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).
There's nothing more satisfying for middle management than being the decision maker on a farm out.
by Delhi Kedi May 05, 2009
What Preps said to make fun of the term "Far Out". This also corrisponded with "Right Arm"
"farm out, you dope smoking hippies"
by Immortal-Jake May 10, 2006
Giving your dog up to a farm because he can't function in an urban environment.
" I love the little bastard with all my heart, but I had to farm out little Boo. He couldn't take being cooped in that apartment all the time. Christ, I miss him."
by Bess Dreary July 20, 2006