Point Energy Partners Permian, LLC, et.al., v. MRC Permian Company

MRC Permian Company (“MRC”) was granted an oil and gas lease with a primary term expiring on February 28, 2017. MRC spudded a new well on November 22, 2016, which temporarily suspended the termination of the lease. Pursuant to the lease’s continuous drilling provision, MRC’s activities delayed termination until May 21, 2017, unless it spudded another new well by that date. Due to an error in scheduling by MRC’s operations team, MRC did not spud a new well by May 21, 2017; instead, MRC was scheduled to spud a new well on June 2, 2017. MRC claimed to have experienced operational issues that allowed it to invoke the lease’s force majeure provision, permitting additional time to resolve the issues and extending the termination deadline. After taking top leases on the affected acreage, Point Energy Partners Permian, LLC called MRC’s use of the force majeure provision into question. Discovery revealed the force majeure event occurred on an unrelated MRC lease on unrelated acreage; MRC claimed that the other acreage delayed their rig schedule, which affected their spud date on the lease in question.

The Texas Supreme Court was asked to consider whether the force majeure clause could be invoked to extend the lease’s termination date. Based on the lease’s language, the court held that it could not because if there had been no delay, the operation as scheduled would still not have satisfied the May 21 continuous-drilling deadline. The force majeure clause was inapplicable because the force majeure event was not the reason for the lease termination; the scheduling error was. Thus, the force majeure clause could not be used to extend MRC’s lease termination date.