Face Challenges Confidently

168 Bargsley v. Pryor Petroleum Corp.

Wednesday, September 2nd, 2015

Richard F. Brown

Bargsley v. Pryor Petroleum Corp., 196 S.W.3d 823 (Tex. App.—Eastland 2006, pet. denied), strictly construes a sixty-day clause limited to “drilling” and holds that other operations will not preserve the lease. The lease clause provided:
If, at the expiration of the primary term of this lease, oil or gas is not being produced on the leased premises, but lessee is then engaged in drilling for oil or gas, then this lease shall continue in force so long as drilling operations are being continuously prosecuted on the leased premises; and drilling operations shall be considered to be continuously prosecuted if not more than sixty (60) days shall elapse between the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well. If oil or gas shall be discovered and produced from any such well or wells drilled or being drilled at or after the  expiration of the primary term of this lease, this lease  shall continue in force so long as oil or gas shall be produced from the  leased premises.
The lessee’s activities included long-stroking the existing oil well; laying a pipeline; doing electrical work; installing, checking and repairing flow lines; replacing a tank; keeping the electricity on; and keeping the equipment on the lease. “While these activities under certain circumstances might be considered to be ‘operations,’ that is a question we do not address, as these ‘operations’ are not ‘drilling operations’ as a matter of law.”
The lease also provided:
In case of cancellation or termination of this lease for any cause, lessee shall have the right to retain under the terms hereof twenty (20) acres of land around each oil or gas well producing, being worked on or drilling hereunder.
Lessee argued that the lease should not have been terminated as to the twenty acres around each well that fell within this lease provision. The court reversed and remanded the summary judgment on the issue as to whether the oil well on the lease was “being worked on,” which was a fact question.