A federal jury has awarded two Oklahoma oil companies $220,000 in damages from a “well-bashing” incident in 2015 by a company later bought by Devon Energy Corp.
The jury awarded H&S Equipment Inc. and Mark Holloway Inc. the damages after a two-day trial earlier this week in federal court in Oklahoma City.
The companies said a hydraulic fracturing job in the summer of 2015 on a Felix Energy LLC horizontal well near one of their vertical wells in Blaine County overpressured the well and destroyed its production. They sought damages and lost profits in excess of $1 million for subsurface trespass, creating a private nuisance and negligence.
Devon spent $1.9 billion to buy Felix Energy in late 2015, a transaction that gave it another 80,000 net acres in Oklahoma’s STACK play. It also inherited the lawsuit, which was filed against Felix in November 2015.
The jury sided with H&S Equipment and Holloway on the subsurface trespass and nuisance claims. U.S. District Judge Joe Heaton ruled Devon wasn’t negligent as a matter of law.
Devon has not said if it plans to appeal the judgment.
“At this time, we’re unable to discuss the specifics of the case, which involves a well we acquired after it was drilled and completed,” Devon said in a statement Thursday. “When the case is finalized, we’ll be able to discuss the circumstances in greater detail. In any event, safe and responsible operations are our top priority wherever we operate.”
‘I didn’t know if I could hold out’
Andy Sheen, whose H&S Equipment and Holloway own and operate the Coffey No. 1-14 well in Blaine County, called the judgment a win for vertical operators. He predicted more lawsuits against horizontal producers after the verdict.
“There’s several different companies that have been fracked into, but the big boys will run you out of your business with their attorneys’ fees,” Sheen said Thursday in a phone interview. “I’d had enough. I didn’t know if I could hold out, but if I knew if I could last, I could prove they pressured me up to 2,200 pounds (per square inch) before they blew up my well. I thought I would get more money, but if I didn’t, it might also set a precedent.”
Sheen said he’s had two other vertical wells affected by nearby horizontal drilling and hydraulic fracturing, a phenomenon known as “well bashing” or a “frack hit.” Sheen came to a settlement with another large, public company at one well. In the other case, he said wasn’t aware of the problems at that well in Kingfisher County until it was too late.
Sheen said he’s been in the oil business about 40 years as a plunger lift operator and owns and operates another half-dozen wells.
“I’m a one-man show and do everything by myself,” he said. “I fought this lawsuit by myself. Maybe now these other small operators won’t be scared to fight. I think I’ve opened the door for other people to try to defend themselves.”
In court filings, attorneys for Devon said H&S Equipment and Holloway didn’t mitigate the alleged damages by either evaluating the well, repairing it or reopening it. They said the plaintiffs appeared to pick an “overinflated” amount for lost profits based on past production, not future estimates of oil prices and decline curves, the term for a decline in output over time.
The judgment comes as the Oklahoma Corporation Commission works to finalize emergency rules to implement a new state law allowing longer lateral drilling in nonshale formations. The debate over Senate Bill 867 in this year’s legislative session was contentious and pitted smaller, vertical operators against larger horizontal drillers.
SOURCE: The Oklahoman
Compiled and Published by GIB KNIGHT
Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.
