In 2010, the Gipses signed an oil and gas lease (the “Gips Lease”) with Burlington Resources Oil & Gas Co., LP (“Burlington”), a subsidiary of ConocoPhillips Co. (“Conoco”). The Gips Lease provided for a one-fourth (1/4) royalty, and gave Burlington the right to pool the Gipses’ acreage. The Gips Lease also required Burlington to “obtain ratification of [the] lease by all holders of outstanding royalty” prior to pooling. A year later, the Gipses and Hahn ratified the lease. Presumably based on the “double fraction” language of the NPRI reservation in the Gips Deed, a question arose as to the method of calculating Hahn’s NPRI. There appear to be three possible calculations: (i) a fixed 1/8 NPRI; (ii) a floating 1/2 of future lease royalty; or (iii) a floating 1/8 (1/2 of 1/4) of future lease royalty. [4] In 2011, Conoco approached Hahn with a stipulation of interest (the “2011 Stipulation”) to clarify the interest. The 2011 Stipulation provided that: Presumably based on the “double fraction” language of the NPRI reservation in the Gips Deed, a question arose as to the method of calculating Hahn’s NPRI. There appear to be three possible calculations: (i) a fixed 1/8 NPRI; (ii) a floating 1/2 of future lease royalty; or (iii) a floating 1/8 (1/2 of 1/4) of future lease royalty. In 2011, Conoco approached Hahn with a stipulation of interest (the “2011 Stipulation”) to clarify the interest. The 2011 Stipulation provided that:
necessary to vest in each of said respective parties the interest set opposite their name above . . . [5]
To effectuate the purposes of this Stipulation of Interest, each of the parties hereto does hereby grant, bargain, sell, convey, quitclaim and deliver unto each of the other respective parties any interest in the Subject Interest (as herein stipulated) necessary to vest in each of said respective parties the interest set opposite their name above . . .
Conoco subsequently pooled this acreage into the “Maurer Unit B,” and sent Hahn a division order crediting him with a fixed 1/8 th NPRI. A representative of the company later contacted Hahn and told him that the division order was incorrect, and that Conoco did not believe he owned any interest in the pooled acreage. Hahn sued, seeking a declaratory judgment that he owned a 1/8 fixed NPRI. The trial court instead ruled that Hahn owned a floating 1/8 of the landowner’s royalty in any future oil and gas lease based on the 2011 Stipulation, teeing up Hahn’s first appeal.
II. First Appeal: Hahn v. Gips [6]
In his first appeal, Hahn argued the trial court erred by giving effect to the 2011 Stipulation, which he regarded as having failed as a conveyance. The court of appeals agreed with Hahn, holding that the Gips Deed unambiguously reserved to Hahn a fixed 1/8 NPRI. The court of appeals also held that the 2011 Stipulation was inadmissible as extrinsic evidence outside the four corners of the Gips Deed. The Supreme Court denied Conoco’s petition for review in this first appeal. [4] Whether Hahn owed a full 1/8 (1/2 of 1/4) NPRI, or a lesser 1/32 (1/2 of 1/4 of 25%) NPRI was of critical interest to both Burlington/Conoco and the Gipses. A full 1/8 NPRI would be problematic for both the Gipses and Conoco as it would not only absorb the Gipses’ 1/16 landowner royalty, but Conoco would in theory have to account for the additional 1/16 royalty payment out of its net revenue interest (diluted for pooling). [5] 2024 Tex. LEXIS 1180, at 7. [6] 2018 Tex. App. LEXIS 1098 (Tex. App.—Corpus Christi – Edinburg 2018, pet. denied).
For and in consideration of the premises, and other valuable considerations . . . each of the undersigned does hereby acknowledge, stipulate and agree that it was the intent of the parties in the [Gip Deed] that the interest reserved was a one-eighth (1/8) “of royalty” for a term of 15 years from June 9, 2003 (emphasis added).
To effectuate the purposes of this Stipulation of Interest, each of the parties hereto does hereby grant, bargain, sell, convey, quitclaim and deliver unto each of the other respective parties any interest in the Subject Interest (as herein stipulated)
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N at i onal A ssociation of D i v i s i on O rder A nalys t s
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