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CAUSE NO. 2016-45652
PEREGRINE OIL & GAS, LP § IN THE DISTRICT COURT OF
§
Plaintiff
§ HARRIS COUNTY, TEXAS
§
HRB OIL & GAS, Ltd. and
VHPM, LLC
Defendants § 190 JUDICIAL DISTRICT
ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW
Plaintiff, PEREGRINE OIL & GAS LP (hereinafter “Peregrine”), files its
ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW
pursuant to Rule 298, Tex.R.Civ.P. to Judge Beau A. Miller and states:
Pursuant to Rule 298.P. , Peregrine requests this honorable Court
include the following Findings of Fact and Conclusions of Law to the version provided
by and filed by HRB Oil & Gas, Ltd. and VHPM, LLC (collectively “HRB”) on July 5,
2021 ostensibly as the Findings of Fact and Conclusions of Law adoped and entered by
This version of the Findings of Fact and Conclusions of Law filed by HRB shall
be referred to herein as “July 5, 2021 Findings of Fact and Conclusions of Law.”
This ADDITIONAL FOR FINDINGS OF FACT AND
CONCLUSIONS OF LAW is made and filed with the clerk of court on July 8, 2021 within
en (10) day time limit provided by Rule 298, Tex.R.Civ.P.
Peregrine requests this honorable Court to make the following findings of
fact as additional findings of fact to be included with the “July 5, 2021 Findings of Fact
and Conclusions of Law”:
(a) As Operator, Peregrine is responsible for conducting all operations on the Block
including drilling the well, constructing the platform, completing the well,
quipping the well and platform, operating the well, operating the platform,
constructing a pipeline, operating the pipeline, marketing and sales of production,
arranging for all services, paying all invoices, distributing proceeds and billing and
collecting each nonOperator’s proportionate share of such expenses. As a part
of this responsibility Peregrine delivered monthly invoices to each party in the
form of Joint Interest Billings (“JIBs”) and issued checks for revenue distributions.
(b) Article 8 of the PA requires Peregrine to market the production from Block 155
unless each party made separate arrangements to market its share of production.
HRB did not make any separate arrangements. Peregrine, as Operator, marketed
such production and disbursed proceeds to such non marketing party. The PA
requires the Operator to market the production from the well or wells for those
parties who do not separately arrange for marketing and sales of the production.
Defendant HRB did not arrange to market its own production. Peregrine, pursuant
to the PA sold HRB’s share of the production, paid the lease burdens and disbursed
the proceeds to HRB, along with statements detailing the production volumes and
prices received. Peregrine performed these services pursuant to the PA. Neither
the PA nor the OOA expressly required Peregrine to disburse the proceeds of
production to the various nonoperating working interest owners, but Peregrine
did so as this duty was implied.
(d) Pursuant to Peregrine’s accounting, “payout” occurred in June of 2013, but
Peregrine as the result of invoicing and payment adjustments did not determine
that fact until some months later in April of 2014. At that time Peregrine adjusted
HRB’s and the other participants’ accounts to change, effective May 1, 2014, the
revenue and expense sharing percentages. See Plaintiff’s Ex. 7, the “Payout
Statement.” In September of 2014, in response to an inquiry from HRB concerning
the decrease in its net revenue interest, Peregrine specifically notified HRB that
“payout” had occurred, and that Peregrine would perform a reconciliation of the
non Operator’s accounts. See Plaintiff’s Ex. 6, the September 8, 2014 email from
Tim Austin to Ben Hale.
(e) The reconciliation was necessary because for the period of June 2013 to April
2014, all non operating interest owners received and paid JIBs based on their
incorrect and higher BPO working interest, and some nonoperators (those not
selling their share of production themselves, including HRB) had been paid
proceeds of production by Peregrine at their incorrect and higher BPO net
revenue interest.
(f) Plaintiff’s Ex. 5, also Exhibit C to the OOA, is the COPAS Accounting Procedure
Offshore Joint Operations. COPAS provides the period of time in which Peregrine
was allowed to make adjustments to accounts. Under Ex. 5, the Operator may
make adjustments to the accounts if such adjustments are made within 24 months
of the end of the calendar year in which such bills and statements were rendered.
