                                     PUBLISHED

                      UNITED STATES COURT OF APPEALS
                          FOR THE FOURTH CIRCUIT


                                      No. 18-1291


EQUINOR USA ONSHORE PROPERTIES INC., f/k/a STATOIL USA
ONSHORE PROPERTIES, INC.,

                    Plaintiff – Appellee,

             v.

PINE RESOURCES, LLC,

                    Defendant – Appellant.


Appeal from the United States District Court for the Southern District of West Virginia,
at Charleston. Irene C. Berger, District Judge. (2:14-cv-21169)


Argued: December 11, 2018                                     Decided: March 6, 2019


Before GREGORY, Chief Judge, MOTZ, and FLOYD, Circuit Judges.


Affirmed by published opinion. Chief Judge Gregory authored the opinion, in which
Judge Motz and Judge Floyd joined.


ARGUED: David Allen Barnette, JACKSON KELLY, PLLC, Charleston, West
Virginia, for Appellant. Fields Alexander, BECK REDDEN LLP, Houston, Texas, for
Appellee. ON BRIEF: Michael M. Fisher, Vivian Hatzi Basdekis, JACKSON KELLY,
PLLC, Charleston, West Virginia, for Appellant. Joel T. Towner, BECK REDDEN LLP,
Houston, Texas; Bridget Furbee, Bridgeport, West Virginia, John J. Meadows, STEPTOE
& JOHNSON PLLC, Charleston, West Virginia, for Appellee.
GREGORY, Chief Judge:

      This appeal concerns a contractual obligation to “spud” three wells on a tract of

land in West Virginia. The parties dispute whether the obligation to “spud” the wells is

an obligation only to begin drilling or to complete the wells to the point of mineral

production. Following a bench trial, the district court determined that the Purchase and

Sale Agreement (“PSA”) executed between Petitioner Pine Resources, LLC and the

predecessor of Respondent Equinor USA Onshore Properties, Inc. f/k/a Statoil USA

Onshore Properties, Inc. contains no requirement that the spudded wells be completed to

production. We agree with the district court that the PSA does not require hydrocarbon

production. We therefore affirm.



                                            I.

                                            A.

      Pine Resources sold its Marcellus mineral rights in 565 acres of land in Barbour

County, West Virginia (the “Langley tract”) to PetroEdge Energy LLC, a non-party,

pursuant to a November 7, 2008 PSA. 1 In addition to documenting the terms of the

mineral rights sale, the PSA set forth certain drilling obligations on the Langley tract.


      1
          Pine Resources’s principal testified at trial that mineral rights are typically
leased, not sold. J.A. 1562–63. In a typical mineral rights lease, the lessee assumes the
obligation to develop the mineral rights within a specified time period. J.A. 1563. If that
obligation is not fulfilled, the mineral rights revert to the lessor. Id. Here, rather than
lease its mineral rights, Pine Resources chose to sell them to PetroEdge and retain only a
royalty interest in hydrocarbons produced therefrom. J.A. 1562. As Pine Resources’s
principal explained, the deal was structured in this way for tax purposes. J.A. 1572.

                                            2
Specifically, PetroEdge agreed to apply for a meter tap on a gas transmission line on or

before 60 days after executing the PSA, i.e. December 7, 2008. Following installation of

that meter tap, the PSA provided for the “spudding” of three wells: the first was to be

spudded within one year of the meter tap’s installation, and a total of three wells were to

be spudded within five years of the meter tap’s installation.        The PSA permitted

PetroEdge to satisfy the spudding obligations by spudding horizontal wells with openings

that were off the Langley tract so long as any portion of the well traversed the Langley

tract.   Pursuant to the PSA, Pine Resources retained an overriding royalty interest

(“ORRI”) of 18% of the hydrocarbons “produced from or attributable to” the mineral

rights that were sold to PetroEdge. J.A. 1734.

         The PSA contained other provisions related to the parties’ drilling and surface

operations. The parties agreed to meet on a quarterly basis to consult regarding each

other’s drilling plans and to use reasonable efforts to cooperate with each other in their

surface operations. The PSA also established procedures to be used if a party chose to

abandon a “producing well” that ceased to produce hydrocarbons. Id.

