Texas Oil and Gas Attorney Blog
In Cromwell v. Anadarko E&P Onshore, LLC (No. 23-0927 May 25, 2025), the Texas Supreme Court issued an opinion concerning the habendum clause in two oil and gas leases. An example of a typical habendum clause, that is required in some form in all oil and gas leases, is this:
“This lease shall be in force for a term of three (3) years from this date (called “primary term”) and as long thereafter as oil, gas or other minerals are produced from said land, or land with which said land is pooled hereunder, or as long as this lease is continued in effect as otherwise herein provided.”
David W. Cromwell and Anadarko E&P Onshore, LLC are oil-and-gas co-tenants, both owning shares of the working interest on the same land in Loving County, Texas. Cromwell entered into two leases and sent copies to Anadarko. For almost 10 years, Cromwell asked Anadarko eight to ten times to enter a joint operating agreement and participate in production from Anadarko’s existing three wells, but Anadarko never provided Cromwell with a joint operating agreement. Instead, Anadarko repeatedly sent Cromwell AFEs (Authorization for Financial Expenditures) for Anadarko’s three wells and Cromwell paid them. Anadarko said these were sent in error.
The primary term expired on Cromwell’s two leases without production by Cromwell. Anadarko decided, without saying anything to Cromwell, that his two leases had terminated and ran in and took new leases from Cromwell’s lessors. Cromwell sued.
The Supreme Court held that the habendum clauses, like the example above, said there had to be production to keep the leases from terminating at the end of the primary term, but the clauses do not say whose production it had to be. In other words, it did not have to be production by Cromwell. Instead, Anadarko’s own production kept these leases in force.
This decision is based on settled contract law; however, I wonder if Anadarko’s deceptive behavior had any effect on the Court?