Texas Oil and Gas Attorney Blog
The El Paso Court of Appeals published an interesting opinion about the rights of a lessor to royalties from a non-operating co-tenant oil company. The case is Pioneer Natural Resources v. Elberta M. Royalty, 2026 WL 2435350 (Tex.Civ.App.-El Paso no pet.).
In this case, the operator was Henry Resources LLC. Henry had a joint operating agreement with Pioneer, which was the non-operating co-tenant. The joint operating agreement provided that Pioneer would not get paid royalties until after payout. Pioneer had signed a lease with Elberta, which provided for payment of royalties beginning with first production. Henry drilled producing wells but did not begin paying Pioneer until after payout. Elberta sent a demand letter to Pioneer, demanding royalties beginning with first production of the Henry wells. Pioneer refused.
The Court of Appeals held that Pioneer owed Elberta royalties since first production and interest on those royalties due to their late payment.
Pioneer had argued that it was not possible to calculate royalty due Elberta because it did not have enough information to calculate the royalties. The Court said that it was possible to calculate the royalties from publicly available information.