Incline Energy v. PDC Energy

• Court: Colorado Court of Appeals
• Decided: July 3, 2025
• Docket: 24CA1630
• Status: Unpublished

Opinion

24CA1630 Incline Energy v PDC Energy 07-03-2025

COLORADO COURT OF APPEALS

Court of Appeals No. 24CA1630 Weld County District Court No. 23CV30569 Honorable Todd Taylor, Judge

Incline Energy, LLC,

Plaintiff-Appellant,

v.

PDC Energy, Inc., and Extraction Oil and Gas, Inc.,

Defendants-Appellees.

JUDGMENT REVERSED AND CASE REMANDED WITH DIRECTIONS

Division III Opinion by JUDGE DUNN Brown and Schock, JJ., concur

NOT PUBLISHED PURSUANT TO C.A.R. 35(e) Announced July 3, 2025

Fennemore Craig, P.C., Cody C. Bourke, Allison M. Hester, Denver, Colorado, for Plaintiff-Appellant

Crisham & Holman LLC, John K. Crisham, David C. Holman, Littleton, Colorado, for Defendant-Appellee PDC Energy, Inc.

Welborn Sullivan Meck & Tooley, P.C., Samuel S. Bacon, David Hrovat, Denver, Colorado, for Defendant-Appellee Extraction Oil and Gas, Inc. ¶1 Plaintiff, Incline Energy, LLC (Incline), appeals the district

court’s summary judgment in favor of defendants, PDC Energy, Inc.

(PDC), and Extraction Oil and Gas, Inc. (Extraction). We reverse the

judgment and remand the case for further proceedings.

I. Background

¶2 In two separate transactions, PDC assigned wellbore interests

in certain wells to Incline and Extraction. Incline claims that five of

those wellbore interests were conveyed twice — first to Incline and

later to Extraction — which leads us to the dispute here: whether

PDC conveyed the same or different wellbore interests to Incline and

Extraction.

A. The First PDC Transaction

¶3 In July 2020, PDC and Raisa II, LLC (Raisa), entered into a

purchase and sale agreement (Raisa agreement) and an assignment

(Raisa assignment) under which PDC conveyed its “right, title and

interest” in “the working interest and net revenue interest in the

wellbores of the wells described on Exhibit A” attached to both

1 contracts.1 The Raisa agreement and Raisa assignment included

wellbores that were “permitted, drilled, or to be drilled in the

future.” Along with the wellbores, PDC conveyed, among other

things, the associated oil and gas leases “insofar and only insofar as

such interests cover the [w]ellbores” and the rights to all oil, gas,

and other minerals that may be produced from the wellbores. PDC

reserved its “right, title and interest” in “any other wellbores”

besides those identified in Exhibit A.

¶4 In total, Exhibit A listed fifty wellbores each identified by

several descriptors, including “Pad Name,” “Well Name,” “Operator,”

“API,” and “Location.”2

1 The parties and the district court used the terms “wells” and

“wellbores” somewhat interchangeably. Taking our lead from the Raisa agreement, we will refer to the interests in “the wellbores of the wells described on Exhibit A” collectively as “wellbores.” 2 “API” is shorthand for the American Petroleum Institute Well

Number. Though the parties dispute the importance — and perhaps the meaning — of the API number, the American Petroleum Institute defines the API number as a “unique, permanent, numeric identifier assigned for identification purposes to a well (hole-in-the- ground) which is drilled for the purpose of finding or producing oil and/or gas or providing related services.” Am. Petroleum Inst., API Bulletin D12A, The API Well Number and Standard State and County Numeric Codes Including Offshore Waters Preface (rev. 1979).

2 B. The Assignment from Raisa to Incline

¶5 Also in July 2020, Raisa assigned to Incline a fifty percent

interest in the wellbores and related interests that it acquired from

PDC (Incline assignment). The Incline assignment included an

Exhibit A listing the same fifty wellbores that PDC had conveyed to

Raisa.

C. The Second PDC Transaction

¶6 In late 2021, PDC sold and assigned to Extraction its “right,

title and interest” in several wellbores and related interests

identified on exhibits attached to that assignment (Extraction

assignment).

