May 1 (Bloomberg) -- Chesapeake Energy Corp., the second-largest U.S. natural gas producer, must pay $121 million to three Texas lease holders after failing to persuade an appeals court to overturn a verdict that it reneged on deals to buy mineral rights when prices plunged in 2008.
A federal judge in Houston ruled in 2012 that Chesapeake couldn’t escape contracts to lease more than 500 oil and gas properties from Preston Exploration Co. and two affiliates. The Oklahoma City-based company began negotiating the leases in June 2008, only to see gas prices plunge by as much as 50 percent in the weeks before the contract closing that November.
The lawsuit is one of hundreds of landowner claims filed in federal and state courts in Texas, Michigan, Pennsylvania and other states alleging Chesapeake broke contracts for oil and gas leases.
Chesapeake had no basis for claiming Preston and its affiliates couldn’t deliver their end of the deal and was therefore required to fulfill its obligations under the agreement, a three-judge panel of U.S. Court of Appeals in New Orleans said in its ruling today.
The case is Preston Exploration Co. L.P. v. G.S.F. LLC and Chesapeake Energy Corp., 13-20345, U.S. Court of Appeals for the Fifth Circuit (New Orleans).
To contact the editors responsible for this story: Michael Hytha at firstname.lastname@example.org Andrew Dunn