Occidental Petroleum CEO Says Crude Downturn Has 3-Year Lifespan, Industry Is Halfway Through Current Cycle

According to Reuters, Occidental Petroleum Corporation OXY's CEO issued some cautious commentary over the crude oil sector.

Stephen Chazen, Occident's CEO spoke at an industry conference on Monday. The executive's comments focused on companies that that borrowed heavily when crude oil prices were higher, and now face "major issues over that leverage."

Chazen pointed out that investors heavily sold shares of exploration and production companies who tapped capital markets to finance new activity. Now, the same market is penalizing pipeline companies formed as master limited partnerships as the structure relies on growth to pay large dividends in exchange for favorable tax treatments.

At $30 oil, very few, if any companies are experiencing the type of growth that is required to satisfy their dividend requirements.

"They were counting on growth in production that for now is not there," Reuters quoted Chazen as saying. "So that's really a major issue for the midstream - trying to deal with way too much debt given the (dividend) promises made to limited holders."

Chazen also stated that the current crude oil downturn will have a lifespan of about three years - and the industry is only about halfway through the cycle.