D. The Disputed Wellbores

¶7 Recreated below from Exhibit A to the Raisa assignment are

the five wellbores that Incline alleges PDC conveyed twice (disputed

wellbores):

3 Pad Name Well Name Operator API No. Location

CBJ FED CBJ Fed 15W-25-12 Extraction Pending SENE 6-5N-65W

CBJ FED CBJ Fed 15W-25-2 Extraction Pending SENE 6-5N-65W

GP GP Hillside Fed 17W-20-11N Extraction 05-123-44428 NENE 20-5N-65W

GP GP J Evans Fed 20W-20-17N Extraction 05-123-44426 NENE 20-5N-65W

GP Cody Fed GP Cody Fed 20E-15-5N Extraction 05-123-50284 NENE 20-5N-65W

A table excerpting the five disputed wellbores as described on Exhibit A to the Raisa assignment.3

¶8 And recreated below from Exhibit B-1 to the Extraction

assignment are purportedly the same five disputed wellbores:

Well Name API No. Operator Name Tshp Rng Sec SHL

GP CBJ FED 17W-25-01 05-123-44427 Extraction 5N 65W 20 NENE

GP CBJ FED 17W-25-02 05-123-44428 Extraction 5N 65W 20 NENE

GP CBJ FED 17W-25-03 05-123-44426 Extraction 5N 65W 20 NENE

GP CBJ FED 17W-25-04 05-123-50284 Extraction 5N 65W 20 NENE

GP CBJ FED 17W-25-05 05-123-24173 Extraction 5N 65W 20 NENE

A table excerpting the five disputed wellbores as identified in Exhibit B-1 to the Extraction assignment.

3 In its opening brief, Incline singled out seven wellbores that PDC

assigned to Extraction. Three of those seven wellbores had API numbers identical to wellbores assigned to Incline. The remaining four wellbores had pending API numbers. Incline, however, only contests the ownership of two of the wellbores with pending API numbers. Thus, as Incline confirms in its reply brief, the dispute is “centered on the ownership of five” wellbores.

4 ¶9 Raisa later assigned its remaining fifty percent interest in the

disputed wellbores to Incline.

E. The Litigation

¶ 10 After the Extraction assignment, Incline sued PDC and

Extraction. In its complaint, Incline alleged that, before the

Extraction assignment, Extraction had offered to buy the disputed

wellbores from Incline. After Incline refused to sell them to

Extraction, PDC allegedly went ahead and conveyed the disputed

wellbores to Extraction.

¶ 11 Incline asserted nine claims for relief, some of which were

dismissed along the way. As for the claims that survived, Incline

asserted that PDC (1) breached the Raisa assignment by selling the

disputed wellbores to Extraction4 and (2) breached the implied

covenant of good faith and fair dealing. Incline also asserted that

both PDC and Extraction were unjustly enriched and sought

declaratory relief and to quiet title in the disputed wellbores.

4 Though the complaint didn’t separately reference the Raisa

agreement, the Raisa assignment is expressly “subject to the terms and conditions of” the Raisa agreement.

5 ¶ 12 PDC and Extraction each moved for summary judgment,

arguing, among other things, that the various contracts were

unambiguous and that a simple comparison of the exhibits

reflecting the conveyed wellbores plainly showed that they were

different. More specifically, PDC and Extraction argued that the

Raisa agreement conveyed only the fifty wellbores identified on

Exhibit A, and the five disputed wellbores were not the same

wellbores later conveyed to Extraction because the wellbores on

Exhibit B-1 to the Extraction assignment had different well names.

In support, PDC and Extraction both pointed to evidence attached

to their respective motions.

¶ 13 Incline responded that genuine issues of material fact

remained concerning whether PDC had conveyed the disputed

wellbores twice. It argued that because some of the disputed

wellbores shared several identical descriptors — such as the pad

name, operator, API number, and location — whether the conveyed

wellbores were the same or different could not be determined on the

face of the various contracts and exhibits, and extrinsic evidence

was needed to resolve that question. Incline then pointed to

extrinsic evidence that showed Extraction, as the operator of the

6 wells, could change the well names (and, in fact, had changed the

well name for two of the disputed wellbores). Thus, Incline argued

that the well names were not dispositive for determining whether

PDC conveyed the same wellbores twice.

