Our lease was for 2 years. Lease expires this June. Well is producing. What happens in June? Do they have to negotiate a renewal with us? What does "Held by Production" mean exactly? I know people are gonna say "look at your contract", but I was just wondering in general terms, what has been peoples experiences on this?
Marjorie,
"Held by Production" means if any minerals are produced and sold during the term of the original lease, the lease does not need to be renewed or renegotiated by the producer. It appears in your case this has happened.
Rick
Held by production means well is producing so your lease will not expire as long as well is producing.
Arg. How about if the first well stops producing or reduces production, and they want to drill another well?
Marjorie,
Even if they were to reduce production to a lower level to wait for prices to rise or some other situation, any minerals sold would still allow the lease to be held by production. They could put the well in a "shut-in" status that gives the producer a finite window of time where you are compensated a small amount per acre. Does your lease have a "shut-in" clause? If so, those terms would be spelled out.
Rick
It depends how the lease reads. It's possible that it is only held by production as to a certain depth. If that is the case, you could sign another lease as to those non-producing stratum, if anyone is interested.