What does Held By Production - HBP mean?
A term used in oil and gas industry. An oil exploration and production company gets from landowners the mineral rights on lease for a specified duration, primary period. In lease agreement there is generally a provision, known as Held By Production (HBP), that allows the oil and gas company to continue drilling and production activities on the property beyond primary period as long as oil well is producing economically.
Futures Knowledge Explains Held By Production - HBP
Held By Production clause enables the oil company to operate for the entire economic life cycle of an oil field. The lease rental and royalty for the extended period however need to be renegotiated with the landowners. For example, with the boom of sale gas in Pennsylvania, oil producers now offer substantially higher land lease rental of $5,000 per acre and 20% royalties as against $50 per acre and 12 % royalties during primary lease period.