Compadres, Inc. v. Johnson Oil and Gas Corp.

547 So. 2d 382, 106 Oil & Gas Rep. 474, 1989 La. App. LEXIS 1355, 1989 WL 73561
CourtLouisiana Court of Appeal
DecidedJune 28, 1989
Docket88-309
StatusPublished
Cited by5 cases

This text of 547 So. 2d 382 (Compadres, Inc. v. Johnson Oil and Gas Corp.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Compadres, Inc. v. Johnson Oil and Gas Corp., 547 So. 2d 382, 106 Oil & Gas Rep. 474, 1989 La. App. LEXIS 1355, 1989 WL 73561 (La. Ct. App. 1989).

Opinion

547 So.2d 382 (1989)

COMPADRES, INC., Plaintiff-Appellant,
v.
JOHNSON OIL AND GAS CORPORATION, et al., Defendants-Appellees.

No. 88-309.

Court of Appeal of Louisiana, Third Circuit.

June 28, 1989.

*383 Jeff E. Townsend, Jr., Lake Charles, for plaintiff-appellant.

Karl E. Boellert, Lake Charles, for defendants-appellees.

Before STOKER, YELVERTON and KNOLL, JJ.

STOKER, Judge.

The litigants in this case were business associates and co-owners of mineral interests. Johnson Oil & Gas Corporation sold a working interest to plaintiff, Compadres, Inc. and later transferred working interests to others including Geotrends, Inc. These working interests applied to oil, gas and mineral leases referred to as the "Leckelt-Heywood leases." The plaintiff filed suit for various forms of relief based on the contractual relations existing between the parties. Johnson Oil & Gas Corporation and Geotrends, Inc. answered the suit and reconvened and sought judgment against Compadres, Inc. for certain relief. The trial court rendered judgment in one respect in favor of the plaintiff, but the judgment was largely in favor of the defendants and reconvenors. The plaintiff appealed.

Neither Johnson Oil & Gas Corporation (Johnson) nor Geotrends, Inc. (Geotrends) has filed a brief in this court. Compadres, Inc. (Compadres) is the only party which appealed. We gather that Johnson is in bankruptcy.[1]

FACTS

The trial court rendered written reasons for judgment. We quote from these reasons the following statement of facts:

"REASONS FOR JUDGMENT

"This is a suit arising out of certain letters of agreement and an operating agreement entered into by plaintiffs and defendants relative to leases in the Jennings Field of Acadia Parish, specifically the Leckelt and Heywood Leases.
"On October 1, 1984, Johnson Oil & Gas Corporation contracted with Compadres, Inc. to sell to it a twenty (20) percent undivided interest in certain mineral leases as aforesaid in consideration for which Compadres agreed to provide a turnkey workover [sic] of the Leckelt No. 4 well at the sole cost and expense of Compadres; in addition, Compadres agreed to provide and/or secure as co-maker or co-signer a bank loan for Johnson in the amount of ONE HUNDRED FIFTY THOUSAND AND NO/100 ($150,000.00) DOLLARS. The repayment of the loan was to be the sole responsibility of Johnson but in the event *384 Johnson was to be unable to retire any portion of the debt of which Compadres was at risk, in such event Compadres had the right to retire any portion of said debt and Johnson agreed to assign additional interest to Compadres on the basis of one (1) percent working interest for each and every $3000 of principal reduction which Compadres was to be required to pay. This agreement dated November 8, 1984, but effective October 1, 1984 (P-1) also provides that:

"`The parties hereto recognize that as to the retained interest of Johnson, Johnson intends to and will assign certain undivided interest [sic] to third parties.'