         A year and a half after the PSA was executed, concern grew that PetroEdge would

be unable to meet the deadline for the spudding of the first well due to a delay in

installation of the meter tap. PetroEdge had been able to secure only one of two rigs that

it needed to drill the first well, which was to be a horizontal well with a surface opening

outside of the Langley tract. The second rig was necessary to drill the horizontal portion

of the well, which would eventually penetrate the Langley tract. The parties agreed to

extend the deadline for spudding of the first well to December 31, 2011 in exchange for

                                            3
$100,000 in consideration paid to Pine Resources. The parties also agreed that the meter

tap installation date would be set at April 1, 2009, regardless of the actual installation

date, and that the deadline for spudding of the second and third wells would be April 1,

2014. After a second delay, the parties agreed to amend the PSA a second time to allow

PetroEdge until March 31, 2012 to satisfy its contractual obligations in connection with

the first well. No additional consideration was paid.

       PetroEdge began drilling the first well, known as Bumgardner 5-2H, in December

2011. The well was drilled to 6,134 feet and penetrated the Langley tract in March 2012.

It was never completed, however, and has never produced hydrocarbons.

       After drilling the first well, the parties continued to meet on a quarterly basis until

September 2012, when PetroEdge missed the quarterly meeting.                  In late 2012,

PetroEdge’s CEO Larry Richard notified Pine Resources that PetroEdge had sold its

mineral interests to Statoil. The PetroEdge-Statoil purchase agreement provided that

Statoil would assume responsibility for the “performance of all express and implied

obligations” arising from “instruments in the chain of title to the Assets, the Leases, the

Contracts and all other orders, contracts and agreements to which the Assets are subject,

including the payment of royalties and overriding royalties.” J.A. 2440. Schedule 3.25

of that contract listed the Pine Resources-PetroEdge PSA as one of these contracts and

indicated: “The first drilling obligation satisfied by drilling the Bumgardner #5-2H Well.

Must drill at least two (2) additional wells, vertical or horizontal, on or before April 1,

2014 (may be negotiable).” J.A. 1856.



                                              4
       After Pine Resources learned of Statoil’s purchase of PetroEdge’s mineral rights,

Pine Resources’s principals made several attempts to contact Statoil to schedule quarterly

meetings. They initially received no formal response. Months later, on July 11, 2013,

Statoil and Pine Resources met. During that meeting, Statoil’s Joshua Ozment informed

Pine Resources that a second well had been permitted on the same pad as the first well

and that Ozment assumed that his company would drill that well.

       Also on July 11, 2013, Pine Resources notified Statoil in writing of what Pine

Resources considered to be three ongoing violations of the PSA. First, Pine Resources

stated that Statoil had failed to meet its quarterly meeting obligation. Second, Pine

Resources considered Statoil’s failure to “complete[ ] and turn[ ] into production” the

first well a breach of the PSA. J.A. 1823. And third, Pine Resources noted the remaining

drilling obligations and requested an update of Statoil’s plans to satisfy those obligations.

Statoil did not respond to that correspondence, but the company’s vice president of

business development forwarded Pine Resource’s letter internally, stating, “Sounds like

we are in some trouble, but maybe you guys get a lot of these.” J.A. 1857.

       Pine Resources followed up its July 11, 2013 letter with additional emails and

phone calls in an attempt to ascertain Statoil’s plans to satisfy its obligations under the

PSA. In December 2013, Statoil informed Pine Resources that it would not complete the

first well or drill the second or third wells and asked that Pine Resources explain its

demands in writing. Pine Resources sent a demand letter to Statoil, stating “[t]here was

an immediate requirement to contract with a pipeline for service and a requirement to

drill three wells.” J.A. 1826. A month later, Statoil responded that it was “not obligated

                                             5
to complete the [first well] until the Langley Meter Tap is installed.” J.A. 1900. Because

the meter tap had not yet been installed, the obligation to spud the second and third wells,

according to Statoil, had not yet been triggered.

       Pine   Resources    responded     with       several   additional   emails   and   other

communications to Statoil, explaining among other things that Pine Resources had agreed

with PetroEdge that the meter tap installation date would be April 1, 2009.               Pine

Resources’s correspondence initially went unanswered. When Statoil finally did respond,

its position was: “If you sue us, we’ll bankrupt you.” J.A. 1547.

       Statoil took no steps to complete the Bumgardner 5-2H Well or to begin drilling

the second or third wells on the Langley tract. Statoil sold its interest in the Marcellus

mineral rights in 2015.

                                             B.

