Apache Corp. v. Apollo Expl., L.L.C.

This Texas Supreme Court case involves a dispute concerning the termination date of a particular oil and gas lease included in Purchase Sale Agreements (“PSAs”) between Apache Corporation, as buyer, and Apollo Exploration, L.L.C., et al. as sellers. The parties agree that one part of the lease expired but did not agree on the precise date that it expired; at issue was whether that part of the lease expired on December 31, 2015, or January 1, 2016.

The lease stated that its effective date was January 1, 2007, “from which date the anniversary dates of this lease shall be computed.” (Emphasis added.) The lease also stated that it would be “in force for a Primary Term of three years from the effective date of this lease.” (Emphasis added.) The lease was renewed over time until 2016. When the lease was not renewed, the sellers argued that the language from the PSA meant that the lease expired on December 31, 2015. Petitioner contends it ended one day later, on January 1, 2016.

The court reversed the decision of the Court of Appeals and held that the default common-law rule applies, and therefore, the lease agreement expired on January 1, 2016. Under this rule, the effective date, or measure date, is not included in the time period calculation. Parties entering into an agreement can express their intent to depart from this default rule by expressly stating a different way to calculate the time period. Still, the parties did not do so here, so the default common-law rule applies.