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Oil Drillers Exposed in Three-Way Hedges

  • Falling oil blows hole in insurance for Pioneer, Noble, Callon
  • Three-ways sacrifice some price protection amid sharp declines
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Stockman: Oil in $20 Range as Far as the Eye Can See

Asjylyn Loder
Updated on

Oil at $30 a barrel is blowing a hole in the insurance that U.S. shale drillers bought to protect themselves against a crash.

Companies including Marathon Oil Corp., Noble Energy Inc., Callon Petroleum Inc., Pioneer Natural Resources Co., Rex Energy Corp. and Bonanza Creek Energy Inc. used a strategy known as a three-way collar that doesn’t guarantee a minimum price if oil falls below a certain level, company records show. While three-ways can be cheaper than other hedges, they leave drillers exposed to sharp declines.