# Burlington Resources Oil & Gas Company, LP v. Petromax Operating Co., Inc., Woodbine Acquisition, LLC, N/K/A MD America Energy, LLC, Petro Texas, LLC, CH4 Energy II, LLC, and Texcal Energy South Texas, LP > Court of Criminal Appeals of Texas · October 21, 2015 URL: https://www.frixlaw.com/law-library/cases/4063358 ## Case - **Court:** Court of Criminal Appeals of Texas - **Decided:** October 21, 2015 - **Precedential status:** Published - **Opinion:** Opinion - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4063358 ## Opinion text ACCEPTED 06-15-00044-CV SIXTH COURT OF APPEALS TEXARKANA, TEXAS 10/20/2015 7:43:29 PM DEBBIE AUTREY CLERK No. 06-15-00044-CV IN THE SIXTH DISTRICT COURT OF APPEALSFILED IN 6th COURT OF APPEALS TEXARKANA, TEXAS 10/21/2015 8:59:00 AM Burlington Resources Oil & Gas Company LP, DEBBIE AUTREY Clerk Appellant, v. PetroMax Operating Co., Inc., Woodbine Acquisition, LLC, Petro Texas, LLC, Ch4 Energy II, LLC, and TexCal Energy South Texas L.P., Appellees. On Appeal from the 12th Judicial District Court Madison County, Texas, Cause No. 12-13130-012-10 BRIEF FOR APPELLANT Fred Hagans Kirsten M. Castañeda Kendall C. Montgomery Roger D. Townsend HAGANS BURDINE MONTGOMERY ALEXANDER DUBOSE JEFFERSON & RUSTAY, P.C. & TOWNSEND LLP 3200 Travis, Fourth Floor 1844 Harvard Street Houston, Texas 77006 Houston, Texas 77008 Vincent L. Marable III John R. Mercy PAUL WEBB, P.C. Mercy Carter Tidwell, L.L.P. 221 N. Houston Street 1724 Galleria Oaks Drive Wharton, Texas 77488 Texarkana, Texas 75503 ATTORNEYS FOR APPELLANT Oral Argument Requested IDENTITY OF PARTIES AND COUNSEL Appellant: Kirsten M. Castañeda State Bar No. 00792401 Burlington Resources Oil & kcastaneda@adjtlaw.com Gas Company LP ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 4925 Greenville Avenue, Suite 510 Dallas, Texas 75206 Roger D. Townsend State Bar No. 20167600 rtownsend@adjtlaw.com ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 1844 Harvard Street Houston, Texas 77008 John R. Mercy State Bar No. 13947200 jmercy@texarkanalawyers.com MERCY CARTER TIDWELL, L.L.P. 1724 Galleria Oaks Drive Texarkana, Texas 75503 Appellate counsel Fred Hagans State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 3200 Travis, Fourth Floor Houston, Texas 77006 ii Vincent L. Marable III State Bar No. 12961600 trippmarable@sbcglobal.net PAUL WEBB, P.C. 221 N. Houston Street Wharton, Texas 77488 Trial and appellate counsel Bennie D. Rush State Bar No. 17400425 1300 11th Street, Suite 300 Huntsville, Texas 77340-3857 Trial counsel Appellee Brad D’Amico PetroMax Operating Co., Inc. State Bar No. 00783923 bd@canteyhanger.com CANTEY HANGER LLP 1999 Bryan Street, Suite 3300 Dallas, Texas 75201 David J. Beck State Bar No. 00000070 dbeck@beckredden.com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@beckredden.com BECK REDDEN LLP 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Trial and appellate counsel David Hammit State Bar No. 08857660 DAVID HAMMIT, LLC 109 South Madison Street Madisonville, Texas 77864 Trial counsel iii Appellees David J. Beck Petro Texas, LLC, State Bar No. 00000070 Ch4 Energy II, LLC dbeck@beckredden.com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@beckredden.com BECK REDDEN LLP 1221 McKinney Street, Suite 4500 Houston, Texas 77010-2010 Trial and appellate counsel John R. Bankhead State Bar No. 01676600 Attorney at Law 110 W. Cottonwood Madisonville, Texas 77864 Trial counsel Appellee Greg W. Curry Woodbine Acquisition, LLC State Bar No. 05270300 greg.curry@tklaw.com Gregory D. Binns State Bar No. 24027148 greg.binns@tklaw.com Richard B. Phillips, Jr. State Bar No. 24032833 rich.phillips@tklaw.com THOMPSON & KNIGHT LLP 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Trial and appellate counsel Kevin R. Knight State Bar No. 11601400 LAW OFFICE OF ROGER KNIGHT, JR. P.O. Box 925 Madisonville, Texas 77864 Trial counsel iv Appellee Jesse R. Pierce TexCal Energy South Texas State Bar No. 15995400 L.P. jpierce@pierceoneill.com Brian K. Tully State Bar No. 24039217 btully@pierceoneill.com PIERCE & O’NEILL, LLP 4203 Montrose Blvd. Houston, Texas 77006 Trial and appellate counsel v TABLE OF CONTENTS Page Identity of Parties and Counsel ................................................................................ ii Table of Contents .....................................................................................................vi Index of Authorities .................................................................................................ix Statement of the Case...............................................................................................xi Issues Presented ..................................................................................................... xii 1. Burlington and the PetroMax Defendants disagree about the proper interpretation of an oil and gas assignment, which (in turn) determines whether certain leases are jointly owned and continue in effect an area of mutual interest (“AMI”) under an earlier letter agreement. a. Did the trial court err in rejecting Burlington’s interpretation as a matter of law, rather than holding the assignment to be ambiguous? b. Alternatively, did the trial court err in concluding that the PetroMax Defendants’ interpretation is reasonable, rather than enforcing Burlington’s interpretation as a matter of law? 2. Burlington also moved for summary judgment on its right to acquire 25% of oil and gas leases or mineral rights acquired by the PetroMax Defendants in the AMI, without any reduction or limitation based on the scope of Burlington’s joint ownership of leases/rights within the AMI. Did the trial court err in denying Burlington summary judgment on this issue? 3. Did the trial court err in granting the PetroMax Defendants’ summary judgment motion and denying Burlington’s summary judgment motion? Introduction ...............................................................................................................1 Summary of the Dispute ...........................................................................................2 Statement of Facts .....................................................................................................4 vi TABLE OF CONTENTS (CONT’D) Page I. The 1975 Letter Agreement created an Area of Mutual Interest intended to endure as long as any lease in the AMI was jointly owned. ..................................................................................................4 II. Upon succeeding Buttes as a party to the 1975 Letter Agreement, the PetroMax Defendants performed those obligations until 2012. ..........................................................................6 III. The PetroMax Defendants performed under the 1975 Letter Agreement with knowledge of a subsequent 1994 assignment. .......10 A. Southland listed four wells for sale at an auction, as reflected in the resulting assignment. ......................................10 B. The PetroMax Defendants obtained two title opinions, both of which interpreted the 1994 Assignment as conveying only Southland’s interest in the four wells.............12 IV. Regardless of its own experts’ title opinions, in 2012, the PetroMax Defendants abruptly disavowed their obligations. ............15 V. The trial court concluded the 1994 Assignment unambiguously conveyed not just the listed wells, but all of Southland’s ownership interest in the four leases. .................................................16 Summary of Argument ...........................................................................................17 Argument.................................................................................................................19 I. The interpretation of the 1994 Assignment as conveying only Southland’s interest in four wells—and not all of its interest in four entire leases—is reasonable. .......................................................19 A. As reflected in the 1994 Assignment, Southland auctioned its interest in four wells and expressly reserved other interests. ..........................................................................20 B. Burlington’s interpretation comports with the 1994 Assignment’s language and harmonizes its provisions. ..........23 C. Burlington’s interpretation also is consistent with the circumstances surrounding the 1994 Assignment. ..................26 vii TABLE OF CONTENTS (CONT’D) Page II. If the PetroMax Defendants’ interpretation also were reasonable, the resulting ambiguity would preclude summary judgment, requiring remand. ..............................................................28 III. However, Burlington offered the only reasonable interpretation of the applicable agreements, requiring rendition in Burlington’s favor. .............................................................................30 A. The 1994 Assignment conveys only Southland’s interest in the four enumerated wells. ...................................................30 B. In addition, the 1975 Letter Agreement does not provide for reduction of Burlington’s rights proportionate to the scope of its joint ownership. ....................................................34 Conclusion and Prayer ............................................................................................36 Certificate of Compliance .......................................................................................38 Certificate of Service ..............................................................................................39 Appendix 1975 Letter Agreement (CR:589-625) .......................................... Tab 1 1994 Assignment and Bill of Sale (CR:1029-34) ......................... Tab 2 Order Granting Defendants’ Motion for Summary Judgment on Title Issues (CR:1617).............................................................. Tab 3 Order Denying Burlington’s Motion for Partial Summary Judgment Seeking Various Declarations (CR:1618-19) .......... Tab 4 Order on Joint Motion to Sever and Abate (CR:1640-45) ............ Tab 5 viii INDEX OF AUTHORITIES Page(s) Cases Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) ............................................................19, 28, 30, 32 Columbia Gas Transmission v. New Ulm Gas, Ltd., 940 S.W.2d 587 (Tex. 1996) ..............................................................................30 DeSantis v. Wackenhut Corp., 793 S.W.2d 670 (Tex. 1990) ..............................................................................36 Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433 (Tex. 2009) ..............................................................................29 Freeman v. Stephens Production Co., 171 S.W.3d 651 (Tex. App.—Corpus Christi 2005, pet. denied) ......................25 Houchins v. Devon Energy Prod. Co., L.P., No. 01-08-00273-CV, 2009 WL 3321406 (Tex. App.—Houston [1st Dist.] Oct. 15, 2009, pet. denied) (mem. op.) ..............................................30 Hous. Expl. Co. v. Wellington Underwriting Ags., Ltd., 352 S.W.3d 462 (Tex. 2011) ........................................................................20, 26 J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) ..............................................................................19 Luckel v. White, 819 S.W.2d 459 (Tex. 1991) ..............................................................................32 Neece v. A.A.A. Realty Co., 322 S.W.2d 597 (Tex. 1959) ..............................................................................35 Philipello v. Taylor, No. 10-11-00014-CV, 2012 WL 1435171 (Tex. App.—Waco Apr. 25, 2012, pet. denied) (mem. op.) .................................................................20, 27 R&P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517 (Tex. 1980) ..............................................................................32 ix INDEX OF AUTHORITIES (CONT’D) Page(s) Sun Oil Co. v. Madeley, 626 S.W.2d 726 (Tex. 1981) ..................................................................20, 27, 29 Treatises Patrick H. Martin & Bruce M. Kramer, 2 WILLIAMS & MEYERS OIL & GAS LAW § 432 (4th ed. 2010) .............................................................................6 x STATEMENT OF THE CASE Nature of the Case: This is an oil and gas dispute. The parties disagree about whether Burlington jointly owns an interest in some leases in an area of mutual interest (“AMI”), as required to continue that AMI in effect. CR:445, 593, 1384. This question, in turn, is controlled by whether a 1994 Assignment: (1) conveyed an interest in four denominated wells while reserving other interests in four leases; or (2) conveyed all interests in four entire leases. CR:484-85; 1SCR:21-22. Course of Appellant (Plaintiff Burlington) filed suit against Proceedings: Appellees (collectively, the “PetroMax Defendants”), asserting claims such as breach of contract and declaratory judgment regarding its ownership rights and the AMI’s continuing effect. CR:443-48. The PetroMax Defendants denied these claims, Appellee PetroMax asserted a counterclaim for suit to quiet title, and Appellee Woodbine asserted counterclaims for suit to try title, trespass-to-try title, and declaratory judgment. CR:365, 1378-87. Burlington and the PetroMax Defendants filed competing summary-judgment motions on Burlington’s ownership rights relating to the AMI. CR:484-85; 1SCR:21-22. Trial Court The trial court denied Burlington’s summary-judgment Disposition: motion. CR:1618-19 (Apdx. Tab 4). The trial court granted the PetroMax Defendants’ summary judgment on title issues, ruling that: (1) Burlington owns no interest in the AMI; and (2) the AMI provision has terminated. CR:1617 (Apdx. Tab 3). On the parties’ joint motion, the trial court severed the remaining claims in order to render its summary judgment rulings final and abated the severed action pending this appeal. CR:1640-45 (Apdx. Tab 5). xi ISSUES PRESENTED 1. Burlington and the PetroMax Defendants disagree about the proper interpretation of an oil and gas assignment, which (in turn) determines whether certain leases are jointly owned and continue in effect an area of mutual interest (“AMI”) under an earlier letter agreement. a. Did the trial court err in rejecting Burlington’s interpretation as a matter of law, rather than holding the assignment to be ambiguous? b. Alternatively, did the trial court err in concluding that the PetroMax Defendants’ interpretation is reasonable, rather than enforcing Burlington’s interpretation as a matter of law? 2. Burlington also moved for summary judgment on its right to acquire 25% of oil and gas leases or mineral rights acquired by the PetroMax Defendants in the AMI, without any reduction or limitation based on the scope of Burlington’s joint ownership of leases/rights within the AMI. Did the trial court err in denying Burlington summary judgment on this issue? 