“A verbal contract isn’t worth the paper it’s written on.” —Samuel Goldwyn
In Roxo Energy Co., LLC v. Baxsto, LLC,12025 Tex. LEXIS 378 (2025). the Supreme Court of Texas was once again given the opportunity to address whether oral negotiations should influence a subsequent written agreement. The court reiterated that reliance on an oral representation that is directly contradicted by the express, unambiguous terms of a written agreement, is almost never justified as a matter of law. This is even more true when the parties to the agreement are both sophisticated, and there are “red flags” present in the negotiation indicating that you should not rely on the verbal statements. Sophisticated business entities participating in an arm’s-length transaction are expected to recognize red flags that others who are less experienced may not.
I. Background
This case concerns alleged fraudulent conduct by Roxo Energy Company, LLC, et al.2Roxo Energy Company, LLC was partially funded by Vortus Investment Advisors, LLC (“Vortus”), a private equity group that participated in some of the negotiations. (collectively “Roxo”) in the lease and subsequent sale of mineral interests from Baxsto, LLC (“Baxsto”).3Baxsto v. Roxo Energy Co., 668 S.W.3d 912, 922 (Tex. App.—Eastland 2023), rev’d 2025 Tex. LEXIS 378 (2025). Baxsto owned various undivided mineral interests in Howard and Borden Counties.
In 2016, Baxsto and Roxo began negotiating a lease and the potential sale of Baxsto’s mineral interests. Roxo allegedly stated that: (1) a lease would give Roxo leverage over other mineral owners in the area; therefore, if Baxsto would execute a lease quickly, Roxo would give Baxsto the most favorable deal of any owner; (2) Roxo was “not in the business of flipping mineral interests,” but instead intended to drill on and develop the acreage itself; and (3) Roxo planned to “make its money at the bit” by drilling and developing the land. Roxo further maintained throughout the negotiations that it was also interested in purchasing Baxsto’s mineral interests outright.
Baxsto and Roxo executed a Letter of Intent on October 26, 2016, agreeing that Baxsto would execute a lease within 60 days for a bonus of $5,000 per net mineral acre.4Id. To memorialize their agreement Baxsto and Roxo executed three additional written agreements: the lease, a lease memorandum, and a lease purchase agreement. The lease purchase agreement included (1) a provision that Roxo could record the lease after Roxo had tendered the lease bonus payment to Baxsto, and (2) an option period for Roxo to purchase the lease. The lease purchase agreement further provided that if Roxo did not exercise its option to purchase the lease, the executed lease would be returned to Baxsto. Roxo, in apparent violation of the agreement, recorded the memorandum before any lease bonus was paid to Baxsto.5Id. at 922-23.
In the following weeks, Roxo allegedly made additional representations to Baxsto. Baxsto was led to believe that Roxo (and its private equity backer Vortus) only drilled the acreage they leased, and they were not lease flippers. Baxsto was also led to believe that Roxo had raised $200-250 million to develop its acreage. Baxsto thus confidently executed an extension of its option period under the lease purchase agreement. This extension also included a “most-favored nations clause” to match any greater bonus payment made to another owner in the area. To allow additional time for due diligence, another round of extensions was given on both the Howard and Borden County acreage.
In February 2017, Roxo made the bonus payment to Baxsto for the Howard County Acreage. Soon after the bonus payment was made on the Howard County acreage, Roxo informed Baxsto that its capital commitment to develop had been drastically reduced by Vortus, but that it was still interested in purchasing Baxsto’s acreage. Baxsto was eager to monetize its minerals, and Roxo expressed its belief that Baxsto was getting a “great deal.” The transaction closed for $5,666,602.6Id. at 923.
Roxo never actually drilled a well on Baxsto’s acreage or any other land but sold Baxsto’s minerals to another operator. Baxsto later discovered that another mineral owner, Navigator Oil & Gas (“Navigator”), had been paid a much higher lease bonus of $11,000 per net mineral acre. Based on these discoveries, Baxsto accused Roxo of defrauded Baxsto to “lock itself” into an unproductive lease then sell its minerals in a fire-sale for less than market value. Baxsto sued Roxo for various forms of fraud and fraudulent inducement.7Id. at 924.
II. Trial court decision & appeal
Baxsto’s claims against Roxo focused on: (i) the amount of the lease bonus (i.e., $5,000 vs. $11,000); (ii) Roxo’s representations about having the capital commitment to develop its acreage; (iii) whether Roxo intended to drill and develop or flip the acreage; and (iv) whether the lease was recorded prematurely (i.e., prior to the lease bonus being paid).8Id. at 927. To prevail on its fraud allegations, Baxsto would have to prove that Roxo made (1) a material misrepresentation; (2) which was false; (3) which was known to be false when made; (4) which was intended to be acted on by the other party; (5) which the party relied upon; and (6) which caused injury to the other party. Fraudulent inducement adds an additional element of a promise of future performance with no intention of performing at the time the promise was made.9Id. at 927-28. The trial court found for Roxo and granted summary judgment on all of Baxsto’s fraud claims.
