Investopedia

Continue to Site »

Farmout

Filed Under »
Dictionary Says

Definition of 'Farmout'

The assignment of part or all of an oil, natural gas or mineral interest to a third party. The interest may be in any agreed-upon form, such as exploration blocks or drilling acerage. The third party, called the "farmee," pays the farmor a sum of money up front for the interest and also commits to spending money to perform a specific activity related to the interest, such as operating oil exploration blocks, funding expenditures, testing or drilling. Income generated from the farmee's activities will partly go to the farmor and partly go to the farmee in percentages determined by the agreement.

Investopedia Says

Investopedia explains 'Farmout'

A company may decide to enter into a farmout agreement with a third party if it wants to maintain its interest but wants to reduce its risk or doesn't have the money to undertake the operations that are desirable for that interest. Farmout agreements give farmees a potential profit opportunity that they would not otherwise have access to. Government approval may be necessary before a farmout deal can be finalized.

Articles Of Interest

  1.

    Uncovering Oil And Gas Futures

    Find out how to stay on top of data reports that could cause volatility in oil and gas markets.

  2. What Determines Oil Prices?

    Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why.

  3. A Guide To Investing In Oil Markets

    Find out how to take advantage of this market without having to open a futures account.

  4. Accounting For Differences In Oil And Gas Accounting

    How a company accounts for its expenses affects how its net income and cash flow numbers are reported.

  5. Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.

  6. Unearth Profits In Oil Exploration And Production

    Drill down into financial statements to tap into the right companies and let returns flow.

  7. J.D. Rockefeller: From Oil Baron To Billionaire

    More than 70 years after his death, this man remains one of the great figures of Wall Street.

  8. Getting A Grip On The Cost Of Gas

    Feeling overwhelmed by rising oil prices? We offer some tips that will save you money.

  9. Investing In Oil And Gas UITs

    Unit investment trusts provide direct exposure to the energy sector, fueling better returns.

  10. The Gasoline Business Is All About Location

    Gasoline prices can vary tremendously based on where you are in the world. Here are some of the reasons why it varies so much.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  2. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  3. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  4. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  5. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.

  6. Angelina Jolie Stock Index

    An index made up of a selection of stocks from companies associated with actress Angela Jolie.
Trading Center