Sunac Petroleum Corp. v. Parkes
Supreme Court of Texas
416 S.W.2d 798 (Tex. 1967)
Parkes (plaintiff) assigned an oil and gas lease, reserving a royalty, and the interest eventually passed to Sunac Petroleum (Sunac) (defendant); the lease could extend beyond its primary term either through additional drilling after a dry hole or continued drilling operations already underway at the term's expiration, or through production within a pooled unit. Sunac pooled the lease for gas purposes only, and although a well was being drilled within that gas unit (but not on Sunac's own leasehold) when the primary term expired, it ultimately produced oil rather than gas; Sunac then began drilling a new well on its own leasehold, but also signed a new lease with the underlying landowners on the theory the original lease had already expired, and stopped paying Parkes his royalty, leading Parkes to sue.
Whether a lease clause extending the primary term for drilling operations underway at the expiration of the primary term applies only to the continuous prosecution of the particular operations being conducted at that expiration, rather than to new operations begun afterward.