HOUSTON (AP) — The value of oil fields in West Texas have plummeted due to the coronavirus pandemic, which has caused the demand for crude to go down.
Eli Huffman, a land broker and attorney at Houston-based Lone Star Production Co., said he has seen land prices fall below $1,000 an acre for property that used to be worth more than $10,000 an acre.
“When (oil) prices are too low, no one is buying land,” Huffman said. “Everybody is risk-adverse at the moment.”
The average price of U.S. shale acreage has fallen by more than 70% in two years — from $17,000 per acre in 2018 to $5,000 per acre in 2020, according to Norwegian energy research firm Rystad.
Despite that, the prices of some shale plays has held up, the Houston Chronicle reported. The Permian-Delaware basin is still valued at $30,000 per acre and the Midland basin is valued at $17,000 an acre, Rystad added.
But prices for devalued oil and gas lands will not be able to bounce back as quickly if the pandemic worsens and lockdowns keep pressure on demand for petroleum.
“We do not foresee demand for (oil) assets rising in the coming quarters,” Alisa Lukash, a senior analyst at Rystad, said in Thursday’s report.