Hardin-Simmons University v. Hunt Cimarron Limited Partnership D/B/A Cimarron Exploration Company
07-15-00303-CV
| Tex. App. | Jul 25, 2017Background
- Hardin‑Simmons (lessors) and Hunt Cimarron (lessee) executed an oil-and-gas lease on Aug. 1, 2006 covering ~4,960 acres in Cochran County, Texas with a 5‑year primary term ending July 31, 2011, a Pugh/retained‑acreage clause, a continuous development clause, and a reworking (savings) clause.
- The lease required Lessee to file a recorded partial release within 30 days after any partial/total termination (para. 12.h).
- Prior production on the property largely dated from the 1950s–1960s; Hunt did not drill new wells during the primary term but commenced reworking operations on ten legacy wells shortly before the term ended.
- Hardin‑Simmons demanded a release after the primary term; Hunt refused, asserting the reworking clause kept the entire lease alive. Hardin‑Simmons sued for lease termination, breach of express and implied covenants, and declaratory relief regarding the release.
- A jury found for Hunt on development, release, and that ten specified wells were producing in paying quantities; trial court entered take‑nothing judgment. On appeal the court reversed in part, holding the lease terminated as to all acreage except 40 acres around listed producing/disposal wells and remanded for further proceedings on fees.
Issues
| Issue | Plaintiff's Argument (Hardin‑Simmons) | Defendant's Argument (Hunt) | Held |
|---|---|---|---|
| 1. Whether the lease expired as a matter of law at end of the primary term as to non‑productive acreage | Lease expired as to all non‑productive acreage because no production and reworking clause does not extend the whole lease beyond Pugh/retained‑acreage limits | Reworking operations commenced before primary term end preserved the entire lease (all lands & depths) under para. 6 | Court: Lease expired as to non‑productive acreage. Reworking clause preserves only acreage that fits the retained‑acreage/production‑unit definitions; not entire lease (issue sustained). |
| 2. Whether Hunt breached implied covenant to reasonably develop | Hunt failed to drill wells a reasonably prudent operator would have drilled; breach as matter of fact | Hunt acted as reasonably prudent operator (developing a waterflood/unit) and pursued reworking/unitization | Court: Jury finding of no breach upheld; evidence to support no‑breach verdict (issue overruled). |
| 3. Whether Hunt breached obligation to record a release of non‑productive acreage | As a matter of law lease terminated as to non‑productive acreage and Hunt thus failed to timely record releases | Hunt argued no obligation because reworking clause preserved the lease | Court: Jury answer that Hunt executed required release set aside; court rendered that Hunt failed to execute the required release (issue sustained). |
| 4. Whether ten specified wells were producing in paying quantities on Aug. 1, 2011 | Wells were not producing in paying quantities; lack of revenue evidence means they could not hold acreage | Hunt produced evidence of profitability over a reasonable period and other circumstances supporting paying production | Court: Jury finding that wells produced in paying quantities was not against the great weight and preponderance of the evidence (issue overruled). |
Key Cases Cited
- King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (legal‑sufficiency review standards)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (evidentiary standard for reviewing jury findings)
- BP Am. Prod. Co. v. Laddex, Ltd., 513 S.W.3d 476 (Tex. 2017) (two‑prong test for "producing in paying quantities")
- Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. 2002) (habendum clause and production meaning)
- Amoco Prod. Co. v. Alexander, 622 S.W.2d 563 (Tex. 1981) (implied covenant to develop and protect lease once production obtained)
- Ridge Oil Co. v. Guinn Invs., Inc., 148 S.W.3d 143 (Tex. 2004) (activities sufficient to maintain lease include operations calculated to obtain production)