Court of Appeals of Texas, Seventh District, Amarillo
Appeal from the 31st District Court Wheeler County, Texas
Trial Court No. 12, 769, Honorable Steven R. Emmert,
QUINN, C.J., and CAMPBELL and PIRTLE, JJ. 
Quinn Chief Justice.
case involves the reservation of an interest in various
mineral leases by Cabot Oil and Gas Corporation and whether
the affirmative defense of the statute of frauds effectively
vitiated a portion of that reservation. Newfield Exploration
Mid-Continent, Inc. argued that it did, filed both a
traditional and no-evidence motion for summary judgment upon
the affirmative defense, and obtained a final summary
judgment denying Cabot recovery. Two of the three issues
before us pertain to the statute of frauds and the
satisfaction of its requirements. The third issue concerns
various forms of estoppel and whether they barred Newfield
from invoking the statute of frauds. We affirm.
was the operator of the mineral lease in which Cabot
purportedly reserved the interest. The reservation appeared
in the "Assignment of Oil, Gas and Mineral Leases"
(assignment) Cabot executed in favor of Samson Lone Star
Limited Partnership. Through the document, Cabot assigned to
all of its right, title and interest in and to the Oil, Gas
and Mineral Leases described on Exhibit "A"
attached hereto, hereinafter referred to as said Leases, less
and except the EEX McCoy #27 -1 wellbore located 791' FSL
and 21 07' FWL of Sec. 27 Camp School Lands, Wheeler
County, Texas and the 160 acre proration unit surrounding
said well from the surface down to 15, 500'.
(Emphasis added). Newfield did not question the legitimacy of
that part of the reservation describing the wellbore and its
language in play here is reference to "the 160 acre
proration unit surrounding said well from the surface down to
15, 500'." No "160 acre proration unit"
had ever been designated. That circumstance, coupled with the
lack of any further description of the property, prevented
one from identifying the encompassed acreage with any
reasonable certainty, said Newfield. Due to the inability to
identify the acreage, Newfield believed that the statute of
frauds voided the portion of the reservation pertaining to
the 160 acre proration unit. Cabot disagreed, arguing that
the proration unit actually referred to the entire southwest
quarter of section 27, Camp School Lands.
argument was derived from language appearing in a
participation agreement it executed with Newfield's
predecessor-in-interest. A portion of that agreement
addressed Cabot's option to participate in the drilling
of the initial well, that is, the aforementioned McCoy #27-1
well. In paragraph 5.2 of the document, the parties wrote:
EEX shall propose the drilling of the Initial Test Well
within the Prospect Area. In the event Cabot does not
participate in the drilling of the Initial Test Well proposed
and drilled within the Prospect Area, Cabot shall assign to
EEX all of its interest in a 640 acre proration unit
and all of its interest in two (2) adjoining 640 acre
proration units, such proration units to be selected by
(Emphasis added). Apparently, Cabot combined the phrase
"640 acre proration unit" in paragraph 5.2 with the
fact that a section of land consists of 640 acres. The
combination apparently led it to infer that the parties
intended reference to a "640 acre proration unit"
to mean a particular section of land within the
"prospect area" encompassed by the participation
agreement. For instance, a 640 acre proration unit in
the Camp County School Lands survey apparently would be the
entirety of section 16, or 21 or 22, or 23 or 27 or the
like. And, because allusion to a "640 acre
proration unit" equated a particular section of land as
demarcated in a survey within the "area of mutual
interest, " then a "160 acre proration unit"
necessarily equaled a specific quarter section of that
particular section, or so Cabot would argue. That, in turn,
meant the reservation of the "160 acre proration
unit" surrounding the "wellbore" of the McCoy
#27-1 well encompassed the entire southwestern quarter
section of section 27 since the well was located in that
trial court rejected Cabot's interpretation of the phrase
"160 acre proration unit" when it granted
Newfield's motion for summary judgment. It also rejected
Cabot's effort to use the theory of estoppel as a means
of preventing Newfield from invoking the statute of frauds.
As previously mentioned, we have been asked to revisit those
One and Three - ...