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David Allen QC and Henry Moore appear for Apache before Court of Appeal in important Farm-Out Agreement dispute

27th Nov 2020

Apache North Sea Ltd v Euroil Exploration Ltd [2020] EWCA Civ 1397

David Allen QC and Henry Moore appeared for Apache before the Court of Appeal in a significant oil and gas case.

They acted for the appellant and proposed cross-respondent.

The appeal concerned a Farm-Out Agreement by which Apache sold to Euroil Exploration Limited (“Euroil”) certain interests in respect of UK Continental Shelf licence areas in the North Sea.

The Farm-Out Agreement was a form of sale agreement providing for Euroil to pay for a share of “total costs…whensoever incurred” in respect of the drilling of wells in the relevant licence areas, and a share of historic costs incurred by Apache.

The construction of the price was the main issue on the appeal. Apache argued that the words “total costs…whensoever incurred” were undefined because they meant what they said, and therefore referred to the total costs incurred by Apache in drilling the relevant well.

Carr LJ, with whom Lewison and Peter Jackson LJJ agreed, acknowledged the “initial attraction” of Apache’s submissions and remarked that they had been advanced in a “clear and skilful manner” (at [37] and [64]).

Nonetheless, and without reaching a concluded view on the meaning of the word “whensoever”, the Court dismissed the appeal on this point by holding that the words “total costs…whensoever incurred” had to be interpreted by reference to a Joint Operating Agreement appended to the Farm-Out Agreement, under which there was a cap on the costs which Apache could recover from Euroil (at [47], [52]-[60]).

As to the remaining points before the Court, Carr LJ found in favour of Apache by holding that:

  1. Euroil would not have been entitled to uphold the judgment below on grounds not argued below (at [66]); and
  2. Euroil’s application for permission to cross-appeal against the trial judge’s adverse order on costs was dismissed because it had no prospect of success and there was no other compelling reason to hear it (at [69]).

The judgment can be viewed here.

David Allen QC and Henry Moore were instructed by Clyde & Co LLP.