Farm-in Agreement Template for England and Wales

A Farm-in Agreement lets an incoming party earn an interest in an exploration or production asset by funding work on it, rather than by buying the interest for cash. Under England and Wales law the transfer itself normally depends on regulatory consent, so the agreement must handle the gap between signing and transfer.

When do you need this document?

You need a Farm-in Agreement when a licence or concession holder wants a work programme funded without giving up the asset, and an incoming party wants a defined exposure to exploration or development upside. It is the standard instrument for bringing a partner into an exploration licence, for funding a specific well or seismic campaign, and for staged entry where the incoming party earns more interest as it funds more work.

What does it cover?

The agreement defines exactly what the incoming party must spend or do to earn its interest, and when that interest transfers, which is usually on completion of the work rather than on signature. It deals with cost overruns, with what happens if the work is abandoned part way through, and with who operates the asset. It sets the regulatory conditions to transfer and allocates the risk of consent being refused. It also fixes responsibility for liabilities the asset already carries, including environmental condition and decommissioning, which are the exposures most likely to outlast the exploration itself.

Common pitfalls

The recurring failure is an earning trigger that is not defined tightly enough. If the agreement says the interest is earned on completion of a well without defining the target depth, the testing, or what completion means if the well is abandoned, the parties end up arguing about whether anything was earned at all. The second is ignoring decommissioning: liability can follow the interest, and an incoming party that has not priced or secured its share can inherit an obligation far larger than its work commitment. The third is treating regulatory consent as a formality rather than a condition with a deadline and a defined consequence.