Anadarko Petroleum Corp. v. TRO-X, L.P., 8th Court of Appeals, Tyler, March 18, 2016, 2016 Tex. App. LEXIS 2861

A “washout” case in which the court held that a new lease, taken after the breach and termination of the underlying lease for non-performance of a covenant was not a renewal, extension or top lease that would prevent a washout of the interest in the prior lease.

TRO-X had 5 leases in Ward County that it assigned to Eagle under a Participation Agreement. The leases had an off-set well provision requiring the drilling of a successful offset well if another well was drilled within 660 feet of the leasehold border. Anadarko drilled such a well but did not commence an offset well within the time requirement. Anadarko negotiated new leases and the parties signed a release of the TRO-X leases. TRO-X brought suit claiming that the new leases were subject to the Participation Agreement. The court held otherwise and the court of appeals affirmed.