See Plaintiff’s Ex. 5, the COPAS exhibit attached as Exhibit C to the OOA and
separately listed and produced as Ex. 5 at the trial.
(g) “Payout” occurred in June 2013. The adjustments under COPAS could be made
up to the end of December 2015. Peregrine made the adjustments and demanded
payment within the time period allowed by Ex. 5, the COPAS Exhibit. Peregrine
demanded payment on December 15, 2015. HRB did not prepare a “payout”
calculation. HRB did not demand an audit of Peregrine’s “payout” calculation.
(h) Peregrine reconciled overpayments and underpayments by/to each non
Operator, adjusted the accounting records, and sent invoices to each non
Operator with the net amount due Peregrine. The Account Receivables Summary
Statement was dated November 30, 2015. The invoices attached to the December
15, 2015 demand letter were dated December 11, 2015. See Plaintiff’s Ex. 8 & 9.
(i) The Accounting statement sent to HRB in December of 2015 (Ex. 9) is a postperiod
adjustment. Post period adjustments are common in the offshore oil and gas
industry and in the oil and gas industry in general. Postperiod adjustments occur
because of volume changes in the measured production, price changes for the
constituent parts of the production, and ownership changes between the initial
report and the postperiod adjustment. Plaintiff’s Ex. 14 is a Peregrine check and
check stub to HRB with examples of post period adjustments.
Council of Petroleum Accountants Societies COPAS.
(j) The other non operating parties, Peregrine Oil & Gas II, Fieldwood Energy
Offshore, LLC (“Fieldwood”) and Knight Resources, LLC (“Knight”) settled their
accounts with Peregrine. Fieldwood paid the JIB for overpayment to Peregrine
and Knight conveyed its interest in the Block 155 assets to Peregrine in payment
of its JIB for overpayments. Peregrine Oil & Gas II paid the difference to Peregrine.
Tim Austin, VP of Land for Peregrine testified to the Knight and Fieldwood
transactions and introduced Plaintiff’s Ex. 16 and 17. Terrell Lanier testified to the
payment by Peregrine Oil & Gas II to Peregrine and introduced Plaintiff’s Ex. 18 as
the documentary evidence of this transaction. HRB produced no evidence of
course of performance.
(k) In February of 2016, Peregrine delivered a Notice of Pending Default to HRB, again
demanding payment. See Plaintiff’s Ex. 10, February 9, 2016 Notice of Pending
Default.
(l) Article 8.7 of the OOA requires parties to the OOA who dispute a charge from the
Operator to first pay the charge then initiate objections to the charge. See
Plaintiff’s Ex. 2, Article 8.7 that provides, in part, as follows:
…If a Party believes that Operator’s charges, or a portion thereof, are
incorrect, that Party shall nevertheless pay the charges claimed by
Operator and may notify Operator that the charges are in dispute…
(m) With the exception of Defendant HRB, all nonOperators resolved the outstanding
amounts due to Peregrine for the amounts as set out in the December 15, 2015
reconciliation. See testimony of Tim Austin and Terrell Lanier and Ex. 16, 17, and
18. HRB refused to pay any portion of the amount outstanding and due to
Peregrine. However in a June 2016 email, HRB’s counsel advised Tim Austin that
Peregrine could net HRB’s share of the proceeds of production to pay this charge
without stating that the charge was not authorized under the PA or OOA. See
Plaintiff’s Ex. 11.
(n) The term “charge” is not defined in the PA or the OOA but the term is used in
Article 8.7. HRB did not pay the $210,883.31 to Peregrine and HRB did not notify
Peregrine that the charge was in dispute as required by the procedure outlined in
Article 8.7. HRB’s counsel did not dispute the charge in his June 2016 email to Tim
Austin. See Plaintiff’s Ex. 11.
