The habendum clause is the part of an oil and gas lease that defines its duration: a fixed primary term, followed by a secondary term that continues for as long as the lease produces in paying quantities.
The habendum clause (sometimes called the "term clause") has two halves. The primary term is a fixed window — commonly three to five years — during which the operator has the right to drill but is not yet required to produce. The secondary term is open-ended: it keeps the lease alive "as long thereafter as oil or gas is produced," which is the mechanism behind held by production (HBP).
In practice this means a lease you signed years ago can still be in force today if a well is producing — even a marginal one — because production in paying quantities continually renews the secondary term.
The habendum clause determines whether your minerals are committed or free to re-lease. If the primary term lapses with no production and no saving clause is triggered, the lease typically expires and your minerals are open again. If a well is producing, the lease holds — sometimes across acreage you would rather see released, which is why a Pugh clause is so valuable.
When you sell or evaluate minerals, the status of the habendum clause — primary vs. secondary, and whether production is genuinely "in paying quantities" — is one of the first things a buyer checks.
Held by Production (HBP) explained
Educational information only — not legal, tax, or investment advice. Consult a qualified attorney, CPA, or landman about your specific situation.
The primary term is a fixed number of years (often 3–5) in which the operator may drill. The secondary term has no fixed end — it lasts as long as the lease produces in paying quantities, so production keeps the lease alive indefinitely.
Generally, the well must generate revenue that exceeds its operating (lifting) costs over a reasonable period. A well losing money on operations may fail this test, which can terminate the secondary term — though the exact standard varies by state and lease language.
Often, yes — unless your lease contains a Pugh clause. Without one, a single producing well can hold all the acreage in the lease, including undeveloped tracts, under the secondary term.
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