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Cimarex Energy Co. v. Anadarko Petroleum Corp.

Court of Appeals of Texas, Eighth District, El Paso

March 13, 2019, Decided

No. 08-16-00353-CV


 [*80]  OPINION

Appellant, Cimarex Energy Co. (Cimarex) and Appellee, Anadarko Petroleum Corp. (Anadarko), were co-tenants on certain property located in Ward County, both of whom held leases giving each of them undivided fractional mineral interests on the same property. After Anadarko successfully completed drilling operations on two producing wells on the property, Cimarex sued Anadarko alleging it had failed to account for Cimarex's share of the production. In June 2013, the parties entered into a settlement agreement requiring Anadarko to make a settlement payment for production from the two wells through May 2013, and to account to Cimarex monthly thereafter for its share of production. In August 2015, Cimarex filed the underlying lawsuit contending that Anadarko breached the Settlement Agreement when it failed to account monthly for Cimarex's share of production. Both parties moved for [**2]  summary judgment, with Cimarex contending that Anadarko breached the agreement as a matter of law, while Anadarko claimed that its obligation to make payments ceased because Cimarex's lease had expired, and because Cimarex was therefore no longer a co-tenant with any interest in the property. The trial court granted Anadarko's motion for summary judgment, but denied Cimarex's cross-motion, and this appeal followed. We affirm.


Cimarex's Interests

In December of 2009, Cimarex leased a fractional undivided 1/6th mineral  [*81]  interest in approximately 440 acres in Ward County, Texas, (the subject property) from the Estate of F. Kirk Johnson, III (the Cimarex lease).1 The Cimarex lease contained a habendum clause, which provided for a primary term of five years, and a secondary term, stating that the lease remained in force after the primary term "as long thereafter as oil or gas is produced from said land or from land with which said land is pooled."2 The lease was considered "paid-up" for the primary term, meaning that Cimarex was not required to commence drilling operations during that period of time, and was not required to pay any delay rentals to the lessor during the five years, [**3]  regardless of whether it commenced operations or not.3 See generally ConocoPhillips Co. v. Koopmann, 547 S.W.3d 858, 874 (Tex. 2018) (recognizing that a "paid-up" lease is one under which all delay rentals bargained for are paid in advance, which maintains the lease during the primary term regardless of production). The Cimarex lease, however, specified that despite the fact that the five-year primary term was paid-up, this did not relieve Cimarex of "the obligation to pay royalties on actual production" during that time.4 It is undisputed that Cimarex did not drill a well or commence operations for drilling a well on the subject property during the primary term of the Cimarex lease, i.e., from December of 2009 until December of 2014.

Anadarko's Interests

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574 S.W.3d 73 *; 2019 Tex. App. LEXIS 1992 **; 2019 WL 1146790


Subsequent History: Petition for review filed by, 06/28/2019

Prior History:  [**1] Appeal from the 143rd District Court of Ward County, Texas. (No. 15-07-23-648-CVW).


lease, parties, co-tenant, lessors, drilling, primary term, lessee, terminated, secondary, settlement agreement, operating agreement, subject property, summary judgment, contends, mineral, alive, mineral interest, trial court, pooled, terms, costs, habendum clause, ambiguous, royalties, oil production, mineral lease, argues, commence drilling, attorney's fees, provisions

Civil Procedure, Appeals, Summary Judgment Review, Standards of Review, Summary Judgment, Evidentiary Considerations, Absence of Essential Element, Judgments, Entitlement as Matter of Law, Burdens of Proof, Movant Persuasion & Proof, Nonmovant Persuasion & Proof, Motions for Summary Judgment, Cross Motions, Standards of Review, Questions of Fact & Law, Energy & Utilities Law, Leases & Licenses, Contracts Law, Contract Interpretation, Ambiguities & Contra Proferentem, Entitlement as Matter of Law, Appropriateness, Parol Evidence, De Novo Review, Contract Interpretation, Intent, Leases & Licenses, Habendum Clauses, Real Property Law, Estates, Present Estates, Fee Simple Estates, Oil, Gas & Mineral Interests, Concurrent & Successive Interests, Pooling & Unitization, Joint Operating Agreements, Defenses, Demurrers & Objections, Affirmative Defenses, Estoppel, Defenses, Assignment, Release & Surrender