“Held by Production”

Written by about Drilling and Producing + Leases on August 13, 2012

Landowners who are “held by production” (HBP) by an operating well are actually still stuck under an old oil and gas lease. Generally speaking, as long as you are receiving a royalty that lease is still in effect. Many factors determine whether or not you are able to get out of an old lease. Sometimes it’s possible, but more often than not, it is not possible.

While that lease is in effect on your property, it’s up to the company that owns the lease to decide what to do with it. They can drill a Utica well themselves, or they can sell that Utica portion of the lease to a major company and let them drill. When HBP leases are sold, the landowners are very rarely entitled to any money. In the past two years, we have seen this occur repeatedly: the landowners can’t make money to sign a new lease and are not entitled to the profits if the lease is sold.

There is some good news to all of this. Many older leases are not set up for Utica drilling. They may not allow for a large enough drilling units to be formed. They may require your consent to assign the lease. These “problems” with old leases translate to bargaining power for the landowner because the landowner is the one who has to amend the old lease.

Eric Johnson

About Eric Johnson

ERIC C. JOHNSON attended Ohio State University, earning a degree in economics and then graduated from the University of Cincinnati Law School in 1983. His areas of practice are personal injury law, real estate, oil and gas, contracts, litigation and appeals.