IN THE DISTRICT COURT OF CUSTER COUNTY
STATE OF OKLAHOMA
WARWICK-JUPITER, LLC,
Plaintiff,
v.
WALTER DUNCAN OIL, LLC,
Defendant.
Case No. CA25-134
FILED
DISTRICT COURT
Custer County, Okla.
NOV 7 2025
STACI HUNTER
COURT CLERK
PETITION
Plaintiff Warwick-Jupiter, LLC ("Warwick") for its Petition against Defendant Walter Duncan Oil, LLC ("Duncan") asserts the following allegations and claims:
PARTIES
1. Warwick is a Delaware limited liability company with its principal place of business in Oklahoma City, Oklahoma.
2. Duncan is an Oklahoma limited liability company with its principal place of business in Oklahoma City, Oklahoma.
JURISDICTION AND VENUE
3. This Court has subject matter jurisdiction over this action pursuant to the original jurisdiction granted by the Oklahoma Constitution.
4. This Court has personal jurisdiction over Duncan because its principal place of business is located in Oklahoma and, upon information and belief, one or more of its members resides in Oklahoma. Additionally, Duncan was formed pursuant to the Oklahoma Limited Liability Company Act, 18 O.S. §§ 2000-2067.
5. Jurisdiction and venue are proper in this Court because the subject real property is located in Custer County. See 12 O.S. § 132.
SUMMARY OF THE CASE
6. This lawsuit involves a dispute over Duncan’s obligations under a letter agreement (the “Letter Agreement”) pursuant to which it assigned Warwick the Merganser 1416-121324-1HM well (“Merganser 1H”). [Ex. 1, Letter Agreement.] In particular, Warwick seeks to hold Duncan accountable for its failure to pay, or even notify Warwick of the obligation and deadline to pay, the dry hole costs necessary to participate in production from the Merganser 1H. As a result, the participating interests Warwick believed it was acquiring from Duncan in two wells—not only the Merganser 1H, but also the Merganser-1416-121324-2HM well (“Merganser 2H”)—were deemed “non-consent” and relinquished to the operator under the applicable pooling order entered by the Oklahoma Corporation Commission (“OCC”). Accordingly, Duncan breached the parties’ agreements and the interests Warwick received have been so materially extinguished that Warwick is entitled to full rescission of both transactions.
GENERAL FACTS SUPPORTING ALL CLAIMS
7. Duncan and third-party Validus Energy II Midcon LLC (“Validus”) own leasehold mineral interests in Section 13, Township 14N, Range 16W, Custer County, Oklahoma (“Section 13”).
8. On July 9, 2025, the OCC entered Pooling Order 750799 (the “Pooling Order”) establishing a drilling and spacing unit in Section 13, appointing Validus the operator, and setting forth the rights of leasehold owners dependent upon their election to participate and payment of production costs. Importantly, the Pooling Order provides that owners failing to timely elect or
pay the dry hole costs are deemed to have forfeited their rights to participate in the wells to the operator in exchange for payment of a cash bonus.
9. Before the Pooling Order was entered, Duncan and Validus entered a pre-pooling letter agreement ("PPLA") that, inter alia, expands upon Duncan’s rights under the Pooling Order by permitting Duncan to delay paying its dry hole costs until “twenty (20) days upon receipt of spud notice from Validus” instead of paying within twenty-five (25) days of the date the Pooling Order is entered. [Ex. 2, PPLA, ¶ 2(a).]
10. Under both the Pooling Order and the PPLA, any owner that fails to timely elect to participate and pay the associated costs for the initial well forfeits to the operator its rights to participate in subsequent wells in the unit.
11. On August 11, 2025, Duncan received and signed for a certified copy of the spud notice from Validus for the Merganser 1H, which started the 20-day deadline for Duncan to pay Validus its proportionate share of dry hole costs.
12. Seven days later, Duncan agreed to sell its interest in the Merganser 1H to Warwick for $350,000.00. [Ex. 1, Letter Agreement.]
