Farm-in
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(is a form of joint-venture wherein one company can earn an option to purchase)
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Revision as of 17:14, 3 October 2008
A farm-in" agreement or working option agreement is a form of joint-venture wherein one company can earn an option to purchase an interest in a property by virtue of making an initial investment in exploring it.
This provides the acquiring company with an opportunity to test out the property through its own exploratory work in order to decide whether or not the option should be exercised. For the company disposing of the drilling rights the benefit to them is in proving their property. Usually few funds ever exchange hands with such agreements, and the option to acquire drilling rights is usually of short duration such as 12 to 18 months.
