Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC

Summary

The Louisiana Supreme Court held that a 1972 joint operating agreement did not apply to an oil and gas lease acquired by Midstates Petroleum in 2008 within the geographic area described in the agreement. Applying Louisiana contract-interpretation principles, the court concluded that the agreement covered leases and unleased mineral interests owned by the parties when the agreement was executed, and that it did not contain an area-of-mutual-interest provision covering future leases. The court reversed the court of appeal and reinstated the trial court's judgment in favor of Midstates.

Holdings

1. The JOA applies to leases and unleased mineral interests located within the geographic area described in Exhibit A only when those interests were owned by the parties at the time the JOA was executed; it does not automatically apply to Midstates's 2008 after-acquired lease.
2. Partial summary judgment in favor of Midstates was proper because the undisputed JOA language established that the agreement did not govern the 2008 lease.

Questions Presented

1. Whether the 1972 joint operating agreement applies to an oil-and-gas lease acquired by one party in 2008 within the geographic area described in Exhibit A.
2. Whether the court of appeal correctly interpreted the geographic description in Exhibit A as covering all present and future leases within that area.
3. Whether Midstates was entitled to partial summary judgment under the JOA and applicable Louisiana contract-interpretation principles.

Disposition

reversed