Oil prices, Oil producers

Bloomberg: Oil Crash Exposes New Risks for U.S. Shale Drillers

Repost of Bloomberg News  by API SmartBrief – Energy

Shale drillers see new challenges

December 19, 2014

U.S. shale oil production. Photographer: Andrew Burton/Getty Images

The three-way collar strategy that some drilling companies use to hedge oil and natural gas price risks could aggravate a cash crunch in the face of a steep slump in oil prices, according to this analysis. Although this hedge is cheaper than other strategies, it can expose companies to sharp price declines. “Because we’ve had high energy prices for so long, it could have given them a false sense of confidence. They picked a price they thought it wouldn’t go below. It has turned out to be very expensive,” said Ray Carbone, president of Paramount Options.   MORE: Bloomberg (12/19)