(o) Peregrine retained and designated Jeffry D. Weems as an expert witness on oil
and gas operating agreements. The Court accepted Mr. Weems as an expert on
oil and gas operating agreements. Mr. Weems’ curriculum vitae is included as part
of Plaintiff’s Ex. 12. Mr. Weems opined that the Joint Interest Billing (JIB) for the
overpayment was a “charge” under the OOA because HRB allowed Peregrine to
market the production for HRB. Thus, Peregrine handled and was accountable for
all of the proceeds of production for HRB and overpayments in excess of proceeds
less other costs and expenses would be characterized as “charges” when included
in a JIB. Mr. Weems testified that the term “payout” is a common term in the
industry and that its definition is well known. Mr. Weems did not offer any
opinions on COPAS and opined that this was not a COPAS issue but was an
operating agreement issue. Mr. Weems testified to his experience as a landman
for Shell Western E&P, Inc. in calculating “payout” and in administering post
period adjustments. Mr. Weems testified that he never encountered the position
taken by HRB in this litigation. In all of his experience with pay uts of farmout
agreements and Joint Operating Agreement expenses, all industry participants
treated the overpayment issue described in this litigation as a financial obligation
or a “charge.”
(p) Peregrine designated Terrell Lanier as a fact and expert witness and Tim Austin as
a fact witness. Mr. Lanier is an accountant with 41 years of accounting work
including 21 years as a Chief Financial Officer or Controller for oil and gas
companies and testified to the payout calculation, the definition of payout, and
the unpaid JIBs up to March 31, 2021 for the continued operation of Block 155.
See Plaintiff’s Ex. 19, 20, 21 and 22. The Court accepts this testimony. Mr. Austin
testified to the BPO and APO structure of this series of transactions. Mr. Austin
testified to the definition of payout as accepted in the oil and gas industry. Mr.
Austin testified to the time periods and delays for reconciliation of accounts. Mr.
Austin also testified to the performance of the parties to the PA, OOA and PHA
and to the custom and usage of parties involved in oil and gas production from
Gulf of Mexico offshore platforms. Mr. Austin testified to being involved in over
one hundred transactions involving BPO and APO reconciliations. Mr. Austin
testified that he had never been confronted with the claims asserted by HRB. Mr.
Lanier also testified that he had never been confronted with the claims asserted
by HRB in his 41 years of accounting work. The curriculum vitae for Mr. Lanier is
attached as part of Plaintiff’s Exhibit 12.
(q) HRB’s counsel agreed to Peregrine’s right to offset revenue attributable to HRB
to the financial obligation or charge to return overpaid production proceeds.
Plaintiff’s Ex. 11. HRB’s counsel agreed that HRB owed these charges.
(r) The claims for unpaid Joint Interest Billings and the overpaid revenue claims are
inextricably intertwined. The legal services performed in pursuit of these claims
is common and overlapping. Peregrine is entitled to an award of $238,283.78 in
attorneys’ fees.
(s) The Court finds that the meaning of the word “charges” as used in the OOA is an
operating agreement issue. The Court finds that Mr. Weems opinions on the use
of the word or term “charges” should be given weight and that Mr. Wright’s
opinions while correct are not relevant to the determination of the issue before
this Court. The Court finds that the course of performance of the other parties to
the PA, OOA and PHA and the custom and usage in the industry supports
Peregrine’s claims.
(t) Under the OOA, Peregrine can use selfhelp to pay HRB’s unpaid obligations.
Peregrine may retain any revenues due to HRB for production from Block 155 and
fees from Block 133 in order to reduce HRB’s debt. See Plaintiff’s Ex. 2, OOA,
Article 8.6. HRB’s counsel agreed to this selfhelp remedy. See Plaintiff’s Ex. 11,
June 10, 2016 email from Cannaday to Austin.
Peregrine requests this honorable Court to make the following conclusions
of law conclusions of law to be included with the “July 5, 2021 Findings of
Fact and Conclusions of Law”:
(u) In contract construction cases, this Court is tasked with finding the meaning of a
provision to which the parties have agreed. See, e.g., Murphy Expl. Prod. Co.
USA v. Adams, 560 S.W.3d 105, 110 (Tex. 2018) (interpreting the contract to
ascertain its meaning before determining whether the party breached the
contract); BarrowShaver Res. Co. v. Carrizo Oil Gas, Inc., 590 S.W.3d 471, 479
(Tex. 2019).
