Easy cash for oil explorers will prolong the supply glut that has slashed prices and profits by buoying companies that otherwise would shrink or die, said Occidental Petroleum Corp. Chief Executive Officer Stephen Chazen.
In previous oil-industry busts, producers had to rely on loans to survive because they were shut out of capital markets, Chazen said at the IHS CERAWeek event in Houston on Monday. This time around, oil companies have a host of alternative financing available from the bond and equity markets, as well as private equity firms and hedge funds, he said.
“In the past cycles the industry was kept out of the capital markets -- they couldn’t sell stock and they couldn’t sell debt really, and the banks sort of bailed them out,” Chazen said. “There’s a lot of new money out there. That’s what’s different.”
The life support provided to the weakest players in the petroleum sector will slow the reduction in output required to re-balance oil markets and allow prices to begin recovering, he said.
Chazen, 68, said oil prices appear likely to average $60 a barrel over the medium term.