New Lease or Top Lease? Lessor’s Intent Will Govern

In Anadarko Petroleum Corp. v. TRO-X, L.P., No. 08-15-00158-CV, 2016 Tex. App. LEXIS 2861, the El Paso Court of Appeals concluded that the execution of new leases operated to terminate and release old leases covering the same lands. Id., at *22. The Court recognized that there was not enough evidence to show (i) that the Lessors placed any emphasis on the execution of a separate release of the old leases to make the new leases effective, or (ii) that the Lessors intended for the new leases to be top leases that would come into effect only upon the recordation of a Release Agreement. Id., at *21-22. In February 2007, David E. Cooper, Hill-Cooper, Ltd., Richard W. Cooper, Kendall C. Hill, and Shirley Cooper (the "Lessors") executed five oil and gas leases in favor of TRO-X, as Lessee (the "2007 Leases"). Id., at *2. The 2007 Leases contained an Off-Set Well…
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Washout of Production Payments Upon Expiration of the Underlying Leasehold

The Texas Supreme Court, in Apache Deepwater, LLC v. McDaniel Partners, Ltd., No. 14-0546, 2016 Tex. LEXIS 179 (February 26, 2016), addressed the issue of the calculation of production payments reserved in the assignment of four oil and gas leaseholds, and whether, after two of the leases terminated, the production payment should be adjusted to reflect the loss of the two leaseholds. The dispute in Apache Deepwater centered on the interpretation of a production payment reserved in the assignment of four oil and gas leases. Id., at *1-2. In 1953, Hugh W. Ferguson, Jr. ("Ferguson") assigned to L.H. Tyson ("Tyson") four oil and gas leases that Ferguson owned in Upton County, Texas. Id., at *2. The assignment reserved to Ferguson a one-sixteenth (1/16) production payment, which it described as "1/16th of 35/64ths of 7/8ths, being one-sixteenth of the entire interest in the production from said lands to which Assignor claims to be entitled under the…
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Statutory Subordination of Liens to Oil and Gas Leases

In a measured victory for oil and gas companies operating in Texas, the 84th Texas Legislature has passed House Bill 2207, codified as TEX. PROP. CODE § 66.001, and titled "Sale of Property Subject to Oil or Gas Lease." Chapter 66 became effective January 1, 2016, and applies with respect to foreclosure sales or judicial foreclosures commenced on or after that date. Prior to the enactment of House Bill 2207, the general rule of priority between mortgages and oil and gas leases was "first in time, first in right." If an oil and gas lease was taken prior to a mortgage, then it was superior to and unaffected by the subsequent foreclosure of the junior lien. Conversely, if the mineral estate was burdened by an outstanding mortgage at the time it was leased, a lessee would often have to go through the time-consuming and sometimes difficult task of obtaining a…
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