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Click here for the full text of this decision FACTS:Kerr-McGee Corp. entered into 61 oil and gas leases with a group of 60 individuals, estates and trusts (Helton) for land in Wheeler County. Kerr-McGee drilled the Holmes 17-1 well that contacted with approximately 73 feet of what became known as the Lower Puryear reservoir zone. The well was very profitable. Kerr-McGee drilled several more wells after that, some of which contacted Lower Puryear, but at different rates of thickness, and some of which had no contact at all with Lower Puryear. Accordingly, these wells varied in profitability, and some were not profitable at all. Eventually, Helton sued Kerr-McGee for breach of the implied covenant to protect the leaseholds from drainage. They alleged that the Holmes 17-1 well, and other wells drilled in that section of the land (known as Section 17) drained the gas from another section of the land (known as Section 10), even though two wells had indeed been drilled on Section 10. Helton argued that Kerr-McGee, as a reasonably prudent operator, should have drilled an offset well on Section 10 as close as possible to Holmes 17-1, a known producer; Kerr-McGee had no economic incentive to drill the offset well since it owned leases in the surrounding sections. Helton alleged that the hypothetical offset well would have encountered the same Lower Puryear reservoir as Holmes 17-1 and would have been very profitable. At a bench trial, Helton offered the expert testimony of Michael Riley, a petroleum engineer. Riley testified on direct examination his theory on how much gas the hypothetical well would have produced. Multiplied by Helton’s three-sixteenth royalty interest, Riley estimated that Helton would have made nearly $2.15 million. Riley said that he looked at numerous accepted sources, such as well logs, base maps, production information, Railroad Commission records, and scout cards, to obtain data about the area and the wells surrounding the hypothetical well’s location. On cross-examination, Riley stated that his conclusion was based on the assumption that the hypothetical well would have produced at the same rate as the Holmes 17-1 well, at least until another later-drill well began producing, and then the three wells would have produced at the same rate until the reservoir ran dry. When asked if the production of the Holmes 17-1 and later-drilled wells would tell him anything about the hypothetical well’s production, Riley said, “No, it does not.” Kerr-McGee objected to Riley’s testimony at this point, on the ground that it was unreliable, and moved to strike. The trial court denied the motion, and Riley was twice recalled to testify. After its expert testified to a different theory on the calculation of loss, Kerr-McGee filed a no-evidence motion for judgment as a matter of law, and a motion for judgment, both of which the trial court denied. The trial court ruled in favor of Helton, finding Kerr-McGee breached the implied covenant and awarding Helton more than $840,000 in royalties, plus future damages. The trial court denied Kerr-McGee’s motions to modify the judgment and for a new trial. The court of appeals affirmed, ruling that while Riley’s opinion may not have been absolute, it constituted some factual basis to support his opinion on the amount of damages. Kerr-McGee appeals only the rulings with respect to Riley’s testimony. For purposes of appeal, Kerr-McGee assumes the basic issue of liability, but it contends Riley’s testimony was unreliable. HOLDING:Reversed and rendered that Helton take nothing. The court first addresses Helton’s argument that Kerr-McGee did not properly preserve the issue for appeal. Helton says that Kerr-McGee waived its right to make a motion to strike Riley’s testimony when it waited to do so until the close of cross-examination. Agreeing that there is a general requirement to object during trial to prevent a trial by ambush, the court nonetheless finds that Helton was not ambushed here. Kerr-McGee objected as soon as the basis for the objection became apparent, and Helton had the opportunity to address the objection when Riley was twice recalled. Also, parsing Kerr-McGee’s objection at trial, the court confirms that Kerr-McGee was objecting both to the reliability of Riley’s factual foundation and the improper methodology. Contrary to Helton’s argument that Kerr-McGee objected only to the former, the court finds that Kerr-McGee’s position on appeal is not broader than the one it took at trial. Turning to the no-evidence challenge to Riley’s testimony, the court cites Merrell Down Pharms. Inc. v. Havner, 953 S.W.2d 706 (Tex. 1997), and its progeny for the principle that the substance of an expert’s testimony must be considered, including whether the underlying data should be independently evaluating to determine if the opinion itself is reliable. Expert testimony is unreliable if it is not grounded in the methods and procedures of science, and is no more than subjective belief or unsupported speculation. Further, in reviewing the reliability of expert testimony, the court is not to determine whether the expert’s conclusions are correct; rather, the court should determine only whether the analysis used to reach those conclusions is reliable. The court says there is a long history of requiring more than speculation as evidence of drainage, though estimating the production of a hypothetical well will necessarily involve some circumstantial evidence. The court then quotes extensively from Riley’s opinion on cross-examination, noting that Riley never explained how certain characteristics of the Holmes 17-1 well would be predictors for the hypothetical well’s production. And though Riley tried to explain that characteristics of permeability or porosity would predict the well’s production, he did not say whether those factors affected his production estimates, if at all. Moreover, Riley failed to sufficiently explain why known differences in the existing wells, such as the thickness of the Lower Puryear reservoir encountered, would not result in different production rates. “In sum, even if the data Riley used is the type generally relied on by petroleum engineers to estimate production, and even if the underlying facts and data Riley used are accurate, there is simply too great an analytical gap between the data and Riley’s conclusions for the conclusions to be reliable and therefore some evidence. Because Riley’s testimony regarding the amount of damages is incompetent, there is no evidence to support the amount of damages awarded by the trial court.” The court determines that a remand to the trial court would not be in the interest of justice. This decision does not modify any legal precept, so remand for that reason is unjustified. Additionally, because Helton had more than two years to prepare for trial, had full access to Kerr-McGee’s records and had four days after Riley’s testimony to respond, a remand would in essence give Helton a second bite of the apple. OPINION:Smith, J.; Phillips, C.J., Hecht, Owen, Jefferson, Schneider, Wainwright and Brister join. Hecht, J., filed a concurring opinoin; Wainwright, J., joins. O’Neill, J., did not participate.

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