Western District of Texas Applies Heritage Framework to Production Sharing Agreement's No-Deductions Clause in Reeves County Royalty Dispute

Mineral owners in Reeves County challenged Permian Resources' deduction of post-production costs from royalties on wells subject to Production Sharing Agreements, arguing the PSAs' express "without deduction of any pre-production or post-production costs" language superseded the underlying lease's "at the mouth of the well" royalty clause. The magistrate judge applied Heritage Resources and Warren to recommend dismissal, finding the no-deductions clause "simply meant nothing" under Texas Supreme Court precedent establishing that "at the well" language creates both a valuation point and valuation method that subsequent clauses cannot alter without changing the computation point itself.