Changes

Because of the diversity of ownership of oil and gas interests and/or the need to share economic risks, the oil and gas industry has utilized a number of different contractual arrangements. The most common types of contracts used are farm-outs-farm-ins, or well trade agreements, and joint operating agreements.

Because of the diversity of ownership of oil and gas interests and/or the need to share economic risks, the oil and gas industry has utilized a number of different contractual arrangements. The most common types of contracts used are farm-outs-farm-ins, or well trade agreements, and joint operating agreements.

==Farm-outs and farm-ins (WELL TRADES)==

==Farm-outs and farm-ins (Well trades)==

When the owner (''farmor'') of an oil and gas working interest agrees to assign an interest in a lease (called the ''farm-out area'') to another party (''farmee'') in consideration of the farmee drilling a well or wells (''farm-out wells'') on the farm-out area, the farmor is said to have made a farm-out and the farmee has made a ''farm-in.'' Sometimes the farmee may be required to do more than drill a well, including performing geological and seismic studies or paying a cash consideration for past costs incurred by the farmor.

When the owner (''farmor'') of an oil and gas working interest agrees to assign an interest in a lease (called the ''farm-out area'') to another party (''farmee'') in consideration of the farmee drilling a well or wells (''farm-out wells'') on the farm-out area, the farmor is said to have made a farm-out and the farmee has made a ''farm-in.'' Sometimes the farmee may be required to do more than drill a well, including performing geological and seismic studies or paying a cash consideration for past costs incurred by the farmor.