3. Did the trial court err in granting the PetroMax Defendants’ summary judgment motion and denying Burlington’s summary judgment motion? xii INTRODUCTION When parties disagree about the proper interpretation of a contract, a trial court cannot reject a reasonable interpretation through summary judgment. If only one interpretation is reasonable, the trial court may grant summary judgment consistent with that interpretation. If more than one reasonable interpretation exists, no summary judgment may be granted. There is not a third option by which a trial court may choose between two reasonable contract interpretations—discarding one and embracing another—as a matter of law. Burlington and the PetroMax Defendants disagree on the proper interpretation of an oil and gas assignment. Burlington’s interpretation is reasonable. It comports with the circumstances surrounding the assignment, honors the assignment’s language, and harmonizes all the assignment's provisions. Indeed, two noted oil and gas lawyers hired by the PetroMax Defendants to offer title opinions---years before this lawsuit was filed---reached the same interpretation. Yet, when each side moved for summary judgment on its interpretation of the Assignment, the trial court not only denied Burlington’s motion, but also granted the PetroMax Defendants summary judgment consistent with their interpretation. The claims on appeal should be remanded (if the competing interpretation is reasonable) or judgment rendered in Burlington’s favor (if the competing interpretation is not reasonable). Either way, the summary judgment cannot stand. 1 SUMMARY OF THE DISPUTE The proper interpretation of the oil and gas assignment at issue will determine whether Burlington currently has rights in an area of mutual interest (the “AMI”). The AMI was created by agreement in 1975 (the “1975 Letter Agreement”), and it continues in effect as long as the 1975 Letter Agreement’s parties jointly own any leases within the AMI. It is undisputed that a lease called the Wilson Lease is located in the AMI. Whether the AMI continues in effect turns on whether Burlington’s ownership interest in the Wilson Lease was conveyed by a later assignment (the “1994 Assignment”). Burlington contends that it currently owns part of the Wilson Lease, which means the AMI continues in effect. If the AMI continues in effect, the 1975 Letter Agreement requires the PetroMax Defendants to offer Burlington a 25% working interest in all leases and mineral rights they have acquired in the AMI. The PetroMax Defendants contend that the ownership interests claimed by Burlington were conveyed away by the 1994 Assignment, which would mean the AMI terminated years ago. If the AMI no longer exists, Burlington has no right under the 1975 Letter Agreement to acquire a 25% working interest in the leases/rights the PetroMax Defendants have obtained in the AMI. None of the parties in this case was an original party to the 1975 Letter Agreement or the 1994 Assignment. Therefore, before delving into the relevant 2 facts, it is helpful to understand how everyone came to be involved in this dispute: • The 1975 Letter Agreement creating the AMI, and its attached Joint Operating Agreement, was between Aztec Oil & Gas Company and Buttes Resources Company. CR:589-625 (Apdx. Tab 1). • Aztec’s rights and obligations under the 1975 Letter Agreement passed through company mergers to Southland Royalty and ultimately to Burlington. CR:485 n.1, 626-30, 631-34, 635-36, 637.  The 1994 Assignment, which was signed during the period that Southland had succeeded to Aztec’s rights, is between Southland and Samson Resources Company (which is not a party to this lawsuit). CR:1029-34 (Apdx. Tab 2). • Through a variety of agreements signed at various points in time, the PetroMax Defendants acquired part of Buttes’ interests in the AMI, subject to Buttes’ rights and obligations under the 1975 Letter Agreement and 1975 JOA. CR:489-90, 638-46, 647-58, 659-60, 661- 62, 663-785.  Most of the communications between the parties relevant to this dispute occurred between Burlington and three of the PetroMax Defendants: PetroMax Operating Co., Inc., Woodbine Acquisition LLC, and TexCal Energy South Texas L.P. 3 STATEMENT OF FACTS To understand the 1994 Assignment, one must first understand the interests to which it applied. Hence, we present our Statement of Facts chronologically. I. The 1975 Letter Agreement created an Area of Mutual Interest intended to endure as long as any lease in the AMI was jointly owned. Forty years ago, Aztec and Buttes agreed to explore and develop oil and gas leases together. See CR:589. Back in 1975, Buttes owned an undivided one-half working interest in nine oil and gas leases. CR:589, 596. Through the 1975 Letter Agreement, Buttes conveyed to Aztec an undivided 25% interest in the leases. CR:589, 591-92. For future leases they might acquire, the parties established an Area of Mutual Interest (“AMI”). CR:593. If either party acquires a lease or mineral rights within the AMI, the 1975 Letter Agreement requires the acquiring party to offer the other party the same proportionate interest as in the original nine leases. Id. Accordingly, if Aztec (now Burlington) acquires leases in the AMI, Buttes (whose interests are now partially held by the PetroMax Defendants) must be offered a 75% interest; likewise, if the PetroMax Defendants acquire leases in the AMI, then Burlington must be offered a 25% interest. Id. To accept, the offeree must elect participation within 15 days and reimburse the other for its share of the acquisition costs. Id. A Joint Operating Agreement (the “1975 JOA”) governs operation and participation in wells drilled on jointly-held leases within the AMI. To drill a well 4 on the jointly-held leases without all parties’ consent, the 1975 JOA requires the party wishing to drill to notify the other parties in advance and give them a chance to participate. CR:602-03 (§§11, 12). The 1975 Letter Agreement provides that the AMI continues in effect as long as jointly owned leases exist in the AMI. CR:593. After the first three years, the AMI shrank to a boundary two miles outside the jointly-owned leases in the area at that time. CR:593-94. As it turned out, at the end of three years, all nine original leases remained jointly owned. CR:487; see also CR:74-75. So, the AMI continued in effect with a boundary of two miles outside those leases. CR:594. It is undisputed that five of the original leases no longer exist and that a sixth lease is no longer jointly owned by Aztec’s successor-in-interest, Burlington.1 Three of the original leases remain in the AMI: (1) the Wilson Lease; (2) the Gibbs Lease; and (3) the Buchanan Lease. RR:7, 33. Burlington claims an ownership interest in each of these leases, but for purposes of summary judgment, focused its attention on the Wilson Lease. CR:436, 490-99; RR:7. 1 Four of the original leases terminated in 1979 at the end of their primary terms. CR:74. With regard to a fifth lease, all but one well was assigned to a third party in 1981, and the remaining well was assigned to another third party in 1997. CR:74, 77. A sixth lease expired upon cessation of production in 1999. CR:74. 5 II. Upon succeeding Buttes as a party to the 1975 Letter Agreement, the PetroMax Defendants performed those obligations until 2012. The PetroMax Defendants succeeded to Buttes’ rights and obligations under the 1975 Letter Agreement, and they initially acknowledged and performed those obligations. In doing so, they repeatedly recognized Burlington’s continuing ownership rights in the Wilson Lease. For example, when defendant TexCal conveyed to defendant PetroMax certain rights in the Wilson Lease in a 2009 farmout agreement, 2 they both acknowledged Burlington’s rights to notice and participation in wells governed by the 1975 JOA. CR:647, 651, 658-59. Indeed, TexCal limited PetroMax’s right to earn under the farmout agreement to wells in which “Third Parties” did not participate. CR:656. “Third Parties” included Burlington (denoted by the name of its parent, ConocoPhillips). CR:656. And, in proposing the initial test well and subsequent wells contemplated by the farmout agreement, PetroMax would be required to give notices under the 1975 JOA. Id. 3 2 A “farmout agreement” is a contract to assign oil and gas lease rights in certain acreage upon the completion of drilling obligations and the performance of any other covenants and conditions set forth in the agreement. Patrick H. Martin & Bruce M. Kramer, 2 WILLIAMS & MEYERS OIL & GAS LAW § 432 (4th ed. 2010). 3 See also CR:659 (amending Farmout Agreement to remove from excepted lands— i.e., to add to the acreage subject to Farmout Agreement—the 160-acre drilling unit for the Wilson #5 Well), 661-62 (amending the DeFacto Termination provision and again including provisions regarding continuing rights to notice and participation under 1975 JOA). 6 Similarly, in 2011, defendants Woodbine, PetroMax, Petro Texas, and CH4 Energy expressly acknowledged in a Purchase and Sale Agreement that “Burlington Oil & Gas Company owns an undivided 25% interest in and to 1537.83 acres out of that certain Oil and Gas Lease dated August 29, 1974, between James D. Wilson, as Lessor, and Curran R. Campbell, Inc., as Lessee . . . ,” i.e., the Wilson Lease. CR:663, 781. The defendants further acknowledged that “[t]his is an outstanding interest that has been non-consented in both the Wilson #1H and Wilson #2H wells.” Id. They also “anticipated that Burlington (now Conoco-Phillips) will continue to go non-consent on future wells.” Id. In addition to these acknowledgments and agreements among themselves, the PetroMax Defendants asserted the AMI’s continuing force and effect—and Burlington’s continued joint ownership of the Wilson Lease—in communications with Burlington. For instance, in 2009, TexCal and PetroMax sent Burlington Authorities for Expenditure (“AFEs”) regarding participation in drilling the Wilson #1H and #2H wells (i.e., the same wells referenced two years later in the Woodbine/PetroMax Purchase Agreement discussed above). CR:786-87, 793-94. The cover letters identify TexCal “as the current Operator of the Contract Area covered by” the 1975 JOA. CR:786, 793. In proposing that PetroMax drill these two wells on the Wilson Lease, both letters also notify Burlington that, “[i]n accordance with the provisions of Article 12 of the JOA, you have 30 days after receipt of this 7 notice in which to indicate your election to participate in the proposed drilling of the above referenced well and to pay the cost thereof.” CR:787, 794. The enclosures (i.e., ballots and accompanying AFEs) reflect that, upon an election to participate, Burlington would have a 25% working interest in the proposed wells. CR:789, 792, 796. PetroMax also sent Burlington an AFE proposing to drill another well4 on the Wilson Lease. CR:804-09. In the cover letter, PetroMax stated that, under the terms of the 1975 JOA, Burlington had 30 days after receipt to return its election to participate. CR:804. And, after Woodbine acquired interests from PetroMax, Woodbine sent AFEs to Burlington for drilling five additional wells5 on the Wilson and Gibbs Leases. CR:810-12, 814-17, 820-21, 825-26, 832-33, 837-38, 849-50. As anticipated, Burlington went “non-consent” on several of the proposed wells.6 CR:496-97. For each of these wells, Burlington wrote to Woodbine in 2012 and requested that Woodbine provide payout statements, regulatory information, and plats. CR:497. Woodbine provided payout statements dated May 30, 2012, reflecting 4 This AFE concerned the Dunman/Wilson No. 1-H Well. CR:804. 5 These AFEs concerned the Wilson #3H, Wilson #6H, Wilson #5H, Gibbs #1H (later drilled as the Gibbs #2H Well), and Dunman Wilson A #2H wells. CR:810- 12, 814-17, 820-21, 825-26, 832-33, 837-38, 849-50. 6 These non-consent wells were the Dunman/Wilson No. 1-H, Wilson #1H, Wilson #2H, Wilson #3H, and Wilson #6H wells. CR:496-97. 8 Burlington’s working interest in the non-consent wells on the Wilson Lease as follows (CR:497-98): Non-Consent Well Burlington Interest Wilson #1H Well .25 Wilson #2H Well (a/k/a Wilson Unit “A” # 2H) .24531250 Wilson #3H Well .24531250 Wilson #6H Well .25 Dunman/Wilson No. 1-H Well .10535714 Burlington did elect to participate in other wells on the Wilson and Gibbs Leases, including the Wilson #5H Well.7 CR:820, 1136-37. Woodbine accepted Burlington’s election to participate in the Wilson #5H Well. CR:498, 1137. Woodbine also availed itself of the benefits of the 1975 Letter Agreement, accepting Burlington’s payments of its share of the required costs. CR:498; see also CR:1137. In accordance with its obligations under the 1975 Letter Agreement, Woodbine paid Burlington proceeds from the Wilson #5H Well totaling $1,335,253.59. CR:498, 1137. 7 The wells in which Burlington elected to participate were the Wilson #5H, Gibbs #1H, and Dunman Wilson A #2H wells. CR:820, 1136-37. 9 III. The PetroMax Defendants performed under the 1975 Letter Agreement with knowledge of a subsequent 1994 assignment. During the years that the PetroMax Defendants performed their obligations under the 1975 Letter Agreement and recognized Burlington’s ownership rights in the Wilson Lease, they did so with knowledge of a 1994 Assignment of certain interests by a previous Aztec successor-in-interest, Southland Royalty. A. Southland listed four wells for sale at an auction, as reflected in the resulting assignment. In 1994, Southland listed for sale in an auction its interests in four wells in the AMI: (1) the Wilson James D. Unit 2; (2) the Wilson James D. #3 (misspelled as the “Wilson James D.O.” well); (3) the Buchanan 1; and (4) the Gibbs Bros. 1. CR:1497. We will refer to the first two wells, both offered for auction from the Wilson Lease, as Wilson #2 and Wilson #3. These two wells were located on one of the two separate tracts of land that comprise the Wilson lease. Id. As shown by the map on the following page, the Wilson Lease consists of two non-contiguous tracts. 