West Texas oilfield contracts ruling on horizontal wells

The decision backs Ovintiv and adds certainty for operators drilling allocation wells across the region.

Apr. 11, 2026 at 1:23pm

Got story updates? Submit your updates here. ›

A photorealistic studio still life featuring a metal pipe fitting, steel wrench, and hardhat arranged on a clean white background, representing the tools and materials of the modern oil and gas industry.Specialized equipment and materials symbolize the technological advances transforming the West Texas oilfield.Pyote Today

A federal judge in Texas has ruled that legacy oilfield joint operating agreements (JOAs) written for vertical wells still apply to modern horizontal wells that extend beyond the original contract boundaries. This decision provides clarity for energy companies drilling allocation wells in the Permian Basin, confirming that older JOAs remain valid even as drilling technology has advanced.

Why it matters

The ruling helps resolve uncertainty around how legacy oilfield contracts apply to the widespread use of horizontal drilling techniques in West Texas. It provides assurance to operators that they do not owe additional payments if a horizontal well extends beyond the original JOA-covered area, which has been an issue causing disputes in the region.

The details

In the case of McCully-Chapman Exploration, Inc. v. Ovintiv USA, Inc., a federal judge in Midland-Odessa ruled that a JOA from the 1980s still applied to several horizontal wells drilled by Ovintiv in 2019 and 2021, even though the wells extended beyond the original contract area. This confirms that older JOAs written for vertical wells remain valid for today's multi-mile horizontal laterals.

  • In March 2023, Judge David Counts of the U.S. District Court for the Western District of Texas, Midland-Odessa Division, issued the ruling.
  • The JOA in question was originally entered into in the 1980s, before the widespread use of horizontal drilling.
  • The horizontal wells at the center of the case were drilled by Ovintiv in 2019 and 2021.

The players

Ovintiv USA, Inc.

An energy company that was the defendant in the lawsuit and prevailed in the court's ruling that its older joint operating agreement still applied to its modern horizontal wells.

McCully-Chapman Exploration, Inc.

The plaintiff in the lawsuit against Ovintiv, challenging the application of the legacy JOA to Ovintiv's horizontal wells.

Judge David Counts

The federal judge in the U.S. District Court for the Western District of Texas, Midland-Odessa Division, who issued the ruling in favor of Ovintiv.

Chris Hogan

The founding partner of Hogan Thompson Schuelke, who represented Ovintiv in the lawsuit.

Got photos? Submit your photos here. ›

What they’re saying

“For a long time, JOAs were in place – still are in place in West Texas – for vertical wells. Then come along horizontal wells and we have to figure out if JOAs that apply to vertical wells apply to horizontal wells, despite horizontal wells being in place for two decades.”

— Chris Hogan, Founding Partner, Hogan Thompson Schuelke

“Since the decision came down, I've received numerous messages saying 'Thank goodness — this was a big area of certainty.'”

— Chris Hogan, Founding Partner, Hogan Thompson Schuelke

“This adds certainty as to how new technology is applied. This is good for West Texas as producers seek to optimize horizontal production.”

— Chris Hogan, Founding Partner, Hogan Thompson Schuelke

What’s next

The ruling provides clarity for energy companies in the Permian Basin as they continue to expand their use of horizontal drilling techniques. It removes a potential source of disputes over the application of legacy oilfield contracts, allowing operators to move forward with greater certainty.

The takeaway

This court decision helps resolve a key uncertainty around how older oilfield joint operating agreements apply to modern horizontal drilling practices in West Texas. By confirming that legacy JOAs remain valid, even for wells that extend beyond original contract boundaries, the ruling provides much-needed clarity for energy companies in the Permian Basin as they optimize their horizontal production.