¶ 14 The district court determined that the contracts were not

ambiguous and, therefore, that it could not consider extrinsic

evidence. Then, without explaining which descriptors it deemed

dispositive, the court determined that “[n]one of the disputed

wellbore interests claimed by Incline appear on Exhibit ‘A’” and

concluded as a matter of law that PDC conveyed different wellbores

to Incline and Extraction. The court didn’t address the overlap in

the descriptors of the disputed wellbores or the import of the

identical API numbers for three of those wellbores. The court

entered summary judgment in favor of defendants on all of Incline’s

claims, though it didn’t separately analyze the unjust enrichment,

implied duty of good faith and fair dealing, quiet title, or declaratory

judgment claims.

II. Summary Judgment

¶ 15 Incline appeals the summary judgment, contending that the

district court erred in multiple ways. But we needn’t address each

7 argument because we agree with Incline that the various contracts

on their face don’t plainly and unambiguously answer the question

of whether PDC conveyed the same wellbores to Incline and

A. Preservation

¶ 16 PDC and Extraction question whether Incline preserved all its

appellate arguments. But Incline objected to summary judgment

under the plain terms of the various contracts. It also argued that

the contracts were ambiguous and that disputed material facts

concerning whether PDC conveyed the same wellbores to Incline

and Extraction precluded summary judgment. Thus, the issues

Incline raises on appeal were presented to the district court, and

the district court had an opportunity to rule on them; that’s all

that’s required for preservation. See Kritzer v. Qwest Corp., 2025

COA 54, ¶ 23.

B. Standard of Review and Legal Principles

¶ 17 We review de novo the district court’s grant of summary

judgment. Univ. of Denver v. Doe, 2024 CO 27, ¶ 7. Summary

judgment is a drastic remedy and should only be granted when the

pleadings and supporting documents show that no disputed issue

8 of material fact exists and that the moving party is entitled to a

judgment as a matter of law. Id.; C.R.C.P. 56(c). The moving party

bears the burden of establishing the lack of a triable factual issue,

and “[t]he party opposing summary judgment, by contrast, is

entitled to the benefit of all favorable inferences that may

reasonably be drawn from the facts.” Doe, ¶ 8.

¶ 18 We also review de novo the interpretation of a contract.

French v. Centura Health Corp., 2022 CO 20, ¶ 24. When

interpreting a contract, our primary goal is to give effect to the

parties’ intent. Id. at ¶ 25. We discern that intent primarily from

the language of the contract itself. Id. We first determine whether

the contract’s terms are ambiguous by examining the contract’s

plain language. Id. If the contract is unambiguous, we will enforce

it as written. Id. But if the contract is ambiguous, meaning its

terms are susceptible of more than one reasonable interpretation,

then extrinsic evidence is admissible to establish the parties’ intent.

Id.

C. The Disputed Wellbores

¶ 19 Incline maintains that because the Raisa agreement and the

various assignments don’t answer the question of whether PDC

9 conveyed the disputed wellbores twice, extrinsic evidence is needed

to resolve that question.5 We agree.

¶ 20 To be sure, Exhibit A from the Raisa assignment and Exhibit

B-1 from the Extraction assignment reflect wellbores with different

well names. But the exhibits also reflect that the disputed

wellbores share several specific descriptors, including pad name,

operator, API number, and location. Indeed, three of the five

disputed wellbores share identical API numbers. The parties

dispute the import of the well name and identical API numbers.

And all do so by referencing materials outside the Raisa agreement

and the various assignments.

¶ 21 For example, in its complaint, Incline alleged that API

numbers are “unique and permanent” identifiers “assigned to each

well.” Then, in opposition to summary judgment, Incline relied on

extrinsic evidence to argue that

• the Colorado Energy and Carbon Management Commission

(ECMC) considers API numbers to be the “national standard

5 The contours of Incline’s arguments are somewhat imprecise, but

as we understand it, they boil down to one central point: extrinsic evidence is needed to resolve whether PDC conveyed the same wellbores twice.

