Chesapeake Energy owes almost $20 million for trying to skip out on oil
and gas leases when prices plummeted, the 5th Circuit ruled Wednesday.
Peak Energy Corp. sold the rights to over 5,400 acres in Harrison County to Chesapeake Exploration LLC and Chesapeake Energy LLC for $81 million cash in July 2008. Chesapeake agreed to pay $15,000 per acre.
On October 9, 2008, Chesapeake asked to postpone the closing until January 2009. Six days later, it informed Peak that it would not be completing the purchase. Michael Falen, Chesapeake's supervisor of acquisitions, told Coe there were "timing issues" and that the properties were "edgy."
By this point, natural gas prices had plummeted approximately 50 percent from their highs in early July and the fair-market value of the leases in Harrison County had fallen to $3,000 per acre.
Finding that the contract was enforceable, a federal judge in the Eastern District of Texas awarded Peak Energy $19.75 million in damages, more than $434,000 in attorneys' fees and more than $19,000 in costs.
The New Orleans-based federal appeals court affirmed Wednesday, rejecting Chesapeake's argument that the contract is unenforceable under the Texas statute of frauds because Peak allegedly failed to adequately identify the property in question.
"The July Agreement conveys all of Peak's rights, interest and title in oil and gas leases in the areas shown on Exhibit A, which outlined several tracts of land in Harrison County," Judge Patrick Higginbotham wrote for a three-judge panel. "This description is similar to other agreements enforced by Texas courts in which an owner conveyed all the property he owned in a specified state, county or survey."
Read more: http://www.courthousenews.com/2012/09/13/50250.htm
Peak Energy Corp. sold the rights to over 5,400 acres in Harrison County to Chesapeake Exploration LLC and Chesapeake Energy LLC for $81 million cash in July 2008. Chesapeake agreed to pay $15,000 per acre.
On October 9, 2008, Chesapeake asked to postpone the closing until January 2009. Six days later, it informed Peak that it would not be completing the purchase. Michael Falen, Chesapeake's supervisor of acquisitions, told Coe there were "timing issues" and that the properties were "edgy."
By this point, natural gas prices had plummeted approximately 50 percent from their highs in early July and the fair-market value of the leases in Harrison County had fallen to $3,000 per acre.
Finding that the contract was enforceable, a federal judge in the Eastern District of Texas awarded Peak Energy $19.75 million in damages, more than $434,000 in attorneys' fees and more than $19,000 in costs.
The New Orleans-based federal appeals court affirmed Wednesday, rejecting Chesapeake's argument that the contract is unenforceable under the Texas statute of frauds because Peak allegedly failed to adequately identify the property in question.
"The July Agreement conveys all of Peak's rights, interest and title in oil and gas leases in the areas shown on Exhibit A, which outlined several tracts of land in Harrison County," Judge Patrick Higginbotham wrote for a three-judge panel. "This description is similar to other agreements enforced by Texas courts in which an owner conveyed all the property he owned in a specified state, county or survey."
Read more: http://www.courthousenews.com/2012/09/13/50250.htm
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