Trion Farmout Analogy: A farmout and the Trion auction are alike in just two respects

Trion Farmout Analogy: A farmout and the Trion auction are alike in just two respects

Industry observers and their lawyers who are familiar with farmout agreements in jurisdictions outside Mexico have been puzzled by the government’s use of “farmout” for a contract model that lacks the essential elements of this kind of agreement.

A farmout model presumes that an oil company (the “farmor”) holds a lease, a portion or percentage of which it wishes to convey to another party (the “farmee”) in exchange for certain benefits. The clock on a farmout agreement is quite different from that of other associations in the oil industry: the farmee has to perform certain agreed‐upon activities that, together, would constitute the Earning Event, at which future moment a working interest in the lease is conveyed.

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Written by

George Baker

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.

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