and also offers a wider range of alternatives for parties negotiating a farm-out transaction. As with all forms of models, and as indicated in the new guidelines, it should only be used as a guide to inform the possible structure of an agreement and not to be used dogmatically. The new model form is most appropriate in relation to an exploration asset and not as part of a development or production asset. This issue, the relationship between a farmout and an JOA, was at the heart of the issue in this recent decision of the High Court (Commercial Division, England and Wales). The agreement in question was what I would call an agreement on agriculture and participation. Apache was the farmer and the EEL was the farm. EEL had to earn interest by participating in the cost of a well that had to be drilled by Apache with certain options in order to acquire a larger share by adding a larger share of the costs. Problems may arise in one of the potential transaction structures described above. If farmee starts paying before obtaining all the necessary consents from third parties and before the transaction is concluded, farmee may be entitled to a refund (depending on the circumstances) if the transaction is ultimately not concluded.

This scenario occurred when EnQuest obtained reimbursement of the money it paid into a trust account as part of the cancelled agreement with PA Resources to acquire a stake in the Didon oil field in Tunisia. In this case, a farm may consider the farmer`s financial ability to repay funds and the need for assistance or credit guarantee that are the source of this potential repayment. However, a farm must also be aware that claims for reimbursement and termination depend on the circumstances and conditions of the farm-out agreement. A farmer can, for example. B, argue that if the farm`s expenses had not been authorized by the farmer in the absence of an operating agreement with the farm, the farm should not be entitled to reimbursement for a failed operation.