Texas Business Court Decision – March 27, 2026
No. 25-BC04B-007 Robert May, et al. v.Ineos USA Oil & Gas, LLC, et al. (Fourth Division, Judge Sharp) 25-bc04b-0007-may-v-ineos-usa-oil-gas-2026-tex-bus-14.pdf
Contracts/Oil and Gas Leases. Plaintiffs assigned two leases to defendants to permit them to conduct oil and gas drilling on the property; plaintiffs reserved a reversionary interest in the Leases except for assets defendants “earned” by reaching certain drilling goals. Plaintiffs alleged in this action that defendants had breached the agreements. The matter now comes before the court on defendants’ motion for partial summary judgment. Held: (1) the leases granted a fee simple determinable interest to defendants, subject to the possibility of a reverter in the plaintiffs/lessees; (2) the defendants possessed a vested interest in the leases upon the contracts’ execution; (3) that assignment, however, was conditional, subject to divestment; the agreement that the defendants would have a carveout for “assets earned” by meeting certain goals was an exception to plaintiffs’ reversionary interest and not an exception to the lease assignment; (4) plaintiffs’ ownership of a reverter did not divest defendants of their fee simple determinable, which was immediate upon the signing of the contract; (5) under the contracts, only cessation of continuous drilling operations triggered a reversion; the parties have identified no other event – including the defendants’ alleged failure to properly designate earned wells or acreage – that triggers a reversion to plaintiffs; (6) at the cessation of continuous drilling, defendants’ interest in the leases will terminate as to all property not “earned” according to the agreements; this earned-asset provision operates as a special limitation as to any assets defendants failed to earn by the end of the continuous-drilling-operations period; the record is not yet sufficiently developed for the court to determine what assets defendants have earned; (7) when assigning the leases, plaintiffs reserved a reversionary “back-in” interest in certain of defendant’s earned assets; plaintiffs earn their 30% reversionary interest when a well becomes an “earning well;” the three components of the back-in interest are: (a) the earning well, (b) the earned acreage for such earning well, and (c) any other wells drilled on the earned acreage; their payout is defined in the agreement and a well drilled on acreage that has already been earned is not an earning well for payout purposes; nonearning wells cannot trigger payout, given the three components plaintiffs gain from each payout; if they were to receive a 30% interest in the earning well, earning acreage for each earning well, and any other wells on that acreage every time any earning well and and again any time any other well reaches payout, they could accumulate 30% of the same wells and acreage multiple times over; instead payout can occur only as to each earning well, which then grants plaintiffs their 30% interest in all three components relating to that earning well; that back-in interest will only revert to plaintiffs a single time as to each earning well; and (8) because the contract terms are conclusive the court will not consider plaintiffs’ extrinsic evidence to construe them.
The motion for partial summary judgment is granted to defendants on these issues:
(1) the contracts conveyed to defendants a vested fee simple determinable in the leases;
(2) no partial termination or corresponding reversion of defendants’ interests can occur until defendants cease continuous drilling operations;
(3) the contracts’ earned-acreage provisions operate as special limitations on defendants’ property interests; and
(4) plaintiffs’ 30% reversionary back-in interest is triggered at payout, which occurs upon and is calculated based on cost recovery for each earning well under the process described in the lease agreements, which aggregates all specified costs on the corresponding earned acreage; payout cannot occur independently as to a nonearning well.