       On July 8, 2014, Statoil brought suit against Pine Resources in the United States

District Court for the Southern District of West Virginia.           The complaint sought a

judgment declaring that Statoil owed no obligations to Pine Resources under the PSA

beyond making royalty payments. Pine Resources filed a counterclaim, asserting breach

of Section 5.7(b) of the PSA—the section setting forth the spudding obligations.

       The parties filed cross-motions for summary judgment. The district court granted

summary judgment to Statoil and denied Pine Resources’s motion for summary judgment

on its counterclaim. In doing so, the district court found that, under the unambiguous

language of the PSA, the spudding obligations extended only to the “Purchaser,” which

the court read to mean PetroEdge alone.

                                                6
         Pine Resources appealed, and we reversed in an unpublished per curiam opinion.

Statoil USA Onshore Props. Inc. v. Pine Resources, LLC, 675 F. App’x 285 (4th Cir.

2017).     We held that the spudding obligations extended beyond PetroEdge to its

successors and assigns and, therefore, to Statoil as PetroEdge’s assign. Id. at 289–90.

We remanded with instructions to enter summary judgment in favor of Pine Resources on

Statoil’s declaratory judgment claim and to consider in the first instance Statoil’s

argument that Pine Resources sustained no damages in connection with the breach of

contract counterclaim. Id. at 296.

         On remand, the parties filed cross-motions for summary judgment on the issue of

damages. The district court denied both motions, and the parties proceeded to a bench

trial.

         At trial, the district court ruled on two issues: (1) whether the PSA required

production in addition to drilling of the wells and (2) the amount of damages that resulted

from Statoil’s breach of the PSA. After a two-day bench trial, the district court found in

favor of Statoil. The court determined that the contract language is ambiguous with

respect to whether it requires production.       Looking to extrinsic evidence, the court

concluded that the PSA contains no production requirement. The court also noted that

Pine Resources’s evidence of its damages was based entirely on royalty losses tied to

well production; Pine provided no evidence of damages resulting from Statoil’s failure to

spud the second and third wells. Therefore, the court awarded no damages.

         Pine Resources now appeals to this Court.



                                             7
                                             II.

       We “review a judgment following a bench trial under a mixed standard of

review—factual findings may be reversed only if clearly erroneous, while conclusions of

law, including contract construction, are examined de novo.” Dan Ryan Builders, Inc. v.

Crystal Ridge Dev., Inc., 783 F.3d 976, 979 (4th Cir. 2015) (quoting Roanoke Cement

Co. v. Falk Corp., 413 F.3d 431, 433 (4th Cir. 2005)). The scope of our review is

narrow: “we do not exercise de novo review of factual findings or substitute our version

of the facts for that found by the district court.” Walton v. Johnson, 440 F.3d 160, 173

(4th Cir. 2006) (citing Jiminez v. Mary Wash. College, 57 F.3d 369, 378 (4th Cir. 1995)).

Rather, “[i]f the district court’s account of the evidence is plausible in light of the record

viewed in its entirety, the court of appeals may not reverse it even though convinced that

had it been sitting as the trier of fact, it would have weighed the evidence differently.”

Id. (alteration in original) (quoting Anderson v. City of Bessemer City, 470 U.S. 564,

573–74 (1985)). Nonetheless, we may reverse a district court’s factual finding if, “on the

entire evidence,” we are “left with the definite and firm conviction that a mistake has

been committed.” Id. (quoting United States v. U.S. Gypsum Co., 333 U.S. 364, 395

(1948)).



                                             III.

                                             A.

       We begin by reviewing the district court’s determination that the PSA contains no

hydrocarbon production obligation. The PSA provides that its construction is controlled

                                              8
by West Virginia law. Under West Virginia law, “the function of a court is to ascertain

the intent of the parties as expressed in the language used by them” in their contract.

Zimmerer v. Romano, 679 S.E.2d 601, 610 (W. Va. 2009) (per curiam) (quoting Davis v.

Hardman, 133 S.E.2d 77, 81 (W. Va. 1963)). In doing so, courts must read contracts “as

a whole, taking and considering all the parts together.” Id. (citation omitted). Reading

the contract as a whole, we must be mindful that “specific words or clauses . . . are not to

be treated as meaningless, or to be discarded, if any reasonable meaning can be given

them consistent with the whole contract.” Dunbar Fraternal Order of Police, Lodge No.

119 v. City of Dunbar, 624 S.E.2d 586, 591 (W. Va. 2005) (per curiam) (citation

omitted).