(v) The Court concludes that the Court of Appeals for the First District of Texas’
August 30, 2018 Memorandum Opinion in Cause No. 01 CV determined
that the term “charges” was ambiguous and raised a genuine issue of material
fact. Pg. 20 of Memorandum Opinion, a copy of which is attached; J.M. Davidson,
Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).
(w) Since the Court of Appeals found that the term “charges” in the OOA was
ambiguous, the meaning becomes a fact issue for this Court and extraneous
evidence, e.g. performance of the parties, custom and usage, must be admitted
to help determine the language's meaning. BarrowShaver Res. Co. v. Carrizo Oil
Gas, Inc., 590 S.W.3d 471, 480 (Tex.2019); Italian Cowboy Partners, Ltd.
Prudential Ins. Am., 341 S.W.3d 323, 33334 (Tex. 2011).
Indefinite terms may be given precision by usage of trade or course of dealing
between the parties in the absence of an agreement to the contrary. Barrow
Shaver at 486; Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 239 (Tex. 2016)
(citing STATEMENT ECOND ONTRACTS § 33 cmt. a AW NST 1981).
The Court concludes that Peregrine and HRB did not have an agreement to
disregard course of dealing between the parties. The Court concludes that the
course of dealing between Peregrine and the other parties to the Participation
Agreement demonstrates that the term “charges” included invoicing for
overpayment of proceeds of production.
(z) The Court concludes that Peregrine introduced evidence of industry custom and
practice on the industry treatment of overpayments under a BPO/APO
reconciliation. This industry custom and practice evidence was unrefuted by HRB.
This industry custom and practice evidence supports Peregrine’s interpretation of
the word “charges.”
(aa) The Court concludes that HRB failed to produce any evidence that the “payout”
calculation was erroneous. The Court concludes that HRB failed to produce any
evidence of industry custom and usage in the reconciliation process involved with
the BPO and APO calculations. The Court concludes that HRB failed to produce
any evidence contrary to the course of performance evidence introduced by
Peregrine. The Court concludes that HRB failed to produce any evidence that
“charges” as used in Article 8.7 was limited to costs or expenditures.
(bb) The Court concludes that postperiod adjustments are common in the offshore oil
and gas industry and that the COPAS provides for a 24 month time period after
the calendar year when the adjustment is made within which to make postperiod
adjustments. The Court concludes that the November 2015 invoice and the
December 15, 2015 demand letter to HRB fell within 24 months after the end of
calendar year 2013, the year in which payout occurred.
The Court concludes that the term “charges” as used in Article 8.7 of the OOA
includes claims for overpayment as the result of the Before Payout and After
Payout reconciliation.
(dd) The Court concludes that HRB failed to follow the procedure required by Article
8.7 of the OOA, i.e., pay the disputed amounts within the time required and
engage in the dispute resolution procedure in the OOA.
(ee) The Court concludes that HRB’s failure to comply with Article 8.7 is a breach of the
OOA.
(ff) The Court concludes that Peregrine Oil & Gas LP is entitled to judgment against
HRB Oil and Gas Ltd. and VHPM, LLC, jointly and severally, as VHPM, LLC is the
general partner of a limited partnership
ADDITIONAL REQUEST is being served on all counsel of record.
sts this Court to include the ADDITIONAL REQUEST FOR FINDINGS
OF FACT AND CONCLUSIONS OF LAW pursuant to Rule 298, Tex.R.Civ.P. in any
final Findings of Fact and Conclusions of Law adopted by the Court.
Respectfully submitted,
ONES ILL ORTER RAWFORD
RAWFORD LLP
Michael D. Jones
Michael D. Jones
mjones@jonesgill.com
Texas Bar No. 10929350
Joseph D. Porter
jporter@jonesgill.com
State Bar No. 16150100
6363 Woodway, Suite 1100
Houston, Texas 77057
Telephone: (713)6524068
Facsimile: (713)6510716
TTORNEYS FOR EREGRINE IL
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the foregoing
ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW
was served via eservice on July 8, 2021 to all parties of record in accordance with the
Texas Rules of Civil Procedure.
