Face Challenges Confidently

175 Broesche v. Jacobson

Tuesday, September 1st, 2015


Richard F. Brown

Broesche v. Jacobson, 218 S.W. 3d 267 (Tex. App. Houston [14th Dist.] 2007, no pet., holds that “working interest” and “leasehold interest” do not necessarily have the same meaning. In this case, the text described the interest to be transferred as “[o]ne-half of all oil and gas interests of the parties as described on Exhibit A.” The parties then described multiple properties on Exhibit A to their agreement in the following format:

County              Well                             WI%                   NRI%             Status


Calhoun            Fredrich #1                0.333333             0.249998             A


It was undisputed that “WI%” means working interest percentage, but the parties did dispute whether the interest to be conveyed was an interest in the fifty specific wells listed in Exhibit A, or in the underlying leasehold.
Although the court noted that there is strong authority holding that the term working interest when used in its technical sense refers to a leasehold interest, terms such as “working interest” are used loosely and inaccurately. Sometimes “working interest” denotes merely an interest in mineral rights, or a percentage of the mineral interest granted. Under the facts of this case, the court held that it could not determine whether the parties intended to use the term in its technical sense or more loosely, and that the description was ambiguous, even though the parties were both geologists.
Exhibits similar to the one in this case, either in chart form, or as a computer printout, are common. The significance of the case is that it highlights the importance of the text of the agreement or deed in defining the interest to be conveyed, when the property description on the attached exhibit is limited. The text of an agreement or deed usually has a fairly elaborate description of the property rights to be conveyed. This almost always includes (as a minimum) a conveyance of property rights expressly described as “the leases on Exhibit A” or as a “leasehold interest in the leases on Exhibit A.” Broesch holds that “working interest” alone is not necessarily a definitive term.