The International Farmout Process
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This is a description of the farmout (and associated farmin) process for international oil and gas professionals and deal-makers.
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The International Farmout Process
- 1. THE OIL AND GAS FARMOUT PROCESS It is important to understand the workflow and allocate time and money accordingly Peter Cockcroft 2019 1
- 2. I like to classify the process into five phases 1. Planning and Preparation 2. Marketing 3. Engagement 4. Closing 5. Post-Closing 2Peter Cockcroft 2019
- 3. 1. Planning • Prepare a strategy • Put together a farmout “brochure” or “information memorandum”. • Collate and prepare all data in an accessible format • Prepare appropriate documentation (Confidentiality Agreement and draft Farmout or Sale/Purchase Agreement) 2. Marketing • Use AIDA (“Attract Interest Desire Action”) • Review and approach potential “farmees” • Put together a data room (this could be “virtual”) 3. Engagement • Man the data room and “field” questions • Review and negotiate the various deal offers 4. Closing • Negotiate Farmout Agreement and Sale & Purchase Agreement • Finalise and close 5. Post-Closing • Obtain all necessary approvals 3Peter Cockcroft 2019
- 4. Planning your farmout n Why are you doing this? Budgetary? Timing? Lack of appropriate expertise? Portfolio optimization (risk management) n What do you need? Seismic/well Back costs n How long do you have? n What is the value of your project? n Who is the ideal partner? n Who will run your process? n Prepare budget & timeline for the Farmout n Documents Term sheet/HOA Prepare CA n Are there any barriers? Regulatory or partner? n Data Collate all data Put in appropriate format n Teaser preparation n Marketing methodology – “AIDA” Limited Public 4Peter Cockcroft 2019
- 5. Marketing n Redefine your ideal “farmee” or Joint Venture partner n Access appropriate Market n Prepare and distribute Teaser n Prepare Information Memorandum n Prepare Website/social media/ public forums n Set up Data Room Obtain approvals Location Hardware Software Allocate appropriate personnel 5REMEMBER “AIDA”Peter Cockcroft 2019
- 6. Engagement n List and prioritize candidates Identify key personnel n Send CA (or NDA) n Run Data Room and field questions n Negotiation Planning Engagement n Sign Term Sheet/LOI n Approval n Farmout Agreement/SPA Draft/negotiate Finalize, ready for approvals 6Peter Cockcroft 2019
- 7. Closing nFinalize Farmout Agreement/SPA nField Trip is always useful before signoff nApprovals Corporate Joint Venture Government 7Peter Cockcroft 2019
- 8. Post-Closing nAssignment and Change of Control approvals from Regulators nNovations to Licence documentation /JOA nFinalize all Conditions Precedent 8Peter Cockcroft 2019
- 9. Contact Peter Cockcroft If you need further information, please contact me at LinkedIn or peter@2penergy.com 9Peter Cockcroft 2019