Hold by Production?

Texas Mineral Rights
1

I have a sale offer in Pecos County, TX, Block 8, sections 41 & 42 (A-5205 & A-214).

Each time we’ve declined, it’s increased significantly. With their latest offer, they mentioned it would be HBP (held by production) and that selling is probably the only option because leasing won’t be a thing for many more decades from now. I had mentioned we weren’t interested in selling, only leasing.

I honestly don’t know what this means. Any thoughts?

2

When lands are Held by Production (HBP), it means there is an existing oil and gas lease that has moved beyond its primary term because production is keeping the lease in effect. As long as the lease remains valid, the lessee generally retains the right to continue developing the leased acreage without obtaining a new lease from the mineral owners.

Being HBP does not mean there will never be additional drilling. Many HBP leases continue to be developed years or even decades after the initial well is drilled. It simply means the operator doesn’t need to negotiate a new lease before drilling additional wells, assuming the existing lease still covers those rights.

Looking at the Texas RRC GIS map, I don’t see any current production within Sections 41 or 42. That could mean one of several things:

  • The acreage is not actually HBP.
  • An older lease covers additional acreage, and production elsewhere on that lease is holding these sections.
  • There may be a pooling or unitization arrangement under the lease that is holding the acreage.

Are you currently receiving any royalties from these properties?

1 Like
3

This is a very succinct explanation. I appreciate this comment as I have a similar occurrence in WY.

Thank you

4

Thank you, WTXT878! I really appreciate your insights.

We do not have any leases with anyone. So I guess I’m not sure who has a lease on these sections (we hold 28 net royalty acres I think).