May 01, 2017
Dallas - The Texas Supreme Court recently declared Thompson & Knight LLP client BP America Production Co. (“BP”) the winner of a five-year long lease termination dispute.
In the matter of BP America Production Co. v. Red Deer Resources LLC, Red Deer Resources LLC (“Red Deer”) sought termination of BP’s 2,100-acre oil and gas lease in Lipscomb County in the Texas Panhandle under two claims: (i) the lease failed to produce in paying quantities through June 12, 2012 and (ii) the last well on the lease was incapable of producing in paying quantities on June 13, 2012 (the date BP tendered its shut-in royalty payment). After a two-week trial, in August of 2013, the jury answered questions on the first theory in favor of BP, but answered questions on the second claim in favor of Red Deer. Based on the second theory of recovery, the trial court entered judgment terminating BP’s lease—a lease Red Deer asserted was worth more than $40 million—and the Amarillo Court of Appeals affirmed in 2015. The Texas Supreme Court decided to review the case in 2016 and heard oral argument in January 2017. Thompson & Knight filed the final post-submission brief on behalf of BP in February 2017.
On April 28, 2017, the Texas Supreme Court issued its opinion holding that the questions submitted to the jury on the second theory were immaterial because the terms of the lease required an analysis of the well’s capability to produce on the date gas was last “sold or used,” which was June 4, 2012. Thus, the questions submitted about June 13, 2012 could not support a judgment in Red Deer’s favor. Since BP prevailed at trial on the only material questions submitted to the jury, the Texas Supreme Court reversed and rendered a take-nothing judgment in BP’s favor.
Thompson & Knight Trial Partner Rob Vartabedian, Associate Conrad Hester, and Partner Rich Phillips represented BP with John Ben Blanchard of Brown & Fortunato at trial and Skip Watson of Davis Gerald & Cremer in the appeals. To read the full opinion, visit http://www.txcourts.gov/media/1438008/150569.pdf.