Held by production, when does it terminate?

I have mineral rights in a section of Ward County Texas. There has been only one well on the property and that was drilled in the early 70’s. Checking on the RCC there has been zero production on the well for the past 10 months. Is there a standard time in which the held by production clause is no longer valid? Do I need to submit something to the oil company about it? No one is inquiring about leasing this section currently but I want to make sure I’m in a position to negotiate new terms and a bonus if that were to occur.

First look at the terms of your lease to see how it describes the termination as sometime a number of months is specified. If the lease says only when production ceases, with no time included, then there can be a legal question as to whether a reasonable operator would shut-in a well due to low prices or pipeline capacity limitations and so the lease is still in effect. Courts have been all over the place with this. Second, if there is a DPU or unit agreement, then you should review to see if that document has effectively amended your lease. For example, the lease says termination when production ceases for 90 days and the DPU says the unit terminates when production ceases for 6 months. You should also check on RRC on-line information under Wellbore Query to make sure that there has not been a new RRC lease number assigned and production is being reported under another lease number. You should contact the operator, by email or letter, saying that it appears the lease has terminated due to cessation of production and asking for a release or for information showing that the lease is still in effect. It is possible that the operator has been working on the well on a regular basis trying to get it back into production. If you post the name of the well and the operator, someone may be able to provide information on the well status.

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Thanks very much for your response. The lease, as I guess most were back then, is vague and in the oil companies favor. It simply says “So long as oil, gas or other mineral is produced from the land” I will need to look into some of the other items you have mentioned.

Shut-in clauses are not typically located in the same paragraph as the primary term. What is the book and page number your OGL is filed under? If you don’t know that, can you tell me Lessor, Lessee, and date of the lease? Ward County is all online. I, and others, can take a look at it and help you get a better understanding of what’s going on. Odds are the well has been shut-in due to the market. Most leases have a time limit for how long a well can be shut-in before it crosses over into non-producing territory. I feel like most of the ones I see are typically 18-24 months in length.

Usually a lease with require a shut-in payment if a lease is shut-in due to a lack of market which would be accompanied by a notice. If this is an old 1970’s deep gas well, it could require expensive repairs that are not economically justifiable. Post the name of the well for more help.

I appricate the help and the offers to do more. I’m reluctant to give specifics on the property as my family already gets too many cold calls from landmen. Maybe my concern is unwarranted but I don’t want to open the door to undesired solicitation.

There has been zero production reported to the RCC since November 2019 for the only well on the section. Since May 2019 I have received 1 payment on the well for $6.33.

I ended up sending my oil attorney information on the matter and he has suggested : “I can send a letter requesting that the lease be terminated and a release be recorded in the deed records so that landmen looking to lease will know that acreage is open and available for lease again. If they won’t cooperate, we can also have you sign an affidavit of non-production, which is the next best thing to a full release of the lease.”

If you are getting cold calls to buy, then something is probably up and it might be advisable to find out what is going on.

Thanks for the response. The section we get offers on is next to this one and has had quite a few wells drilled on it over the past few years. We are always open to legitimate leasing inquiries but would never sell this land that my great grandfather bought. It amazing me that landman will call and act like they are offering you a good deal to buy and their offer is less than one year royalty income.