Drillers Could Face Shaky Start to New Year Due to Lack of Hedging

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From SNL:
U.S. oil and natural gas producers have significantly less of their production hedged for 2016 than they did in 2015, and that lack of price protection could bring more financial distress, particularly for less-than-investment-grade companies, according to a report by Standard & Poor's Ratings Services. 
"Hedges represent 8% (1.619 MMboe/d) of total expected oil and gas production in 2016, a marked decline from the 15% hedged last year," S&P said Dec. 15. "The trend continues for speculative-grade companies, which have just 29% (1.437 MMboe/d) of total oil and gas production hedged next year compared with 45% in 2015." 
Among independent producers in the Utica and Marcellus shales, the group is deceptively well-hedged compared to the national peer group, an SNL Energy analysis found. 
"Deceptively" because while the majority of these producers, such as Antero Resources Corp., have more than half of their production hedged at prices above $3/Mcf, some major Appalachian drillers, such as Southwestern Energy Co. and Cabot Oil & Gas Corp., are going into the new year without any hedges. 
The companies that worry S&P the most have credit ratings of B or below, and the rating agency expects to see more defaults as 2016 goes on, particularly after lending banks finish up their credit redeterminations in the spring.
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