OT18320 - PRT: unitisations and re-determinations - farm outs - outline

A disposal of all, or a part, of an interest in a production licence is often referred to as a farmout. Consideration received for such a disposal can consist of:

  1. Cash for the purchase of an individual participator바카라 사이트™s licence interest(s) or
  2. The increasing interest party (farmer-in or farmee) undertaking a work programme at his own expense, e.g. drilling a further exploration or appraisal well on the block in question, for the benefit of all participators on the licence in question. In such a situation the increasing interest party would acquire a proportionate share of each of the other participators바카라 사이트™ (reducing interest parties) interests or
  3. The increasing interest party agrees to bear part or all of one or more reducing interest party바카라 사이트™s share(s) of expenditure on the licence. As part of the agreement the increasing interest party may also acquire a retained share of production until an aggregate amount has been received.

The consideration provided by the farmer-in may also include the grant to the farmer-out of:

  1. A right to receive a royalty - a royalty interest.
  2. A net profit interest - a payment out of production relating to the acquired interest.

The grant of such rights has no PRT effect. If a field is developed liability rests with the farmer-in as he is the participator who holds the licence which gives rise to the oil won. The farmer-in is, however, treated as having disposed of the oil to the farmer-out in a sale not at arms length - see OTA75\Sch3\Para6(2).