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Glossary

Terms Starting With Letter F
  • Farm-down, Farm-in, Carve-out

    If a licensed exploration company strikes oil or gas, it may sell a share in its rights over the discovery to other companies.  This is called a “farm-down” and is a common practice among small exploration companies, as it enables them to share with others the investment costs and technological challenge of getting the oil out of the ground and on to world markets.   A “farm-in” is a similar arrangement made by an exploration company before it strikes oil: the company may sell a share in its exploration rights, typically in order to raise capital or attract necessary expertise for completing exploration.   Similarly, a “carve out” is where a company divides an area over which it holds a concession and sells rights over part of that concession to another company.