Oil-Hedge Strategy That Failed Shale in 2014 Burns It Again
- So-called costless collars hurt explorers during 2014 crash
- The strategy came back in vogue ahead of 2020 market downturn
Photographer: David McNew/Getty Images
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In the aftermath of the 2014 oil crash, U.S. shale learned a painful lesson: Not all hedging strategies pay off. Countless producers were left exposed to big losses after crude plunged to levels that made their insurance less valuable.
Now, as the shale industry tries to pick up the pieces after the Saudi-Russia war for market share hammered crude, some of those same producers are reliving the same costly mistake. Noble Energy Inc., Callon Petroleum Co. and Parsley Energy Inc. are among drillers sorely exposed to the latest market crash due to their hedging strategy, a Bloomberg review of company records show.