Habendum Conundrums

The habendum clause is the clause that specifies the lease term. Generally it will consist of a primary term and a secondary term. The primary term is fixed for a certain amount of time (e.g. 1 year, 3 years, 5 years, etc.). It gives the lessee x number of years during which it can drill a well and begin to produce oil & gas. The secondary term is often phrased along the lines of “and as long thereafter as oil & gas are produced…”. If a well is drilled during the primary term, the lease will continue in force for as long as there is production.

It is this clause that will help you determine whether a lease is still in its primary term, held-by-production (HBP), or expired. If the primary term has passed, check for any wells drilled on the leased premises during the relevant time period. If you find that there has been continuous production on the leased tract since the end of the primary term, the lease is held by production and is still in effect. If the primary term has ended, no extension has been filed, and no well was drilled or production on the premises has ceased, the lease is expired.