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Slant Operating, LLC v. Octane Energy Operating, LLC
The Business Court of Texas denied Octane Energy's plea to the jurisdiction in a breach of contract action brought by Slant Operating, holding that Slant adequately pleaded that a letter agreement containing reciprocal waivers of objections to directional drilling applications constituted a qualified transaction with aggregate value exceeding the $10 million jurisdictional threshold. The court rejected Octane's arguments that the agreement's silence on consideration and alleged status as an unenforceable agreement to agree defeated jurisdiction, finding that the value of each waiver at the time of contracting—based on expected production of additional resources—was properly alleged to exceed $10 million.
Analysis
Business Court Enforces Letter Agreement Requiring Reciprocal Off-Lease Penetration Point Waivers Between Adjacent Operators
Slant Operating obtained partial summary judgment against Octane Energy for breach of a letter agreement requiring reciprocal waivers for drilling from off-lease penetration points on adjacent leaseholds, after Slant had already provided its waiver to Octane. The Business Court rejected Octane's defenses that the future waiver provision was too indefinite to enforce and that Slant was required to exhaust Railroad Commission administrative remedies before pursuing breach of contract claims.
Business Court Strikes Down Third-Party Beneficiary Claims in Off-Lease Penetration Point Waiver Dispute
The Business Court of Texas granted Octane Energy's motion to strike untimely summary judgment evidence and granted in part its motion for summary judgment in a dispute over a letter agreement between oil and gas operators exchanging waivers for off-lease penetration point permit applications. The case involves whether non-signatory leasehold owner Slant WTX Holdings II, LLC can recover damages as a third-party beneficiary when operator Slant Operating, LLC claims breach for failure to waive objections to drilling the Gardendale Wells.
Business Court Dismisses Leaseholder's Third-Party Beneficiary Claim in Directional Drilling Dispute
The Business Court of Texas granted Octane Energy's plea to the jurisdiction, dismissing leaseholder Slant WTX Holdings II, LLC for lack of standing to enforce a letter agreement containing reciprocal waivers of drilling objections between operator Slant Operating LLC and adjacent operator Octane Energy. The court held that Slant WTX Holdings failed to establish third-party beneficiary status because the contracting parties did not enter into the agreement with the intention to directly benefit the leaseholder.
Business Court Jurisdiction Upheld Over $10 Million Directional Drilling Waiver Agreement
The Business Court of Texas denied Octane Energy's plea to the jurisdiction in a breach of contract action brought by Slant Operating, holding that Slant adequately pleaded that a letter agreement containing reciprocal waivers of objections to directional drilling applications constituted a qualified transaction with aggregate value exceeding the $10 million jurisdictional threshold. The court rejected Octane's arguments that the agreement's silence on consideration and alleged status as an unenforceable agreement to agree defeated jurisdiction, finding that the value of each waiver at the time of contracting—based on expected production of additional resources—was properly alleged to exceed $10 million.
Business Court Enforces Letter Agreement Requiring Competitor to Waive Objections to Off-Lease Drilling Applications
The Business Court of Texas granted partial summary judgment to Slant Operating on its breach of contract claim against Octane Energy, holding that a letter agreement requiring reciprocal waivers of objections to off-lease penetration point drilling applications was a valid, enforceable contract with sufficiently definite terms. The court rejected Octane's arguments that the future waiver provision was unenforceable for indefiniteness and that Slant was required to exhaust administrative remedies before the Texas Railroad Commission before pursuing breach of contract claims.
Texas Business Court Denies Third-Party Beneficiary Standing to Leaseholder in Horizontal Drilling Waiver Dispute
Slant WTX Holdings II, LLC, a leaseholder for Slant Operating LLC's proposed horizontal well with a penetration point off its leasehold, sought to enforce a reciprocal waiver agreement between Slant Operating and adjacent operator Octane Energy Operating, LLC. The Business Court sustained Octane's plea to the jurisdiction, holding that the leaseholder lacked standing as a third-party beneficiary because there was no evidence that Octane entered the letter agreement with the intention to benefit the leaseholder, and any benefit conferred was merely incidental.
Business Court Bars Third-Party Beneficiary Damages in Off-Lease Penetration Point Waiver Dispute
The Business Court of Texas granted in part Octane Energy's summary judgment motion in a dispute over a letter agreement that reciprocally waived objections to off-lease penetration point drilling permits, while also granting Octane's motion to strike untimely summary judgment evidence filed by Slant Operating and Slant WTX Holdings II. The plaintiffs had sought three categories of damages—lost revenue for six Gardendale Wells, lost revenue for 35 future unidentified wells, and drilling redesign costs—after Octane allegedly failed to provide a promised waiver for the Gardendale Wells.