Uncleared margin rules threaten E&P hedging

Exploration and production companies can find it difficult to satisfy collateral demands when looking to hedge their output using derivatives. Now, Dodd-Frank threatens to make this even harder with margin requirements for uncleared trades. Alexander Osipovich reports

Oil and gas exploration and production (E&P) firms face a dizzying range of challenges, including hurricanes, oil spills, collapses in energy prices and expropriations of their assets by foreign governments. Now, the firms have a new danger to worry about: the US Dodd-Frank Act.

Buried in the hundreds of pages of Dodd-Frank regulations are several provisions that have sparked alarm among E&P companies, which fear the law will limit their ability to hedge commodity price risk. In particular