13. In the Letter Agreement, “Warwick acknowledge[d] that Duncan has elected to participate in the [Merganser 1H] to the full extent of its interest” and “agree[d] to timely pay [Validus] its share of any dry hole and completion costs for the well pursuant to the [PPLA].” [Ex. 1, Letter Agreement, ¶ 2.]
14. However, Duncan never informed Warwick it had received a spud notice from Validus seven days earlier, triggering the 20-day deadline to pay the dry hole costs and making the payment due to Validus by August 31, 2025.
15. The Letter Agreement further provides that “Warwick will reimburse Duncan for any dry hole, completion, or other joint interest billing costs Duncan has incurred for the [Merganser 1H],” indicating any “dry hole . . . costs” already due and owing would be paid by Duncan subject to reimbursement by Warwick. [Ex. 1, Letter Agreement, ¶ 2.]
16. Duncan further “represent[ed] and warrant[ed] to Warwick” that “there are no consents, waivers, approvals, preferential rights to purchase, rights of first refusal or other similar rights or restrictions on the sale or assignment of the Well that have not been obtained or waived and that would be applicable to . . . the consummation of the transactions contemplated by this Agreement.” [Ex. 1, Letter Agreement, p. 2 (emphasis added).]
17. On August 21, 2025, Duncan and Warwick closed the transaction for the Merganser 1H with Duncan never telling Warwick it had received the spud notice on August 11th and payment for dry hole costs was due to Validus by August 31st.
18. The next day, on August 22, 2025, Duncan reached out to Warwick and asked if it would also like to purchase Duncan’s interest in the Merganser 2H. Having already purchased the Merganser 1H, Warwick indicated it was interested and the parties began price negotiations which culminated in an agreement on August 28, 2025.
19. During their negotiations for the Merganser 2H, Duncan advised Warwick that it had not yet made an election to participate in the Merganser 2H and the election was due on September 11, 2025. However, Duncan never said anything to Warwick about having received the spud notice for the Merganser 1H and the payment for dry hole cost coming due on August 31, 2025.
20. Duncan and Warwick closed on the Merganser 2H on September 3, 2025.
21. That same day, Warwick notified Validus it had purchased both the Merganser 1H and Merganser 2H wells. Validus responded that Warwick’s interests in both wells had been deemed “non-consent” and relinquished to Validus under the terms of the Pooling Order and the PPLA because Duncan failed to timely pay the dry hole costs for the Merganser 1H.
COUNT I – BREACH OF CONTRACT
22. Warwick incorporates the preceding paragraphs as if fully set forth herein.
23. The Letter Agreement constitutes a valid and binding contract between Duncan and Warwick for the purchase and sale of the Merganser 1H.
24. Warwick fully complied with its obligations under the Letter Agreement.
25. Duncan breached the Letter Agreement by (a) failing to pay the dry hole costs for the Merganser 1H by August 31st and preserving the interest it sold to Warwick, and (b) failing to even inform Warwick it had received the spud notice on August 11th and the payment to Validus for the dry hole costs was due by August 31st.
26. As a direct result of Duncan’s breaches, Warwick has been damaged in an amount in excess of $75,000.
COUNT II – RECISSION
27. Warwick incorporates the preceding paragraphs as if fully set forth herein.
28. Warwick and Duncan mutually intended that Warwick acquire fully-participating interests in the Merganser 1H and the Merganser 2H.
29. Due to Duncan’s breaches of the Letter Agreement, Warwick acquired only “non-consent” interests in the Merganser 1H and Merganser 2H and the right to payment of a cash bonus for the Merganser 1H in an amount less than half the purchase price Warwick paid Duncan.
30. As a result, the consideration the parties mutually intended for Warwick to receive has been materially extinguished and fails as a matter of law providing Warwick the right to rescind both transactions pursuant to 15 O.S. §§ 232 and 233.