10 • Tract 1 is the larger tract and contains the Wilson #1, Wilson #4, and Wilson #5 wells. • Tract 2 is the separate, smaller tract and contains the Wilson #2 and Wilson #3 wells. At the auction, Samson Resources Company purchased the interests sold by Southland. CR:1029. Southland and Samson signed the 1994 Assignment. CR:1031. The assignment provides for an Exhibit A that will both: (1) particularly describe the Interests—including “oil and gas leases, leasehold interests, rights, and interests attributable or allocable to the oil and gas leases or leasehold interests by virtue of 11 pooling, unitization, communitization, and operating agreements” being conveyed; and (2) specifically note and reflect the “certain lands, leases, properties, interests, leasehold rights, depths or formations” that Southland “reserves and retains unto itself from the Interests . . . .” CR:1029. Thus, the Assignment provided that Exhibit “A” would set forth both the interests being conveyed away and the interests being reserved by Southland. Indeed, Exhibit “A” contains two separate lists: (1) a list of four leases owned by Southland, with an exception for lands attributable to wells Southland previously had farmed out; and (2) a list of “Associated Wells.” CR:1033. Unfortunately, Exhibit “A” does not specify which list sets forth the conveyed interests and which list sets forth the reserved interests. Id. However, consistent with the listing of only four wells in the auction catalog, the very first words in the 1994 Assignment are: “Well Name: BUCHANAN 1, GIBBS BROS 1, WILSON JAMES 2 AND WILSON JAMES 3”. Id. B. The PetroMax Defendants obtained two title opinions, both of which interpreted the 1994 Assignment as conveying only Southland’s interest in the four wells. The two lists in Exhibit A to the 1994 Assignment led to confusion for both the PetroMax Defendants and Burlington. Consequently, before sending the 2009 12 AFEs to Burlington in connection with drilling on the Wilson Lease, TexCal and PetroMax obtained two title opinions about whether Burlington still owned any working interest in that lease. In 2007, TexCal retained J. Jan Jircik, a Texas lawyer who is Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization, to perform a title opinion. CR:860. Jircik did not interpret the 1994 Assignment as conveying all of Southland’s interest in the Wilson Lease, but instead interpreted the 1994 Assignment as if it included only Southland’s interest in the Wilson #2 and Wilson #3 wells and the associated production units, i.e., Southland’s interest in Tract 2. CR:896. Jircik opined that the interest Southland had reserved in the Wilson Lease “was eventually acquired by Burlington Resources Oil & Gas Company, L.P.” Id. Accordingly, as to the two Wilson wells listed for auction, expressly identified at the top of the 1994 Assignment, and included as “Associated Wells” on its Exhibit “A,” Jircik concluded that Burlington did not own any gross working interest. CR:863- 64. But as to wells located on Tract 1 of the Wilson Lease,8 Jircik opined that Burlington owned a gross working interest of .2500000. CR:862, 865-66. In 2009, PetroMax retained Ronald Moore, another Texas lawyer Board Certified in Oil, Gas and Mineral Law by the Texas Board of Legal Specialization, 8 At the time, these wells were the Wilson #1, Wilson #4, and Wilson #5 Wells. CR:862, 865-66. 13 to provide a title opinion on acreage in the Wilson lease. CR:1035. Moore likewise concluded that Burlington owned a working interest in several portions of the Wilson lease. CR:1035-37. Jircik’s opinion was provided to PetroMax and Woodbine. CR:501. There is no evidence, however, that either of the title opinions was provided to Burlington. Upon receiving the 2009 AFEs from PetroMax proposing wells to be drilled on the Wilson Lease, Burlington initially informed PetroMax that it “has completed a diligent review of files internal and external and determined Burlington has no working interest. The files show that all interest has been conveyed out to other parties.” 3SCR:2075; RR:51-52. In response to Burlington’s contention, Moore supplemented his opinion. CR:1079. He set forth “Jircik’s and our interpretation” that Burlington did own a “25% WI in Wilson Lease less 160 acre Production Units for Wilson No. 2 and 3 wells”. CR:1080 (emphasis added). He also opined that, in the 1994 Assignment, “Southland Royalty Company assigned what appears to be only its interest in the Wilson Well Nos. 2 and 3 Production Units to Samson Resources Company, leaving the balance of its interest still owned by Southland (2210/34).” CR:1079. Burlington later reached the same conclusion. As described above in Section II, Burlington elected to participate in certain wells and paid its share of the costs. 14 Burlington also asserted its right to payout statements and other information regarding non-consent wells in which it did not elect to participate. In sum, for 18 years, Burlington and the PetroMax Defendants operated consistently with the interpretation of the 1994 Assignment as conveying only the interests offered at auction: the four wells and associated production units. IV. Regardless of its own experts’ title opinions, in 2012, the PetroMax Defendants abruptly disavowed their obligations. In 2012, the PetroMax Defendants abruptly changed position. Woodbine asserted that, contrary to the Jircik opinion, Burlington had “divested the last of its interest in the Wilson Lease as of September 9, 1994” and “does not own an interest in . . . the Wilson Lease . . . .” CR:1130. Woodbine attempted to return to Burlington $190,692.84, purported to be the costs Burlington had paid in association with the Wilson #5H well minus the well proceeds Woodbine had already paid Burlington. CR:1130-31. Woodbine also stopped work on another proposed well in which Burlington had elected to participate. 9 See CR:1131. Only after repudiating Burlington’s right to participate did Woodbine drill that well. Id. Burlington’s demands for the PetroMax Defendants to comply with the ongoing requirements of the 1975 Letter Agreement have been met consistently with refusal. CR:1130-31, 1138-40. Woodbine has obtained permits for at least 11 wells 9 This was the Dunman Wilson A #2H well. CR:1130-31. 15 associated with the Wilson lease, without providing Burlington notice or an opportunity to participate. CR:1138-39. Woodbine and PetroMax also have acquired leases within the AMI without offering the requisite 25% working interest to Burlington. CR:1139. V. The trial court concluded the 1994 Assignment unambiguously conveyed not just the listed wells, but all of Southland’s ownership interest in the four leases. Burlington filed the underlying lawsuit in order to enforce its rights under the 1975 Letter Agreement and 1975 JOA. CR:433-49. Besides requesting declaratory relief, Burlington brought separate claims for, inter alia, breach of contract, specific performance, conversion, and breach of duty to pay proceeds. CR:443-48. In addition to the PetroMax Defendants’ denials of these claims (CR:322, 364-65, 1390-91, 1397-98), PetroMax asserted a counterclaim for suit to quiet title, and Woodbine asserted counterclaims for suit to try title, trespass-to-try title, and declaratory judgment. CR:365, 1378-87. Burlington and the PetroMax Defendants filed competing summary-judgment motions on the questions regarding Burlington’s ownership rights relating to the AMI. CR:484-85; 1SCR:21-22. Each side moved for summary judgment regarding Burlington’s ownership interest in any leases within the AMI to continue the AMI in effect. CR:484-85; 1SCR:21-22. The trial court denied Burlington’s summary-judgment motion, but 16 granted the PetroMax Defendants’ competing motion on title issues. CR:1617-19. The trial court ruled that: 1. Burlington does not own any interest in the AMI described in the 1975 Letter Agreement made the basis of this suit; and 2. The AMI provision in the 1975 Letter Agreement has terminated. CR:1617. On joint motion by all parties, the trial court severed the remaining claims into a separate lawsuit in order to render its partial summary judgment final. CR:1632, 1635, 1640-43. The trial court then abated the severed case pending this appeal. CR:1643. Thus, the severed issues remain pending and are not presented for review in this appeal. SUMMARY OF ARGUMENT Burlington’s interpretation of the 1994 Assignment is reasonable. Burlington’s interpretation comports with the very first words of the assignment, setting forth only interests in four wells to be conveyed. Burlington’s interpretation also honors the assignment’s reservation provision. Unless Exhibit A is interpreted so that the list of wells sets forth the interests being conveyed and the list of leases sets forth the interests being reserved, the reservation provision would be rendered meaningless. 17 Moreover, Burlington’s interpretation is consistent with the circumstances surrounding the assignment. Only Southland’s interests in four wells were offered for sale at auction. And the interpretation’s reasonableness is confirmed by two title opinions from board certified lawyers who were hired long before suit was filed, not by Burlington, but by the PetroMax Defendants. Because Burlington’s interpretation is reasonable, the trial court’s summary judgment rejecting that interpretation cannot stand. What happens next—remand or rendition—depends on whether the PetroMax Defendants’ competing interpretation also is reasonable. If the competing interpretation were reasonable, the 1994 Assignment would be ambiguous. On that basis, the matter should be remanded for trial. But if, as shown below, the PetroMax Defendants’ interpretation is unreasonable, then as a matter of law, Burlington is entitled to rendition of judgment that the AMI continues in effect. Burlington also moved for summary judgment that its right to obtain a 25% working interest in leases and mineral rights is not proportionately reduced based on any decrease in the scope of Burlington’s joint ownership interests generally in the AMI. The 1975 Letter Agreement provides for proportionate reduction of the 25% requirement under other circumstances, but not based on diminution of the number 18 or size of leases/rights held jointly by Burlington in the AMI. Accordingly, Burlington also is entitled to summary judgment on this point. ARGUMENT I. The interpretation of the 1994 Assignment as conveying only Southland’s interest in four wells—and not all of its interest in four entire leases—is reasonable. The 1994 Assignment expressly provides that its Exhibit A lists both the interests being conveyed and the interests being reserved. CR:1029. The problem is that, in setting forth the two lists, Exhibit A does not expressly identify which list sets forth the interests being conveyed and which sets forth the interests being reserved. See CR:1033. But the language and circumstances surrounding the creation of the 1994 Assignment demonstrate that it is reasonable to interpret the 1994 Assignment to convey only Southland’s interest in the enumerated wells. Whether a contract is ambiguous is a question of law. E.g., Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). A contract is ambiguous whenever it is reasonably susceptible to more than one meaning. Id. at 393. When a contract is ambiguous, its interpretation presents a question of fact precluding summary judgment. Id. at 394. In determining whether a contract is ambiguous, courts examine and consider the entire writing, striving to harmonize and give effect to all provisions so that none is rendered meaningless. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003); Coker, 650 S.W.2d at 393. Courts also consider the facts and circumstances 19 surrounding the contract’s execution. E.g., Hous. Expl. Co. v. Wellington Underwriting Ags., Ltd., 352 S.W.3d 462, 469 (Tex. 2011); Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731-32 (Tex. 1981); Philipello v. Taylor, No. 10-11-00014-CV, 2012 WL 1435171, at *7 (Tex. App.—Waco Apr. 25, 2012, pet. denied) (mem. op.). In this case, the 1994 Assignment’s text and surrounding circumstances establish that Burlington’s interpretation is reasonable. A. As reflected in the 1994 Assignment, Southland auctioned its interest in four wells and expressly reserved other interests. The 1994 Assignment exists because Southland decided to auction off its interest in four wells. CR:1497. Consistent with Southland’s auction listing, the first words in the 1994 Assignment are: “Well Name: BUCHANAN 1, GIBBS BROS 1, WILSON JAMES 2 AND WILSON JAMES 3”. Compare CR:1029 (emphasis in original) with CR:1497 (auction listing). The 1994 Assignment expressly provides that Southland is conveying some interests, but reserving others. CR:1029. The assignment discusses both conveyance and reservation in general terms, expressly leaving the particulars and specifics to be set forth in Exhibit A. Id. In describing the conveyance and reservation generally, the 1994 Assignment speaks in broad, generic terms. For instance, the assignment describes the interests being conveyed (defined collectively as the “Interests”) to include: The oil and gas leases, leasehold interests, rights and interests attributable or allocable to the oil and gas leases or leasehold interests by virtue of pooling, unitization, communitization, and operating 20 agreements, licenses, permits, and other agreements, all more particularly described on Exhibit “A” hereto, limited as to the lands and depths indicated on Exhibit “A” (collectively the “Leases”), together with identical undivided interests in and to all the property and rights incident thereto . . . . CR:1029. And, the assignment describes the interests being reserved equally broadly (id.): [Southland] reserves and retains unto itself from the Interests those certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit “A” . . . . As provided in the 1994 Assignment, Exhibit A sets forth two lists in the following format: (1) a list of all the interests Southland owned in four leases; and (2) a list of the same four wells on the assignment’s first page: 21 The top list is untitled. CR:1033. It names the Odom, Gibbs, Wilson, and Buchanan Leases: The right side of the top list sets forth the legal description of each lease. Id. Under the legal descriptions appears an exception for acreage Southland had farmed out and retained only an overriding royalty interest: 22 Thus, the top list specifically notes and reflects all of Southland’s ownership interest in the entirety of the four, denominated leases.10 On the other hand, the bottom list names only the wells that appear at the top of the 1994 Assignment and in the auction catalogue: B. Burlington’s interpretation comports with the 1994 Assignment’s language and harmonizes its provisions. Interpreting Exhibit A so that the top list describes the interests Southland is reserving from the 1994 Assignment and the bottom list describes the interests Southland is conveying is consistent with: (1) the list of four wells at the top of the assignment; (2) the language providing that Exhibit A describes both interests being conveyed and interests being reserved to Southland; and (3) the entire reservation provision, which expressly provides that Southland reserves and retains to itself the 10 After the 1994 Assignment was signed, the Odom Lease expired upon cessation of production in 1999. CR:74. 