88E

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Wce1986

638 Posts.

23

07/02/19

17:25

Post #: 37367001
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Originally posted by Lazarus65: ↑

I think that is the great unknown for all of us mug punters. Essentially, how long is a piece of string? From my research it would appear that a typical FO consists of 3 components.

First component is some sort of cash compensation for previous expenses incurred in getting the acreage to 'farmable' status. So this could include land acquisition costs, any seismic studies and any earlier drilling etc. It may not be all expenses. It could be based on working interest - but then again could be based on more or less than working interest. What 'we' get in this component is partially reflective on the level of interest in our land....but also partially reflective of the second component.

The second component consists of a contribution to drilling. Typically this would be disproportionate to the working interest. So for example, the farmer may give up 70% WI to a farminee, in exchange for 143% costs of drilling up to dry hole or even completed flow test for a minimum number of wells. In this type of case the 30% WI retained by the farmer is essentially on free carry up to the agreed end point (ie dry hole or completed flow test). There is usually an agreed cap here too. Any expenditures beyond this agreed point are typically done on a WI basis.

The third component is a 'management framework' of sorts with clarity on who is the operator of record, who is the defacto operator (if indeed that is different), how decisions are made during the life of the farming agreement and what happens to working interests if one or other party does not make their required contributions..etc.

I would love to see a FO agreement for 70% WI farmed out for: say $20m cash contribution for component 1; a 3 hole free carry to completed flow test stage covering our three big multistack targets within our western fairway: Victor/Indigo Charlie topset play, the Bravo/Lima Seebee fan play, and the Stellar/Heavenly Torok fan play. For the third component I would be happy to cede operator-ship if the farminee was an experienced North Slope Tier 1 and the timeframes were aggressive (eg 3 drills in 2020).

Could be totally wrong or miles off course. All just my speculation....but need to kill time while Winx rig is setting up on the ice pad.

AllIMO and GLTA.

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Still Lov ya work Laz

88E Price at posting: 2.0¢ Sentiment: Hold Disclosure: Held
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Still Lov ya work Laz :)

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Still Lov ya work Laz :)

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