Equinor USA Onshore Props. Inc. v. Pine Res. LLC (P)

This appeal concerns a contractual obligation to “spud” three wells on a tract of land in West Virginia. The parties dispute whether the obligation to “spud” the wells is an obligation only to begin drilling or to complete the wells to the point of mineral production. The district court properly ruled that the Purchase and Sale Agreement executed between the petitioner and respondent contains no requirement that the spudded wells be completed to production. The Agreement does not require hydrocarbon production.

The Agreement is ambiguous as to whether it required completion of the three wells to production. Because it is reasonably susceptible to two meanings — (1) that it required only that drilling be commenced and (2) that it required drilling completion and mineral production — extrinsic evidence may determine the intent of the parties. Here, while there is evidence that the petitioner believed the Agreement required production, the record as a whole supports the district court’s conclusion that the intent of the parties wasn’t completion of the three wells to production in the timeframe established by the Agreement’s section 5.7(b). The Agreement contemplates mineral production but stops short of requiring it.

The district court also properly concluded that the petitioner failed to prove it sustained any damages. The respondent doesn’t dispute that it breached the Agreement by failing to spud the second and third wells. But the petitioner’s evidence of damages was related entirely to royalties to which it would have been entitled had the three wells been completed and producing. No separate evidence of damages sustained solely due to the failure to spud the second and third wells was introduced. Absent evidence of damages flowing from the respondent’s failure to begin drilling the second and third wells, the district court committed no error in granting judgment to the respondent.

Affirmed.

Equinor USA Onshore Props. Inc. v. Pine Res. LLC (P), No. 18-1291, Mar. 6, 2019. 4th Cir. (Gregory) from SDWV at Charleston (Berger).



Categories: 4th U.S. Circuit Court of Appeals, Opinions, Published

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