       Generally, “[a] valid written instrument which expresses the intent of the parties in

plain and unambiguous language . . . will be applied and enforced according to such

intent.” Arnold v. Palmer, 686 S.E.2d 725, 733 (W. Va. 2009) (brackets in original)

(citations omitted). When a contract’s terms are clear and unambiguous, “[e]xtrinsic

evidence will not be admitted to explain or alter the terms of [the] contract.” Faith

United Methodist Church & Cemetery of Terra Alta v. Morgan, 745 S.E.2d 461, 481 (W.

Va. 2013) (citation omitted).

       On the other hand, where contract language is ambiguous, extrinsic evidence may

be considered to aid the court in its construction of the contract. Yoho v. Borg-Warner

Chems., 406 S.E.2d 696, 697 (W. Va. 1991) (per curiam). Language is ambiguous when

it is “reasonably susceptible of two different meanings” or is “of such doubtful meaning

that reasonable minds might be uncertain or disagree as to its meaning.” Payne v.

                                             9
Weston, 466 S.E.2d 161, 166 (W. Va. 1995) (quoting Shamblin v. Nationwide Mut. Ins.

Co., 332 S.E.2d 639, 642 (W. Va. 1985)).

                                             1.

       We agree with the district court that the PSA is ambiguous as to whether it

required PetroEdge, and by assignment Statoil, to complete the three wells to production.

       The PSA required that the purchaser “spud” three wells, but the contract does not

define the term “spud.” Nor does it contain an explicit requirement of well completion or

production. Therefore, we first look to the plain meaning of “spud.” Fraternal Order of

Police, Lodge No. 69 v. City of Fairmont, 468 S.E.2d 712, 715 (W. Va. 1996).

       The plain meaning of “spud” refers only to the initial drilling of wells, not

completion or production. The term’s dictionary definition is “to begin to drill (a hole for

an oil well) by imparting an up-and-down motion to the drilling bit.” Spud, Oxford

English Dictionary (2d ed. 1989); J.A. 2324. This meaning is consistent with the way in

which “spud” has been understood in the oil and gas industry. See John S. Lowe, Oil and

Gas Law in a Nutshell 6 (6th ed. 2014) (“The well is spudded when the drill bit begins to

bite into the ground.”); Caltex Oil Venture v. Comm’r of Internal Revenue, 138 T.C. 18,

28–29 (2012) (“[A] well is ‘spudded’ when the drill bit penetrates the ground for

purposes of drilling an oil or gas well.”); L&B Oil Co., Inc. v. FERC, 665 F.2d 758, 763

(5th Cir. 1982) (“[S]pudding in” is “the initial boring of the hole, to a depth of

approximately 100 feet, in drilling an oil or gas well.” (citing H. Williams & C. Meyers,

Manual of Oil and Gas Terms 564 (4th ed. 1976))); J.A. 2926 (Schlumberger Oilfield



                                            10
Glossary defining “spud” to mean “to start the well drilling process by removing rock,

dirt and other sedimentary material with the drill bit”).

       Although one of Pine Resources’s principals, Richard Heffelfinger, conceded at

trial that the industry meaning of “spud” is the initiation of the drilling process, J.A.

1601–03, Pine Resources argues that the spudding requirements in Section 5.7 should be

read in the context of the entire PSA, see Zimmerer, 679 S.E.2d at 610, and that such a

reading demonstrates that the parties intended the wells to be completed and begin

producing. “In the construction of written instruments technical words are presumed to

have been used in a technical sense and should ordinarily be given their strict meaning;

but this rule is not absolute and when it appears from the context that another meaning

was intended such words will not be applied in their technical sense.” Lane v. Bd. of

Educ. of Lincoln Cty., 131 S.E.2d 165, 169 (W. Va. 1963) (citations omitted).

Accordingly, we must examine the PSA as a whole to determine whether the parties

intended the spudding requirement to mean anything other than it is ordinarily understood

to mean in the oil and gas industry.

       The PSA contains several provisions that call into question the parties’ intent in

their use of the term “spud.” For example, the PSA provides for cooperation in parallel

drilling and well operations, including quarterly meetings to discuss ongoing operations.

The PSA also sets forth procedures for well abandonment and restoration, which apply

only to producing wells that cease production. And the PSA provides for an ORRI in

hydrocarbon production. As we observed in our previous opinion, these provisions

suggest that the PSA has the “apparent objective of promoting mineral production.”

