Seagull Energy E & P, Inc. v. Eland Energy, Inc.

207 S.W.3d 342 (2006)

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Nature of the Case

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Facts

P is a lessee and operator of two offshore oil and gas leases in the Gulf of Mexico. In 1994, D purchased an interest in both leases, acquiring a 1.09375% and a 9.41719% interest. D expressly assumed certain rights and responsibilities under two offshore operating agreements. Both agreements designated P as the operator and were essentially the same. They provided that D and the other lessees were to share the cost of operations in proportion to their respective interests and that P, as operator, was to exploit the minerals and collect the operating costs from the other lessees. D sold its interest in these leases to Nor-Tex Gas Corporation, also assigning to Nor-Tex its rights and obligations under the operating agreements. Nor-Tex failed to reimburse P for its share of operating costs, and P sought these costs from D as an interest owner. D refused to pay because it no longer owned an interest in the leases. P sued Ds for breach of the operating agreement. Both parties moved for summary judgment. The trial court denied D's motion but granted a partial summary judgment for P. The court concluded that Nor-Tex had breached the operating agreement by failing to pay its share of the operating expenses and that D also remained liable for these expenses, which it incurred under the operating agreement. The court held Ds jointly and severally liable to P in the amount of $268,418.90, plus interest and attorney's fees. D appealed. The court of appeals reversed the judgment to the extent it awarded damages against D. The court concluded that D had no continuing liability after the assignment of its working interest because the agreements did not expressly provide for such a continuing obligation. P appealed.