Texas Oil and Gas Attorney with Law Offices of Gregory D. Jordan Comments on Breach of Contract Case
Austin, TX (Law Firm Newswire) August 14, 2013 - An oil and gas company has filed a lawsuit against a drilling company, alleging breach of a contract to drill three wells.
Conquistador Petroleum filed the lawsuit against E&B Natural Resources Management Corp. on April 5, 2013 in Jefferson County District Court. Francesco Galesi is also named as a defendant.
Conquistador claims that E&B owes it hundreds of thousands of dollars because it failed to fulfill its contract to drill three wells on a 22-acre property, after one hole was found to be dry. Conquistador claims it invested $600,000 in obtaining seismic data for the planned wells in the North Port Acres Prospect and spent $4 million more afterwards.
“Drilling for oil and gas has inherent risks,” says Gregory D. Jordan, an Austin, Texas oil and gas attorney. “Companies should plan exploration and structure contracts in a way that anticipates various potential outcomes. Sometimes your crystal ball may be a bit cloudy, so it’s important to consider the impact a bad well may have.”
Conquistador claims it acquired the seismic data in 2006 and 2007, and the two companies signed an exploration agreement on May 1, 2008, under which E&B would drill three wells to a depth of 10,500 feet. According to the complaint, E&B's performance under the contract was guaranteed by Galesi.
The lawsuit states that Conquistador obtained a license allowing E&B to drill the wells using the seismic data, but E&B did not drill the first well by the September 1, 2008 deadline. That deadline was extended.
According to the complaint, after reviewing the seismic data, the two companies amended their agreement such that E&B would drill two wells to a depth of 16,500 feet instead of the three shallower wells. The first well was drilled in the fall of 2010, but it was dry and was therefore plugged in November of that year. The lawsuit alleges that E&B failed to drill the second well and requested termination of the agreement after all the leases expired in 2012. The complaint further claims that E&B failed to pay lease maintenance costs as agreed.
“E&B may have some problems if its drilling agreement did not allow it to back out in the event of a bad first well,” notes Jordan. “We will have to see how E&B tries to justify its actions.”
Conquistador is seeking reimbursement for its sunk costs, which total $2.3 million, as well as $600,000 it invested in obtaining seismic data. The plaintiff is seeking actual damages, attorney's fees, costs, and interest. The case has been assigned to Judge Donald Floyd of the 172nd District Court.
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