Held by Production

Why it matters when you sell

Whether your acreage is held by production is one of the first things a buyer establishes, because it fixes the terms they are buying into. A tract held under a 1970s lease carries that decade's royalty fraction and deduction language permanently, and it prices accordingly. Acreage that is open, or close to coming open, gives a buyer the prospect of modern terms and attracts a stronger bid.

How this varies across the states we serve

Lease vintage tracks drilling history, so it varies sharply by basin. Permian and Anadarko acreage in Texas and Oklahoma frequently sits under leases signed decades before the shale era, held continuously ever since by conventional wells. Bakken acreage in North Dakota and Montana and Delaware Basin acreage in New Mexico was more often leased or re-leased during the 2005 to 2015 period, on terms closer to modern ones. Two owners with comparable production can be selling quite different lease terms depending on when their area was first drilled.

What to have in hand

Find out which lease governs your acreage and what it says about royalty and deductions. Buyers will price those terms whether or not you have read them, so knowing them first means you can explain what you are selling rather than discovering it in diligence.

Related terms

• Royalty Fraction
• Pugh Clause