Federal Insurance Company et al v. Select Energy Services LLC and Exco et al. is a reminder for negotiators of indemnity and defense obligations in oilfield contracts that choice of law is important. Ignore it when drafting and it will be too late when litigating.

The events

Three workers were injured on an Exco drilling rig in DeSoto Parish. Two sued in Texas, one sued in Louisiana. In the Texas suit Exco demanded that Select indemnify and defend Exco under the parties’ service agreement; Select did, and paid $31MM to settle. In the Louisiana suit the roles were reversed. Exco (through Federal) agreed to defend Select. Exco then withdrew its defense and alleged that the indemnity provision was unenforceable because it contravened La. R.S. 9:2780 the Louisiana Oilfield Anti-Indemnity Act.  Select filed a reconventional demand to recover the amount of the Texas settlement.

The choice of law provision called for Texas law to apply without regard to conflict of laws provisions. In case a court might choose to apply the Louisiana Act, there was a substitute indemnity provision: The indemnity and insurance obligations are separate and apart from each other. The insurance obligation would support, but not in any way limit, the defense and indemnity obligations set forth in the agreement.

The Louisiana and Texas Acts

The Louisiana Act was an attempt to avoid adhesionary contracts in which, due to unequal bargaining power, a contractor would have no choice but to agree to indemnify the oil company lest they risk losing the contract. The Act declares null and void any provision in any agreement which requires defense and/or indemnification where there is negligence or fault on the part of the indemnitee or an independent contractor who is directly responsible. If Louisiana law applied, the statute would invalidate Exco’s defense and indemnity obligations to Select.

On the other hand, the Texas Act generally invalidates oilfield indemnity agreements but allows enforcement of mutual indemnity obligations limited to the scope and amount of contractual indemnity insurance each party as indemnitor has agreed to provide to the other as indemnitee. Thus, a mutual obligation is enforceable but limited to the extent of coverage limits of contractual indemnity insurance.

The insurance provided by the parties in the contract brought the mutual indemnity agreement within the exception.
Continue Reading Louisiana Court Considers Texas and Louisiana Oilfield Anti-Indemnity Acts

Co-author Brittany Blakey

Let’s begin with a question: Master service agreements (“MSA’s” in the trade), once agreed upon, often remain in force for years. As time passes and circumstances change, the parties amend, sometimes losing sight of the original details. Was Stingray Pressure Pumping, LLC v. In re Gulfport Energy Corporation the result of forgetfulness

Co-author Rees LeMay*

In Apollo Exploration, LLC v. Apache Corp., Texas’ 11th Court of Appeals analyzed several provisions of purchase and sale agreements in a complex oil and gas transaction and demonstrated a measured, text-centered approach to the interpretation of contract language.

Significant parts of the holding hinged on the Court’s reference to

Co-author Rusty Tucker

This is another chapter in the dispute between Eagle Oil & Gas Co. and. TRO-X, L.P.  The litigation arises out of an agreement to acquire and sell oil and gas leases. Here, TRO-X alleges that Eagle failed to remit a share of revenues from production that commenced after the first suit between the parties ended.


In 2005 TRO-X and Eagle entered into an acreage acquisition agreement for leases in Pecos and Reeves counties. The interests would be acquired in Eagle’s name for both parties. Each party could choose to retain a percentage of un-promoted working interests in the prospects, and the remaining interests would be sold to third parties. Profitable sales would yield either “cash proceeds” or “non-cash proceeds.” The agreement included an AMI.
Continue Reading A Long-Running Dispute Over an Acquisition Agreement is Returned to the Trial Court

What could possibly go wrong when drill pipe and a delivery ticket are sent to a well location? Well …

The facts

In Knight Oil Tools v. Rippy Oil Company, Knight rented drill pipe to Rippy for an Eagle Ford well.  A delivery ticket represented that the pipe complied with API premium class standards. The pipe, marked with two white bands, was supposed to meet standards for API premium class pipe. Some of the pipe did not comply with the standards.

(The physical condition of used drill pipe is indicated by an industry-recognized system of colored bands, with each color representing a certain physical condition.)

The pipe broke in the hole because of what the parties agreed was fatigue. Rippy abandoned the well and an offset well was unsuccessful. Rippy sued Knight to recover damages for the lost well and Knight counterclaimed for unpaid invoices.

Partial summary judgment for the customer
Continue Reading Defective Drill Pipe+Delivery Ticket=Lawsuit

Co-author Skyler Stuckey

In Endeavor Energy Resources, L.P. v. Energen Resources Corp. et al. the Supreme Court of Texas construed a continuous development clause in an oil and gas lease covering 11,300 acres in Howard County. After the primary term, lessee Endeavor could retain acreage by drilling a new well every 150 days. The clause gave Endeavor “ … the right to accumulate unused days in any 150-day term during the continuous development program in order to extend the next allowed 150-day term between the completion of one well and the driling of a subsequent well.

After the primary term, Endeavor drilled 12 wells that extended the lease. Endeavor began drilling a 13th well 320 days after completing the preceding well. In the ensuing period Energen top-leased the supposedly non-retained parcels. Litigation ensued.

The dispute focused on how to calculate the number of “unused days”. Endeavor argued that it could carry forward unused days across multiple 150-day terms.  Energen argued that unused days in any given 150-day term could be carried forward only once, to the next term.
Continue Reading Texas Supreme Court Deems Continuous Development Clause Ambiguous