Murphy Exploration & Production Company—USA, a Delaware Corporation v. Shirley Adams, Charlene Burgess, Willie Mae Herbst Jasik, William Albert Herbst, Helen Herbst, and R. May Oil & Gas Company, Ltd.

Summary

The Supreme Court of Texas held that Murphy Exploration & Production Company complied as a matter of law with an oil and gas lease’s offset provision by timely drilling a horizontal well on the leased acreage to the same producing formation as a neighboring well. The Court rejected implied proximity and drainage-protection requirements not stated in the leases, reversed the court of appeals, and reinstated the trial court’s summary judgment, as modified to remove appellate attorney’s fees.

Holdings

1. The offset provision did not require the responsive well to be located a particular distance from the lease boundary or the triggering well. Its specific location and depth requirements were that the well be drilled on the leased acreage and to a depth adequate to test the same formation producing from the adjacent well.
2. Murphy complied with the offset provision as a matter of law by commencing drilling operations on the leased acreage within 120 days after completion of the Lucas well and continuing with due diligence to a depth adequate to test the same formation.
3. Murphy was not required to prove that the Herbst well actually protected the leased tracts from drainage, and the lease did not presume or require drainage protection as the purpose of the responsive well.

Questions Presented

1. Whether the leases' offset provision required Murphy's responsive well to be located within a particular distance of the lease boundary or triggering well.
2. Whether Murphy conclusively established compliance with the offset provision by commencing a well on the leased acreage within 120 days and drilling it with due diligence to a depth adequate to test the same formation as the adjacent producing well.
3. Whether the trial court's summary judgment for Murphy was proper under the leases' express language and the context of horizontal drilling in the Eagle Ford Shale.

Disposition

reversed