PRAYER FOR RELIEF
WHEREFORE, Warwick prays the Court enter a judgment in its favor and against Duncan as follows:
A. Rescinding the agreements for the purchase and sale of the Merganser 1H and Merganser 2H and ordering each party to return to the other all consideration exchanged;
B. In the alternative, awarding Warwick damages in an amount in excess of $75,000 caused by Duncan’s breaches of the Letter Agreement;
C. Awarding Warwick its costs and attorney fees as permitted by law; and
D. Granting such other and further relief as the Court deems just and proper.
Respectfully submitted,
[Signature]
Nicholas ("Nick") V. Merkley, OBA No. 20284
Cole T. McDaniel, OBA No. 35677
GABLEGOTWALS
BOK Park Plaza
499 West Sheridan, Suite 2200
Oklahoma City OK 73102
Telephone 405-235-5500
Facsimile 405-235-2875
Email
[email protected]
[email protected]
Attorneys for the Plaintiff
Warwick-Jupiter, LLC
Duncan Oil Properties, Inc.
100 N. Broadway Ave., Suite 2500
Oklahoma City, Oklahoma 73102
(405) 272-1800
August 18, 2025
Warwick-Jupiter, LLC
Attn: Leslie Griffin
6608 N. Western Avenue, Box 417
Oklahoma City, OK 73116
Re: Wellbore Assignment
Validus’ Merganser 1416-121324-1HM Well
Section 13-14N-16W
Custer County, Oklahoma
Dear Leslie:
This letter agreement is to memorialize the terms upon which Walter Duncan Oil, LLC ("Duncan") will convey and Warwick-Jupiter, LLC ("Warwick") will acquire all of Duncan’s working interest in the wellbore of the above-described oil and gas well (the "Well") and associated leasehold and other cost-bearing working interest, limited to the wellbore of the Well on the form of assignment attached hereto as Exhibit "A". Duncan estimates (but does not represent) the working interest to be conveyed hereunder to cover 79.432998 acres in the Mississippian formation at a 79.828125% net revenue interest, within the wellbore of the Well.
In exchange for the sum of Three Hundred Fifty Thousand Dollars ($350,000.00), payable at Closing, Duncan will execute and deliver the Assignment to Warwick. In addition, Warwick will reimburse Duncan for any dry hole, completion, or other joint interest billing costs Duncan has incurred for the Well. Warwick acknowledges that Duncan has elected to participate in the Well to the full extent of its interest and Warwick agrees timely pay Validus Energy II Midcon, LLC ("Validus") its share of any applicable dry hole and completion costs for the well pursuant to that certain Pre-Pooling Letter Agreement dated June 23rd, 2025 between Duncan and Validus.
Closing shall occur on or before August 22, 2025 ("Closing"). Warwick shall have until two (2) days prior to Closing to verify that Duncan has Defensible Title to the interest to be conveyed hereunder. As used herein, "Defensible Title" means title that, while not marketable or perfect, delivers the quantum of working interest contemplated herein at the net revenue interest contemplated herein and is not in breach of the below representations and warranties. Any alleged title defects not delivered to Duncan in writing on or before two (2) days prior to Closing shall be deemed waived. Duncan shall have until Closing to cure or attempt to cure, to Warwick’s reasonable satisfaction, any title defects timely asserted in writing by Warwick.