                                             11
Statoil USA Onshore Props., 675 F. App’x at 291. Indeed, the abandonment and ORRI

provisions would be rendered meaningless in the absence of producing wells. Thus,

these provisions cast doubt on whether the parties intended the term “spud” to mean

merely the initiation of the drilling process. See Dunbar Fraternal Order of Police, 624

S.E.2d at 591 (“[S]pecific words or clauses . . . are not to be treated as meaningless, or to

be discarded, if any reasonable meaning can be given them consistent with the whole

contract.” (citation omitted)).

       Statoil argues that we need not resort to parol evidence in light of the fact that Pine

Resources and PetroEdge were both represented by counsel during their negotiation of

the PSA. See Iafolla v. Douglas Pocahontas Coal Corp., 250 S.E.2d 128, 135 (W. Va.

1978) (explaining that “the strength of a court’s conviction with regard to the

applicability of the parole evidence rule to any given contract increases in direct

proportion to the degree to which the parties are commercial parties represented by

counsel”). The fact of representation alone, however, does not persuade us that the

PSA’s drilling requirement is unambiguous. Because the PSA is reasonably susceptible

to two meanings—(1) that it required only that drilling be commenced and (2) that it

required drilling completion and mineral production—we consider the extrinsic evidence

to determine the intent of the parties.

                                             2.

       Pine Resources challenges the district court’s evaluation of the evidence in two

primary respects.    First, Pine Resources takes issue with one of the district court’s

credibility findings.   Second, Pine Resources argues that the district court ignored

                                             12
substantial extrinsic evidence such that its conclusions are not supported by the weight of

the evidence. We disagree.

                                              a.

       At trial, Heffelfinger testified that he believed the spudding obligations required

completion of the wells and production of hydrocarbons. He testified that he made that

clear during a conversation with Richard, PetroEdge’s CEO, about extension of the

spudding deadlines.     According to Heffelfinger, Richard confirmed that PetroEdge

intended to complete the wells. Despite the lack of evidence to refute Heffelfinger’s

testimony regarding his conversation with Richard, the district court found this aspect of

Heffelfinger’s testimony noncredible based on his tone and demeanor. J.A. 3249–50.

       Given the lack of refuting evidence, Pine Resources argues that the adverse

credibility finding was erroneous. However, we have held that we “may not reverse a

trier of fact, who had the advantage of hearing the testimony, on a question of

credibility.” Doyle v. Arlington Cty. Sch. Bd., 953 F.2d 100, 104–05 (4th Cir. 1991)

(quoting McCrary v. Runyon, 515 F.2d 1082, 1086 (4th Cir. 1975), aff’d, 427 U.S. 160

(1976)); see also Fed. R. Civ. P. 52(a)(6) (“[T]he reviewing court must give due regard to

the trial court’s opportunity to judge the witnesses’ credibility.”). We decline to second-

guess the district court’s credibility determinations here.

                                              b.

       Nor do we find that the district court’s conclusion is unsupported by the “clear

weight of the evidence considered in light of the entire record.” Jiminez, 57 F.3d at 379.

Pine Resources highlights three categories of evidence that it argues weigh against the

                                             13
district court’s judgment: (1) the parties’ negotiation of two extensions of the drilling

deadline, (2) Heffelfinger’s credible testimony, and (3) correspondence from Pine

Resources to Statoil explaining its position regarding breaches of the PSA. We address

each category of evidence in turn.

       The district court concluded that the negotiated extensions of the drilling deadline

weighed against a finding that the PSA requires production because those extensions did

not reference any related production requirement.          Pine Resources asserts that the

deadline extensions show the opposite—that production was required—because those

extensions of time were needed to allow PetroEdge to penetrate the Marcellus minerals

and complete the first well, not merely start it. This argument ignores a key fact about

the first well: the surface hole of that well was not located on the Langley tract. Thus,

for the well to satisfy one of Section 5.7(b)’s spudding requirements, the horizontal

length of the well had to reach the Langley tract. 2 Heffelfinger acknowledged at trial that


