Hogan Thompson Schuelke Wins JOA Dispute for Ovintiv in the Western District of Texas

Energy litigation firm Hogan Thompson Schuelke recently secured a win for Ovintiv in McCully-Chapman Exploration, Inc. v. Ovintiv USA, Inc. in the U.S. District Court of the Western District of Texas in Midland, Texas. The federal court ruling resolves a major unanswered question for Texas operators: how legacy contracts apply to modern horizontal wells.

At issue was a question no Texas court had yet addressed: Does a model form Joint Operating Agreement (JOA) that pre-dates the widespread use of horizontal wells apply to allocation wells that produce both from lands inside and beyond the JOA's Contract Area?

Ovintiv maintained that the JOA applied to horizontal wells traversing the contract area, meaning that McCully’s interest was subject to contractual non-consent penalties. The firm tried the case to the bench in September 2025.

In March 2026, Judge David Counts ruled in favor of Ovintiv, finding a JOA entered in the 1980s did apply to several horizontal wells drilled in 2019 and 2021. The ruling confirms that older JOAs—originally written for vertical wells—remain applicable to today’s multi-mile laterals that extend beyond original contract boundaries.

This decision has implications for thousands of wells across the Permian Basin and beyond. More than 36,000 allocation well permits have been issued in Texas since 2013, and many of those wells were drilled under decades-old JOAs. For companies evaluating their rights under older JOAs—whether as operators or non-operators—McCully is an important data point.

The Hogan Thompson Schuelke trial team included James Schuelke, Chris Hogan, Samantha Thompson, and Tanya Sasko.

If you are dealing with questions about the applicability of an existing JOA to horizontal allocation wells, or disputes over non-consent penalties in multi-section development, contact us to discuss how this decision may affect your operations.