Ambiguity

In this oil and gas case, a pair of working interest owners sued to recover alleged overcharges made by the operator to the joint account. The trial court found that the joint operating agreement was ambiguous and submitted the matter to a jury, which ruled in favor of the operator. The Court of Appeals affirmed. The contract provision at issue was from a pre-printed form, but included a typewritten addition at the end. The form language permitted the operator to allocate a portion of its overhead and charge it to the joint account, while the typewritten insert provided for flat-rate monthly charges. The working interest owners believed that the flat rate in the inserted language was all the operator could charge to the joint account, while the operator believed it could charge both its overhead and the per-well rate. The Court of Appeals held that the contract was ambiguous because both proffered interpretations were reasonable, and therefore affirmed the jury’s finding in favor of the operator’s interpretation.

MCS Minerals, Ltd. v. Plains Explor. & Prod. Co., No. 05-12-01309-CV