Aipn International Model Farmout Agreement
Other trends in farm-out agreements, especially with regard to risk allocation The FOA 2019 model is a user-friendly format that has been improved to cooperate with the 2012 appointing aisle model (AIPN Model JOA). The new version contains more form and substance under warranty, indemnification and termination and offers new options and alternatives to better tailor the user experience. If the consideration includes a cash payment, the parties have several options to agree on the structure of that payment, including the payment date (related to the parties` position on the date of transfer of the farmout shares, for example.B. when signing the agreement or when the Farmout shares are transferred to the buyer/farmor) and to whom they are paid and on what basis (i.e. To the seller/Farmor as reimbursement of past or historical expenses, or to the operator under the joint venture agreement for cash calls as a promotion or carry). Prior to the start of the review, AIPN asked its members about how they were using the 2004 FOA model and what they wanted to see in the revised model. Based on members` response, the Review Committee decided to develop the 2019 FOA model primarily from the perspective of the English legal directorate, with members pointing out that English law was the dominant (but not only) law in force for their international farmout agreements. The current legislation is essential, as it influences the legal interpretation of several important value levers of the Farmout agreement, including guarantees and indemnities. At the same time, some options and alternatives have been included in the 2019 FOA model in order to adapt the model of other jurisdictions.
For example, there is an option that would offer guarantees on a compensation basis, an approach more common in American practice. One of the key issues regarding the structure and negotiation of farm-out agreements is the date of transfer of legal title to the asset from the producer to the producer and the nature of the consideration that the producer brings in exchange for that stake in the asset. Darren is a corporate lawyer dedicated to the energy sector. He advises clients on M&A transactions in the oil and gas sector along the upstream, midstream and downstream value chains, with a focus on cross-border transactions after advising asset transactions in more than 30 jurisdictions. Darren also has experience with trade agreements related to the oil and gas industry, including production sharing contracts, joint venture agreements, sales and transport agreements, and joint venture matters. The new Farm-Out type AIPN agreement covers the following two types of counterparty structures, which reflect the common transaction structures described above: a farm-out agreement acts as a kind of contract of sale in which a seller (the “farmor”) undertakes to transfer part (but not all) of its shares in an upstream asset to the buyer (the “Farmeee”). in exchange for the buyer agreeing to assume (or finance) labor obligations such as acquiring seismic data or drilling wells in relation to that asset. In the context of the oil and gas industry, the upstream “asset” that is transferred is typically participation in a license, production-sharing contract, or other concession granted by a government to a company to research and produce oil and gas. . .