RE: Block XX26 Aug 2025 17:30
Few real world farm out examples below, in our case any and every conceivable deal could be on the table and this is part of the reason it takes so long for these deals to be agreed but great to hear letter of intent has been circulated.
Real-world examples of oil & gas deals where a farmee paid cash (or equivalent consideration) to the farmor for interests—including producing wells—often along with other development commitments:
1. Occidental Petroleum & Colgate Energy (Permian Basin)
In 2020, Occidental (OXY) farmed out a 51% stake in its Permian Basin assets to Colgate Energy Partners III in exchange for $508 million in cash. This allowed Occidental to reduce debt and improve liquidity—classic case of cash-for-producing-assets farmout.
FasterCapital
2. Northern Minerals & Exploration (Texas Onshore Deal, 2014)
A more detailed, contract-level illustration:
Farmor: Northern Minerals & Exploration Ltd.
Farmee: Grasshoppers Unlimited Inc.
Farm-in terms:
Farmee would bring 3 inactive wells back online, drill new wells, and conduct geological and pressure tests.
Payment included:
A $25,000 cash payment, plus issuance of 5 million restricted shares to the farmor.
In return, the farmee earned 75% of working interest in the lease and wells.
Justia Contracts
This is a textbook structure: upfront cash (and equity) for converting non-producing assets back into production.
3. Kosmos Energy & Colleagues (Offshore Ghana, 2023)
Here, Kosmos energy farmed out 40% of its working interest in offshore Ghana blocks to Hess. In return, Hess carried Kosmos’s share of development costs—up to $200 million per block. Additionally, Kosmos retained a 10% convertible overriding royalty interest that it could convert into working interest post-payout.
FasterCapital
This one differs—as there’s no direct cash, but rather cost carry and royalty conversion—common in exploratory or appraisal-stage deals.
4. Large Acquisitions of Producing Assets
While these are not strictly farmout/in, they illustrate the cash-for-producing-interest principle:
Matador Resources acquired oil & gas producing assets plus undeveloped acreage in the Delaware Basin in a $1.91 billion all-cash deal.
Reuters
Kinder Morgan, for roughly $100 million, acquired a large oilfield in West Texas—with 265 producing wells, producing ~1,100 barrels per day—with cash payment.
Reuters
These transactions underscore how valuable producing assets command significant cash in return—even in outright acquisitions.
Yes—when existing production is part of the farm-in, farmees typically include cash or equivalent compensation for that revenue stream. In exploratory or appraisal stages, it might instead be cost-carry structures or royalties. Real-world examples—like Occidental/Colgate, or Northern Minerals/Grasshoppers—clearly reflect this.
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