In none of them was there a neglect to explore or develop for any such period as is here shown, or an expressed intention not to do so, in a comparable situation. Goodwin v. Standard Oil Co., 290 F. 92; Humphreys Oil Co. v. Tatum, 26 F.2d 882; Orr v. Comar Oil Co., 46 F.2d 59; Denker v. Mid-Continent Petroleum Corp., 56 F.2d 725; Pelham Petroleum Co. v. North, 78 Okla. 39; 188 P. 1069; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200; 23 P.2d 387. The petitioners are entitled to relief in equity as they have no adequate remedy at law.
II. Diligence and prudence is the standard of the implied covenant applied by the authorities. Billeaud Planters Inc. v. Union Oil Co. of California, 144 F. Supp. 464; Blair v. Clear Creek Oil Gas Co., 148 Ark. 301, 230 S.W. 286, 19 A.L.R. 430; Blake v. The Texas Co., 123 F. Supp. 73; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387; Carper v. United Fuel Co., 78 W. Va. 433, 89 S.E. 12, L.R.A. 1917A 171; Carter Oil Co. v. Dees, 340 Ill. App. 449, 92 N.E.2d 519; Carson v. Ozark Natural Gas Co., 191 Ark. 167, 83 S.W.2d 833; Cooper v. Ohio Oil Co., 25 F. Supp. 304; Culbertson v. Iola Portland Cement Co., 87 Kan. 529, 125 P. 81; Deep Rock Oil Corp. v. Bilby, 199 Okla. 430, 186 P.2d 823; Fontenot v. Austral Oil Exploration Co. Inc., 168 F. Supp. 36; Geary v. Adams Oil Gas Co., 31 F. Supp. 830; Gerson v. Anderson Prichard Production Co., 149 F.2d 444; Hartman Ranch Co. v. Associated Oil Co., 10 Cal.2d 232, 73 P.2d 1163; Humphreys Oil Co. v. Tatum, 26 F.2d 882; Hutchins v. Humble Oil Refining Co., 161 S.W.2d 571; Indian Territory Illuminating Oil Co. v. Haynes Drilling Co., 180 Okla. 419, 69 P.2d 624; Kleppner v. Lemmon, 197 Pa. 430, 47 A. 353; Lafitte Co. v. United Fuel Oil Co., 177 F. Supp. 52; Millette v. Phillips Petroleum Co., 209 Miss. 687, 48 So.2d 344; Myers v. Shell Petroleum Corp., 153 Kan. 287, 110 P.2d 81
3. Same — In Absence of Stipulation Neither Lessor nor Lessee Is Arbiter of Extent to Which Operations Shall Proceed. Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is, in the absence of a stipulation to that effect, the arbiter of the extent to which, or the diligence with which, the operations shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both. Pelham Petro. Co. v. North, 78 Okla. 39, 188 P. 1069; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387. 4. Equity — Jurisdiction to Adjust Rights of Parties Upon Allowance of Monetary Compensation Without Relegating Parties to New Action Strictly Legal in Nature.
Due diligence is measured by what a reasonably prudent operator would do under the existing facts and circumstances, having regard for the interest of both the lessor and the lessee. Trust Co. of Chicago v. Samedan Oil Corp., 10 Cir., 192 F.2d 282, 284; Denker v. Mid-Continent Petroleum Corporation, 10 Cir., 56 F.2d 725, 727; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387, 389; Ramsey Petroleum Corporation v. Davis, 184 Okla. 155, 85 P.2d 427, 429; Newell v. Phillips Petroleum Co., 10 Cir., 144 F.2d 338, 339. The term of the Lowder 5-year lease expired on June 3, 1958.
The duty imposed by the implied covenants of a lease to diligently develop the lease and to drill offset wells to protect the lease from drainage is to do that which an operator of ordinary prudence, having a regard for the interests of both lessor and lessee, would do. Ramsey Petroleum Corporation v. Davis, 184 Okla. 155, 85 P.2d 427, 429; Pelham Petroleum Co. v. North, 78 Okla. 39, 188 P. 1069, 1072; Donaldson v. Josey Oil Co., 106 Okla. 11, 232 P. 821, 823; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387, 389; Indian Territory Illuminating Oil Co. v. Haynes Drilling Co., 180 Okla. 419, 69 P.2d 624, 626; Denker v. Mid-Continent Petroleum Co., 10 Cir., 56 F.2d 725, 727, 84 A.L.R. 756; Brewster v. Lanyon Zinc Co., 8 Cir., 140 F. 801, 814. Neither the lessor nor the lessee is the arbiter of the extent to which, or the diligence with which the exploration and development shall proceed.
