Amoco Production Co. v. Underwood

McCLOUD, Chief Justice.

This case involves the cancellation by lessors of a “gas unit” designated by lessee under the pooling provisions of eight oil, gas and mineral leases. The jury found that the designation of the gas unit by the lessee was not made in “good faith”.

Victory Petroleum Corporation entered into a “Farmout Contract” with Amoco Production Company whereby Victory agreed to drill a test well on Section 3, BS&F Survey, Wheeler County, Texas, and Amoco agreed to assign to Victory certain leases covering land located near Section 3. Amoco reserved an overriding royalty interest in…