A Fort Worth oil and gas company has been awarded the mineral rights to a square mile in Midland County after convincing a state jury that a competitor who claimed to own the leasehold failed to produce oil and gas “in paying quantities” for more than a year.
The winner-takes-all verdict was issued Monday in favor of Centralia Permian of Fort Worth, which challenged the leasehold of Pioneer Natural Resources USA Inc., a Fortune 500 Delaware corporation whose principal place of business in Texas is in Irving. It came at the conclusion of a seven-day jury trial presided over by state District Judge Rodney Satterwhite.
Centralia was represented at trial by Rob Vartabedian, Alix Allison and Nick Davis of the Fort Worth office of Alston & Bird, an international firm with headquarters in Atlanta; and by Scott Brister in the Austin office of Hunton Andrews Kurth.
Pioneer Natural Resources was represented by Jad Davis and Jacob Davidson of Davis Gerald & Cremer of Midland; and Andrew McCollam of the McCollam Law Firm of Houston.
Lawyers for Pioneer did not immediately return telephone calls seeking comment on the verdict.
Vartabedian, who led the trial team for Centralia, said the verdict was significant because his client’s lawsuit was the first in a case challenging a mineral rights leasehold in the Permian Basin on the ground that the holder forfeited its claim by failing to produce profitable amounts of oil and gas over a significant period of time. The Permian Basin, he said, accounts for 40 percent of all U.S. oil production.
He said Alston & Bird is pursuing similar litigation involving leases on two other sections in Midland County.
According to Centralia’s lawsuit, Pioneer Natural Resources’ leases on the Midland County section “like almost all oil and gas leases in Texas,” expired when the company failed to “produce in paying quantities.”
Oil production in Texas collapsed in 2017 – was “abysmal,” according to Centralia’s lawsuit – with plummeting market prices.
“But rather than release its leases in 2018 as it should have done and as a reasonable and prudent operator would have done,” the suit said, Pioneer “continued to pile up losing month after losing month, failing to produce profitable amounts of oil and gas for the entire year of 2018 as well. For these two years, the leases always produced poorly, and for many months they produced nothing at all.”
In effect, the suit said, this non-production terminated Pioneer’s leasehold.
At trial, Pioneer attributed its inability to produce oil and gas on a casing leak, which rendered its drilling equipment inoperative.
Vartabedian said the section previously had been productive since 1979. He said Centralia, representing two families that are lessors of the property’s mineral rights, plans to contract with a drilling concern to resume profitable production on the property.