10 to uniquely identify all oil and gas wells, and wells

associated with oil and gas operations”;

• the ECMC issues an API number after it approves a well

permit, and API numbers stay the same regardless of how

many times a well name changes;

• three of the disputed wellbores had identical API numbers

(along with other identical descriptors), while two of the

disputed wellbores were not identified by API number in the

Raisa assignment because the API numbers were “pending”

at the time;

• for the two disputed wellbores with pending API numbers,

those wellbores had “AFE” numbers that matched to

wellbores for which Incline had assumed significant

outstanding liabilities payable to Extraction;6

• Extraction had discretion to change well names; and

6 In the oil and gas industry, “AFE” means “Authority for

Expenditure” or “Authorization for Expenditure.” 8 Patrick H. Martin & Bruce M. Kramer, Williams & Meyers, Oil and Gas Law 29 (2014).

11 • for the two disputed wellbores with matching AFE numbers

(but pending API numbers), Extraction had changed those

well names.

Given this, Incline emphasized the importance of the API number in

identifying the disputed wellbores and discounted the import of the

other descriptors, particularly the well name.

¶ 22 By contrast, Extraction argued that “only each [w]ell’s actual

name is unique and determinative” for each of the fifty wellbores

identified in the assignments. In support, Extraction referenced

extrinsic evidence suggesting that the well name reflected the

wellbore’s location and production target. And Extraction

minimized the import of the API numbers in identifying the

disputed wellbores by again citing extrinsic evidence indicating that

the ECMC reuses API numbers for different wells and had done so

for some of the disputed wellbores (though Extraction attached this

evidence to its summary judgment reply, leaving Incline no ability

to respond).

¶ 23 PDC too supported its argument that the well name, and not

the API number, was dispositive in identifying the disputed

wellbores by pointing — not to the plain language of the Raisa

12 agreement and the various assignments — but to extrinsic evidence

such as well permits, affidavits, and deposition testimony. And

though Extraction and PDC both maintain on appeal that the Raisa

agreement and various assignments are unambiguous and show

that PDC conveyed different wellbores to Incline and Extraction,

they again do so by reference to the same extrinsic evidence.7

¶ 24 All this is to say, the Raisa agreement and the various

assignments do not plainly and unambiguously answer the pivotal

question in this litigation: whether PDC conveyed any of the five

disputed wellbores more than once. Though Exhibit A is plain on

its face, as is Exhibit B-1, what they mean is susceptible of more

than one reasonable interpretation. See Ad Two, Inc. v. City & Cnty.

of Denver, 9 P.3d 373, 380 (Colo. 2000) (Hobbs, J., dissenting) (“A

latent ambiguity exists where the language of the document,

although clear on its face, is susceptible to more than one

meaning.”); see also Sault Ste. Marie Tribe of Chippewa Indians v.

Granholm, 475 F.3d 805, 812 (6th Cir. 2007) (observing that latent

7 PDC especially leans on a substantial amount of extrinsic

evidence that the district court didn’t consider in granting summary judgment.

13 ambiguity doesn’t stem from the document’s language “but instead

arises from a collateral matter when the document’s terms are

applied or executed”) (citation omitted). And as demonstrated by

the parties’ reliance on it, extrinsic evidence is needed to resolve

that question. See Sch. Dist. No. 1 v. Denver Classroom Tchrs.

Ass’n, 2019 CO 5, ¶ 14 (explaining that if a contract is ambiguous,

“the meaning of its terms is generally an issue of fact to be

determined in the same manner as other disputed factual issues”)

(citation omitted); see also Comet Energy Servs., LLC v. Power River

Oil & Gas Ventures, LLC, 2008 WY 69, ¶¶ 5-14 (reversing entry of

summary judgment because material questions of fact existed

about the interests conveyed in the sale and assignment of an oil

and gas well); 8 Patrick H. Martin & Bruce M. Kramer, Williams &

Meyers, Oil and Gas Law 1140 (2014) (noting that “the nature and

scope of the rights that are conveyed using a well bore assignment,

if not stated expressly, may be difficult to define”).

¶ 25 But even if we assume that the various assignments and

related exhibits are not susceptible to any ambiguity, because the

various assignments don’t plainly tell us whether PDC conveyed any

of the five disputed wellbores more than once, disputed facts still

14 exist as to whether PDC breached its obligations under the Raisa

agreement. That’s a factual question. See Lake Durango Water Co.

v. Pub. Utils. Comm’n, 67 P.3d 12, 21 (Colo. 2003) (“Once the terms

of the agreement have been identified, the fact finder must

determine whether the party accused of breaching has performed

its obligations under the contract.”).

