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Tuesday, March 17, 2015Houston, TX
8:00–9:15 a.m.
ALIGNING OPERATIONAL RISK MANAGEMENTWITH CORPORATE GOVERNANCE
Presented by
Scott UhlSenior Vice President
EWI Specialty Casualty E&S
Jim LatimerManaging DirectorBlackhill Partners
The oil and gas industry, especially the upstream segment, has historically struggled to
overcome the silos of segregated risk exposures while needing to make strategic, opera-tional, legal, and tactical decisions about the deployment and best use of their assets,whether they are resources, reserves, plants, or facilities. This session will explore whatmakes operational risk challenging not just in measurement and management but also inleadership and how best to treat operational risk in the upstream and midstream sectorsfrom within the context of failures of processes, failures of systems, or human error. Thenit will examine how energy companies can measure traditional risk exposures and incor-porate risk into related management areas such as strategic planning, capital investment,and performance measurements that permit the enterprise to more efficiently pursuenew exploration-related opportunities and value creation for shareholders.1
opyright © 2015 International Risk Management stitute, Inc.
www.IRMI.com
Notes
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Scott UhlSenior Vice President
EWI Specialty Casualty E&S
Scott Uhl is senior vice president of EWI Re, Inc.’s Specialty Casualty E&S division, a wholesaleand co-brokerage insurance intermediary with risk consulting capabilities. His core placementand consulting focus is on directors, officers, and corporate securities liability (D&O); technologyerrors and omissions (E&O); information security and privacy liability; professional E&O liability;employment practices liability (EPL); and fiduciary liability. He has direct access to both the do-mestic and the Lloyd’s of London marketplaces. He regularly speaks and writes on managementand professional liability matters.
Prior to joining EWI, Mr. Uhl served as the practice leader of Lockton Financial Services Gover-nance Risk Management Group and Technology sub-practice, based in Silicon Valley and Dallas.Earlier assignments include serving as the Western US underwriting manager for Liberty Interna-tional, underwriting D&O, EPL insurance, and fiduciary and professional liability, and the branchmanager and lead initial public offering management liability underwriter at American Interna-tional Group (NYSE: AIG) and CLP Resources (NYSE: TBI).
Mr. Uhl earned his bachelor of arts from California State University, Chico, in economic geogra-phy. He has served on the board of the Greater Dallas Chapter of the Claims and Litigation Man-agement Alliance (CLM), is a member of the Professional Liability Underwriters Society (PLUS)and Risk & Insurance Management Society (RIMS), and from 2006 to 2012 served two terms onthe Advisory Board of the National Association of Corporate Directors, North Texas Chapter.
Jim LatimerManaging DirectorBlackhill Partners
Jim Latimer, a managing director at Blackhill Partners, is an accomplished leader, investment man-ager, management consultant, lender, and energy executive with extensive experience in complexand difficult situations. He has been the chief risk officer and/or interim chief executive officer ofATP Oil & Gas (formerly NYSE: ATPG), Cano Petroleum (formerly AMEX: CFW), Crusader Energy,Rand Energy, and Lothian Oil and was crisis manager in the TIC United Corporation bankruptcy.
His background includes all phases of corporate finance, business strategy, operations manage-ment, and corporate governance in the oil and gas business. He has expertise in creating capitalstructures that enhance company performance and has helped a diverse group of corporate or-ganizations accelerate their growth and successfully transition from middle market companies topublicly held entities. Mr. Latimer currently serves as a director of Enron Creditors RecoveryCorp. and Cinco Resources, Inc., and is a former director of NGP Capital Resources Company(NASDAQ: NGPC), Magnum Hunter Resources, Prize Energy, and Falcon Drilling.
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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.
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Presented by
Jim LatimerBlackhill Partners, LLC
Scott UhlEWI Specialty Casualty E&S
Aligning Operational Risk with Corporate Governance
for Public Oil and Gas Companies
Aligning Operational Risk with Corporate Governance
for Public Oil and Gas Companies
March 17, 2015
Scott UhlEWI Specialty Casualty E&S
One Lincoln Centre5430 LBJ Freeway #1595
Dallas, Texas 75240(972) 560-0680
Jim LatimerBlackhill Partners, LLC 2651 N. Harwood St.
Suite 120Dallas, Texas 75201
(214) [email protected]
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Efficacy, Execution & Process ….How Engaged Should a Board Be?
The Passive Board
• Functions at the discretion of the CEO.
• Limits its activities and participation
• Limits its accountability
• Ratifies management’s preferences
The Certifying Board
• Certifies to shareholders that the CEO is doing what the board expects and that management will take corrective action when needed.
• Emphasizes the need for independent directors and meets without the CEO.
• Stays informed about current performance and designates external board members to evaluate the CEO.
• Establishes an orderly succession process.
• Is willing to change management to be credible to shareholders.
The Engaged Board
• Provides insight, advice, and support to the CEO and management team.
• Recognizes its ultimate responsibility to oversee CEO and company performance; guides andjudges the CEO.
• Conducts useful, two-way discussions about key decisions facing the company.
• Seeks out sufficient industry and financial expertise to add value to decisions.
• Takes time to define the roles and behaviors required by the board and the boundaries of CEO and board responsibilities.
The Intervening Board
• Becomes intensely involved in decision-making around key issues.
• Convenes frequent, intense meetings, often on short notice.
The Operating Board
• Makes key decisions that management then implements.
• Fills gaps in management experience.
LEAST INVOLVED MOST INVOLVED
Copyright © 2004 Harvard Business SchoolPublishing Corporation. All rights reserved.
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What Is Good Corporate Governance?
What Is Good Governance?“A strong independent and knowledgeable board can make a significant difference in the performance of any company. Our corporate governance guidelines emphasize the qualities of strength of character, an inquiring and independent mind, practical wisdom and mature judgment. It’s not an accident that we put strength of character first. Like any successful company, we must have directors who start with what is right, who do not have hidden agendas and strive to make judgments about what is best for the company and not about what is best for themselves or some other constituency.”
Kenneth Lay, Chairman & CEO of Enron(excerpted from speech at the 1999 Conference on
Business Ethics)
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Some “Quick Math” on Federal Securities Claims
Since 1996 …
• 3,924 federal securities class actions
• 29,000 total defendants (individual directors and officers and companies)
• 2,018 or 52% companies have settled
• 57-60% are likely to settle (438 ongoing cases)
• 1,468 or 37% have been dismissed
• $88 billion (approximate) total dollar value of all settlements
• $43 million average settlement
• $35 million without Enron, WorldCom, and Tyco
• 180 federal securities class actions: energy and utilities (4.6% of total)
• 243 federal securities class actions: 5th Circuit (TX, LA, and MS)
• 122 federal securities class actions: 10th Circuit (CO, KS, NM, UT, WY)8
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Frequency of Derivative Actions(2004-2013)
0
20
40
60
80
100
120
140
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Settlements with aCompanion DerivativeAction
Settlements without aCompanion DerivativeAction
33 40
79
76
4240
62
4635
24
3027
48 4757 53
50 41
27
40
10 *Data provided by Cornerstone Research/Stanford Law School; March 2014 (http:///securities.stanford.edu).
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Frequency of SEC Actions(2004-2013)
0
20
40
60
80
100
120
140
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Settlements with aCorresponding SECAction
Settlements without aCorresponding SECAction
26
20
99
83
2922
31
22
23
7
12
13
61 78
7577 62
58
45
54
11 *Data provided by Cornerstone Research/Stanford Law School; March 2014 (http:///securities.stanford.edu).
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