23 certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit A. Compare CR:1029 (setting forth language in 1994 Assignment) with CR:1033 (Exhibit A). If both lists in Exhibit A described the interests conveyed, then contrary to the reservation provision, no part of Exhibit A would note or reflect any interest being reserved. The exception, in the top list of leases, of acreage Southland had previously farmed out from the four leases does not constitute a “reservation.” The exception describes an interest Southland did not own. By definition, Southland could not “reserve and retain unto itself” an interest it did not own. Rather than constituting the reservation, the exception describes what is not included in the reservation: the portions of the leases that Southland had farmed out under a previous agreement. See CR:74-75, 82-85, 501-05, 1380-81. Without this exception, the top list would not have accurately described all of the interest Southland owned in the four leases. By accurately describing the interest Southland did own in the four leases, the top list identifies with reasonable certainty the interest Southland reserved and retained unto itself from its conveyance of the four wells. The PetroMax Defendants suggest instead that use of the term “leases” in the description of the interests being conveyed must mean that the 1994 Assignment conveys the leases set forth in Exhibit A. Yet, the term “leases” appears in both the provision describing the interests being conveyed and the provision describing the 24 interests being reserved. CR:1029. Because it is used to describe generally both types of interests, the term does not aid in determining whether the list of leases on Exhibit A describes the interests being conveyed or the interests being reserved. Moreover, in describing both conveyed and reserved interests, the assignment speaks not only of “leases,” but also of “interests” less than an entire lease. Id. So, just as it is possible that an entire lease could fall into either category, it is possible for interests less than an entire lease (i.e., four wells and their associated production units) to fall into either the category of interests being conveyed or the category of interests being reserved. The general use of the term “leases” must be read in conjunction with the list of specific wells set forth at the top of the same page. For example, in Freeman v. Stephens Production Co., 171 S.W.3d 651, 653 (Tex. App.—Corpus Christi 2005, pet. denied), a deed purported to convey “that certain lot, tract or piece or parcel of land . . . .” Despite this general description of the interests conveyed as a single lot, the deed later specifically described the interests conveyed as “All of Lot 1, Block 15; Lot 2, Block 15; The West 17.51 acres of Lot 3, Block 15; All of Lot 10, Block 15,” etc. Id. Reading the entire deed as a whole, it was reasonable to interpret the singular phrase “lot, tract or piece or parcel of land” to mean multiple lots. Id. at 654. In this case, it is equally reasonable to interpret the interests collectively defined as the “Leases” to mean only the wells and related production units specifically identified at the top of the first page. Compare id. at 653-54 with CR:1029. 25 Unless Southland’s interest in the four wells was the only interest being conveyed, there was no reason to list those four wells at the top of the first page or in Exhibit A. If the 1994 Assignment conveyed all of Southland’s interest in the four leases, there was no reason to highlight four of the wells on those leases. Southland’s interest in the four wells already would be part of the conveyance of all its interest in the leases. Nor can the list of “Associated Wells” be explained as an inventory of all the wells on the four leases. For example, the “Associated Wells” list does not identify the Wilson #1 well. See CR:1033. The plain language of the 1994 Assignment establishes the reasonableness of Burlington’s interpretation. Southland assigned only its interest in the enumerated wells (i.e., the wellbores and related production units), while reserving the remainder of its interest in the Wilson, Gibbs, Buchanan, and Odom leases. C. Burlington’s interpretation also is consistent with the circumstances surrounding the 1994 Assignment. Even without considering the surrounding circumstances, Burlington’s interpretation comports with the language in, and harmonizes the provisions of, the 1994 Assignment. See Argument §I(A), supra. Nonetheless, it is appropriate also to consider the circumstances surrounding the assignment. Circumstances that existed prior to and contemporaneous with the execution of the 1994 Assignment are properly examined in determining whether the assignment is ambiguous. See Hous. 26 Expl., 352 S.W.3d at 469; Madeley, 626 S.W.2d at 731-32; Philipello, 2012 WL 1435171, at *7. Southland offered for auction only its interest in four wells. CR:1497. Southland did not list for auction only the wellbore, nor did it offer the entire leasehold. Instead, Southland’s auction listings encompassed: (1) its interest in the Wilson #3, Buchanan 1, and Gibbs Bros 1 wells; and (2) an “after payout only” interest (“APO”) only with regard to the Wilson James D. Unit 2 Well. Compare id. (reproduced above, listing interests offered by Southland) with CR:1459 (listing another seller’s wellbore interest with the notation “WELLBORE 27 ONLY”) and CR:1475 (listing another seller’s entire leasehold interest with the notation “LEASEHOLD”). The limited scope of interests submitted by Southland to the auction house is echoed by: (1) the discrete list of four wells at the top of the 1994 Assignment; and (2) the discrete list of four wells on Exhibit A. It is entirely reasonable to read the 1994 Assignment, including Exhibit A, as conveying only those particular interests Southland actually offered for auction and reserving to Southland all other interests it owned. Because Burlington’s interpretation of the 1994 Assignment is reasonable, the trial court erred in granting summary judgment in the PetroMax Defendants’ favor. See Coker, 650 S.W.2d at 393-94. The only question remaining is whether reversal of the summary judgment should be accompanied by: (1) remand for further proceedings in the trial court consistent with this Court’s opinion and judgment; or (2) rendition of summary judgment in Burlington’s favor. This remaining question turns on whether the PetroMax Defendants’ competing interpretation of the 1994 Assignment also is reasonable. II. If the PetroMax Defendants’ interpretation also were reasonable, the resulting ambiguity would preclude summary judgment, requiring remand. Despite the logic and consistency with Texas law demonstrated by Burlington’s interpretation, the PetroMax Defendants contend that the 1994 28 Assignment should be interpreted to convey all of Southland’s interest in the Wilson, Gibbs, Buchanan, and Odom leases, except for the lands attributable to the H.K. Odom Wells, James D. Wilson #4 Well and the Buchanan #2 Well. Even if this interpretation were reasonable (see Argument §III(A), infra), it would not support summary judgment against Burlington’s own reasonable interpretation. Faced with two, competing reasonable interpretations, a court cannot conclude that, given all the language, the 1994 Assignment “plainly and clearly discloses the intention of the parties.” See Madeley, 626 S.W.2d at 731-32. The inherent reasonableness of Burlington’s interpretation is confirmed not only by the 1994 Assignment and its surrounding circumstances, but also by the fact that not one, but two, accomplished oil and gas lawyers hired by the opposing parties reached the same interpretation before any litigation arose. The PetroMax Defendants’ repeated invocation of “plain language” to support their now-contrary position does not diminish the reasonableness of the earlier title opinions they themselves obtained. “[R]easonable people ‘will sometimes disagree about what reasonable people can disagree about,’ but even so, it is difficult to maintain that language is plain in the face of a substantial, legitimate dispute over its meaning.” Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 446 (Tex. 2009) (Hecht, J., concurring). 29 To the extent that the Court finds PetroMax Defendants’ competing interpretation of the 1994 Assignment reasonable, the resulting ambiguity would preclude summary judgment. See Coker, 650 S.W.2d at 394. That ambiguity would require reversal of the trial court’s summary judgment rulings and remand for further proceedings consistent with this Court’s opinion and judgment. Id. III. However, Burlington offered the only reasonable interpretation of the applicable agreements, requiring rendition in Burlington’s favor. A. The 1994 Assignment conveys only Southland’s interest in the four enumerated wells. In truth, however, the PetroMax Defendants’ interpretation is unreasonable. Competing interpretations of a contract do not create an ambiguity unless both are reasonable. Columbia Gas Transmission v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). Because the PetroMax Defendants’ interpretation is unreasonable, this Court should render judgment in Burlington’s favor, ruling as a matter of law that the AMI continues in effect. To interpret the 1994 Assignment as conveying all of Southland’s interest in entire leases fails to harmonize all provisions of the contract and renders some of the contractual language meaningless. For example, reading both lists as collectively describing the conveyed interests would render meaningless the 1994 Assignment’s reservation provision. See Houchins v. Devon Energy Prod. Co., L.P., No. 01-08- 00273-CV, 2009 WL 3321406, at *4-5 (Tex. App.—Houston [1st Dist.] Oct. 15, 30 2009, pet. denied) (mem. op.) (stating principle that an interpretation that fails to harmonize the provisions is not reasonable). This provision expressly “reserves and retains” to Southland the “certain lands, leases, properties, interests, leasehold rights, depths or formations as specifically noted and reflected on Exhibit ‘A’ . . . .” CR:1029. What lands, leases, properties, interest, leasehold rights, depths or formations are specifically noted and reflected on Exhibit A? Exhibit A gives us two options: (1) the set of four leases; and (2) the set of four wells. CR:1033. No one contends that the set of four wells was reserved and retained. Such a contention would be unreasonable given that these were the same wells submitted for auction and listed at the top of the Assignment’s first page. CR:1029, 1497. That leaves only the set of leases at the top of Exhibit A to describe the reserved interests. Yet, the PetroMax Defendants contend that the reservation is limited to the narrow “exception” from the listed leases. As discussed above in Section I(B), the exception describes acreage Southland had already farmed out. See CR:74-75, 82-85, 501-05, 1380-81; see also 2SCR:14. Southland could not reserve to itself an interest it did not hold at the time of the Assignment, i.e., “the lands attributable to the H.K. Odom Wells, James D. Wilson #4 Well and the Buchanan #2 Well.” CR:1033 (emphasis added). On the other hand, it was logical for Southland to (1) convey its interest in the four listed wells, and (2) reserve the 31 remainder of its interest in the four listed leases, which it owned with the exception of the lands attributable to the farmed-out wells. Reading both lists on Exhibit A as describing the interests being conveyed also would render impermissibly meaningless the list of four wells in the Assignment and on Exhibit A. See Luckel v. White, 819 S.W.2d 459, 462 (Tex. 1991); Coker, 650 S.W.2d at 393; R&P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518-19 (Tex. 1980). If the Assignment conveyed all of Southland’s interest in the four listed leases, including interests in any wells drilled on them, there was no reason to list four of the wells included in that transfer. It is illogical to read the title of the list of wells—i.e., “Associated Wells”— to mean “the wells associated with the four above leases.” For instance, the Wilson #1 well, which also was located on the Wilson Lease, is not included in the list of “Associated Wells.” CR:1033. Thus, the list does not set forth the wells “associated” with the four leases, but instead identifies the wells “associated” with the sale at auction, i.e., the only interests being assigned. That the 1994 Assignment and Exhibit A afford different treatment to different wells on the Wilson Lease is entirely consistent with the surrounding circumstances. Recall that the Wilson Lease consists of two, non-contiguous tracts. The Wilson #2 and #3 wells—whose wellbores and associated production units formed the entirety of Tract 2—were included in the list of four wells being 32 conveyed. Because Southland had farmed out its interest in the Wilson #4 well, Exhibit A excepted the lands attributable to that well from the Wilson Lease interest that Southland reserved to itself. But, the Wilson #1 well was not conveyed (through the list of four wells) or carved out from the reservation (through an exception to the list of four leases). Southland did not offer its interest in that well at auction, so it was not included in the auction catalogue, the list of wells at the top of the 1994 Assignment, or the list of “Associated Wells” in Exhibit A. Unlike the Wilson #4 well, Southland still owned its working interest in the Wilson #1, though the interest was subjected to an after-payout penalty when Southland went non-consent. Therefore, unlike the Wilson #4 well, the Wilson #1 was not included in the exception from the list of leases. As a result, Southland reserved and retained unto itself its interest in the Wilson #1 well, which it holds to this day. 11 The PetroMax Defendants’ interpretation ignores these distinctions. It would render meaningless the list of wells in the 1994 Assignment, the assignment’s reservation provision, and the list of “Associated Wells” on Exhibit A. 11 In addition, although the Wilson #5 well has quit producing, Burlington still owns an interest in the leasehold acreage pursuant to Humble Resources Company’s re- assignment of all interest in the Wilson #5 and associated acreage after termination of its farmout agreement. CR:922-1028, 1037. 