This is also the established rule in the Oklahoma courts. Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387; Indian Territory Illuminating Oil Co. v. Haynes Drilling Co., 180 Okla. 419, 69 P.2d 624; Ramsey Petroleum Corp. v. Davis, 184 Okla. 155, 85 P.2d 427. We have quoted at length from our opinion in the Gerson case because it clearly sets forth the principle by which the questions presented must be decided, and because, in the interest of brevity, we shall not cite the numerous other cases which have dealt with this problem.
The standard by which both are bound is what an experienced operator of ordinary prudence should do in the circumstances, bearing in mind that the purpose of the contract is the mutual benefit of the lessor and the lessee. Fox Petroleum Co. v. Booker, 123 Okla. 276, 253 P. 33; Broswood Oil Gas Co. v. Mary Oil Gas Co., 164 Okla. 200, 23 P.2d 387; Indian Territory Illuminating Oil Co. v. Haynes Drilling Co., 180 Okla. 419, 69 P.2d 624, certiorari denied, 302 U.S. 736, 58 S. Ct. 143, 82 L.Ed. 569; Ramsey Petroleum Corporation v. Davis, 184 Okla. 155, 85 P.2d 427; Indian Territory Illuminating Oil Co. v. Rosamond, 190 Okla. 46, 120 P.2d 349, 138 A.L.R. 246; Brewster v. Lanyon Zinc Co., 8 Cir., 140 F. 801; Carter Oil Co. v. Mitchell, 10 Cir., 100 F.2d 945. But the lessee does not bear an implied obligation to drill an offset well to prevent drainage unless, taking into consideration all existing facts and circumstances, it would probably produce oil in sufficient quantity to repay the whole sum required to be expended, including the cost of drilling, equipping, and operating the well, and also pay a reasonable profit on the entire outlay.
See Webb v. Croft, 120 Kan. 654, 244 P. 1033, 1035; Howerton v. Kansas Nat. Gas Co., 81 Kan. 553, 106 P. 47, 34 L.R.A. (N.S.) 34; Id., 82 Kan. 367, 108 P. 813, 34 L.R.A. (N.S.) 46; Day v. Kansas City Pipe Line Co., 82 Kan. 861, 109 P. 186. It has been recently followed in Broswood O. G. Co. v. Mary O. G. Co. (Okla.Sup.) 23 P.2d 387, where the court, under a state of facts similar to those in the instant case, refused to cancel the undeveloped portion of an oil and gas lease. In Webb v. Croft, supra, decided April 10, 1926, the court said:
In I.T.I.O. Co. v. Haynes Drilling Co., 180 Okla. 419, 69 P.2d 624, we held in Syllabi 3 and 6: "3. Where the object of the operations contemplated by an oil and gas lease is to obtain a benefit or profit for both lessor and lessee, neither is, in the absence of a stipulation to that effect, the arbiter of the extent to which, or the diligence with which, the operations shall proceed; but both are bound by the standard of what, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both. Pelham Petro. Co. v. North, 78 Okla. 39, 188 P. 1069; Broswood Oil Gas Co. et al. v. Mary Oil Gas Co. et al., 164 Okla. 200, 23 P.2d 387." "6.
To the same effect is Cooper v. Ohio Oil Company, 25 F. Supp. 304 (D.C. Wyo. 1938). In Broswood Oil and Gas Company v. Mary Oil and Gas Company, 164 Okla. 200, 23 P.2d 387 (1933), plaintiff sued to cancel a lease for breach of covenant to develop, and to recover damages for alleged drainage by wells of defendant on adjoining lands. The trial court held that there was no drainage, and if any, it was very slight, insufficient to make the drilling of an offset well profitable.