Barry F. Cannaday
Dentons US LLP
barry.cannaday@dentons.com
2000 McKinney Ave., Suite 1900
Dallas, Texas 75201
0900
0910 facsimile
Michael D. Jones
Michael D. Jones
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CAUSE NO. 2016-45652 PEREGRINE OIL & GAS, LP § IN THE DISTRICT COURT OF § Plaintiff § HARRIS COUNTY, TEXAS § HRB OIL & GAS, Ltd. and VHPM, LLC Defendants § 190 JUDICIAL DISTRICT ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW Plaintiff, PEREGRINE OIL & GAS LP (hereinafter “Peregrine”), files its ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW pursuant to Rule 298, Tex.R.Civ.P. to Judge Beau A. Miller and states: Pursuant to Rule 298.P. , Peregrine requests this honorable Court include the following Findings of Fact and Conclusions of Law to the version provided by and filed by HRB Oil & Gas, Ltd. and VHPM, LLC (collectively “HRB”) on July 5, 2021 ostensibly as the Findings of Fact and Conclusions of Law adoped and entered by This version of the Findings of Fact and Conclusions of Law filed by HRB shall be referred to herein as “July 5, 2021 Findings of Fact and Conclusions of Law.” This ADDITIONAL FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW is made and filed with the clerk of court on July 8, 2021 within en (10) day time limit provided by Rule 298, Tex.R.Civ.P. Peregrine requests this honorable Court to make the following findings of fact as additional findings of fact to be included with the “July 5, 2021 Findings of Fact and Conclusions of Law”: (a) As Operator, Peregrine is responsible for conducting all operations on the Block including drilling the well, constructing the platform, completing the well, quipping the well and platform, operating the well, operating the platform, constructing a pipeline, operating the pipeline, marketing and sales of production, arranging for all services, paying all invoices, distributing proceeds and billing and collecting each nonOperator’s proportionate share of such expenses. As a part of this responsibility Peregrine delivered monthly invoices to each party in the form of Joint Interest Billings (“JIBs”) and issued checks for revenue distributions. (b) Article 8 of the PA requires Peregrine to market the production from Block 155 unless each party made separate arrangements to market its share of production. HRB did not make any separate arrangements. Peregrine, as Operator, marketed such production and disbursed proceeds to such non marketing party. The PA requires the Operator to market the production from the well or wells for those parties who do not separately arrange for marketing and sales of the production. Defendant HRB did not arrange to market its own production. Peregrine, pursuant to the PA sold HRB’s share of the production, paid the lease burdens and disbursed the proceeds to HRB, along with statements detailing the production volumes and prices received. Peregrine performed these services pursuant to the PA. Neither the PA nor the OOA expressly required Peregrine to disburse the proceeds of production to the various nonoperating working interest owners, but Peregrine did so as this duty was implied. (d) Pursuant to Peregrine’s accounting, “payout” occurred in June of 2013, but Peregrine as the result of invoicing and payment adjustments did not determine that fact until some months later in April of 2014. At that time Peregrine adjusted HRB’s and the other participants’ accounts to change, effective May 1, 2014, the revenue and expense sharing percentages. See Plaintiff’s Ex. 7, the “Payout Statement.” In September of 2014, in response to an inquiry from HRB concerning the decrease in its net revenue interest, Peregrine specifically notified HRB that “payout” had occurred, and that Peregrine would perform a reconciliation of the non Operator’s accounts. See Plaintiff’s Ex. 6, the September 8, 2014 email from Tim Austin to Ben Hale. (e) The reconciliation was necessary because for the period of June 2013 to April 2014, all non operating interest owners received and paid JIBs based on their incorrect and higher BPO working interest, and some nonoperators (those not selling their share of production themselves, including HRB) had been paid proceeds of production by Peregrine at their incorrect and higher BPO net revenue interest. (f) Plaintiff’s Ex. 5, also Exhibit C to the OOA, is the COPAS Accounting Procedure