33 Consequently, the PetroMax Defendants’ interpretation does not comply with contract construction principles and is unreasonable. Burlington’s interpretation is the only reasonable interpretation. It compels the conclusion that, as a matter of law, Burlington still jointly owns an interest in (at the very least) the Wilson #1 well, which continues the AMI in effect. Consequently, in the alternative to the remand requested above, Burlington is entitled to rendition of judgment that, pursuant to the 1975 Letter Agreement and 1994 Assignment, its ownership interest continues the AMI in effect. B. In addition, the 1975 Letter Agreement does not provide for reduction of Burlington’s rights proportionate to the scope of its joint ownership. Finally, in its summary-judgment motion, Burlington sought a ruling that the 1975 Letter Agreement does not provide for a reduction of the undivided 25% interest to be offered to Burlington in leases and mineral rights within the AMI if Burlington’s joint ownership in the nine original leases diminishes over time. CR:523-26. The 1975 Letter Agreement provides that the AMI continues in effect “as long as leases are jointly owned within such area . . . .” CR:593. Upon acquiring any oil and gas leases or mineral rights within the AMI, Buttes agreed to offer to Aztec an undivided 25% interest in those leases/rights. Id. No provision was made for a reduction in that percentage if Aztec’s (or later, Burlington’s) ownership share of leases/rights within the AMI diminished over time. Id. 34 Had the parties wanted to provide for that reduction, they knew how to do so. The 1975 Letter Agreement does provide for a proportionate reduction in the interest required to be offered to Aztec if Buttes acquires less than the full 100% interest in an oil and gas lease or mineral rights in the AMI. CR:593. But the parties chose not to make a similar provision for any reduction in proportion to Aztec’s joint ownership of leases within the AMI. Texas courts are not allowed to rewrite the agreement to add such a provision. See, e.g., Neece v. A.A.A. Realty Co., 322 S.W.2d 597, 600 n.3 (Tex. 1959). As shown above, Burlington is entitled to reversal of the trial court’s holding that the AMI provision terminated. Because Burlington offered the only reasonable interpretation regarding its undiminished right to a 25% interest in leases/rights acquired within the AMI, this Court should reverse the trial court’s denial of summary judgment on that issue, as well. Further, the Court should render judgment that Burlington’s rights under the 1975 Letter Agreement and AMI to the offer of a 25% interest in leases or mineral interests acquired in the AMI by Buttes’ successors- in-interest are not subject to reduction or limitation based on Burlington’s ownership share of leases and rights within the AMI. 35 CONCLUSION AND PRAYER In determining whether ambiguities exist in oil and gas assignments, it is critical to analyze and apply consistently the principles that govern all contracts. The most basic policy of contract law is to protect the parties’ justified expectations. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 677 (Tex. 1990). The ability to form justifiable expectations about contractual rights and obligations depends, in turn, upon the certainty with which parties may predict how the law will interpret and enforce their agreement. Id. This essential legal framework is weakened by summary judgments that stray from fundamental principles governing contract construction, particularly in an area of widespread importance such as oil and gas assignments. Appellant Burlington Resources Oil & Gas, L.P. asks this Court to reverse the trial court’s summary-judgment rulings and (1) either remand the issues to the trial court for further proceedings consistent with this Court’s opinion and judgment, or render judgment that the AMI continues in effect; and (2) render judgment that Burlington’s rights to acquire a 25% interest in leases or mineral interests acquired by Buttes’ successors-in-interest in the AMI are not subject to reduction or limitation based on the scope of Burlington’s joint ownership of leases and rights within the AMI. Burlington also asks for all other relief to which it is entitled at law or in equity. 36 Respectfully submitted, /s/ Kirsten M. Castañeda John R. Mercy Kirsten M. Castañeda State Bar No. 13947200 State Bar No. 00792401 jmercy@texarkanalawyers.com kcastaneda@adjtlaw.com MERCY CARTER TIDWELL, ALEXANDER DUBOSE L.L.P. JEFFERSON & TOWNSEND LLP 1724 Galleria Oaks Drive 4925 Greenville Avenue, Suite 510 Texarkana, Texas 75503 Dallas, Texas 75206 Tel: (903) 794-9419 Tel: (214) 369-2358 Fax: (903) 794-1268 Fax: (214) 369-2359 Vincent L. Marable III Roger D. Townsend State Bar No. 12961600 State Bar No. 20167600 trippmarable@sbcglobal.net rtownsend@adjtlaw.com PAUL WEBB, P.C. ALEXANDER DUBOSE 221 N. Houston Street JEFFERSON & TOWNSEND LLP Wharton, Texas 77488 1844 Harvard Street Tel: (979) 532-5331 Houston, Texas 77008 Fax: (979) 532-2902 Tel: (713) 523-2358 Fax: (713) 523-4553 Fred Hagans State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 3200 Travis, Fourth Floor Houston, Texas 77006 Tel: (713) 222-2700 Fax: (713) 547-4950 Attorneys for Appellant Burlington Resources Oil & Gas Company LP 37 CERTIFICATE OF COMPLIANCE I certify pursuant to TEX. R. APP. P. 9.4(i)(3) that this Brief complies with the length limitations of Rule 9.4(i) and the typeface requirements of Rule 9.4(e). 1. Exclusive of the contents identified by Rule 9.4(i)(1) and inclusive of all textboxes, footnotes, and endnotes, this Brief contains 7,543 words as counted by the Word Count function of Microsoft Word 2010. 2. This Brief has been prepared in proportionally spaced typeface using: Software Name and Version: Microsoft Word 2010 Typeface Name: Times New Roman Font Size: 14 point /s/ Kirsten M. Castañeda Kirsten M. Castañeda 38 CERTIFICATE OF SERVICE I hereby certify that on the 20th day of October, 2015, a true and correct copy of the foregoing Brief, including Appendix and hyperlinked materials, is served on Appellee by e-mail and e-service via efile.txcourts.gov to counsel of record as described below: Mr. Brad D’Amico Mr. David J. Beck bd@canteyhanger.com dbeck@beckredden.com CANTEY HANGER LLP Mr. Thomas E. Ganucheau 1999 Bryan Street, Suite 3300 tganucheau@beckredden.com Dallas, Texas 75201 BECK REDDEN LLP Counsel for Appellee PetroMax 1221 McKinney Street, Suite 4500 Operating Co., Inc. Houston, Texas 77010-2010 Counsel for Appellees PetroMax Mr. Greg W. Curry Operating Co., Inc., Petro Texas Greg.Curry@tklaw.com LLC, and CH4 Energy II, LLC Mr. Gregory D. Binns Gregory.Binns@tklaw.com Mr. Jesse R. Pierce Mr. Richard B. Phillips, Jr. JPierce@pierceoneill.com Rich.Phillips@tklaw.com Mr. Brian K. Tully THOMPSON & KNIGHT LLP BTully@pierceoneill.com 1722 Routh Street, Suite 1500 PIERCE & O’NEILL, LLP Dallas, Texas 75201 4203 Montrose Blvd. Counsel for Appellee Woodbine Houston, Texas 77006 Acquisition, LLC n/k/a MD America Counsel for Appellee TexCal Energy LLC Energy South Texas, LP /s/ Kirsten M. Castañeda Kirsten M. Castañeda 39 No. 06-15-00044-CV IN THE SIXTH DISTRICT COURT OF APPEALS Burlington Resources Oil & Gas Company LP, Appellant, v. PetroMax Operating Co., Inc., Woodbine Acquisition, LLC, Petro Texas, LLC, Ch4 Energy II, LLC, and Texcal Energy South Texas L.P., Appellees. On Appeal from the 12th Judicial District Court Madison County, Texas, Cause No. 12-13130-012-10 APPENDIX TO BRIEF FOR APPELLANT Tab 1975 Letter Agreement (CR:589-625) ..................................................................... 1 1994 Assignment and Bill of Sale (CR:1029-34) .................................................... 2 Order Granting Defendants’ Motion for Summary Judgment on Title Issues (CR:1617) ...................................................................................................... 3 Order Denying Burlington’s Motion for Partial Summary Judgment Seeking Various Declarations (CR:1618-19) .......................................................... 4 Order on Joint Motion to Sever and Abate (CR:1640-45) ...................................... 5 40 Tab 1 Tab 1 ' ,_ .. : BUTTES RESOUHCES COMPANY SOUTHWEST DlVlSJbN TELEX: 1100 MILAM MAIL] NG ADDR£55 '71!12:.?.:97 P. 0. BOX 20&7 SUITE 733 HOUSTON, TEX,t.S 7700 I HOUSTON, TEXAS 77002 (713) 2Z~.i414 January 7, 1975 Mr. 'lhomas E. Scott Aztec Oil & Gas Company 2000 First National Bank Building Dallas, Texas 75202 Re: Drilling and Joint Operating Agreement - Aztec Oil & Gas Gompwy 00-660 - So. Zulch Prospect Madison, Brazos and Grirhes Cos., Texas Dear Mr. Scott: Buttes Resources Company (hereinafter referred to as "BRC") owns an undivided one-half (1/2) working interest in and to the oil and gas lea.ses. described. and 'r.eferred. to in. Exl;jib;Lt "A" attached hereto and made a part hereof, which leases and the lands covered thereby are referred to herein as "said leases". You have expressed' a desire to participate with BRC in the drilling of a test well in search of oil or gas subject to the terms and conditions hereinafter contained, and this letter, when accepted by you in the space hereinbelow provided, shall set forth the terms of our agreement concerning the drilling of such test well and the operation and development of said leases. - I. Prior to comnencing drilling operations of the test well, BRC shall ·cause title to the tract of land upon which such test well is to be drill- ed to be examined by an attorney of its choice. II. BRC agrees to furnish you the following information: A. A plat on which said leases and the proposed location of the test well are noted. 589 . ·1.· Mr. Scott -2- January 7, 1975 B. The estimated cost of drilling the test well to 9,200 feet, including the cost of all open hole logging Which will be condUcted. Such estimated costs are set forth on the author:ization for expenditure (ARE;); attached hereto ,Y withdraw from this agreement and all obligations hereunder be.tween Aztec and BRC shall be terminated. D. A copy of the title._opinion covering the lease or tract upon which the test well is to be drilled setting forth the fee ownership of the minerals and the ownership of the oil and gas lease covering such mineral interests, based upon abstracts o;f title or a search of the county records and q.pproving title into BRC for drilling and production. No well shall be comnenced under this agreement Jfuwever, until Aztec has approved title to the drillsite lease or tract. III. Subject to all other terms and provisions hereof, BRC agrees to comnence or cause to be corrmenced, at the earliest possible date, operations for the drilling of a test well in search of on or gas at a mutually agreeable location on said l12ases. such test well shall be drilled with due diligence and in a good and workmanlike manner to a depth of 9,200 feet beneath the surface of the earth, whichever is the lesser depth, herein called the "objective depth,'', unless some "impene- trable", as that term is defined below·, j_s encountered prior to reaching the objective depth. The term "irl]penetrablE'l" as used in this agreeroont shall mean formations or conditions which would render fwther drilling operations by a prudent operator' impracticable or which cannot be pene- trated by the use of customary drilling procedure or techniques. If an impenetrable is encountered prior to reaching the objective depth, the provis,tons of Section 3~ Ci (?f .the Join~:CJPe!'at:lrig Ai!i~etrent: attached )lereof· as .EXhil'lit. "C" shalll;lt?Come effectiVe. · · Upon reaching the objective depth for the test well, BRC shall cause such logs and tests to be made which are mutually agreed upon. -- - --· - - --.-.·- --- - - - - - ~. --. -·- ---- ---------,---- 590 Mr>. Scott -3- January 7, 1975. N. Your representative shall be allowed free access to the derrick fioor and to any and all information, {l;eological or otherwise, pertain- ing to the drilling of the test well. Prior to running any logging device, coring or taking any fonnation tests, or other similar type test, BRG shall first give you notice in sufficient time to allow your representative to be present to witness such test. BRC agrees to furnish you two (2) copies of each field print and two (2) Cbpies of each final print of electric logs and shall telephone daily reports to your representative. Any notice required hereunder to be given to BRC shall be furnished to; Buttes Resources Company Attention: Mr. V. K. Kr'aus llOO Milam Building, Suite 733 P. 0. Box 2067 Houston, Texas 77001 Office Phone: (713) 223-1414 Heme Phone: (713) 682-7327 Any notice required hereunder to be given by BRC to you shall be furnished to: Aztec Oil & Gas Company 2000 First. National Bar1k Bldg. Dallas, Texas 75202 DRILLING REPORTS & GEOIDGICAL NOTICES: Attention: Mr. Kenneth A. Wood Office Phone: (214) 741-1272 Home Phone: (214) 254-8090 or Mr. R. K. Taylor Office (214) 741-1272 v. In consideration of BRC's agreement to drill the test well described above you agree to bear and pay the costs, risk:;; and expenses incurt'ed in drilling and testing prior to the running of production casing. for a completion attempt and plugging and abandoning if no completion is attempted on such test well as set out below. Except as ptherwise in this agreement provided, such payment shall be due and payable on or b~fore thirty days after you receive invoices for the same. A. 33-1/3% of all of BRC's costs, risks and expenses incurred in drilling and testing for the test well and jn plugging the well if no completion attempt is made. 591 ll!r:'. Scott -4- January 7, 1975 B. .$46,331. 50 as your share of the acquisition costs paid by BRC for said leases, including broke:r-age and recording costs incur- red in conne.ct.ion With the acquisition of the same as of the date hereof. C. Subject to the tenns of the Joint Operating Agreenent Exh:i.bit "C" hereto, 25% of all costs incurred after the date hereof, including, without lim1tation, :r-entals, curative wor'k, out- side legal costs and costs of governmental regulatory applications and hearings in connection with said leases. All of the costs, risks and exPenses incurred in drilling, testing, completing, etc. shall be supported by invoice or s.tateo-ents of charges, copies of which BRC agrees to make available upon request . Such costs, risks and expenses shall be invoiced to you when BRC receives invoices fo!' the same. VI. Subject to the provisions of Paragraph VII, Upon receipt of payment of your share of the costs and expenses set out inParagraph V-B, which you have agreed to pay herein, BRC agrees to assign to you, with warranty of title, by, through and under BRC but not otherwise, an undivided 25% interest in said leases. Such assignment Shall be subject to the terms of this agreement, the Joint Operating Agreement attached hereto as Exhibit "C", (by this reference made a part hereof), and your proportion- ate part of the lessors' royalty provided for in said leases and the over-riding royalty provided for in Exhibit "E" hereto. It is understood and agreed that all operations conducted after the test well nas been drilled to the objective depth or plugged and abandoned as a dry hOle i f no cornpletior1 is attelllpted shall be conducted under the terms of the Operating Jlgl"eement attached hereto as Exhibit; '.'C'', with your interest therein being an undivided one-fourth (1/4). VII. If any rental shall become due after the date hereof and prior to the Joint Operating Agreement attached hereto as Exhibit "C" becom'ing effective under any of said leases, then BRC shall pay the same and you agree to reimburse BRC for 25% of such rental paynent Within thirty days after rece:ipt of BRC' s invoice; provided, BRC shall not be liable for erroneous payment or inadvertent failure to pay ·a:f!Y such rental. 