CIn

Tuesday, March 1, 2016Houston, TX

3:30 –5:00 p.m.

A CASE STUDY IN RISK MANAGEMENT

Presented by

Jennifer R. AtkinsonLecturer—Terry College of Business

University of Georgia—Athens

Annemarie TobinVice President

Canopius Underwriting Bermuda Limited

Studying how an energy company identifies, assesses, and insures risks can be beneficial

in understanding best practices for managing and financing risk. In this interactive session,a risk management student team from the University of Georgia risk management and in-surance program will present their findings on best practices in risk management and in-surance for energy-related companies.

1

opyright © 2016 International Risk Management stitute, Inc.

www.IRMI.com

Notes

This file is set up for duplexed printing. Therefore, there are pages that are intentionally leftblank. If you print this file, we suggest that you set your printer to duplex.

2

Jennifer R. AtkinsonLecturer—Terry College of Business

University of Georgia—Athens

Jennifer (Jenny) Atkinson is a Lecturer of Risk Management and Insurance at The University ofGeorgia’s Terry College of Business. She joined the faculty in 2010. In addition to lecturing, Jennyis responsible for the Risk Management students involvement with the Atlanta RIMS chapter andacts as faculty liaison for the Gamma Iota Sigma and Insurance Society students including coordi-nation of their participation at conferences such as the Bermuda Insurance Marketing Study Trip,the International Gamma Iota Sigma Conference and National Property Liability Research BureauConference.

Ms. Atkinson previously spent 16 years as an insurance broker. She has both domestic retail ex-perience and international wholesale experience on North American liability coverages.

Annemarie TobinVice President

Canopius Underwriting Bermuda Limited

Annemarie Tobin is a senior insurance executive underwriting North American excess casualty li-ability risks on behalf of Lloyd’s Syndicate 4444. Prior to joining Canopius she was a partner ofWortham Insurance and Risk Management concentrating on excess liability placements.

Ms. Tobin also worked with Marsh where she was a Managing Director responsible for designingand broking umbrella and excess casualty placements as part of the National Casualty Practicefor risk management clients, Bermuda Excess Casualty Manager, and Broking Coordinator, ExcessCasualty.

In 2013 She was recognized by Risk & Insurance magazine as a Power Broker in the Energy—Oil &Gas segment.

3

Notes

This file is set up for duplexed printing. Therefore, there are pages that are intentionally left blank. If youprint this file, we suggest that you set your printer to duplex.

4

Case Studies inEnergy Risk Management

#IRMI2016

IRMI Energy ConferenceMarch 1, 2016Royal Sonesta HotelHouston, Texas

#IRMI2016

WELCOME

Jennifer R. AtkinsonTerry College of Business—Athens, GA

Annemarie E. TobinPrice Forbes and Partners Limited—Bermuda

2

5

#IRMI2016

Who‘s your neighbor• Corporate Risk Management • Underwriter• Broker• Legal / Claims• Other Interested Party

3

#IRMI2016

Today’s discussion• Operational and Exposure differences within the Energy Sector

4

6

#IRMI2016

Facts of Life• Every day we assume risk• All businesses exist to achieve the reward for which they take the risk• Everyone has a risk tolerance• You act safer when you perceive a risk exists

5

#IRMI2016

BASIC PRINCIPLES OF RISK

6

7

Remembering the basics of RiskPeople don’t take risk for the sake of risk … it is tolerated for the satisfaction of other motives …. These “other motives” are the human element that we can’t engineer away …

7

#IRMI2016

Studies in Risk Compensation• Bike helmets• Seat belts• Automobile automatic braking and blind spot indicators• Positive train control? Airplane autopilot?