Warwick-Jupiter, LLC
Letter Agreement, Validus’ Merganser 1416-121324-1HM Well
August 18, 2025
Page 2
Duncan hereby represents and warrants to Warwick as of the date on which the Parties execute this Agreement that:
(a) Duncan has provided true and complete copies of the leases (including any amendments, restatements, modifications and memorandums thereof) to Warwick;
(b) the Well and associated leases are not subject to any gathering, compression, marketing, transportation, water or other similar contracts, including any providing for a dedication of production or acreage, volume commitments or other minimum monetary or in-kind throughput requirements or demand fees or charges, in each case, which will be binding on the Well or Warwick following assignment;
(c) there are no consents, waivers, approvals, preferential rights to purchase, rights of first refusal or other similar rights or restrictions on the sale or assignment of the Well that have not been obtained or waived and that would be applicable to the transfer of the Well from Duncan to Warwick or the consummation of the transactions contemplated by this Agreement;
Warwick acknowledges and agrees that the interest to be assigned pursuant to the Assignment are the subject of one or more Joint Exploration Agreements (Lash Prospect) and an associated Joint Operating Agreement dated September 1, 2002. Subject to the forgoing representations and warranties and the special warranty of title contained in the Assignment, the interests assigned by the Assignment are assigned as is, where is, and without warranty.
If this accurately reflects our agreement, please execute this letter agreement in the space provided below.
Sincerely,
Jason P. Blose
Warwick-Jupiter, LLC
______________________________ ________________________________
Date: _______________________________________
Name: Corinne M. Simon
Title: Managing Counsel
June 23, 2025
RE: Merganser Wells
Cause No. 2025-001711-T
Section 13-14N-16W
Custer County, Oklahoma
Mr. Ferguson:
Validus Energy II Midcon LLC ("Validus") is the Applicant in Pooling Cause CD No. 2025-001711-T and the Order to issue in such cause being the ("Pooling Order") filed at the Oklahoma Corporation Commission ("OCC"), covering Section 13-14N-16W, Custer Co, Oklahoma. The following shall set forth an agreement by and between Validus and Walter Duncan Oil, LLC, successor by conversion to Walter Duncan Oil, LP ("WDOIL") covering Section 13-14N-16W, Custer County, Oklahoma.
In consideration of the mutual covenants and benefits to be kept or derived by the parties hereto, WDOIL shall support Validus as operator under the Pooling Order in the above referenced cause. WDOIL and Validus agree as follows:
1. WDOIL agrees not to protest or cause anyone else to protest all applications filed by Validus with the OCC in Section 13-14N-16W Custer County, Oklahoma and will support Validus as Operator of same.
2. In the event WDOIL elects to participate as a working interest owner in the initial well under the Pooling Order then the following terms shall apply:
a. Validus agrees that WDOIL will not be required to pre-pay its share of the costs in accordance with the terms and conditions under the Pooling Order and it is further agreed that in the event WDOIL should elect to participate with all or any portion of its interest in the drilling of a well under the Pooling Order, then WDOIL shall have twenty (20) days upon receipt of spud notice from Validus to pay its proportionate share of dry hole costs for said well. The right to spud notice does not amend, delay or extend any rights under the Pooling Order as it relates to making an election under the Pooling Order.
b. It is agreed by the parties hereto that in the event WDOIL should elect to participate with all or any portion of its interest in the drilling of a well to be drilled under the Order, then in lieu of prepaying completion costs as set forth in the Order, WDOIL shall pay its share its share of completion costs as incurred and billed through monthly Joint Interests Billings ("JIB"). WDOIL shall pay such JIB's within thirty (30) days from receipt thereof. If WDOIL fails to pay such JIB's with ten (10) days from receipt of notice by Validus that such billings are in arrears for not being timely paid, Validus may, at its option, treat WDOIL as a non-participating party in the unit, in which case WDOIL shall deemed to have elected the highest cash bonus option that qualifies depending on excess burdens attached to such interest as provided for in the Pooling Order. WDOIL will forfeit its right to participate as a working interest owner in the unit, limited to the common sources of supply named in
the Order. In the event WDOIL timely elected to participate in all prior wells and has timely paid costs for each previous well, the terms of this paragraph shall apply only to subsequent wells.
c. WDOIL understands and agrees that costs provided for in the Pooling Order and any AFE or invoice prepared by Validus are estimates only for pre-payment purposes and WDOIL agrees to pay its proportionate share of actual costs incurred.