592 Mr. Scott -5- January 7, 1975 VIII. It is. not the purpose or intention of this agr'eeirent to create, nor shall the same b.e construed as creating .any pdning pqrl;nership, conmercial partnership or other pqrtnership relation nor (>hall the operations of the parties hereunder be construed to be considered as a joint venture. 'Ihe liability of the pqrties hereto shall be several and not joint or collective. Each of the parties hereto elects, under the authority of Section 761 (a) of the Internal Revenue Code of 1954, to be excluded from the application of all of the provisions of Subchapter K of Chapter 1 of SubtitJ.e A of t!:le InternaJ. Revenue Code of 1954. I f the· :Income tax laws of the states in which the property covered hereby is 1ocated contain, or may hereafter contaJn, provisions s:i.rnilar to those contained :in the SUbchapter of the Interna], Revenue Code of 1954 above referred to under which a Similar election is permitted, each. of the pqrties agt>ees that such election shlUl be exercised. If applicable, BRC is hereby author- . ized to execute and file on behalf of both parties hereto such elections with t!:le appropriate governmental agencies. IX. Exhibit "I)P denotes an Area of J)lutu;ll Int¢rest , outlined in red. Tf you acquire any oil and gas leases or mineral rights within the Area of Mutual Interest after the i;'es to · offer to you an undivided one-fourth (1/4) interest in said leases or mineral interest so ~quired; and if .AZTEC accepts said interest, then AZTEC will immediately reimburse BRC for it.s proportionate j>!'rt of th.e acquisition costs.* Such ot'fer or offers .arE: to. be made in wr'iting and offeree shall have fifteen (15) days in Which to. accept or reject such offer. If either so acquires·an oil or gas lease or mineral interest and the other party does not desire to pqrticipate in such acquisition, then the acquirihg party shall own said oil and gas lease or mineral · interest free and clear of all terms and conditions of this agr>eement. If both parties participate in such acquisition, th..L. NO. 6\0 MAY Bl ORDERED DIRECTLY FROM THE PUBLiSHER ROSS- M"'RTIN COMPANY, BOX 800, TULSA 7~1()\ Exhibit "C" r:o Agreement between Buttes Resources Company and Aztec Oil & Gas Company, _dated~ JPr-'..j~ ~,._, \, \'i.l.r 597 ~· ' ;_.: A-4.P.L. FORM 61 o TAaLE OF CONTENTS Tltlo ...... 1. Definitions l. Xitlo i'nllliiRatiAI-1, Loss of Leases and Oil and Gas Interests ·····-···· • 4. Inte.tes-U; of Par-ties 2 Operator of Unit 5. ' 6. Employees 3 7. 'f'esl Well ' 8. Costs and Ex.penses 3 9. O~rator's- Lien 4 10. Term of A~l'eemE:nt ... 4 11. Limitation. on Expenditures ..... • 12. Operations by Less Than All Pa!'ties ..... -~-·. 5 13. Right to Talt-e Production in Kind 6 14. Access to Unit Area 7 15. Drilling Contracts 7 16. Abandonment o£ Wells 7 17. Delay Rentals and Shut-in Well Payments -------- 8 Pa£e:wtial Rilhllo Puoel•a:lC ............... . B 19. Selection of New Ope:rato1· B 20. Maintenance of Unit Ownership 9 21. Resignation- o! Operatol" ········-- 9 22. Liability of Ptu·ties .... 9 23. Renewal or Extension of Leases ·-· 9 24. Surren-der of l.A:ases .. --·····-·· ········• 10 25. Acreag-e or Cash Contributions .. ······ ........................ 10 26. P1·ovlsion Concerning Taxation ---·--···---···-··· 10 .... 11 27. Insut·an-ce -··········· 11 28. Claims and Lawsuil:s Force Majeure 11 29. 3-G. Notices ··-··············· 11 31. Other Condi-tions ........... ----···--- 12 598 A.AY.L. FORM 61c •. · OPERATING AGREEMENT TliiS AGREEMENT, entered into this~-- day of December , 19E-., between Buttes Resources C~pany hereafter designated as "Operator'', and the signatory parties other than Operator. WITNESSETH, THAT, WHEREAS, the parties to this agreement are owners of oil and gas leases covering and, if so lndicated, -unleased mineral interests in the tracts of land described in Exhibit "A", and all partie$ have reached an agreement to explore and develOp these ieases and interests for oil and ga,s to ttle extent and a!l hereinafter provided; NOW, THEREFORE, it is agreed as follows: l. DEFINITIONS As used in this agreement 1 the foJlowing words and terms shall haye th~ meaningS here tlSet·ibed to thetn. ( l) The words "party" and- "pa-rties" shall alt'fays mean a party, or parties, t-o this agre,ement. (2) The parties to this agreement shall always be referred to as 1'it" or "they'', whether the parties be cor- porate bodies, partnerships, associations, or persons real. (3) '!'he term 1'-oil and gas" shall include oil, gas, casinghead gas1 gas condensate, Jand all other liqJ..1,id or gase~ ous hydrocarbons, unless an intent to limit the .inclusiveness of this term is specifically stated. (4) The term "oil and gas intciesls" shall mean unleased fee and mineral interests in tracts of land lying within the Unit A-,:ea which are owned by parties to this agreement. (5) The term "lTnit Area" shall ref~r to and Include allot the lands, oil and gas leasehold inler-esb and oil and gas interests intended t-o be developed and operated for oil and gas pu·rposell undeL· this agreement. ·such lan!ls1 oil and gas leaSehold interests and oil an~ gas interests are described in ;Exhibit ''A". ( 6) The term "drilling unit" shall mean the area fixed for the drilling bf on_e. well by OTI;k7: or rule o! any state or federal Qody having authority. If a drilling WJit is not fixed _by any such rule or order, a drilling unit shall be the dn1ling unit as established by the pattern of drilling iil the Unit Area or as fi_xed by ex,. press agreement oi the parties. (7) All exhibits attached to this agreemnt are made a part of the contract as fully as though copied in ful'l m· the contract. (B) The wL__ _ _ _ days from receipt of tiUe report for this purpose. If t ttle to any lease, or oil and gas interest, is finally rejected by the examining attorney, all parties- s then be asked to state in writing whether they will waive the title defects and ac~t the leases o · ter'ests, or ':"hether they will ~tand on the attorney's opinion. If one or more parties refuse to waive t' detects. this agreement shall, in t~at case, be_ terminated and abandoned, and all abstracts and title pers shall be returned to their senders. If all title.s are approv~ .by t~ enmining at~ torneys., or accepted by all partieS, and if' all leases are accepted as to primary terms, royalty provisions, drilli. obligations and s-pecial burdens, all subsequent :provisions ot this agreement shall become operative B. Failure of Title: A«or aP ti\les aFe ap~'£9" e~ SF a:ae'O'p•o;! 1 Any defects ot title that may develOp shall be the joint re- sponsibility of aU parties and, if a title loJi$ occurs, it shall be the lo~ of all parties, with eaeh bearing its pro- portionate part of the loss and 0! any liabilities incurre~ in the loss. If such a loss occurs, there· shall be no change in, or adjustment of, the interests of the patties in the remaining portion of the Unit Area. C. Loss o[ Leases For Other Than Title Failure: If any lease or interest subject to this agreeme11t be lost through failure to develop or because express or implied covenants have not been performed, or if any lease be permitted to expire at the end of its primuy tenn and not be renewed or extended, the loss shall not be Cf title and all such losses shall be joint losses. and shall be borne by all parties in proportion to their interests and there shaU be no readjust- ment of interests in the remaining portl.on of the Unit Area. 3. lRJLEt...SBB BIL .um GA:S IH'f'EBES'J!S the purpose of this agreement as if it were a leased interest under the !ann of a· s ease attached as Exhibit "B" and for the primary term therein stated. As to ests,. the owner shall receive roya1ty on to,~.sJ'-'"hal1lrgwasu!l.e;a;s;e attached hcr.eto as Erl\ibtt ''B". Such party shall, however, be of this agreement relating to lessees, to the extent that it ow~s 4. INTERESTS OF PARTIES Exhibit "A" lists all of (he parties, and their :respective petcentagtf! or fx:actional interests undel thiii agreement. Unless cllanged by, other provisions, all costs and liabilities lnc~d in operations under this con- tract shall be borne and paid, and all equipment a,nd material acquired in operations on the Unit Area shall be owned, by the parties as their interests are given in Exhibit "A". All productlon of oil and gas from the Unit Area, subject to the payment of lessor's royalties, shall a:J.so be owned by ihe parties in the samt- manner. -·- "Joint Los&" 600 A.A,P.J.:. FORM 610 ' " . U the_ futeres:t of any party in any ·.oil and gas lease covered Qy this agreement is subject to an overriding royalty, production _payment, Or other charge over and above the usual one .. eigthh ( Ml) royalty, Such party shall assume an(i alone bear all such excess obligations and shall account for them t_o th~ oWners: tbeteof out of. its share of the working interest production of the Unit. Area. 5. OPERATOR OF UNIT Buttes Resources Company _______________ shall ---::C.:..:C:..:C:::::.::.::::_c::.::r::::e:..._ be tl\e Operator of the Unit .Area, and Shall ~ontlucr and direct and haVe full control ot all operations on the Unit Area as per- mitted and required by; and within the limits_ of, this agreement. It shall conduct all such operations in a good . and workmanlike manner, but it shaH have no liability as Oper.ator to the other parti~s for losses sustained, or liabUities _Incurred, except such as may result froril gross negligence Or from breach of the provi~ions of tbis agxeetnent. 6. EMPLOtEl:.S The number of employees and their sel~ction, and the hou-rs of labor and the compensation for ~ervices performed, shall ~ determined b:f Operator. All emplOyees shall be the- employees et Operator. On or before the'"·---- day of _ _ _ _ _ _ _ _ _ _ 19 _ _! Operator .shall corornence t 1- ing of a well for oil and gas in the following location: and shall thereafter continue the drilling of the well with due diligen unless granite or other practically impenetrab substance .is encountet·ed at a lesser depth or unless all parties agree to complete the well at a lesser -d Operator shall make reason e tests ol all formations encountered during drilling which give indica- tion of containing oil and g n quantities sufficient to test, unless thi4 agreement shall be limited in its ap- plication to ~ specific maWm or formations, in which event Op-eratur shall be required to test only the formation or to co.tions to which- this agreenJent may apply. perator's judgment the- wen wlll not pr.oduee oil or gas in paying quantities, and it wishes to abandon the tetit as a dry hole, it shall firSt secure the consent ot all parties to the plugging, and the • 8, COSTS AND EXPENSES EXcept as herein otherwise specifically provided, Operator shall promptly pay and discharge aU costs and expenses_ incurred in the developmetlt and operation of the Unit Area pursuant to this agreement and shall charge each of the parties hereto with their respective proportionate shares upon the -coSt and expense basis provided in the Acco\lnting Pr~cedure attached hereto and marked Exhibit ''C". If any provision o( E~­ hibit "C'• should be inconsistent with any provision contained in the body of this agreement, the provisiOns in. the body of this agreement shall prevail. Operator, .at its election, shall have the right from t,ime to time to demand and reCeive from the other parties payment in ad'Vance of their respective shar.es of the estimated amount of the costs to be incurred in a:perations hereunder during the next SUC(Ieeding month, which right may be exercised only by submission to each such party of an itemized statement of sud). e$Umated costs, togetb~T with an invoiCe for its S}lare there- of. Each such statement and invoice for the paym~nt in advand! of .estimated costs shall be submitted on or before the 20th day of the next preceding mont-h. Each: party shall pay to Operator ifs proportionate share of. such estimate within fifteen (15) days after such esthna~ and invoice is received.. If any par_ty fails t~r its 0 share of said es-timate within said time, the amount due shall beaT interest at the rate of.:N. percent( per annum until paid. Proper adjustment shall be made rno»thly between advances and actual cost, to the end that each party shall bear and pa'y its. proportiOnate shate· of actl.ltl1 cost$ incurred, and no more. _,_ Revjsed 1967 601 9. OPERA':\'OR'S LIEN Operator is given a first and pref-erred lien on the interest ot each party covered by this contract, and In each party's interest ln oi1 and gas produced and the proceeds thereof, and upon each party's interest in ma- terial and equipment, to secure the payment Of a:ll sums due from each such party to Operator, In the event any party fails to pay any amount owing by it to Ope•ator as its share of such costs and ex'pense or such advance estimate within the time J.irnited for payment thereof, Operator, w~thout prejudice to . other elj:isting remedies, is authorized, at iU election, to collect from the: purchaser or Pu•chasers Of oU or gas, the proceeds accruing to the working interest or interests in the Unit Area of the delinquent party up to the amount owing by such party, and each purchaser of oil or gas is authori~ed to rely upoh Operator's statement· as to the amount O'W'ing by such party. In the event of the neglect or failure of any non-operating party to promptly pay its proportionate part of the cost and expense o! development and operation when due-, lhe other non-operating parties and Operator; within thirty (30) days after the rend.ition of s_!:atements therefor by Operatot", shall proportionately contribute to the payment of such delinquent indebteCiness"'and the non~operatin&: parties so contributing shall be entitled to the same lien rights as are granted to Operator in· this section. 'Upon the payment· by such delinquent or . defaulting party to Operator of any amount or amounts on such delinqu.entindebt~dneSs, Or upon .any recovery on behalf of the non-operating parties \lnder the lien conferred aboVe, the amount or amounts- so paid or rep covered shall be· distributed and. paid by Operator to the other non-op.erating parties .and Oper~tor propor- tionately in accordance with the contributions theretofore made by them. 10. TERM OF AGREEMENT This agreement shall remain in full force and effect for as long as any of the oil and gas leases subjected to this agl'eement remain or are continued in force as to any part of the Unit Area, whether by production, ex- tension, renewal or otherwise. ,.... ;,.o&,_..,...,..,,....,._.,.........,....,,._y,,_.;.,..,¥jo,.... a dry hole and no other well is producing oil or gas in paying quantities from the Up.it A•.