Court affirms summary judgment on oil drilling agreements case

By Gabriel Neves | Oct 25, 2018

HOUSTON -- In a dispute involving two West Texas oil companies regarding the interpretation of their operating agreements, a summary judgment decision was affirmed.

State Justice Martha Jamison, on the bench of the Texas 14th District Court of Appeals, issued a 14-page ruling on Oct. 16, affirming the Harris County 55th District Court, in the lawsuit filed by Apache Corporation and Permian Basin Joint Venture LLC against OBO Inc.

Apache and PBJV sued OBO for failing to pay for operation expenses as stated in the operating agreement signed between both parties. OBO filed a counterclaim, stating that Apache could not act as an operator, as it was not an interest owner, and accusing the same company of gross negligence.

The lower court, as stated in the ruling, "ordered OBO to pay PBJV $195,330.45 in past due expenses and further ordered that OBO take nothing on its counterclaims against Apache."

OBO sustained in the appeal that the lower court committed an error in granting the summary judgment of the case, as it was "against its request for a declaration that Apache could not act as unit operator because it was not a working interest owner," the ruling said.

The oil operations started in 2007, when PBJV, who owns over 81 percent of working interest in the Shafter Lake San Andres Unit, in West Texas, was designated a unit operator. The company signed an agreement with OBO, who owned over 11 percent, and with Apache, which received some operation duties to work in the area.

Per the agreement, the operators ought to be working interest owners.

In her ruling, justice Jamison stated that OBO was "incorrect" in arguing that PBJV "presented no evidence that it incurred any damages by OBO’s failure to pay" for the past due expenses, as well as in arguing that PBJV "did not assert any affirmative claims" as of the breach.

The justice also considered the fact that Apache was not a unit operator.

"Because Apache was not the Unit Operator, the trial court properly granted summary judgment against OBO’s contingent claims for breach of contract and gross negligence," Jamison said.

Texas 14th District Court of Appeals Case number 14-17-00170-CV

 

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