The Eastland Court of Appeals reversed, finding that there was at least a “scintilla” of evidence of fraud, and that summary judgment was not appropriate. The court focused on the four aspects of the parties’ negotiations listed above that were likely known by Roxo to be false. The court of appeals agreed that there was at least some evidence that, at its core, Roxo’s representations were “part of a larger plan to induce Baxsto to ultimately sell its mineral interests to [Roxo] at a reduced price.”10Id. at 932. This nefarious “two-step scheme” may have been intended to: (1) “lock” Baxsto into a lease with false promises of nonexistent funding and an aggressive drilling plan that would generate royalties; and (2) then immediately after locking Baxsto into the lease, make representations regarding a reduction of available capital improvement funding that Vortus had committed to develop the lease and a lower bonus price being offered to Navigator in order to induce Baxsto to sell its mineral interests at a lower price.11Id. at 932. The Eastland Court of Appeals thus reversed summary judgment, and Roxo petitioned the Supreme Court for review.
III. Supreme Court decision
The Supreme Court of Texas reversed the court of appeals’ judgment and reinstated the district court’s summary judgment in favor of Roxo on all claims. It held that Baxsto could not bind Roxo to its oral promise to drill on and develop the lease because “reliance upon an oral representation that is directly contradicted by the express, unambiguous terms of a written agreement between the parties is not justified as a matter of law.”122025 Tex. LEXIS 378, 6. In reaching its decision, it looked to two notable Supreme Court decisions, Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc.,13590 S.W.3d 471 (Tex. 2019). and JPMorgan Chase Bank, N.A. v. Orca Assets G.P., LLC.14546 S.W.3d 648 (Tex. 2018).
Barrow-Shaver regarded a so-called “hard” consent-to-assign provision in an oil and gas lease. During the lease negotiations, the lessor made representations that it wanted the exclusive right to determine whether the lease could be assigned, but that it would “work with” the lessee on any future assignment and provide consent.15590 S.W.3d 471, 475-76. The final consent-to-assign provision included in the lease required the “express written consent of the [lessor],” to assign to a third-party. However, at the lessor’s request the common language that such consent “shall not be unreasonably withheld” was deleted.16Id. at 476. The Barrow-Shaver court held that the lessee was not justified in relying on any previous oral representations regarding the consent. Such conspicuous absence from the written lease of language cementing the parties’ alleged oral agreement is itself a red flag negating justifiable reliance.17Id. at 501.
On the topic of red flags, Orca Assets stands for the proposition that a person may not justifiably rely on a misrepresentation if there are “red flags” indicating such reliance is unwarranted.18546 S.W.3d 648, 655. Red flags typically consist of a series of events that warrant further investigation after viewing the circumstances in their entirety, while accounting for the parties’ relative levels of sophistication.19Id. at 656. These red flags are generally indications that a party should have investigated further before relying on a representation, especially when the parties are experienced and knowledgeable in the oil and gas industry.
The Roxo court found in the instant case that Baxsto was a sophisticated party whose representative was an experienced oil and gas businessman.202025 Tex. LEXIS 378, 12. When Roxo proffered its written contract — that made no mention of the matters the parties had previously discussed — this alone should have it obvious to a sophisticated seller that the previous discussions were no longer a part of the deal.21Id. at 11. In other words, there were plenty of “red flags” present that should have alerted Baxsto that certain aspects of the negotiations may not be present in the final written agreement. Baxsto should have more carefully read the deal it signed to understand the differences between that and any prior discussions. Baxsto was also free to seek an independent appraisal of the value of its mineral interests.22Id. at 13. Baxsto’s reliance on Roxo’s alleged misrepresentations was therefore not justified.
IV. Takeaway
Roxo serves as a stark reminder that all is fair in love, war, and business negotiations. Texas courts will generally uphold a written agreement between two parties without inquiring further as to the negotiations that led up to the agreement. Further, the greater the parties’ apparent sophistication, the less likely it is that a court will find that they justifiably relied on an alleged misleading representation. Remember, when entering into a gentlemen’s agreement, make sure you are the gentleman whose lawyers put it in writing!
Brad represents clients in connection with upstream energy transactions, complex mineral titles, pooling issues, lease analysis, joint operating agreements, surface use issues, title curative and general oil and gas business matters.
Braedon Morrow is a senior attorney with a proven ability to navigate complex transactional law matters. He specializes in various oil and gas issues, focusing on divestitures, mergers, and acquisitions, particularly within the energy sector. His experience spans both upstream and midstream oil and gas, as well as renewable energy projects. His deep understanding of these areas enables him to effectively address the nuanced challenges of energy transactions and provide strategic, client-focused solutions.