What it means when your minerals are HBP and your options as an owner.
Quick answer
"Held By Production" is one of the most important concepts in mineral rights ownership. If you've received a letter stating your minerals are HBP, or you're wondering why you haven't received a new lease offer, understanding HBP status is essential.
This guide explains what HBP means, how it affects your ownership, and what options you have as a mineral owner with HBP acreage.
HBP Definition: A mineral lease that has extended beyond its primary term because oil or gas production has been established and continues in "paying quantities."
Every oil and gas lease has two phases:
The initial lease period (typically 3-5 years) during which the operator must drill or the lease expires. You receive a bonus payment when signing.
If production is established during the primary term, the lease continues indefinitely "as long thereafter as oil or gas is produced." This is the HBP phase.
Once HBP, the operator doesn't need to negotiate a new lease or pay additional bonus payments. The original lease terms continue.
You continue receiving royalty payments based on your original lease terms for as long as production continues.
HBP leases can last for decades. Some have been in effect for 50+ years with continuous production.
The operator may drill additional wells on the leased acreage without renegotiating terms, provided the original lease allows it.
A lease becomes HBP when:
A well is drilled and completed during the primary term
The well produces oil or gas in "paying quantities"
Production continues without extended interruption
Note: "Paying quantities" generally means production that exceeds operating costs. Marginal wells producing very small amounts may not qualify.
Hold your minerals and collect royalty checks as long as production continues.
Convert future royalties into a lump sum by selling to a mineral buyer.
Many owners with HBP minerals choose to sell because:
HBP minerals with production are attractive to buyers
Immediate liquidity vs. waiting for monthly royalties
Eliminates uncertainty about future production levels
Simplifies estate planning and inheritance
Buckhead provides a free written offer. Our offer comes at no cost and no obligation.
Start Your Free Written OfferHeld By Production means a mineral lease has extended beyond its primary term because production has been established. As long as the well continues to produce oil or gas in paying quantities, the lease remains in effect indefinitely. The operator doesn't need to re-lease or pay additional bonus payments.
An HBP lease can last indefinitely—as long as production continues. Some HBP leases have been in effect for 50+ years. The lease only expires when all wells on the lease cease producing in paying quantities and are plugged and abandoned.
Yes, HBP mineral rights are frequently bought and sold. Buyers purchase your ownership subject to the existing lease. You receive a lump sum, and the buyer receives ongoing royalties. HBP minerals with active production are often attractive to buyers because they generate immediate income.
Production in paying quantities generally means the well generates enough revenue to exceed operating costs and provide some profit to the operator. Courts have interpreted this differently, but minimal production that barely covers costs may not qualify. If production drops too low, the lease could expire.
Yes, you continue to receive royalty payments as long as the wells produce. HBP status doesn't change your royalty percentage—it simply means the lease continues beyond the primary term. You'll receive your contractual royalty on all production from the leased minerals.
Disclaimer: This information is for educational purposes only and should not be considered legal or financial advice. Consult with qualified professionals for specific questions about your lease terms.
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