Ground Lease: A lease agreement that allows a tenant to develop the property for the lease period but forfeits rights to the improvements to the property owner when the lease has matured.
Turnkey contract: A drilling contract that calls for the completion of a well for a fixed price. All costs, including those that are unexpected, must be borne by the drilling contractor.
Joint Operating Agreement: A contract that regulates the relationship between the operator and non-operator. Operator has responsibility of day-to-day operations. Non-operator has financial commitment (AAPL model form).
Held by Production: The continuation of a lease based on production. If production ceases for a specified period of time, the lease terminates.
Farm-In: When a company acquires an interest in an acreage by taking over all or part of the financial commitment for drilling an exploration well.
Farm-Out: A contractual agreement with an owner who holds a working interest in an oil and gas lease to assign all or part of that interest to another party in exchange for fulfilling contractually specified conditions. The farmout agreement often stipulates that the other party must drill a well to a certain depth, at a specified location, within a certain time frame; furthermore, the well typically must be completed as a commercial producer to earn an assignment. The assignor of the interest usually reserves a specified overriding royalty interest, with the option to convert the overriding royalty interest to a specified working interest upon payout of drilling and production expenses, otherwise known as a back-in after payout (BIAPO).