       2
          Pine Resources asserts that the PSA required the first well to reach the Marcellus
zone, thereby demonstrating that the parties intended “spud” to mean more than simply
scratching the surface. Pet’r Br. 27. The PSA, however, required a spudded well to
“traverse[ ]” or “include[ ]” “any portion of the Contract Area,” not the Marcellus zone.
J.A. 1734. The “Contract Area” is defined as “the lands subject to the Mineral Rights or
pooled, unitized or communitized therewith.” J.A. 1726. And “Mineral Rights” are
defined to include “all rights to the extent relating to, or necessary or convenient in
connection with, the ownership, development and operation of the [hydrocarbon]
interests . . . including any access rights and rights to install pipelines, utilities, surface
facilities and other infrastructure necessary or convenient in the exploration for, and
development, production, processing and transportation of, Hydrocarbons.” J.A. 1727.
Thus, the Covered Area, which the well had to traverse or include in order to count
toward Section 5.7(b)’s spudding requirements, is much broader than simply the
Marcellus zone and includes the surface area of the Langley tract to the extent that the
surface area was necessary to PetroEdge and Statoil’s hydrocarbon operations.

                                              14
Pine Resources would be entitled to royalties only if the well reached the Langley tract.

J.A. 1582. Drilling of the well began in December 2011, but the well did not reach the

Langley tract until March 2012, the second extended deadline. In fact, Heffelfinger

testified that the purpose of the deadline extensions was to allow PetroEdge to “begin the

process of spudding the first well.” J.A. 1598. As Heffelfinger explained, “It was never

anticipated that [the] well would be completed by” the second extended deadline. J.A.

1600. In light of these considerations, the district court’s finding that the extensions of

time do not evince an intended production requirement is not clearly erroneous.

       The other evidence highlighted by Pine Resources—Heffelfinger’s testimony and

correspondence from Pine Resources to Statoil—similarly fails to tip the scale in favor of

Pine Resources.     In testimony not subject to the adverse credibility determination,

Heffelfinger stated that the purpose of the spudding obligation—added at the behest of

Pine Resources—was to ensure that PetroEdge developed its mineral rights. Heffelfinger

explained that Pine Resources had previously leased the Langley tract to another

company, which then sat on the mineral rights without developing the land during the

entirety of the leasehold.     In selling the mineral rights to PetroEdge, Heffelfinger

testified, he made clear that the Langley tract was the company’s most valuable tract and

that Pine Resources wanted to see it developed. According to Heffelfinger, he was

“adamant” in negotiations with PetroEdge that development had to take place within a

specific time.    J.A. 1502.   And PetroEdge’s primary concern was with the timing

requirement in relation to the meter tap; PetroEdge “didn’t want to be required to drill a

well and then not be able to produce it immediately.” Id.

                                            15
       Additionally, Pine Resources highlights correspondence that it sent to Statoil after

Statoil assumed the PSA: a July 11, 2013 letter in which Pine Resources explained that it

viewed the failure to complete the first well as a breach of the PSA and an October 11,

2013 email in which Heffelfinger reiterated that Pine Resources believed the failure to

complete the first well to be a “violation of the intent of the agreement,” J.A. 2325. 3

       Although the district court, after making factual findings with respect to the above

evidence, failed to explain why it apparently gave little or no weight to the evidence, the

evidence as a whole—including the contractual language and extrinsic evidence—

supports the district court’s conclusion that the PSA does not require production. As

Heffelfinger conceded at trial, the PSA does not state how minerals were to be produced,

nor does it require a specific type of well.            See J.A. 3026 (expert testimony

acknowledging that different types of wells “are completed differently”). The PSA

contains no deadline by which production was to begin and does not establish any

       3
          Pine Resources also points to a November 12, 2013 letter in which Heffelfinger
indicated that Pine Resources considered the failure to complete the first well to be a
breach of Section 5.7 of the PSA and to a December 17, 2013 letter again addressing the
alleged breach of the PSA due to failure to complete the wells. Statoil objected to the
admission of those letters as irrelevant and settlement discussions subject to exclusion
under Federal Rule of Evidence 408. See Fed. R. Evid. 408(a) (providing that evidence
of conduct or a statement made during compromise negotiations about a claim “is not
admissible—on behalf of any party—either to prove or disprove the validity or the
amount of a disputed claim”). At trial, the district court admitted those communications
subject to review based on the objections. J.A. 1478. In its opinion, the district court
states in a footnote that “those exhibits that contain references to settlement or informal
resolution of the alleged breach are inadmissible under Rule 408.” J.A. 3251. The
November 12, 2013 letter closes by requesting a meeting so that the parties could “agree
on the proper amount of damages.” J.A. 1861. The December 17, 2013 letter is titled
“FOR SETTLEMENT PURPOSES ONLY.” J.A. 1826. Therefore, it appears that the
district court ultimately excluded those letters under Rule 408.