¶ 26 For these reasons, and resolving all doubts in Incline’s favor

and against Extraction and PDC, see Doe, ¶ 8, we conclude that

disputed issues of material fact preclude summary judgment. And

because the district court appears to have rejected all of Incline’s

remaining claims based on the face of the Raisa agreement and

various assignments, our ruling necessarily revives Incline’s

remaining claims for (1) breach of contract; (2) breach of implied

covenant of good faith and fair dealing; (3) unjust enrichment;

(4) quiet title; and (5) declaratory judgment.

III. The Sole Remedy Clause

¶ 27 PDC alternatively contends that we may affirm the summary

judgment in its favor on a separate basis. PDC argues that Incline’s

claims against it are barred by the sole remedy clause in the Raisa

15 agreement (to which no one disputes that Incline is bound).8 We

disagree.

¶ 28 Section 5.6 of the Raisa agreement states:

Survival; Sole Remedy. Notwithstanding any legal requirement regarding any statute of limitation to the contrary, the representations and warranties set forth in Article 4, and the indemnification remedy for breach thereof under this Article 5, shall survive Closing until the date that is twenty-four (24) months from the Execution Date. The terms and provisions of this Article 5 shall be the sole and exclusive remedy of the Parties with respect to the Transaction and the representations, warranties, covenants and agreements set forth in this Agreement, and are in lieu of, and each Party hereby waives, any and all other remedies available, whether at law, in equity or otherwise. No Party shall be liable to the other Party for consequential, exemplary, special or punitive damages, except to the extent such damages would be subject to the indemnity obligations in this Article 5 with respect to any third party claimant.

(Second emphasis added.)

¶ 29 As before, we review de novo the interpretation of a contract.

French, ¶ 24.

8 PDC raised this argument in its motion for summary judgment,

but because the district court disposed of the claims on a different basis, the district court didn’t address it.

16 ¶ 30 PDC argues that Section 5.6 is a valid limitation of liability

provision that limits Incline “to the remedies set forth” in Article 5

and, therefore, that Incline has “waived any and all remedies” other

than those in Article 5.

¶ 31 But beyond this lone assertion, PDC doesn’t develop any

argument explaining whether the remedies in Article 5 apply only to

claims stemming from the representations and warranties in Article

4 (as suggested by the first sentence and the conjunctive “and” in

the second sentence that includes “covenants and agreements”) or,

if not, how Article 5 covers a claim that PDC breached the Raisa

agreement by assigning the disputed wellbores twice. Nor does PDC

address whether Incline’s claims are covered under the remedies in

Article 5. Because PDC’s argument is conclusory and undeveloped,

we decline to address it further. See Trudgian v. LM Gen. Ins. Co.,

2024 COA 87, ¶ 31 (declining to address a “skeletal and conclusory”

argument); Taylor v. Taylor, 2016 COA 100, ¶ 13 (declining to

address a “conclusory” argument that “fail[ed] to address the real

issue”).

¶ 32 Next, PDC claims that because Section 5.6 bars consequential

damages, Incline may not seek “consequential damages in the form

17 of lost profits.” No doubt, the Raisa agreement bars the recovery of

consequential damages. But it’s not clear at this juncture whether

Incline seeks indirect consequential damages or direct damages.

And since not all lost profit damages are indirect damages, it’s

simply premature to determine whether Incline’s claimed damages

are consequential or direct. See SOLIDFX, LLC v. Jeppesen

Sanderson, Inc., 841 F.3d 827, 839 (10th Cir. 2016) (explaining that

although “[t]he Colorado Supreme Court has not expressly defined

when lost profits qualify as consequential damages,” it “would

recognize that lost profits can be either direct or consequential

damages . . . based on its ordinary rule that direct damages flow

directly from the breach of the contract with the breaching party,

while consequential lost profits flow from losses beyond the scope of

that contract”).

IV. Disposition

¶ 33 We reverse the judgment and remand the case for further

proceedings.

JUDGE BROWN and JUDGE SCHOCK concur.