-...""'__,_ .. of ninety {90} days after abandonment of the first test well, this inate "''""'~" agree-ment, in which event this agreement shall con- '"..,='" have been drilled and completed. If production r-esults there- "'""~annnue in force thereafter as if said first test well had been J?roductive in paying "result therefrom this agreement shalt tenninate It is agreed,, however, that the term- ination of this agreement shall riot.:relieve any party hereto from any liability which has accrued or attached prior to the. date of such tennination. ll. LlMITATIO:N" ON EXPENDITURES Without the consent of all parties; (a) No well shall be drilled on the Unit Ar~a e1·ee}lt It"') "eU eK pnsslJ ptodded Evt h• this >eetuw4; .ani except any well drilled pursuant to the provi'sions of Section 12 ot this agreement, it being understood that the consent to the drilling of a well shall include Consent to all n~s.o;aty expenditu•es in the drilling, testing, completing, and equipping of the well, including necessary tankage; (b) No well shall be reworked, plueged back or deepened except a well reworked., plugged back or deepehed pursuant to the provisions of Section 12 of this agreement, it being understood that !he consent to. the reworking, plugging back OI' o·w-'t~ days after the expiration of the notice period of thirty {3(,) days (or as promptly as possible after the expir- ation of ·the -t8-hour period where the drilling rlg is on location., as the case tnay be} actually commence work on the proposed operation ami complete it with due diligence. The entire cost and risk of conducling such operations shall be borne by the Consenting Parties in the proportions that their respective interests as shOwn in Exhibit "A" bear lo thf:! total interests of all Consenti.ng Parties. Consenting' Parties sball ke!!p the leasehpld estates involved in such operations free and clear o! all liens and enf SubchapWr K of Chapter 1 of Subtitle A of the Internal Revenue Code of 1954. If the income tax laws of tbe state. or states J.n which the property covered hereby is located contain, Chapman Roger·C~ V:i.c.e-President NON-OPE:AATOR ~ Aztec Oil & Gas Company lli.CS hes1dent -13- 611 THE. STATE OF TI:.. COUNTY OF !lARJUS - -·x 1 1 BEFORE ME 1. the titl.deraigned authority, on this day personally appeared ROGEa C. OiAPMAN, k~own to me to be the person ~hose. name is subscribed to the foregoing instrument as Vice President of BUTtES RESOURCES COMPANY, a corporation~ and acknowledged to me that he executed- the same as the act and deed of said corporation for the purposes and consideration thete~n expressed, and in the. capacity therein stated. !1 GIVEN UNDER MY !LIND AND SEPfjrl rn'iiW' EXHIBIT .. c ,. I Attached to and made a part ot .. .21?:..£~.~-~~e~me.nt - - - - - - I -----------------------·----------·---- ACCOUNTING PROCEbURE JOINT OPERATIONS L GENERAL PROVISIONS 1. Definitions "J"oint Account" shall mean the account showing the charges and credits accruing because ot the Joint Operations and whit techni~l employe:e;s ~ithe~; tempo- rarily or permanently assigned tel and dil'ectly em.i?loyed in the ope;ation of the .::roint Propert;Yo 1. District Expense, Administrative Overhead and Wareltousing A. District Expense Operator shfl Do!plh"} "Eoch"W411 Ht11-l fM All Wolh; 0T¥!" Tu (2) [ ] Percentage Basis PERCENTAGE BA;.SIS Development: ···--··-··-----·· Percent· ( ·%) ot·the cost .Of development ot the JOint Property exclusive of cost.~ pn,- vided under Paragrapb 8 of. Section .n and. all salvage .credits. Operating: -----··--··---······· Per:cent ( %) of the cost of operating the Joint Pro~~ty e.:11:du~ve of Costs _-provided under: Paragnphs 1 and ·8 of Section II, all sal:va~e credits:; the v~Iue of ll1.]ected subs~ces purchase_d for seconda:ry recovery and all taxes and assessments which are lev1ed, .assessed .and ;pa1d upon the Itnrtt>ral -·- interest in and to the: Joint Property. '' ------·----· J 617 r-'-·· C. Operator's Warehouse Operaling an.d Maintenance Expense [ ] Indude_d in district :expense [ ] No chnrge either dlfect or indirect ( ] Perc~tage basis (describe full)') .. ····-··+>••••·······-------·········-·······-~------···----~--------·······-·--·------ ---------····------········-----,.------· ··-------·····-····-· 2. Combine(l Rates- Well Basis Oper-atOr shall charge the Joint A-cCount for the seJ.·vices covered by Paragraph 1 of this Section III on the basis indicated below: 3. Combined. Rates- Perctmtag-eBnsis Operator· shall charge the Joint Account for Jhe services covered by Paragraph 1 of this Section III ·on the bective of individual leases. · D. The well rates shall be adjusted as of tbe first day of April eaCh y-ear following the effeCtive dat-e of the agreE~rtlent to whieh this Aecounting Procedure. is attaehed,· 'l'he adju.stment shall be computed by multiplying the rate currently in use. by tlle percentage· increase or decrease in the average weekly c.arh)n.g~ of Crude Petroleum and Gas ProduCtion Workers fOr the las~ calendar year compared to the preceding ~alendnr year as shown by ''The Inde:x of Average Weekly Earnings of CruQe. Petroleum and G-is ':luder .P~r_agraph. 1_~ (2) or ~a.-a.gtll!'h 3 of t~•s Section III. Development. shall include all costs in ~qnnectipn w1th dn1Ung, redt:Jlhng, deepemng or any ren:~llal operations on.. any or al1 we~ Is j~vt;lvi"g the use o! drilli~g Cl'ew _and equil?~el}.t; also, prel~minary · expcndl1iU:fCS necessary In preparation tor dnllmg a-nd exponditut:es tllcurred m abandomng when. well ·15. not comp1eted as a prerator from vendee. Any claim by vendee related to such sale shall be charged back to- the Joint Account if and when paid by Operator. VJ. BASIS OF PRICING lUATERIAL TRANSFERRED FROM JOINT ACCOUNT Material ~urchased by either Operator or Non-Operators or divided. ii)_ kind,. unless agreed to ~Y OPerator and Non- Operators shall be priced on the following l;:!asis: L New Prico Defined New pr-ice as used in this- Section VI shall be the price specified fot new Material in Section IV. 2. New MatCI'iat New Material {Condition "A"), being new Material procured for the JOint Property but never used1 at one hundred per .cent (100%) oLcurrent new price (plus sales tax if any), 3. Good Used Material Good used Material (Condition "B"), being qsed M3te.Tial in sound and serviceable condition, suitable for- reuse without reconditioning: ' A. At seventy-five per cent (7S%) of current new price ii Material was charged to Joint Attount as nC!w, or B. At sixty-five per cent (65o/c) at current new price if Material was originally charged to the Joint Account as secondhand at seventy-five per cent (75%) of new price. 4. Other Used Matel'ial Used Material (Condition "C"), at fifty per cent (SO%) of cummt new price, belD.g used Material which: A. Is not in sound and· serviceable condition but suitable for reus¢ after reconditioning, or B. Is serviceable for original function but not suit~ble for reconditioning. 5. Bad-Order Material Material (Condition "D"), no longer suitable for its original purpose without excessive repair c-ost but Usable fut· :rome other pUrpose at a price Comparab-le with that of It-ems normally used :or suOWh ---·· '·' ,.; ' \ I I \ 622 CUR\c.d herein, the t.erm u~.rea of Hutual lnterest 11 moans the area outlined in blue on thc plat attached h·ercto and made .a part hereof and signed by the. President of Campbell for purposes of id"entificar.ion. 2. As t.o all leases acqui;red by C:a-rupbell, its s\lcc-essor.s or assigns, on actea.ge loc.a~ed '-'!thin the Area of Mutual Interes·t. 1 N.owotny shall be assignad the following overrid-ing royalties: (i) lf the ~ist.in& Burdens are 1/Sth or less • then the over- riding royalty shall be l/24th of 8/8ths. (ii) If the Existing Durdcns are g;r·eate:r than ~/8th. but. not greater than l/Gt.h, t.hen the ovcrridin~ royalty shall be l/48th of 8/8ths. (iii) H k~x.istinr, Burdens a-re .greater than 1/6th, then Nowotny. shall not be entitled t.o s.ny ovex(iding royalty . .3. All assignments of ove:rridj:t\& toyaltiC!s to be made under t:.\\e p1·ovied.on.s hereof Shall be made·without: warranty; either expressed Or iutplied, and (·ach ctsstsnoient shall rorovide, as to each lease. that should the Lessor, tli"erein own less than the entire fee simple estar.e in the oil, ~as and other r:li.nerals in ; by si-gning t.he .attached copy hereof at the place pr:ovided and returning sallle to. Campbell. Yours ve1-y truly, C:UP.RAN R. CA.'iP.BELL, INC. /JJ ' /[• . ' ·i Cd~!1r1 (J~L''cl! ct:mt\:': 1:. c:-.~~~·~~-Etl., ,1n11 \'. .\. :~~~~;oT::\' s]•'''q nnt lDl .. . "'•'"•' . '. I ( ' I', '•(' { ( ~-\1\"!I:Xr!'':\: ·,~} :'f''':,• { , ~~-:~--L--, . \. - l --·· ·-' •. ,·.. '-'-uston Parkway Eas~ Suite 1200, flouston, Texas noso C'Asslgnor"), for and in conoiderallon of ONE flUNDRED DOLLARS ($100.00) and other good and valuable conskieration, receipt of which is here acknowledged, does hereby assign, transfer, grant ~ convey unto whose address is ("Auignee"), an of Assignor's right, tiDe and interest in and to the following: 0) The oil and gas leases, leasshold interesls, righ!a and interests a1bibutable or aBocable to the oil and gas leases or leasehold in.terests by virtue of poo6ng, unitization, communitiUtion, and operating agreementS, Hcenses, pennits, and other agreements, all more particularly described on ExhiM "A' hereto, Hmfted as to the lands and depths indicated on Exhibft "A" (collectively the 'Leasss"), together with identical undivided interests in and to all the property and rights incident thereto, including, but not limited to, a!\ rights tn, to and under all agreements, product purchase and sale contracts, leases, permits, rights..of-way, easements, licenses, farmouts, options, orders, and other contracts or agreements of a similar nature to the extent same relate to the Leases; (ii) The wells, equipment, materials and other personal property, fiXtures and improvements on the Leases as of the EffecUve Date (as hereinafter def~ned), app1.:.1rtenant thereto or used or obtained in connection with the Leases or with the production, treatment, sale or disposal of hydrocarbons or waste produced therefrom or attributable thereto, and all other appurtenances thereunto belonging (the "Equipment"); provided, however, Equipment shall not include vehicles, communications equipment, tools, warehouse stock, compressors or leased equipment located on the Leases; (iiij All unitization, communltization, pooJing, and operating agreements, and the units created thereby which relate to the Leases or interests therein described on Exhibit "A" or which relate to any units or wens located on the Leases, including any and all units formed under orders, regulations, rules, and other offiCial acts of the governmental authority having jurisdiction, together with any right, title and Interest created thereby in the Leases; and (iv) All of Assignor's rights to claim revenues or gas resulting from any underproduction attributable to Assignor's interest in the Leases. Al·of Assignor's interest in the above-mentioned assets is herein collectively mferred to as the "Interests" . .Assignpr reserves and retains unto itself from the Interests those certain lands, leases. ;properties, interests, leaSehold rights, depths or formations as .specifically noted and reflected on:~ibit ~'A" ,and the right of joint use of any agreements ass1gned hereunder where needed f_or tAe exp~n, d~Welopment, and operation of any rights or acreage (either horizontally or \fel'ti.e:a&ly) retaine(i by Assignor or where needed in order to exercise ancillary rights in, or for . - to, adjoinlng or nearby properties .owned by Assignor. TO HAVE AND TO HOLD the Interests unto Assignee, its successors and assigns, forever, :s.u_bject to -the follow!~ terms and conCrtions: SM:ASSIGNR.DOC ~~8130194 11-~\§0rract EXHIBIT Copy of OrigineJ Rled in Madison County Clerk's Office z~ 1029 - .. .... ,. , - •., 1. This Assignment is a~pted subject to, and Assignee agrees to assume and perform any and all of the iabl6ties and obUgations. or allegad or thraatonad liabilities and obligations, of Assignor under the Interests and existing on and gas teases assignments, operating agreements, product purchase and sale contracts leases' permits, rights--of-way, ficenses, easements, options, orders, and a~y oth.,; agreements or contracts ~utable to and affecting tha Interests, Including but not 1111'11ted to, any and aD obligations (I) to pay and deiver royalties, overr1dlng royelties, non-participating royalties, and other burdens on production, (ii) In connection with or arising out of balancing of overproduction or underproduction from the Interests and (~i) in compliance with aU laws and governmental regulations wtth respect ~ the Interests including, but not llmltad to, the lawful plugging and abandonment of oil and gaa wells and the restoration of the surface of the land as nearly as possible to its prelease condition, whether or not such liabilities and obligations, or aUeged or threatened liabirlties and obligations, are caused by Assignor's negligence and 'Mlether or not such liabilities and oblgatlons, or alleged or threatened liabiUUes and obligations, arise .during the period of, or from, or In connection With Assignor's ovmership or operation of the Interests. Without limltatlon of the foregoing, Assignee agrees to assume and perform any and aD of the UabilitieA and obligations, or aUeged or threatened liabilities and obligations, of Assignor for claims, losses, damages, costs, expenses, diminutions In vatue, suits, and causes of action of any ldnd or character, with respect to the environmental condition of the Interests, regardless of when the events occurred that caused such condition to exist and whether or not caused by or attributable to Assignors negligence. Assignee shall, to the fullest extent permitted by law, protect, defend, indemnify and hold Assignor and its directors, officers, employees, agents and representatives of each of them, harmless from and against any and all claims, losses, damages, casts. expenses, diminutions in value, suits, causes of action or judgments of any kind or character with respect to any and all liabilities and obligations or alleged or threatened liabilities and obligations, including, but not limited to, any interest, penalty and any attorneys' fees and other costs and expenses incurred in coMection with Investigating or defending any claims or actions, whether or not resulting in .any liability, attributable to or arising out of (I) ownership or operation of the Interests subsequent to the Eff.ectlve Date, and (ii} Assignee's assumption of any !iabfiity or obligation In accordance with this paragraph. THE INDEMNIFICATION, RELEASE AND ASSUMPTION PROVISIONS PROVIDED FOR IN THIS ASSIGNMENT SHALL BE APPLICABLE WHETHER OR NOT THE LOSSES, COSTS, EXPENSES AND DAMAGES IN QUESTION AROSE SOLELY OR IN PART FROM THE GROSS, ACTIVE, PASSIVE OR CONCURRENT NEGLIGENCE, OR OTHER FAULT OF ASSIGNOR. 