                                             16
method of ascertaining damages or lost royalties based on a failure to produce. Yet

Heffelfinger testified that there could exist circumstances—such as adverse economic

conditions—under which production would not be required. As the district court aptly

highlighted, “[w]ithout contract language to apply, it is unclear how the Court could

evaluate whether Statoil was required to produce despite its determination that doing so

would not be profitable.” J.A. 3254. And while Heffelfinger testified that Section 5.7

was included in the contract because Pine Resources wanted to ensure development, the

parties—who negotiated at length while represented by counsel—included no explicit

requirement for completion of the wells or mineral production. We agree with the district

court that the lack of specific contractual provisions governing production would render

any implied production requirement difficult, if not impossible, for a court to enforce.

       In addition to the contract language, the extrinsic evidence shows that at least

PetroEdge believed that its obligations were fulfilled by beginning to drill. 4 Prior to the

transfer of its mineral rights to Statoil, PetroEdge represented to Statoil that it had

“satisfied the first drilling obligation by drilling the Bumgardner 5-2H Well.” J.A. 1816. 5



       4
         We acknowledge that the district court appears to have construed the ambiguous
contract in favor of, rather than against, the PSA’s drafter PetroEdge. While ambiguous
contracts are generally construed against their drafter, “[t]he general rule of construing an
ambiguous contract against the drafter does not mean automatically holding in favor of
the other party. . . . Otherwise, extrinsic evidence would be irrelevant.” W. Va. Inv.
Mgmt. Bd. v. Variable Annuity Life Ins. Co., 820 S.E.2d 416, 430 n.46 (W. Va. 2018)
(omission in original) (citation omitted).
       5
         Pine Resources lodges, for the first time on appeal, a hearsay objection to the
email from PetroEdge to Statoil. Reply Br. 12. That email was admitted at trial without
any objection. J.A. 1477. Because no hearsay objection was made below, such an
(Continued)
                                             17
Then, in selling its rights to Statoil, PetroEdge memorialized its position, in Schedule

3.25 of the purchase agreement, that “[t]he first drilling obligation [was] satisfied by

drilling the Bumgardner #5-2H Well.” J.A. 1856. Moreover, Pine Resources’s own

expert witness testified that the first well, though not completed or producing, had “been

spud” and “drilled.” J.A. 3024.

       In sum, while there is evidence that Pine Resources believed the PSA required

production, the record as a whole supports the district court’s conclusion that the intent of

the parties to the PSA was not that PetroEdge or its assigns would complete the three

wells to production in the timeframe established by Section 5.7(b).               The PSA

contemplates mineral production but stops short of requiring it.

                                             B.

       We also affirm the district court’s conclusion that Pine Resources failed to prove

that it sustained any damages. A party injured by a breach of a contractual obligation is

entitled to recover damages “as may fairly and reasonably be considered as arising

naturally . . . from the breach of the contract itself, or such as may reasonably be

supposed to have been in the contemplation of both parties at the time they made the

contract, as the probable result of its breach.” Desco Corp. v. Harry W. Trushel Const.

Co., 413 S.E.2d 85, 89 (W. Va. 1991) (quoting Ky. Fried Chicken of Morgantown, Inc. v.




objection is untimely. Padilla v. Troxell, 850 F.3d 168, 178 (4th Cir. 2017); Fed. R.
Evid. 103(a) (requiring “timely” and “specific” objection in order to “claim error in a
ruling to admit or exclude evidence”).

                                             18
Sellaro, 214 S.E.2d 823, 827 (W. Va. 1975)). “[R]ecoverable damages must be proved

with reasonable certainty.” Sellaro, 214 S.E.2d at 828 (citations omitted).

       Statoil does not dispute that it breached the PSA by failing to spud the second and

third wells. As the district court noted, however, Pine Resources’s evidence of damages

was related entirely to royalties to which it would have been entitled had the three wells

been completed and producing. No separate evidence of damages sustained solely due to

the failure to spud the second and third wells was introduced. Absent evidence of

damages flowing from Statoil’s failure to begin drilling the second and third wells, the

district court committed no error in granting judgment to Statoil.



                                            IV.

       For the foregoing reasons, we affirm the district court’s judgment.



                                                                              AFFIRMED




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