OT30020 - Capital Gains: Farm Outs - Introduction

A Farm Out involves the disposal of a licence interest by the owner - the Farmer Out in return for consideration given by the Farmer In. Although the term Farm Out refers to transactions where the Farmer out retains some interest in the licence either directly or indirectly (e.g. a share in future production or net profits), it is often applied in the industry to disposals of the entire licence interest.