2. THIS ASSIGNMENT AND BILL OF SALE IS EXECUTED, DELIVERED, AND ACCEPTED WITHOUT ANY REPRESENTATION, WARRANTY OR COVENANT OF TmE OF ANY KIND OR NATURE, EITHER EXPRESS, IMPLIED OR STATUTORY. THE INTERESTS ARE BEING CONVEYED AND ASSIGNED TO AND ACCEPTED BY THE ASSIGNEE IN THEIR "AS IS, WHERE IS" CONDillON AND STATE OF REPAIR, AND WITH ALL FAULTS AND DEFECTS, WITHOUT NN REPRESENTATION, WARRANTY OR COVENANT OF ANY KIND OR NATURE, EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MARKETABILITY, QUALITY, CONDITION, MERCHANTABILITY, ANDIOR FITNESS FOR A PARTICULAR PURPOSE, ALL OF WHICH ARE EXPRESSLY DISCLAIMED. IT IS UNDERSTOOD AND AGREED THAT ASSIGNEE SHALL ACCEPT ALL OF THE SAME IN THEIR "AS IS, WHERE IS" CONDITION AND STATE OF REPAIR AND WITH ALL FAULTS AND DEFECTS, INCLUDING, BUT NOT LIMITED TO, THE PRESENCE OF NATURALLY OCCURRING RADIOACTIVE MATERIAL (NORM). IN ADDITION, ASSIGNOR MAKES NO REPRESENTATION, COVENANT OR WARRANTY, EXPRESS, IMPLIED OR STATUTORY, AS TO THE ACCURACY OR COMPLETENESS OF NN DATA DELIVERED TO ASSIGNEE WITH RESPECT TO THE INTERESTS, OR CONCERNING THE QUALITY OR QUANTITY OF HYDROCARBON RESERVES, IF AtfY, ATTRIBUTABLE TO THE INTERESTS, OR THE ABILITY OF THE INTERESTS TO PRODUCE HYDROCARBONS, OR THE PRICES WHICH ASSIGNEE IS OR WILL BE ENTITLED TO RECEIVE FOR ANY SUCH HYDROCARBONS. 3. TO THE EXTENT APPLICABLE TO THE INTERESTS OR NN PORTION THEREOF, 2 'I ATrue and Correct (---~------~--~~-----------------------~--yct~O-ri~-M-1----­ Filad in Madison County Clerl.:..,: ' ... vo: 417 "" 711 ASSIGNEE HEREBY WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES ACT, CHAPTER 17, SUBCHAPTER E, SECTIONS 17.41 THROUGH 17.63, INCLUSIVE (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED), TEXAS BUSINESS & COMMERCIAL CODE. -4. This Assignment and Blll of Sale shall inure to the benefit of and be binding upon the parties hereto, their heirs, successors and assigns. 5. This Assignment end Bill of Sale may. be executed by Assignor and Assignee in ony number of counterparts, each of which shan be deemed an original instrument, but all of which together shaJI e;onstitute one and the same instrument. 4"'- IN WITNESS WHEREOF, this instrument is executed the-.:!_ d&y of September, 1994, but shall be etrecthle as of lhe 1st day of September, 1994 (the "Effective Datej. ASSIGNOR SOUTHLAND ROYALTY COMPANY ATTEST: By~ ~--------------- Name: Kent Beers Title; Attomey-jn-fact ASSIC¥NEE ~S>s> ~"'L~pu.'-,t'j ~~~. . ~. ATTEST: ~--------------- ·i i I A True and Correm Copy of OriginaJ Aled in MadisOn County Clerk's Office 1031 ·------~- - 1 'IOL 4.17 t"'b 712 I STATE OF TEXAS § § COUNTY OF HARRIS § BEFORE ME, the undersigned au1hority, on this day personally appeared Kent Beers, Attorney-in-Fact for Southland Royalty Company, a Delaware Corporation, known to me to be the person whose name is Subscribed to the foregoing Instrument, and acknowtedged to me that he executed the same for the purposes ancl consideration therein expressed and in the capacity therein &tilted. /7/J GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this~ day of September, 1994. CORPORATION ACKNOWJ EOGMENT STATE OF TEXAS § § COUNTY OF HARRIS § BEFORE ME, the undersigned authority, on this day personally appeared ~==;;;==;;=~;;=;,;;;:;;;=;=~;;;;~;:;;~~~~~~~~ ~ known to me to be of the person and officer whoSe name Is subscribed to the foregoing instrument. and acknowladged 1o me that he/she executed the same for the purposes and consideration therein expressed and in the capacity therein stated as the act and deed of said corporation. GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this _ _ day of September, 1994. MY COMMISSION EXPIRES: Notary Public in and for the S1ate of Texas ATTORNEY-IN..fACT STATEOFTEXAS § § COUNTY OF HARRIS § BEEOR~ ME, the undersigned authority, on this ~}"'rsonally,JI!'~ed~~ ~1( I l )')t, , Attomey·-Fact for ~ ~I llalll!ln/J known to me to be the person whose name is subscribed to the foregoing Instrument~ :1 acknowledged to me that sheJhe executed the same for the purposes and consideration therein expressed and In the capacity therein stated. GIVEN UNDER MY HAND AND OFFICIAL SEAL OF OFFICE on this & day of September, 1994. 4 ATrue and Gorrec\ Copy at Original Filed in MadisOn -~ Gountv Clerl Q~o~ c. ::l. (0 ~!ii~ §' I ~~I!!\) '6 ·, 1033 ~·----~---· _ .. --· .... _;.., ' - ... -·~·-·'"'"···~.~----. - .!3. Defendants Petro Texas, LLC's and CH4 Energy II, LLC's Plea to the Jurisdiction, Answer and Special Exceptions, filed on June 26, 20"13. MD America Energy's Plea to the Jurisdiction, Answer, and {/ Special Exceptions to Plaintiff's Second Amended Petition, filed on September 26, 2014 '; 5. TexCal Energy South Texas' Plea to the Jurisdiction, First Amended Answer, and Special Exceptions to Plaintiff's Second Amended Petition, filed September 26, 2014 ' 6. Defendant MD America Energy, LLC f/k/a Woodbine Acquisition LLC's First Amended Counterclaim, filed on September 26, 2014. Plaintiff's Original Answer to Woodbine's Counterclaim and Special Exceptions filed on August 26, 20'19. '8. Defendant TexCal Energy South Texas, L.P.'s Plea to the Jurisdiction, First Amended Answer and Special Exceptions to Plaintiffs' Second Amended Petition, filed on September 26, 2014. ., 9. Defendant PetroMax Operating Co., Inc.'s First Amended Plea to the Jurisdiction, Answer and Counterclaim and Special Exceptions to Plaintiffs First Amended Petition, filed on June 27, 2013. The two summary judgment orders signed by this Court on December 10, 2014 .· 11. This Order on Joint Motion to Sever and Abate. 1642 SCANNED Mar131512:48p p.7 The effect of this order is to render final for appeal the summary judgment orders signed by this Court on December 10, 2014. It is ORDERED, ADJUDGED and DECREED that the severed case, Cause No. 12-13130-012-1 0-A, is hereby abated during the pendency of the appeal by Burlington Resources Oil & Gas Company LP of this Court's December 10, 2014, orders. Dated: ___,_I_,_7-..L~--=.:..::.:.__ _ _ _ , 201s DISTRICT JUDGE PRESIDING APPROVED AS TO FORM: HAGANS BURDINE MONTGOMERY & RUSTAY, P.C. 2 /- ' l/ By: -F...:.~:..!.e~~H~a-g_a.,t.ftr-;;,-r, ;:·'S,.:z:--c.......::=------- State Bar No. 08685500 fhagans@hagans-law.com Kendall C. Montgomery State Bar No. 14293900 kmontgomery@hagans-law.com 3200 Travis, Fourth Floor Houston, Texas 77006 Telephone: (713) 222-2700 1643 SCANNED Mar 131512:49p p.8 Telecopier: (713) 547-4950 ATTORNEYS FOR PLAINTIFF BURLINGTON RESOURCES OIL & GAS COMPANY LP THOMPSON & KNIGHT LLP By~~ State Bar No. 05270300 greg.curry@tklaw.com Richard B. phillips, Jr. State Bar No. 24032833 rich.phillips@tklaw.com 1722 Routh Street, Suite 1500 Dallas, Texas 75201 Telephone: (214) 969-1700 Telecopier (214) 969-1751 ATTORNEYS FOR DEFENDANT WOODBINE ACQUISITION, LLC, n/k/a MD AMERICA ENERGY,LLC BEcK REDDEN LLP ~·~f IJ!M, pr-~~ t/David J. Beck State Bar No. 0 000070 dbeck@beckredden. com Thomas E. Ganucheau State Bar No. 00784104 tganucheau@ beckredden. com 1221 McKinney Street, Suite 4500 Houston, Texas 77010 Telephone: (713) 951-3700 Telecopier: (713) 951-3720 1644 SCANNED Mar 131512:49p p.9 ATTORNEYS FOR DEFENDANTS PETROMAX OPERATING CO., INC., PETRO TEXAS LLC and CH4 ENERGY II, LLC PIERCE & O'NEILL, LLP ,.~[ r--~il~~~ State Bar No. 15995400 jpierce@pierceoneill.com Brian K. Tully State Bar No. 24039217 btully@pierceoneill.com 4203 Montrose Boulevard Hou~on,Texas77006 Telephone: (713) 634-3600 Te!ecopier: (713) 634-3601 COUNSEL FOR DEFENDANT TEXCAL ENERGY SOUTH TEXAS, LP 1645 SCANNED HYPERLINKED MATERIALS [Not included in paper copy] Freeman v. Stephens Production Co., 171 S.W.3d 651 (2005) 162 Oil & Gas Rep. 563 171 S.W.3d 651 Court of Appeals of Texas, Corpus Christi–Edinburg. Paul FREEMAN, Appellant, v. STEPHENS PRODUCTION COMPANY, A Division of Stephen Group, Inc., et al., Appellees. No. 13–04–208–CV. | Aug. 18, 2005. | Rehearing Overruled Sept. 29, 2005. Synopsis Background: Production company alleging it was lessee of all oil, gas and other minerals under certain land brought action against grandson of grantor who conveyed land to lessors' predecessors in interest, seeking declaration that grantor did not reserve a one-half interest in the mineral estate. Grandson counterclaimed, and lessors filed plea in intervention. The 389th District Court, Hidalgo County, Leticia Lopez, J., granted production company summary judgment, and grandson appealed. Holdings: The Court of Appeals, Dori Contreras Garza, J., held that: [1] genuine issue of material fact as to whether reservation clause in grantor's deed applied to all land conveyed by deed or just one lot precluded summary judgment on production company's declaratory judgment claim; [2] genuine issue of material fact precluded summary judgment on estoppel by deed defense raised by grandson; and [3] evidence submitted by grandson on his adverse possession claim was insufficient to establish that grantor and his successors in interest actually possessed the mineral estate for the requisite period of time. Reversed and remanded. West Headnotes (10) [1] Judgment Particular Cases Genuine issue of material fact as to whether reservation clause in grantor's deed to lessors' predecessors in interest applied to all land conveyed by deed or just one lot precluded summary judgment, in declaratory judgment action brought by production company seeking declaration that grandson of grantor did not own a one-third of the one-half interest in the mineral estate allegedly reserved by grantor in all of land conveyed by deed. Cases that cite this headnote [2] Deeds Language of Instrument If the language of a deed is unambiguous, the court's primary duty is to ascertain the intent of the parties from the language of the deed by using the four corners rule. Cases that cite this headnote © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 Freeman v. Stephens Production Co., 171 S.W.3d 651 (2005) 162 Oil & Gas Rep. 563 [3] Contracts Ambiguity in General Whether a written instrument is ambiguous is a question of law for the court. Cases that cite this headnote [4] Contracts Existence of Ambiguity A written instrument is ambiguous if its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Cases that cite this headnote [5] Estoppel Nature and Elements in General “Estoppel by deed” stands for the general proposition that all parties to a deed are bound by the recitals therein, which operate as an estoppel, working on the interest in the land if it be a deed of conveyance, and binding both parties and privies; privies in blood, privies in estate, and privies in law. 4 Cases that cite this headnote [6] Estoppel Persons Estopped in General Estoppel by deed can be applied against grantors and grantees alike, along with their privies. 2 Cases that cite this headnote [7] Estoppel Persons to Whom Estoppel Is Available Although the party against whom estoppel by deed is sought must be a party or a privy, there is no corresponding requirement for the party invoking estoppel. 3 Cases that cite this headnote [8] Judgment Particular Cases Judgment Landlord and Tenant Cases Genuine issue of material fact as to whether acknowledgements in subsequent conveyances and mineral lease regarding mineral reservation in grantor's deed to mineral lessors' predecessors in interest acknowledged that all of property conveyed by deed or just one lot was subject to the reservation, precluded summary judgment on estoppel by deed defense raised by grantor's grandson, in declaratory judgment action brought by lessee of mineral estate seeking declaration that grandson of grantor did not own a one-third of the one-half interest in the mineral estate allegedly reserved by grantor in all of land conveyed by deed. Cases that cite this headnote [9] Judgment Evidence and Affidavits in Particular Cases Inventory of grantor's estate and affidavit of grantor's grandson regarding grandson's knowledge regarding the estate's inventory was insufficient to establish, in grandson's motion for summary judgment on his adverse possession claim, that grantor and his successors in interest owned a one-half interest in mineral estate allegedly reserved by grantor in all of land conveyed by grantor's deed, where such evidence did not prove or purport to prove that either grandson, © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 Freeman v. Stephens Production Co., 171 S.W.3d 651 (2005) 162 Oil & Gas Rep. 563 grantor, or any of grandson's predecessors in interest actually possessed the mineral estate for the requisite statutory period of time. Cases that cite this headnote [10] Mines and Minerals Adverse Possession Actual possession of the minerals must occur in order for a person to obtain ownership of a mineral interest by adverse possession. Cases that cite this headnote Attorneys and Law Firms *652 Carlos H. Ochoa, McAllen, Gary E. Ellison, Houston, Mickey Olmstead, Austin, for Appellant. Steven W. Ellis, Corpus Christi, Charles C. Murray, Atlas & Hall, J.W. Dyer, Dyer & Associates, McAllen, for Appellees. Donald G. Sinex, Houston, Peter A. Vermillion, Austin, for intervenors. Before Justices YA#NEZ, CASTILLO, and GARZA. OPINION Opinion by Justice GARZA. In this appeal from the trial court's final summary judgment, the parties dispute the terms of a 1946 deed by which Paul Freeman conveyed title to certain property to Kenneth R. Hixon and Mary Katherine Hixon (the “Freeman–Hixon Deed”). Freeman's grandson, also named Paul Freeman (“Paul”), claims that the Freeman–Hixon Deed reserved to his grandfather a one-half participating interest in and to all oil, gas, and other minerals in or under the land conveyed by the deed. Paul contends that he owns a one-third interest in this reservation. His claim is opposed by Stephens Production Company, which asserts rights to certain portions of the mineral estate through a mineral lease executed by the Hixons' successors in interest, some of who are intervenors in this matter and also oppose Paul's claim. Stephens filed suit for declaratory judgment against Paul and four other defendants, asking the trial court to declare that the disputed reservation in the Freeman–Hixon Deed only affected a portion of the *653 conveyed land known as Lot 288. 1 Paul counterclaimed, seeking a declaration that the reservation was not limited to Lot 288 but affected the entire property conveyed by the deed. Subsequently, the lessors of Stephens' mineral lease filed a plea in intervention, seeking a declaration that the Freem [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4063358. Public record. Not legal advice.