The price to drill an acre of land in the biggest U.S. shale basin has tumbled amid the oil rout, creating conditions ripe for more mergers and acquisitions.
Drilling rights in the Permian Basin of West Texas and New Mexico averaged about $24,000 an acre in recent deals, down 67% from 2018, according to Rystad Energy, an Oslo-based research firm. Across U.S. shale, the average price has plummeted to about $5,000 an acre, compared with $17,000 two years ago.
| DATE ANNOUNCED | PERMIAN DEAL | VALUE PER ACRE (USD) |
|---|---|---|
| March 2018 | Concho Resources-RSP Permian | 75,504 |
| August 2018 | Diamondback Energy-Ajax Resources | 33,008 |
| July 2019 | Callon Petroleum-Carrizo Oil & Gas | 16,547 |
| December 2019 | WPX Energy-Felix Energy | 11,965 |
| October 2020 | ConocoPhillips-Concho Resources | 10,471 |
Source: Bloomberg Intelligence
Industry-wide costs for drilling and completing wells will probably drop as much as 5% next year because of consolidation, increased standardization and a drop in service costs, Rystad said. Even more capital will be allocated to the most prolific Permian acreage, the firm said.