Tag: litigation

28Sep

Forecasting a Rise in Lease Termination and Royalty Litigation Amidst Prolonged Oil Slump

Originally appearing in the Energy Expert Analysis Section of Law360.

law 360 logoLaw360, New York (September 25, 2015) — Over the last five years, American shale production has more than tripled. Since last October, however, the oil and gas industry has trudged through a long and pronounced slump in crude oil prices in what has been termed the “Oil Bust of 2015.” Oil prices dropped below $40 a barrel last month for the first time in over six years, and major relief from this slump may be distant as EIA recently announced that it expects crude to average $59 per barrel in 2016.

This low-price environment has been unfavorable for most royalty owners, as low oil prices generally lead to proportionately low royalty payments. It has also lead to a slow-down in additional drilling and development activity as many oil and gas companies slashed budgets for 2015 and 2016. Drilling contractors have stored hundreds of rigs, and oil and gas companies have drastically reduced their workforces. A strong indicator of this slow-down can be found in the Texas Railroad Commission drilling statistics, showing 964 permits issued last month in Texas, compared with 2,440 in August of 2014. Read More »

5Aug

Case Law Update: ConocoPhillips Must Release 15K Acres

Texas Case Law Update: On August 5, 2015, the San Antonio Court of Appeals released its opinion in ConocoPhillips Company v. Vaquillas Unproven Minerals, Ltd., [1] No. 04-15-00066-CV (San Antonio – August 5, 2015).  affirming the trial court’s order declaring ConocoPhillips breached two oil and gas leases in Webb County by failing to release all acreage in excess of 40 acres for each producing and shut-in natural gas well capable of producing in paying quantities. As a result, ConocoPhillips was ordered to release an additional 15,351 acres. The issue on appeal was whether the retained acreage clauses allowed ConocoPhillips to retain 40 acres per gas well or 640 acres per gas well.

This case illustrates how appellate courts can interpret acreage perpetuation and release language in a lease in conjunction with regulatory rules. As such, this case underscores the importance of lease language that references regulatory rules, which may provide for spacing or proration units of a greater or smaller size than the default acreage provided within the lease.

Read More »

Footnotes   [ + ]

© Copyright 2012-2018, McGinnis Lochridge LLP. All Rights Reserved. DISCLAIMER: The information in this article is for general information purposes only. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided in this article.
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