Under Texas law, "capable of producing" is defined as a well that is capable of producing in paying quantities when turned on, without the need for additional equipment or repairs. When you say "no crack yet" do you mean no frac job? There is a case invoving a well in the Barnett Shale where there was expert testimony that wells in the Barnett will not flow without a frac job. Accordingly, this was deemed not to be capable of producing in paying quantities.
While they well is not capable of producing if it has not been fracked yet, the lease is held by ongoing operations.
It is difficult at best to break a lease when there is a well that has been drilled and is in the completion phase. Look for language in yourlease about ongoing operations. There may even be a 90 day period set forth, or it may be more open ended.
Skip, are you aware of operators actually taking this position?
Regarding litigation, it would never come to that because an operator would settle before letting it get to court. The downside is too great as he knows the position is undefendable and would trigger similar claims to the extent he has repeated this absurd practice.
Yes. And although I agree that most operators will settle, they will not do so until suit has been filed, jurisdiction has been established and a court date for the suit, not the venue, has been set. It usually takes about two years. An experienced (and forthright) O&G attorney will inform a client of this and the client upon hearing the time and expense will more often than not decide not to file. Of course the operators intent is only to buy a few months time in many cases as they are not trying to set on the well long term. And they know from experience that most lessors/plaintiffs either run out of money or patience. Makes it easier to settle with them.
The HA operators all seem to follow this strategy to some extent but it does depend on who is threatening suit and what firm or attorney represents them. The attorneys I work with do not take such a case unless the client and the circumstances of the demand meet certain minimum requirements. The industry has a stellar record of prevailing in Federal Court and in the 2nd. Circuit Court of Appeals which covers the area of the HA/BO Play.