8

8

What’s the risk in Energy?BALANCE SHEET PROTECTIONSTOCKHOLDER EXPECTATIONS

9

#IRMI2016

Business Objective – Shareholder Value• Grow and meet economic expectations• Deliver continuous improvement

• Faster• Safer• More reliable• More resilient• Environmentally sound

• Drive growth in Production or Reserves

10

9

#IRMI2016

Industry Image• Deepwater Horizon• Pipelines

• 2010 San Bruno• 2012 Pemex

• Refinery incidents from BP, Chevron etal• Crude by Rail

• Number of derailments down overall• Hydraulic Fracturing and waste water disposal• Cyber risk and terrorism in heavily automated industry

11

#IRMI2016

Have we engineered out the risk?

12

10

#IRMI2016

They say there is “zero tolerance”?• Offshore E&P

• Usually JV ownership• Silo-ed operations• Overly engineered processes• Maintenance is systematic – optimized for efficiency

• Onshore• Shale play requires multiple contactors• Flexibility and Innovation are key• Fracking is no longer just stimulation• Well pads have simultaneous process … drilling + finishing + production

• Where is there risk blindness?• What happens when systems fail?

13

#IRMI2016

Have we engineered out the risk?

14

11

#IRMI2016

Midstream• Aging infrastructure• HCA location• Uncontrolled releases• Collapse / failure storage caverns• Operations in marine environment• Rail loading and unloading• Volatility of assets being transported is a terrorist magnet

15

#IRMI2016

Have we engineered out the risk?

16

12

#IRMI2016

Refineries, products and consumer contact• Risk of spill• Waste product disposal• Contaminated products• Dependence on automated activities• No new refineries• Current trends in acquisitions and divestitures• Movement in storage terminals• Oil Majors were divesting downstream ops to improve returns

17

#IRMI2016

Today’s Economic RealityVolatile Commodity Pricing• Operational efficiency in pricing downturn

• Invest in growth projects and prospects• Continued exploration and appraisal activities but reduced drilling• Preserve strength of balance sheet;

maintain operational flexibility; preserve long term growth options

• Contractual implications …How many drilling rigs to operate? … where to utilize the equipment

• Invest where there is the best return

18

13

#IRMI2016

Mergers, Acquisitions, DivestituresHouston oil and gas companies could be part of dealmaking yearWith oil prices down, companies industry-wide that previously bought assets are now selling them. Houston's Vanguard Natural Resources, for example, spent $1 billion buying rivals, but is now selling off oil fields it acquired. Major acquisitions are on hold because of volatile oil prices, although Cabot Oil & Gas is considered a viable takeover target because of its valuable assets and stability. (Reuters)

Yesterday’sHouston Newspaper ..

19

#IRMI2016

Survival• Flexibility of an Entrepreneur• Discipline and support of a Market Leader• Maximized efficiency• Minimized cost

How will this impact acceptable risk?

20

14

#IRMI2016

Opportunities that may outweigh the risk• Leverage safety & risk management reputation to attract partners• Go for customer reach in unchartered territories

• New or expanded markets (i.e., China)• Frontier acreage

• Operational agility• Increased use of innovations (R&D)• Making acquisitions• Building alliances• Divesting strategically

21

#IRMI2016

Thank you for your participation

22

15

T8. A CASE STUDY IN ENERGY RISK MANAGEMENT

Rating scale for all questions:

4 = Excellent 3 = Very Good 2 = Average 1 = Somewhat Disappointing 0 = Very Disappointing

Overall rating for this workshop? 4 3 2 1 0 Jennifer R. Atkinson Preparation and quality of information 4 3 2 1 0

Energy and enthusiasm of delivery 4 3 2 1 0

Educational focus (not a sales pitch) 4 3 2 1 0

Annemarie Tobin Preparation and quality of information 4 3 2 1 0

Energy and enthusiasm of delivery 4 3 2 1 0

Educational focus (not a sales pitch) 4 3 2 1 0

Comments: _____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

_____________________________________________________________________________________________

To enter the drawing for a cash prize, affix your personal bar code label here or complete this evaluation online.