Offshore Joint Operations. COPAS provides the period of time in which Peregrine was allowed to make adjustments to accounts. Under Ex. 5, the Operator may make adjustments to the accounts if such adjustments are made within 24 months of the end of the calendar year in which such bills and statements were rendered. See Plaintiff’s Ex. 5, the COPAS exhibit attached as Exhibit C to the OOA and separately listed and produced as Ex. 5 at the trial. (g) “Payout” occurred in June 2013. The adjustments under COPAS could be made up to the end of December 2015. Peregrine made the adjustments and demanded payment within the time period allowed by Ex. 5, the COPAS Exhibit. Peregrine demanded payment on December 15, 2015. HRB did not prepare a “payout” calculation. HRB did not demand an audit of Peregrine’s “payout” calculation. (h) Peregrine reconciled overpayments and underpayments by/to each non Operator, adjusted the accounting records, and sent invoices to each non Operator with the net amount due Peregrine. The Account Receivables Summary Statement was dated November 30, 2015. The invoices attached to the December 15, 2015 demand letter were dated December 11, 2015. See Plaintiff’s Ex. 8 & 9. (i) The Accounting statement sent to HRB in December of 2015 (Ex. 9) is a postperiod adjustment. Post period adjustments are common in the offshore oil and gas industry and in the oil and gas industry in general. Postperiod adjustments occur because of volume changes in the measured production, price changes for the constituent parts of the production, and ownership changes between the initial report and the postperiod adjustment. Plaintiff’s Ex. 14 is a Peregrine check and check stub to HRB with examples of post period adjustments. Council of Petroleum Accountants Societies COPAS. (j) The other non operating parties, Peregrine Oil & Gas II, Fieldwood Energy Offshore, LLC (“Fieldwood”) and Knight Resources, LLC (“Knight”) settled their accounts with Peregrine. Fieldwood paid the JIB for overpayment to Peregrine and Knight conveyed its interest in the Block 155 assets to Peregrine in payment of its JIB for overpayments. Peregrine Oil & Gas II paid the difference to Peregrine. Tim Austin, VP of Land for Peregrine testified to the Knight and Fieldwood transactions and introduced Plaintiff’s Ex. 16 and 17. Terrell Lanier testified to the payment by Peregrine Oil & Gas II to Peregrine and introduced Plaintiff’s Ex. 18 as the documentary evidence of this transaction. HRB produced no evidence of course of performance. (k) In February of 2016, Peregrine delivered a Notice of Pending Default to HRB, again demanding payment. See Plaintiff’s Ex. 10, February 9, 2016 Notice of Pending Default. (l) Article 8.7 of the OOA requires parties to the OOA who dispute a charge from the Operator to first pay the charge then initiate objections to the charge. See Plaintiff’s Ex. 2, Article 8.7 that provides, in part, as follows: …If a Party believes that Operator’s charges, or a portion thereof, are incorrect, that Party shall nevertheless pay the charges claimed by Operator and may notify Operator that the charges are in dispute… (m) With the exception of Defendant HRB, all nonOperators resolved the outstanding amounts due to Peregrine for the amounts as set out in the December 15, 2015 reconciliation. See testimony of Tim Austin and Terrell Lanier and Ex. 16, 17, and 18. HRB refused to pay any portion of the amount outstanding and due to Peregrine. However in a June 2016 email, HRB’s counsel advised Tim Austin that Peregrine could net HRB’s share of the proceeds of production to pay this charge without stating that the charge was not authorized under the PA or OOA. See Plaintiff’s Ex. 11. (n) The term “charge” is not defined in the PA or the OOA but the term is used in Article 8.7. HRB did not pay the $210,883.31 to Peregrine and HRB did not notify Peregrine that the charge was in dispute as required by the procedure outlined in Article 8.7. HRB’s counsel did not dispute the charge in his June 2016 email to Tim Austin. See Plaintiff’s Ex. 11. (o) Peregrine retained and designated Jeffry D. Weems as an expert witness on oil and gas operating agreements. The Court accepted Mr. Weems as an expert on oil and gas operating agreements. Mr. Weems’ curriculum vitae is included as part of Plaintiff’s Ex. 12. Mr. Weems opined that the Joint