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Boring finance. Petroleum exploration and firm debt: Evidence from Norway

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  • Mauritzen, Johannes

Abstract

The role of financing in petroleum exploration has gained prominence due to sustainability commitments by major financing institutions. Yet the relationship between exploration and financing has been little explored and poorly understood. I create a novel data set combining detailed exploration data with financial register data on all public and private firms operating on the Norwegian Continental Shelf to analyze the relationship between debt and drilling decisions. I make use of both an over-dispersed Poisson regression model estimated by maximum likelihood and a Bayesian hierarchical negative binomial regression model where key elements of the industry microstructure are specified and explicitly modeled. I find evidence that short-term debt is associated with lower rates of drilling and more modest evidence that long-term debt has a slightly positive relationship with exploratory drilling. This evidence is consistent with a financial constraints theory of oil drilling, and supports the argument that exploration drilling is dependent on a firms access to financing.

Suggested Citation

  • Mauritzen, Johannes, 2024. "Boring finance. Petroleum exploration and firm debt: Evidence from Norway," Journal of Commodity Markets, Elsevier, vol. 35(C).
  • Handle: RePEc:eee:jocoma:v:35:y:2024:i:c:s2405851324000400
    DOI: 10.1016/j.jcomm.2024.100421
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    References listed on IDEAS

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    More about this item

    Keywords

    Petroleum exploration; Firm debt; Bayesian estimation;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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