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HOUSTON (AP) – The value of the West Texas oil fields has plummeted due to the coronavirus pandemic, resulting in lower demand for crude.
Eli Huffman, real estate broker and lawyer at Houston-based Lone Star Production Co., said he saw land prices drop below $ 1,000 an acre for a property that was previously worth more than $ 10,000 an acre.
“When (oil) prices are too low, no one buys land,” Huffman said. “Not everyone is at risk at the moment.”
The average U.S. shale acreage price has fallen more than 70% in two years – from $ 17,000 an acre in 2018 to $ 5,000 an acre in 2020, according to Norwegian energy research firm Rystad.
Despite this, prices for some shale coins held up, the Houston Chronicle reported. The Permian-Delaware Basin is still valued at $ 30,000 an acre and the Midland Basin is valued at $ 17,000 an acre, Rystad added.
But the prices of devalued oil and gas lands will not be able to rebound as quickly if the pandemic worsens and lockdowns keep pressure on demand for oil.
“We do not anticipate an increase in demand for (oil) assets in the coming quarters,” said Alisa Lukash, senior analyst at Rystad, in Thursday’s report.
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