Talisman Energy USA Inc. is being sued by oil and natural gas royalty owners with interests in the Eagle Ford Shale for allegedly manipulating production volumes by as much as 20-30%.
Eugene and Kimberly Cran of DeWitt County, TX filed the claim against Talisman, which gained entry into the Eagle Ford six years ago in a 50-50 venture with Statoil ASA (see Shale Daily, Oct. 12, 2010). The lawsuit, filed in U.S. District Court for the Southern District of Texas, Victoria Division, claims breach of the contract, fraud, conversion and unjust enrichment (Cran v. Talisman Energy USA Inc., No. 6:16-CV-00064).
Talisman was taken over by Spain's Repsol SA last year (see Daily GPI, Dec. 16, 2014). Repsol in turn sold part of its Eagle Ford stake in an asset swap with Statoil, retaining 37% interest. The joint venture between Talisman and Statoil now includes about 4,500 oil and gas leases covering 59,000 net acres and 494 producing wells, according to Provost Umphrey Law Firm LLP, which is representing the Cran family.
"In 2014, Talisman reported its share of Eagle Ford production topped 22,000 bbl of oil/condensate per day and represented approximately 20% of its proven reserves," the law firm noted. Three years ago Talisman and Statoil revised their agreement, allowing Statoil to assume well operations for half of the venture, while Talisman remained the operator for the remaining wells.
"As a result, the Crans and other royalty owners began receiving monthly checks from both companies rather than Talisman alone," Provost noted. After the operations were transferred, the Crans claimed they began receiving checks from Talisman "with substantial variances in production volumes compared to those reflected in their Statoil royalty payments." The shorted production volumes and shorted payments are the "skim," the lawsuit claimed.
"Talisman is accused of secretly altering wellhead production data by arbitrarily reducing the measured volumes of oil and gas by as much as 20%," Provost stated. "The royalty owners say Talisman further reduced the measured volumes in the spring of 2015, shortly after the company was purchased" by Repsol. Early this year Talisman gave up all operator responsibilities in the Eagle Ford and Statoil became the sole operator.
"When Talisman entered the U.S. market, they were totally unprepared to manage fractional ownership interest by individual royalty owners whose rights and remedies are governed by their lease terms," said lead counsel Bryan O. Blevins of Provost. "Our clients have been and are still being significantly and purposely underpaid by Talisman for their mineral rights, and our goal is to make sure that the appropriate parties are held accountable. Talisman's manipulation of production volumes and shorted royalty payments were intentional and may have been related to the Repsol acquisition."
Many producers face royalty underpayment lawsuits across the country, including for alleged underpayments in the Eagle Ford. Chesapeake Energy Corp. faces allegations that it cheated landowners in the Eagle Ford for leases across nearly 16,000 acres and 85 producing wells (see Shale Daily, March 11).