Drafting farmout agreements manually requires extensive knowledge of oil and gas regulations, careful attention to earning obligations, AMI clauses, and JOA references. Energy lawyers spend hours ensuring compliance with regulatory requirements while customizing terms for each farmor-farmee relationship, often juggling multiple precedents and state-specific provisions.
Farmout agreements require intricate provisions covering earning obligations, title warranties, AMI terms, and regulatory compliance—typically demanding 12+ hours of attorney time. Manual drafting risks inconsistencies in interest calculations, ambiguous earning requirements, and inadequate protection for both Farmor and Farmee. Missing critical provisions can lead to costly disputes over whether earning obligations were satisfied or title defects were properly disclosed.
CaseMark's AI analyzes your lease documents and transaction terms to generate comprehensive, state-specific farmout agreements in under 30 minutes. The system automatically calculates working and net revenue interests, drafts precise earning obligations with clear timing requirements, and includes industry-standard provisions for title examination, reassignment rights, and JOA integration. Every agreement is tailored to your jurisdiction's recording requirements and regulatory framework.
This workflow is applicable across multiple practice areas and use cases
Farmout agreements represent a specialized form of asset purchase where oil and gas working interests are transferred in exchange for drilling obligations or other consideration.
Asset purchase attorneys need farmout agreements when clients are acquiring or disposing of oil and gas interests, as these agreements govern the transfer of valuable property rights in energy assets.
Farmout agreements are frequently used in M&A transactions involving oil and gas assets, where working interests are transferred as part of asset acquisitions or divestitures.
M&A attorneys handling energy sector deals regularly encounter farmout agreements as key transaction documents when structuring acquisitions of undeveloped acreage or working interests.
Energy companies use farmout agreements as financing mechanisms to develop acreage without capital expenditure, making them relevant to corporate finance structuring.
Corporate finance attorneys advising energy clients need to structure farmout transactions as alternatives to traditional financing, allowing companies to monetize undeveloped assets and reduce exploration risk.
Farmout agreements involve the transfer of real property interests (mineral rights and leasehold estates) and require similar due diligence and title work as commercial real estate transactions.
Real estate attorneys handling mineral rights and subsurface estates need farmout agreements to document the transfer of these specialized property interests, which share legal characteristics with surface real estate transactions.
You'll need the underlying oil and gas lease documents with legal descriptions and recording information, complete party details for both Farmor and Farmee, and the key transaction terms including the working interest percentage to be earned, earning well requirements (depth, location, timing), and any special provisions like AMI terms. CaseMark will extract relevant information from uploaded documents and prompt you for any missing critical details needed to complete the agreement.
CaseMark drafts detailed earning obligations specifying exact well location requirements, minimum depth or formation targets, commencement and completion deadlines, and what constitutes satisfactory performance. The system addresses dry hole scenarios, substitute well options, force majeure extensions, and reporting requirements. You can customize whether production is required to earn or if reaching target depth suffices, and specify any minimum production thresholds.
Yes, CaseMark generates comprehensive AMI provisions with customizable geographic boundaries, duration terms, and participation mechanics. The system drafts specific language covering what opportunities must be offered, response timeframes, exceptions to AMI obligations, and consequences of non-compliance. You can specify whether the AMI applies to all depths or only formations penetrated by the earning well, and set the AMI duration based on production or fixed time periods.
CaseMark incorporates jurisdiction-specific oil and gas law provisions, regulatory filing requirements, and recording formalities based on where your property is located. The system includes appropriate acknowledgment language for your recording jurisdiction, references to applicable state regulatory agencies, and compliance with state-specific title standards. All agreements are structured to be immediately recordable in the relevant county land records.
CaseMark includes comprehensive title examination provisions giving the Farmee a specified period to review title, requirements for the Farmor to cure identified defects, and remedies if defects cannot be cured. The agreement addresses proportionate reduction of interests for minor defects, termination rights for material title failures, and the Farmee's option to cure defects and offset costs. You can customize cure periods, materiality thresholds, and whether title insurance may substitute for actual cure.