Wednesday, March 5, 2014 Houston, TX. 1:30 2:45 p.m. OEE ISSUES AND ANSWERS

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1 Wednesday, March 5, 2014 Houston, TX 1:30 2:45 p.m. OEE ISSUES AND ANSWERS Presented by Scott Barnard Vice President, Southwest Regional Manager Berkley Offshore Underwriting Managers Pascal Ray Senior Vice President AmWINS Brokerage of Texas, Inc. Perhaps the most important policy covering risks in the oil patch is the operators extra expense (OEE) policy, aka control of well policy. Many nuances and variations in these policies make the coverage vary considerably from insurer to insurer. Since many of these terms are negotiable, it is important to analyze and compare policy forms and carefully consider the coverage options available to ensure that the best possible protection is arranged for any given insured. This session will provide an overview of the coverage and how it works along with case studies of interesting claims and the key issues currently facing brokers and clients. Copyright 2014 International Risk Management Institute, Inc. 1

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3 Scott Barnard Vice President/Southwest Regional Manager Berkley Offshore Underwriting Managers Scott Barnard is vice president and Southwest regional manager with Berkley Offshore Underwriting Managers in Houston, Texas, where he underwrites a book of US and international energy exploration and production risks with clients ranging from major oil companies to local drilling and service contractors. Mr. Barnard has over 30 years of experience in the offshore energy insurance industry that includes underwriting, retail, and wholesale brokering. He currently serves on the Houston Marine Insurance Seminar Planning Committee. He holds a B.S. degree from Auburn University. Pascal Ray Senior Vice President AmWINS Brokerage of Texas, Inc. Pascal Ray is the Upstream Energy practice leader for AmWINS Group, Inc., and is a national resource in these areas. His experience includes developing and managing energy and marine underwriting programs. He has created, developed, and managed energy and marine binding authorities on behalf of the US domestic, London, and Bermudian insurance markets for the last 25 years. Mr. Ray is an instructor for energy and marine insurance continuing education courses in his local community and has written and participated in articles involving energy and marine industry insurance issues. Current topics of issue include hydraulic fracturing in the oil and gas industry and the changing legal environment and risk for the maritime industry. 3

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5 IRMI Energy Risk and Insurance Conference Wednesday, March 5, :30 2:45 p.m. Breakout Session: Current OEE Issues Scott Barnard and Pascal Ray Well out of control defined Brief overview of OEE coverage including Control of well Redrill and restoration Seepage and pollution liability Common endorsements New drilling technology Advanced long-reach horizontal drilling Multi-stage hydraulic fracturing Drilling multiple wells from a small surface footprint Changes in exposures Current issues Casing failure Multi-well pad drilling Communication between wells Termination of coverage Care, custody, and control Exhibits attached below 5

6 Exhibits Casing Failure Endorsement Section B (restoration/redrilling expense) is hereby extended to include the cost of repair or replacement of casing damaged during fracking operations but only when such damage directly results in a well control claim recoverable under Section A herein and the well can be restored without redrilling or sidetracking the well. Coverage hereunder is subject to a sublimit of $ To be agreed (100%) any one occurrence. Subject to an additional premium of $ to be agreed. Multi-Well Endorsement It is agreed that in the event that scheduled paired multiple wells drilled from the same pad are involved in a single Occurrence giving rise to a claim hereunder, Underwriters agree that the applicable Control of Well Limit and Retention shall apply per well, subject to an overall limit per occurrence of the sum of the two largest per well limits (100%) on the pad involved in the claim but never to exceed $ (100%) in all, any one occurrence and in the aggregate as respects this endorsement. Termination of Coverage (1) In respect of any well(s) insured hereunder, coverage shall terminate when the Assured ceases to have an interest in such well(s) unless coverage is terminated sooner by operation of any of Paragraphs 16b(2), (3), or (4) below; (2) In respect of any well(s) which are insured hereunder during drilling only, by virtue of the Assured s electing not to purchase coverage for Producing and/or Shut-In and/or Plugged and Abandoned wells, coverage shall terminate upon either total and/or complete abandonment or completion of such well(s), which shall include the setting of the Christmas Tree, pumping equipment, or 6

7 well head equipment or the dismantling or removal of the drilling equipment from the drill site, or the termination of the Assured s responsibility under contract, whichever shall first occur, except that, if removal of the drilling equipment from the drill site occurs first, then the period of time between complete removal of such equipment and the commencement of completion operations shall not exceed thirty (30) days in order for said completion operations to be covered hereunder; (3) In respect of any well(s) insured hereunder in the course of being drilled, deepened, serviced, worked over, completed, and/or reconditioned at the expiry or cancellation of this policy, coverage shall terminate upon final termination of said drilling, deepening, servicing, working over, completing, and/or reconditioning, notwithstanding the fact that said final termination may occur later than said expiry or cancellation; In no event, however, shall coverage provided under this paragraph (3) above extend beyond three hundred and sixty five (365) days from the expiry date or cancellation of this Policy. (4) In respect of any other well(s) insured hereunder, coverage shall terminate at the expiry or cancellation of this policy or (if plugged and abandoned wells are not insured hereunder) upon total and/or complete abandonment of the wells, whichever shall first occur. This paragraph is not in the original EED 8/86 and/or many other earlier forms. Consideration should be given to inserting it if insured anticipates extended periods between the end of drilling and the commencement of completion of fracking ops. Care, Custody, and Control A detailed discussion, led by Pascal Ray, will be held Thursday, March 6, 2014, from 1:15 to 2:30 pm. This will encompass the increased CCC exposures to operators and the potential need for higher limits. 7

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