Held By Production


DEFINITION of 'Held By Production'

A provision in an oil or natural gas property lease that allows the lessee, generally an energy company, to continue drilling activities on the property as long as it is producing a minimum paying amount of oil or gas. The "held by production" provision thereby extends the lessee's right to operate the property beyond the initial lease term. This provision is also a feature of mineral property leases.

BREAKING DOWN 'Held By Production'

The "held by production" provision enables energy companies to avoid renegotiating leases upon expiry of the initial term. This results in considerable savings to them, particularly in geographical areas that have become "hot" due to prolific output from oil and gas wells. With property prices in such areas generally on an upward trend, leaseholders would demand significantly higher prices to renegotiate leases.

  1. Intangible Drilling Costs - IDC

    Costs to develop an oil or gas well for the elements that are ...
  2. Spud

    In the oil and gas industry, the process of beginning to drill ...
  3. Working Interests

    Refers to a form of investment in oil and gas drilling operations ...
  4. Lease

    A legal document outlining the terms under which one party agrees ...
  5. Wildcat Drilling

    The process of drilling for oil or natural gas in an unproven ...
  6. Implied Volatility - IV

    The estimated volatility of a security's price.
Related Articles
  1. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  2. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  3. Home & Auto

    8 Lease Clauses You Need To Know

    If you're renting an apartment this year, beware of signing contracts with these tricky clauses.
  4. Forex Education

    A Primer On Offshore Drilling

    Learn the important ratios and terms that you'll need to know to get involved in this trading sector.
  5. Active Trading

    Unearth Profits In Oil Exploration And Production

    Drill down into financial statements to tap into the right companies and let returns flow.
  6. Chart Advisor

    These Oil & Gas Stocks Have Reversed

    It's been a long downtrend for oil stock owners, but there's hope. These four oil and gas stocks have reversed and may keep trending to the upside.
  7. Economics

    The Biggest Oil Towns in North Dakota

    Learn how the oil boom in North Dakota has transformed two small towns from sleepy agricultural outposts to booming centers of industry almost overnight.
  8. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  9. Investing News

    Oil Prices Expected to Surge in 2017

    Oil has made headlines for its plummeting prices this year. When will prices rise again?
  10. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  1. Can mutual funds invest in options and futures?

    Mutual funds invest in not only stocks and fixed-income securities but also options and futures. There exists a separate ... Read Full Answer >>
  2. How do futures contracts roll over?

    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  3. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>
  4. What does a futures contract cost?

    The value of a futures contract is derived from the cash value of the underlying asset. While a futures contract may have ... Read Full Answer >>
  5. How much oil must be produced to maintain inventory levels in the United States?

    Domestic energy investors should track the reserve inventory of crude oil for the United States, which is released in a weekly ... Read Full Answer >>
  6. What are average operating expenses for the oil and gas sector?

    The oil and gas sector plays an important role in the economy by drilling, extracting, and processing oil and gas. Because ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!