Royalty and Royalty Interests: Overriding Royalty; Extension or Renewal Clauses

摘要

A consulting firm generating drilling prospects brings a claim for breach of contract after contracting with Nexen, an oil and gas company, to provide seismic and geophysical data to Nexen in exchange for an assignment of an overriding royalty if Nexen acquires an interest in certain property within one year. Nexen acquires a State lease over the property within the one year term, but later releases the lease and enters into an operating agreement outside of the one year period. Nexen stipulates that it was required to assign an overriding royalty on the lease, because it was acquired within the year, but did not assign an overriding royalty to CLK with respect to me operating agreement, contending that it was acquired outside of the one year period and the contract requiring the assignment does not contain a "renewal or extension clause." The trial court holds mat the language requiring Nexen to "assign" an overriding royalty is ambiguous, because the contract does not define the term, and the jury concludes that the parties intended to include a renewal and extension clause after hearing extrinsic evidence as to the parties' intent Held: affirmed. The evidence establishes that, pursuant to industry custom, any assignment of an overriding royalty interest would have included an extension or renewal clause. The court denies CLK's request for double damages under Mineral Code Article 212.23, finding that a letter requesting an assignment of an overriding royalty does not make a demand for payment of a royalty as required by the article.