Farmors often prefer this drilling program option because it encourages additional drilling and related investments. In other words, he holds the carrot on the stick. On the other hand, many farmers also prefer this method because it gives them the opportunity to continue indefinitely, always with the ability to make real-time decisions based on all the different factors of activity such as market conditions, geology, prices, etc. Once a farm has filled its yield barrier, it receives the interest indicated in this part of the Farmout agreement. Options can be categorized as shared interests, undivided interests or a combination. Shared interest means that the farmer transmits all his interest to certain land on the farm. Two common ways to manage the “shared interests” farm farm are to give the farm the area devoted to the wells drilled by the farm. Another option is to structure the agreement to give the farm the area devoted to the drilling well and other drilling sites in the area, sometimes referred to as a check-board allocation.  See z.B. Strata Production Co.
v. Mercury Exploration Co., 916 P.2d 822, 826 (N.M./ 1996); Stekoll Benzin. Co. v. Hamilton, 255 S.W.2d 187, 190 (Tex. 1953). Farmors generally strongly maintain the position that the allocation is only made when the farm is exported. This is simply because the farmer does not need to locate the farm to get a reassignment if he does not provide the agreed benefits. On the other hand, Farmees sometimes pushes ahead of the task.
This is because the farm does not need to put all the time and resources into the project, and then work with the farmer or return to get the contract. In addition, receiving the assignment eliminates the possibility in advance of the farmer`s ability to reject his shares to a third party, which may revoke the farm.  See Kendor Jones, Something Old, Something New: The Evolving Farmout Agreement, 49 Washburn LJ 477 (2009) (citing Strata Prod. Co. v. Mercury Exploration. Co., 916 p.2d 822, 829-30). Here`s an example. You work as a compatriot for David Oil Co. You have kept a small battalion of landowners and rented a nice large area that your geologist thinks will be productive. This gives you 100% of the interest of the job.
They pay 100% of expenses and receive 100% of net income (all revenues decreased from royalties, royalties, taxes, etc.).