Cresson SWD Services, L.P. vs. Basic Energy Services, L.P. is a warning about the perils of an oral agreement for a risky downhole procedure. Cresson hired Basic to make improvements on a saltwater disposal well by deepening the injection zone, inserting a liner, and cleaning out the hole to 8,600 feet.

The Claims

Cresson’s claim: Basic did not complete the well to 8,600 feet as promised and did not offer to complete the work.

Basic’s response: The agreement did not include a guarantee of success and Basic worked on the well until Cresson decided not to spend any more money on the project.

Let the Swearing Match Begin

The testimony came down to the word of Lack, Cresson’s “company man”, and Thomas and Wild, Basic’s rig manager and “head fishing rental tool guy”.  Lack understood that the well was a straight hole, with no deviation from vertical. In communicating with Basic, Lack did not share any of the specifics with the workover other than they were going to clean the bottom of the well and attempt to run a liner. Obstructions were encountered downhole.  Several unsuccessful fishing operations were conducted. It turned out that one surprise obstruction was a whipstock - the tool that kicks off the wellbore and changes the angle from vertical to deviated or directional.

Lack testified about a  meeting at which he told Cresson their options were to continue to spend money fishing without knowing whether it would be successful, or set another whipstock and go in another direction. He testified that it was Cresson’s financial decision to decide what to do.

Basic’s witnesses testified that no decision was made at the meeting.  Basic then rigged down the equipment, moved off the location, and demanded payment. Litigation ensued when Crossen would not pay Basic’s invoice.

The jury decided that the decision not to continue with the operation was Cresson’s and not Basic’s.  Basic recovered a judgment for its invoices.  The appellate court found that this finding by the jury was supported by the evidence.

The Takeaways

• If essential terms of the transaction had been reduced to writing, perhaps this dispute could have been avoided.
• With more effort up front, even more detail could be incorporated into the agreement, further reducing the chances of misunderstandings leading to conflict.
• The trial revolved around a bunch of oral communications. Reducing communications, alternatives, options, and questions to writing brings clarity.
• The more clarity, the more likely litigation can be avoided altogether.
• Clarity adds certainty to the litigation calculation, which enhances early resolution, … which eliminates  trial and appeal, … which saves you time, money, and the agony of tedious, seemingly endless, cross-examination under oath.
• Diogenes would have liked Lack. He was the company man, yet his testimony seems to have helped Basic. either Lack was an honest man or the court  cherry-picked his testimony to find support for the jury finding. That is likely. The appellate court’s job was to look for evidence supporting the jury verdict.

Bobby Keys RIP (his greatness begins at about 3:10)