Burlington Resources Oil & Gas Co. v. Petromax Operating Co.

486 S.W.3d 703, 2016 Tex. App. LEXIS 2493, 2016 WL 908228
CourtCourt of Appeals of Texas
DecidedMarch 10, 2016
DocketNo. 06-15-00044-CV
StatusPublished
Cited by2 cases

This text of 486 S.W.3d 703 (Burlington Resources Oil & Gas Co. v. Petromax Operating Co.) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Burlington Resources Oil & Gas Co. v. Petromax Operating Co., 486 S.W.3d 703, 2016 Tex. App. LEXIS 2493, 2016 WL 908228 (Tex. Ct. App. 2016).

Opinion

OPINION

Opinion by

Justice Moseley

This case involves the adjudication of the parties’ interests in certain oil and gas leases located in Brazos County.1 Burlington Resources Oil & Gas Company, LP, sued PetroMax Operating Co., Inc. (Petro-Max), Woodbine Acquisition, LLC (Woodbine), Petro Texas, LLC (Petro Texas), CH4 Energy II, LLC (CH4), and TexCal Energy South Texas LP (TexCal) (collectively Appellees), for allegedly acquiring oil and gas interests to which Burlington had a claim. In an effort to obtain a declaratory judgment that would settle its claim to the oil and gas interests in question, Burlington filed a motion for partial summary judgment directed at Woodbine and PetroMax. In response, Appellees filed a motion for summary judgment arguing that the evidence conclusively established that Burlington no longer owned the interests it claimed. The trial court [706]*706agreed, granted Appellees’ motion for summary judgment, and denied Burlington’s partial motion for summary judgment.

Burlington has appealed; We conclude that because the summary judgment evidence conclusively established that Burlington conveyed the interests it now claims, it no longer stands in a contractual position to assert its claim. Because our holding on the first issue presented is dis-positive , of the appeal, we do not discuss other points specifically. We affirm the trial court’s judgment.

1. Factual Background

A. The 1975 Original Agreement

Buttes Resources Company owned an undivided one-half working interest in nine oil and gas leases. In 1975, Buttes entered into an agreement with Aztec Oil & Gas Company to cooperate in the exploration, development, and operation of nine oil and gas leaseholds (the Original Agreement). On Aztec’s payment of its share of the costs and expenses under .the Original Agreement, .Buttes agreed to assign it an undivided twenty-five percent of its interest in the nine leases. ■ ¡

In addition to the agreement ■ to jointly explore the existing nine leaseholds, the' Original Agreement denoted an Area of Mutual Interest' (AMI) to promote joint acquisition and exploration of future leaseholds.2 Under the Original Agreement, if Aztec acquired any further oil or gas leases or mineral rights in the AMI, it was required to offer Buttes an undivided seventy-five percent of the acquired interest in the lease. Conversely, if Buttes made an acquisition in the AMI, it would, offer Aztec an undivided twenty-five percent of the acquired interest in the lease. Each of these offers was required to be made in writing, with each party having fifteen days in which to accept or reject the offer.

If a party accepted the offer of interest, it was required to reimburse, the other party . for its proportionate. share of the acquisition cost. If an interest within the AMI became jointly held by the parties, both joint owners would be subject to the terms of a joint operating agreement, which required the party drilling a well on the leasehold to notify the other party and provide it with a chance to participate in the endeavor by sharing the project cost.

The Original Agreement included a map of the .AM,I and further provided that the AMI would “last as long as leases, are .jointly owned within such area.” It is undisputed that only “[tjhree of the original leases remain in the AMI” (to which the parties refer as the Gibbs Lease, the Wilson Lease, and the Buchanan Lease). In its response to Appellees’ motion for summary judgment, Burlington focused on the Wilson lease.

B. The 1978 Farmout Agreement

In 1977, Aztec merged into Southland Royalty Company, one of Burlington’s predecessors. In 1978, Southland entered into a farmout agreement3 with [707]*707Petromark Minerals, Inc., Woodbine’s pre-deeessor-in-interest, “for the drilling of test wells in search for oil and gas” on. the nine leases that were the subject of the Original Agreement and within the AMI. Under this farmout agreement, Petromark assumed Southland’s position under the joint operating agreement with Buttes and participated in drilling wells' at its own cost.

The farmout agreement provided, “As each well is completed as a producer of oil or gas in which Petromark has participated and a unit is declared around same, Southland shall issue Petromark an assignment in recordable form of the portion of said leases that are included in such unit.” It further stated, “Prior to such times as such unit is declared or field rules are established for each- such well in which Petromark has participated, Petromark shall be considered as the owner of its proportionate undivided interest in each such well and a proportionate part of all production therefrom.”

As of 1978, there were two producing wells on the Wilson lease. Southland excepted certain existing wells from the farmout agreement, including the James D.. Wilson # 2 well. Buttes subsequently-acknowledged that Petromark had a working interest in the Wilson lease, although a formal assignment was not completed. ■

C. The 1994 Assignment

In 1994, Southland, as assignor, entered into the assignment and bill of sale which is at the heart of this controversy. At the very top of the 1994 assignment are these words: “Well Name: BUCHANAN' 1, GIBBS BROS. 1, 'WILSON JAMES 2 AND WILSON JAMES 3.” It conveyed to Samson Resources Company all of the assignor’s rights, title, and interest in and to the following:

(i) The oil and gas leases, leasehold interests, rights and interests attributable or allocable to the oil and gas leases or leasehold interests by virtue of pooling, unitization, eom-munitization, and operating agreements, licenses, permits, and other agreements, all more particularly described on Exhibit “A”, hereto, limited as to the lands and depth indicated pn Exhibit “A” (collectively the “Leases”), together with identical undivided interests in and to all the property and rights incident thereto, including, but hot limited to, all rights in, to[,] and under all agreements, product purchase and sale contracts, leases, permits, rights-of-way, easements, licenses, farmouts, options, order, and other contracts or agreements of a similar nature to the extent same relate to the Leases; -
■ (ii) The wells, equipment, materials and other ’ personal' property,' fixtures and improvements on the Leases as of the Effective Date ... appurtenant thereto dr used or obtained in connection with the Leases

The 1994 assignment also contained the following language:

Assignor reserves and retains unto itself from the Interest those certain lands, [708]*708leases, properties, ■ interests, leasehold rights, depths[,] or formations as specifically noted and reflected on Exhibit “A”, and the right of joint use of any agreements assigned hereunder where needed for the exploration, development, and operation of any rights or acreage (either horizontally or vertically) retained by Assignor or where needed in order to exercise ancillary rights in, or for access to, adjoining or nearby properties owned by Assignor.

As shown by the language above, Exhibit A contained both the conveyances and reservations made in the 1994 assignment. The table from Exhibit A is reproduced below, in relevant part:

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Cite This Page — Counsel Stack

Bluebook (online)
486 S.W.3d 703, 2016 Tex. App. LEXIS 2493, 2016 WL 908228, Counsel Stack Legal Research, https://law.counselstack.com/opinion/burlington-resources-oil-gas-co-v-petromax-operating-co-texapp-2016.