operations,” including operations on an existing well. Per the lease, “drilling operations” were defined: “… [1] actual operations for drilling, testing, completing and equipping a well (spud in with equipment capable of drilling to Lessee’s object depth): [2] reworking operations, including fracturing and acidizing; and [3] reconditioning, deepening, plugging back, cleaning out, repairing or testing …” On appeal, HJSA argued, and the court of appeals agreed, that the continuous drilling obligation required the drilling of a new well. The Texas Supreme Court reversed the court of appeal’s judgment in part , rendered judgment that Sundown was not obligated to reassign the contested acreage and remanded to the trial court for further proceedings. Sundown Energy LP, et al. v. HJSA No. 3 Limited Partnership, CAUSE NO. 19-1054 Bryan C Wagner, et al v Apache Corporation The Supreme Court affirmed the judgment of the court of appeals reversing the decision of the trial court concluding that indemnity claims fell within an exception to an arbitration clause and that
the non-signatory assignees were bound by the agreement under a theory of assumption, holding that Plaintiffs’ request for a declaratory judgment was subject to mandatory arbitration. As president of Wagner Oil Company, Bryan Wagner signed a purchase and sale agreement (PSA) purchasing several assets from Apache Corporation. The PSA contained an indemnification provision and an arbitration clause. Later, third- party surface landowners filed lawsuits against Apache, seeking damages for alleged environmental contamination caused by Apache’s operation of the assets before they were sold. Apache filed a demand for arbitration against Plaintiffs, including Wagner Oil and Wagner, for indemnity and defense. Plaintiffs then filed a declaratory judgment action seeking a declaration that Plaintiffs were not parties to the PSA and therefore not subject to the arbitration and indemnity clauses. The trial court denied Apache’s motion to compel arbitration. The court of appeals reversed. The Supreme Court affirmed, holding (1) the indemnity disputes over third party-claims fall within the scope of the arbitration clause and outside its exception; and (2) the Wagner Oil signees were bound by the arbitration clause. Bryan C. Wagner, et al v. Apache Corporation, CAUSE NO. 19-0243
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BlueStone Nat. Res. II, LLC v. Nettye Engler Energy, LP
costs for transportation, gathering and compression, regulatory fees, and severance taxes. After learning that BlueStone was deducting these postproduction costs from its royalty interest, Engler sued. The appeals court rendered judgment in favor of BlueStone, finding that a non-participating royalty interest (“NPRI”) described as “free of cost in the pipeline” was free of production costs but burdened by postproduction costs. The court held “that the royalty interest by its express terms creates a standard royalty subject to postproduction costs.” This case is currently before the Texas Supreme Court waiting on a final decision.
In 2004, BlueStone’s predecessors leased the land and numerous producing wells were drilled. The NPRI was credited as free of post-production costs and paid accordingly. In 2016, BlueStone acquired the operating rights for the wells from Quicksilver. Unlike Quicksilver, BlueStone interpreted the NPRI to be a standard NPRI free of production costs but subject to postproduction costs. BlueStone thus began to pay royalties to Engler based on the value of gas produced as calculated at the point where the gas entered the pipeline attached to the well rather than the point of sale. Under this valuation point, BlueStone deducted postproduction costs related to delivering the gas to market, namely
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N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s
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