Shirley Adams, Charlene Burgess, Willie Mae Herbst Jasik, William Albert Herbst, Helen Herbst and R. May Oil & Gas Company, Ltd. v. Murphy Exploration & Production Co.-USA, a Delaware Corporation
An offset well is a “well drilled on one tract of land to prevent the drainage of oil or gas to an adjoining tract of land, on which a well is being drilled or is already in production.” Williams & Meyers’ Manual of Oil and Gas Terms, p. 718 (1994 ed.) (emphasis added). Paragraph 25 of the Herbst leases (“Leases”) provides that, if a well is drilled on adjacent lands and within 467 feet of the leased premises, the lessee must either drill an offset well, release sufficient acreage adjacent to the draining well to allow the Lessor to drill an offset well, or pay compensatory royalty. Murphy drilled a well on the Leases over 2,100 feet from the draining well and contends it is an “offset well” under Paragraph 25. Such a well does not qualify as an offset well under Paragraph 25. Murphy argues that a well drilled anywhere on the leased premises satisfies its obligation under Paragraph 25, as long as the well is completed in the same formation as the draining well. This argument deprives the word “offset” of any meaning and ignores the plain language and intent of Paragraph 25, which is to protect the leased premises from drainage. Murphy also argues that the well on the adjacent land is not in fact draining the leased premises. There is no evidence in the record to support that contention. More to the point, Paragraph 25 does not require the Lessor to prove that the well is draining the leased premises. The very purpose of Paragraph 25 is to eliminate the need for that proof. The trial court erred in awarding Murphy attorneys’ fees on appeal, based on its counterclaim for declaratory judgment. A request for declaratory judgment “tacked onto” a breach of contract claim cannot be a basis for a fee award. MBM Fin. Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660, 669-70 (Tex. 2009).