Land records · Parcel maps · October 7, 2026
Oil and Gas Lease Explained for Mineral Owners
How an oil and gas lease works: a mineral owner grants a company drilling rights for a bonus and royalty, with a primary term and held-by-production terms.
Oil and gas lease explained: an oil and gas lease is a contract in which a mineral owner, called the lessor, grants a company, called the lessee, the right to explore for, drill, and produce oil and gas from the leased land. In exchange, the owner usually receives an upfront bonus payment and a royalty, which is a share of production or its value. The lease has a primary term, often three to five years, during which the company must drill or pay delay rentals, and a secondary term that continues as long as oil or gas is produced in paying quantities. This page is general land-records background, not legal advice.
Key lease terms
| Term | Meaning |
|---|---|
| Bonus | Upfront payment per acre |
| Royalty | Share of production, often one-eighth to one-quarter |
| Primary term | Initial period to begin drilling |
| Habendum clause | Continues lease while production occurs |
| Delay rental | Payment to delay drilling in some leases |
| Pooling clause | Allows combining tracts into units |
| Shut-in royalty | Keeps lease alive when wells are shut in |
| Pugh clause | Releases unpooled or undeveloped acreage |
| Post-production costs | Whether deductions are allowed from royalties |
Held by production
After the primary term, a lease continues as long as there is production. A single well can hold a large area unless the lease has a Pugh clause or depth limits.
Recording
Leases or memoranda are recorded in county land records. Assignments to other companies and releases are also recorded. Researching mineral title involves tracing deeds, leases, and assignments. See how to find out who owns mineral rights.
Mineral vs royalty ownership
Owners of mineral rights have the right to lease. Owners of royalty interests, conveyed by a royalty deed, receive a share of production but cannot lease. A mineral deed conveys the minerals themselves.
Surface use
Leases give the company reasonable surface use. Surface owners who do not own minerals may negotiate a surface use agreement.
Division orders
When production starts, companies send division orders stating each owner’s decimal interest. Owners should verify interests before signing.
Example
A mineral owner leases 160 acres for a $500 per acre bonus, a 20 percent royalty, and a three-year primary term. The company drills a well in year two. Production holds the lease, and the owner receives monthly royalty checks based on production and prices.
Expired leases
If a lease expires without production, the company should record a release. Unreleased expired leases can cloud title.
Negotiating
Owners often negotiate royalty rates, cost deductions, Pugh clauses, surface protections, and water use. Professional advice is common.
Checking the county records
Look for the recorded lease or memorandum, assignments, and any release.
Bottom line
An oil and gas lease grants drilling rights for a bonus and royalty, with a primary term and continuation while production lasts. Leases, assignments, and releases are recorded. Mineral owners should negotiate key clauses and verify interests on division orders. Explore mineral counties via the Platbookmapper map.
Oil and gas lease explained FAQ
What is an oil and gas lease?
A contract granting drilling rights to a company.
What is a typical royalty?
Often one-eighth to one-quarter of production.
What does held by production mean?
The lease continues while wells produce.
Are oil and gas leases recorded?
Yes, or memoranda are recorded.
What is a Pugh clause?
A clause releasing acreage not included in production units.