Interest Billing (JIB) for the overpayment was a “charge” under the OOA because HRB allowed Peregrine to market the production for HRB. Thus, Peregrine handled and was accountable for all of the proceeds of production for HRB and overpayments in excess of proceeds less other costs and expenses would be characterized as “charges” when included in a JIB. Mr. Weems testified that the term “payout” is a common term in the industry and that its definition is well known. Mr. Weems did not offer any opinions on COPAS and opined that this was not a COPAS issue but was an operating agreement issue. Mr. Weems testified to his experience as a landman for Shell Western E&P, Inc. in calculating “payout” and in administering post period adjustments. Mr. Weems testified that he never encountered the position taken by HRB in this litigation. In all of his experience with pay uts of farmout agreements and Joint Operating Agreement expenses, all industry participants treated the overpayment issue described in this litigation as a financial obligation or a “charge.” (p) Peregrine designated Terrell Lanier as a fact and expert witness and Tim Austin as a fact witness. Mr. Lanier is an accountant with 41 years of accounting work including 21 years as a Chief Financial Officer or Controller for oil and gas companies and testified to the payout calculation, the definition of payout, and the unpaid JIBs up to March 31, 2021 for the continued operation of Block 155. See Plaintiff’s Ex. 19, 20, 21 and 22. The Court accepts this testimony. Mr. Austin testified to the BPO and APO structure of this series of transactions. Mr. Austin testified to the definition of payout as accepted in the oil and gas industry. Mr. Austin testified to the time periods and delays for reconciliation of accounts. Mr. Austin also testified to the performance of the parties to the PA, OOA and PHA and to the custom and usage of parties involved in oil and gas production from Gulf of Mexico offshore platforms. Mr. Austin testified to being involved in over one hundred transactions involving BPO and APO reconciliations. Mr. Austin testified that he had never been confronted with the claims asserted by HRB. Mr. Lanier also testified that he had never been confronted with the claims asserted by HRB in his 41 years of accounting work. The curriculum vitae for Mr. Lanier is attached as part of Plaintiff’s Exhibit 12. (q) HRB’s counsel agreed to Peregrine’s right to offset revenue attributable to HRB to the financial obligation or charge to return overpaid production proceeds. Plaintiff’s Ex. 11. HRB’s counsel agreed that HRB owed these charges. (r) The claims for unpaid Joint Interest Billings and the overpaid revenue claims are inextricably intertwined. The legal services performed in pursuit of these claims is common and overlapping. Peregrine is entitled to an award of $238,283.78 in attorneys’ fees. (s) The Court finds that the meaning of the word “charges” as used in the OOA is an operating agreement issue. The Court finds that Mr. Weems opinions on the use of the word or term “charges” should be given weight and that Mr. Wright’s opinions while correct are not relevant to the determination of the issue before this Court. The Court finds that the course of performance of the other parties to the PA, OOA and PHA and the custom and usage in the industry supports Peregrine’s claims. (t) Under the OOA, Peregrine can use selfhelp to pay HRB’s unpaid obligations. Peregrine may retain any revenues due to HRB for production from Block 155 and fees from Block 133 in order to reduce HRB’s debt. See Plaintiff’s Ex. 2, OOA, Article 8.6. HRB’s counsel agreed to this selfhelp remedy. See Plaintiff’s Ex. 11, June 10, 2016 email from Cannaday to Austin. Peregrine requests this honorable Court to make the following conclusions of law conclusions of law to be included with the “July 5, 2021 Findings of Fact and Conclusions of Law”: (u) In contract construction cases, this Court is tasked with finding the meaning of a provision to which the parties have agreed. See, e.g., Murphy Expl. Prod. Co. USA v. Adams, 560 S.W.3d 105, 110 (Tex. 2018) (interpreting the contract to ascertain its meaning before determining whether the party breached the contract); BarrowShaver Res. Co. v. Carrizo Oil Gas, Inc., 590 S.W.3d 471, 479 (Tex. 2019). (v) The Court concludes that the Court of