d. In the event WDOIL has elected to participate with all of its interest in the initial test well WDOIL shall have the right to share proportionately with Validus in the interests relinquished by owners under the Pooling Order to issue. Validus shall, within a reasonable period of time after the expiration of twenty-five (25) days from the date of entry of the Pooling Order, send written notice to WDOIL setting forth WDOIL’s portion of the interests relinquished under the Pooling Order and the cash bonus (if any) allocated to WDOIL’s share of such interests. WDOIL shall, within ten (10) days of receipt of the notice, send to Validus a written election to acquire its proportionate share of relinquished interests and tender to Validus the portion of the cash bonus (if any) allocated to WDOIL’s share of such interest. An election not to acquire its proportionate share of relinquished interests shall be deemed to have been made by actual election, no election, or by WDOIL’s failure to make proper payment all in a timely manner.
e. It is further agreed upon by both parties that the costs associated with the Pooling Order shall be borne by all participating Working Interest parties subject to the Pooling Order.
3. Provided that WDOIL has participated and has remitted payment in the drilling of the initial test well, Validus agrees to provide WDOIL well information on the same basis as received by Validus, on all wells WDOIL participates in. Well information from wells drilled pursuant to the Pooling Order shall contain, but not limited to, title opinions, all daily drilling reports, open and cased hole logs, including mud logs obtained by Validus and monthly production information. It is agreed that nothing contained in this agreement shall require or obligate Validus to conduct any test, operation, survey, or otherwise obtain any information through the drilling of any well drilled pursuant to the Pooling Order other than the information actually obtained by Validus. In the event conditions in the wellbore of such well are encountered making it impracticable or impossible for Validus to obtain any of the above logs or well information, Validus shall furnish WDOIL the logs and well information actually obtained by Validus from such well. It is expressly understood and agreed that the above information to be provided to WDOIL pursuant to this agreement shall not include any proprietary data owned by Validus that may be used or obtained in connection with any well drilled pursuant to the Pooling Order. WDOIL agrees to provide Validus with a copy of its well information requirement sheet.
4. In the event Validus proposes a subsequent well pursuant to the Pooling Order, and WDOIL has participated in the initial well, WDOIL shall have twenty (20) days from receipt of a proposal and AFE in which to make an election to participate with its interest. Should WDOIL elect to participate in any subsequently proposed well, costs shall be billed and paid pursuant to the terms of this agreement. Should WDOIL elect not to participate in any subsequently proposed well, then WDOIL shall be deemed to have elected under the Pooling Order to have accepted the option under which a party would receive the highest royalty provided for in the Pooling Order that WDOIL can deliver.
5. This agreement shall be binding upon and inure to the benefit of the parties, their heirs, devisees, legal heirs, successors, and assigns.
6. No fiduciary relationship, constructive trust, partnership, joint venture, or mining partnership is intended or meant by this agreement, and no act by any of the parties hereto shall operate to create such a relationship, nor shall any of the provisions hereof be construed or implied as creating such relationship for any purposes whatsoever.
7. The terms and conditions of this agreement shall apply to any well drilled pursuant to the Pooling Order subsequent to the proposed initial well, provided that WDOIL has the right to participate therein as a working interest owner.
8. This agreement and any rights and obligations of the parties hereunder shall terminate and expire in their entirety on the date the Pooling Order expires and shall have no further force or effect on the parties hereto. It is not intended that any obligation created by this agreement extend beyond the Pooling Order expiration date, except for any unsatisfied obligation created or incurred during the term and prior to the expiration of Pooling Order.
If the foregoing terms and conditions are acceptable to you, please so indicate by dating, signing, and returning a copy of this letter to the undersigned on or before June 23, 2025.
Regards,
VALIDUS ENERGY II MIDCON LLC
CHAD PINKERTON
Agreed to and accepted this 23rd day of June, 2025.
Walter Duncan Oil, LLC,
successor by conversion to Walter Duncan Oil, LP
By: Joe Ferguson
Title: Land Manager
