Held by production?

I have a question that seems to get many different answers depending on who you ask.

What is it that actually holds a lease by production? Is it a lease with both a primary and secondary term also called a habendum clause that contains both a primary and secondary term for as long as oil and gas is being produced? Or is it the actual production that occurs during the primary term of the lease and it doesn't matter after that as long as they produce it is held?

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Permalink Reply by Philip Brutz on December 17, 2015 at 4:19pm

How is it worded in your lease?

Permalink Reply by Pondage on December 17, 2015 at 4:21pm

Original lease has the habendum. Lease agreement which amended and or changed the original lease was for two years then shall become null and void.  

Permalink Reply by Philip Brutz on December 17, 2015 at 4:25pm

Please post the exact wording.

Permalink Reply by Pondage on December 17, 2015 at 4:38pm

Said change or modification herein agreed upon to be as follows, that the rental for the use of gas from a certain well drilled on said leased land, and known and designated as well number XXX, shall hereafter be the sum of $$.$$ for (2) years that said gas may be marketed off the said premises, payable in advance beginning on the 12th day of April 1937 in lieu of the rental reserved to the lessors in said lease.It is agreed that this agreement shall be effective for two years from April 12, 1937 to April 12, 1939 and after the last mentioned date shall become null and void. It is agreed that this agreement shall be binding upon etc.    

Mike MurphyPermalink Reply by Mike Murphy on December 18, 2015 at 2:07am

sounds like you need to consult agood oil and gas attorney

Permalink Reply by Barry D on December 18, 2015 at 2:36am

It's not a good idea to try and interpret a clause separated from the entire body of the lease.

The wording of a lease is usually very connected, one clause or phrase being very dependent upon others in the lease. Even one word separated from the remainder of a lease may be misinterpreted.

It's best to read a lease as a whole, not separate parts.

Permalink Reply by William Dotson on December 22, 2015 at 5:05am

It sounds like an old lease where the gas royalty is simply a flat rate per period. WV has declared that this clause is unenforceable upon the royalty owner period. Here is the actual WV Code: http://www.legis.state.wv.us/wvcode/ChapterEntire.cfm?chap=22&a...

Permalink Reply by Barry D on December 18, 2015 at 2:32am

The Primary term is the term of the lease as stated in the body of the lease.

i.e. in your case,  2 years

A Primary term may also be extended by payments "rentals" of some kind or other compensation.

The Secondary term exists when there is a well actually drilled, completed and producing i.e. and for as long as oil and gas etc. are produced.

Held By Production (HBP) is exactly that. The lease remains in force because there is production; and will remain in force as long as there is production. The production "holds" the oil and gas leasehold.

The wording "shall become null and void" only applies if there were no production after the Primary Term of 2 years, or other payment of "rentals" etc.

At least that is the "Cliff Notes" answer to your question.

Permalink Reply by Gas Boy on December 18, 2015 at 4:26am

"Held by Production" - the oil / gas well is producing the product and the royalty owner is receiving monthly royalty checks.

Permalink Reply by brat on December 22, 2015 at 11:00am

Referring to a Clinton well,  what if the landowner takes his free gas for his home directly from the well, but the gas company is not selling any product (gas or oi)l) for over a year?   Should the landowner be getting that delayed rental fees?

Permalink Reply by Kyle Nuttall on January 12, 2016 at 12:56pm

In West Virginia, free gas does not count as production for the purposes of determining whether a lease is still valid.  

Permalink Reply by Tusc-county-man on December 29, 2015 at 7:57am

.....I believe the well has to be producing , and profitable.....

Not sure who decide this......

I have a  Clinton well.....produced less than   130 MCF over a 4 month period, gross revenues of

$220  total for 4 months......and I'm HBP by it.

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