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?
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:
Are you currently receiving any royalties from these properties?
This is a very succinct explanation. I appreciate this comment as I have a similar occurrence in WY.
Thank you
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).
Those sections already have quite a few wells. Depending upon where your acres are located within them, you may or may not be in the spacing unit for older vertical wells.
There are quite a few permits for horizontal wells just to the west of you. I suspect you may be getting sales offers because someone thinks they know something about future wells heading your way. The horizontals have a much larger drilling spacing unit and will likely include older leases and unleased acres in the new horizons. I highlighted your section 42. 41 (A-214) is just to the west of it. Note all of the long horizontal wells to the west. I see Platform has filed a lease in A-214 recently. I see increased leasing just to the north and east of those horizontals, so heading your way.
Good insight- are you seeing any current production from Sections 41 & 42? It looks like all of the older Vertical wells have been plugged.
Looks like your eyesight was even better. I zoomed in and it does look like the old wells are all finished. Not sure if there was a waterfood that might be holding any acreage from other wells outside of those two sections.
If it were me, I might sit back a bit and see what develops and not jump on a sale just yet. Might make more in royalties if the horizontal play continues to develop. Local folks may be able to comment on “heard on the street”.
