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The Strategic Importance of Farm Outs – Part 2

Farm out agreements are amongst the most common and strategically important agreements in oil and gas.  For the explorer they can represent an opportunity to create value from a promising prospect, for others they may play a critical role in portfolio optimisation.

There are many different types of farm out agreement but perhaps the most common covers the exchange of an interest in a licence or contract for the assumption of an obligation.  This almost always happens at the exploration stage and the obligation assumed is usually a commitment to the government to shoot seismic or to drill a well.

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