US oil drillers exposed in three-way hedges as crude dips below US$30

New York

OIL at US$30 a barrel is blowing a hole in the insurance that US 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.

"At the time people hedged, they did it without thinking that oil would g…