Appeals for the First District of Texas’ August 30, 2018 Memorandum Opinion in Cause No. 01 CV determined that the term “charges” was ambiguous and raised a genuine issue of material fact. Pg. 20 of Memorandum Opinion, a copy of which is attached; J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). (w) Since the Court of Appeals found that the term “charges” in the OOA was ambiguous, the meaning becomes a fact issue for this Court and extraneous evidence, e.g. performance of the parties, custom and usage, must be admitted to help determine the language's meaning. BarrowShaver Res. Co. v. Carrizo Oil Gas, Inc., 590 S.W.3d 471, 480 (Tex.2019); Italian Cowboy Partners, Ltd. Prudential Ins. Am., 341 S.W.3d 323, 33334 (Tex. 2011). Indefinite terms may be given precision by usage of trade or course of dealing between the parties in the absence of an agreement to the contrary. Barrow Shaver at 486; Fischer v. CTMI, L.L.C., 479 S.W.3d 231, 239 (Tex. 2016) (citing STATEMENT ECOND ONTRACTS § 33 cmt. a AW NST 1981). The Court concludes that Peregrine and HRB did not have an agreement to disregard course of dealing between the parties. The Court concludes that the course of dealing between Peregrine and the other parties to the Participation Agreement demonstrates that the term “charges” included invoicing for overpayment of proceeds of production. (z) The Court concludes that Peregrine introduced evidence of industry custom and practice on the industry treatment of overpayments under a BPO/APO reconciliation. This industry custom and practice evidence was unrefuted by HRB. This industry custom and practice evidence supports Peregrine’s interpretation of the word “charges.” (aa) The Court concludes that HRB failed to produce any evidence that the “payout” calculation was erroneous. The Court concludes that HRB failed to produce any evidence of industry custom and usage in the reconciliation process involved with the BPO and APO calculations. The Court concludes that HRB failed to produce any evidence contrary to the course of performance evidence introduced by Peregrine. The Court concludes that HRB failed to produce any evidence that “charges” as used in Article 8.7 was limited to costs or expenditures. (bb) The Court concludes that postperiod adjustments are common in the offshore oil and gas industry and that the COPAS provides for a 24 month time period after the calendar year when the adjustment is made within which to make postperiod adjustments. The Court concludes that the November 2015 invoice and the December 15, 2015 demand letter to HRB fell within 24 months after the end of calendar year 2013, the year in which payout occurred. The Court concludes that the term “charges” as used in Article 8.7 of the OOA includes claims for overpayment as the result of the Before Payout and After Payout reconciliation. (dd) The Court concludes that HRB failed to follow the procedure required by Article 8.7 of the OOA, i.e., pay the disputed amounts within the time required and engage in the dispute resolution procedure in the OOA. (ee) The Court concludes that HRB’s failure to comply with Article 8.7 is a breach of the OOA. (ff) The Court concludes that Peregrine Oil & Gas LP is entitled to judgment against HRB Oil and Gas Ltd. and VHPM, LLC, jointly and severally, as VHPM, LLC is the general partner of a limited partnership ADDITIONAL REQUEST is being served on all counsel of record. sts this Court to include the ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW pursuant to Rule 298, Tex.R.Civ.P. in any final Findings of Fact and Conclusions of Law adopted by the Court. Respectfully submitted, ONES ILL ORTER RAWFORD RAWFORD LLP Michael D. Jones Michael D. Jones mjones@jonesgill.com Texas Bar No. 10929350 Joseph D. Porter jporter@jonesgill.com State Bar No. 16150100 6363 Woodway, Suite 1100 Houston, Texas 77057 Telephone: (713)6524068 Facsimile: (713)6510716 TTORNEYS FOR EREGRINE IL CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and correct copy of the foregoing ADDITIONAL REQUEST FOR FINDINGS OF FACT AND CONCLUSIONS OF LAW was served via eservice on July 8, 2021 to all parties of record in accordance with the Texas Rules of Civil Procedure. Barry F. Cannaday Dentons US LLP barry.cannaday@dentons.com 2000 McKinney Ave., Suite 1900 Dallas, Texas 75201 0900 0910 facsimile Michael D. Jones Michael D. Jones