Farmout

When someone strikes economic gold on their land (oil, natural gas, or celebrity minerals), the owner can lease out the area to a company to extract all of those old dinosaur bones or what-have-you, via a “farmout.”

The owner is the “farmor,” who gets money from the extraction company, called the “farmee.” Usually, the farmor gets a wad of cash up front, as well as interest (think: royalty payments). The farmee gets a certain percentage after other costs are taken into account (like the costs of drilling a well or fracking or whatever extraction method). All of these details are laid out in the farmout agreement.

Besides the value from the things extracted, both farmors and farmees share risk and gain geological knowledge of the area, which can help both of them (the farmor because it’s their land, and the farmee since it could help them identify other potential farmors sitting on untapped dino bones/gassy gas/minerals).