"Further assignments of interest in the leases resulted in the following division of ownership:
"Johnson Oil & Gas Corp.      37.5%
Geotrends Corp.               37.5%
Compadres, Inc.               20%
Grady Beakley                  5%
"Subsequently, an operating agreement (D-1) was executed by Johnson Oil & Gas Corp., Geotrends Corp., Compadres, Inc. and Grady Beakley, effective October 1, 1984, though it was signed subsequent to that date.
"On February 22, 1985, Johnson Oil & Gas Corp. (Johnson) and Geotrends Corp. (Geotrends) forwarded a letter of agreement to Compadres, Inc. (Compadres) concerning the workover [sic] of Leckelt No. 4 well. Compadres was to work over the Leckelt No. 4 well at its sole cost and expense and the seventy-five (75) percent interest of Johnson and Geotrends was to be a carried interest and Compadres was to receive seventy-five (75) percent of Johnson [sic] and Geotrends [sic] share of production from the Leckelt No. 4 well until the proceeds from the sale of production, after deducting service tax, windfall profit tax, and operating expense, equalled two hundred (200) percent of the total cost of the workover [sic]. This was accepted by Compadres on February 25, 1985, in the person of Bill Beakley.
"On March 11, 1985, Compadres moved a rig on Leckelt No. 4. On March 13, 1985, Johnson and Geotrends sent another letter of agreement to Compadres wherein Compadres would agree to workover [sic] the Leckelt No. 4 well, specifically described as a recompletion in the Clement sand, and carry Johnson and Geotrends for a thirty-five (35) percent working interest rather than the original seventy-five (75) percent carried interest. Johnson and Geotrends would pick up twenty (20) percent each on their own. It further provided that Compadres would be entitled to receive full proceeds from the Johnson-Geotrends' thirty-five (35) percent share of production, the carried interest, from the Clement sand production in the Leckelt No. 4 well until the proceeds from the sale after the deduction of usual items, equalled two hundred (200) percent of the thirty-five (35) percent carried interest of Johnson and Geotrends. This was agreed to and accepted on March 15, 1985 by Compadres through Bill Beakley. The letter of March 13, 1985 is Exhibit D-2.
"The other document pertinent to an analysis of this action is the operating agreement dated October 1, 1984, specifically Article VII, Paragraph B. Liens and Payments Defaults:
[This quotation is omitted. It is set forth as Footnote 3 of this opinion.]
"Almost from the start disaster greeted Compadres' attempt to reach total depth and complete the Clement sand after re-entry of the Leckelt No. 4 well hole. At a shallow depth the drilling bit accidentally milled out of the cased hole, forcing Compadres to actually side tract [sic] another hole which was unsuccessful in finding the Clement sand. Completion was actually attempted at approximately 7200 feet but the sand did not produce in commercial quantities and the consensus was that the Clement sand had faulted away. At that point in time, Johnson took over the operations and successfully completed in the Lower Robiera sand, an area of production in which Compadres had no `carry' according to the letter of agreement of March *385 13, 1985. The cost of workover [sic] for Compadres was in excess of $365,000 rather than the much more conservative anticipation."

The actual amount of the cost of the work over was $367,447.

At the time Johnson took over operations, Geotrends and Johnson informed Compadres that in their opinion the March 13, 1985 contract limited the enhanced payment (the 35% carried interests X 200%) to production from the Clement Sand. Since the production was ultimately from the Robiera Sand instead, Compadres was, in their opinion, only entitled to 20% of the revenue (for its 20% owned working interests). Johnson and Geotrends took the position that they would only be liable for 20% each of the operating expenses of the Clement Sand work over, while Compadres would be liable for 55% (20% owned interest, plus 35% carried interests). However, Johnson and Geotrends actually paid only 10% each of the costs.

On March 5, 1986 Compadres filed a lien for $347,000 against Johnson's interest in the Jennings-Heywood and Leckelt leases.

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Bluebook (online)
547 So. 2d 382, 106 Oil & Gas Rep. 474, 1989 La. App. LEXIS 1355, 1989 WL 73561, Counsel Stack Legal Research, https://law.counselstack.com/opinion/compadres-inc-v-johnson-oil-and-gas-corp-lactapp-1989.