Opinion ID: 3213067
Heading Depth: 1
Heading Rank: 1

Heading: background and allegations

Text: ¶2 On August 23, 2005, Defendants' predecessor in interest, Encore Operating, L.P. and American Natural Resources (ANR), entered into a letter agreement with an effective date of September 1, 2005, regarding the development of an area of mutual interest (AMI). ANR agreed to assign Encore leases in the AMI, and, in exchange, Encore agreed to (1) drill a test well, (2) pay $350.00 per acre with ANR delivering no less than seventy-eight percent (78%) net revenue interest, (3) allow ANR the option of participating in the test well, (4) give ANR a twelve and one half percent back-in after payout on the initial test well, (5) pay $100,000 regarding the pooling covering the drillsite of the test well, and (6) allow ANR to participate in all future wells drilled in the AMI at any time whether or not the parties held a current lease. Defendants became Encore's successor in interest to the agreement by acquiring Encore's interest in the AMI. ¶3 The provision allowing ANR to participate in future wells (Option Provision) is at the heart of this controversy. It provides: 2. In all subsequent wells within the AMI, ANR shall have the right to participate in the prospect area with a twenty-five percent (25%) working interest . . . . ANR contends that Defendants have drilled and completed seventeen wells in the AMI without allowing ANR to participate in breach of this provision.