Hurricane IVAN Lessons Learned Energy Loss Adjusters Perspective Bryan C. Johnson
I. Lessons Learned - Adjustment Process II. Lessons Learned - The Storm
Lessons Learned - Adjustment Process Issues Regarding Reserve Estimation Supply and Demand Effects on Oil & Gas Prices
Lessons Learned - Adjustment Process Ivan
Lessons Learned - Adjustment Process Issues Regarding Reserve Estimation Supply and Demand Effects on Oil & Gas Prices Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss
Lessons Learned - Adjustment Process Ivan
Lessons Learned - Adjustment Process Ivan
Lessons Learned - Adjustment Process Ivan
600 575 550 525 500 475 450 425 400 Lessons Learned - Adjustment Process 2005 worldwide mobile rig demand forecast Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Month Demand Market Total Rigs
Lessons Learned - Adjustment Process Issues Regarding Reserve Estimation Supply and Demand Effects on Oil & Gas Prices Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss Time Delays due to Unavailability of Contractors
Lessons Learned - Adjustment Process
Lessons Learned - Adjustment Process Issues Regarding Reserve Estimation Supply and Demand Effects on Oil & Gas Prices Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss Time Delays due to Unavailability of Contractors Under-estimated Reserves if Using Established Prices
Lessons Learned - Adjustment Process Issues Regarding Reserve Estimation Supply and Demand Effects on Oil & Gas Prices Service and Equipment Price Spikes (Inflation) Following Catastrophic Loss Time Delays due to Unavailability of Contractors Under-estimated Reserves if Using Established Prices Seat of the Pants Engineering
Lessons Learned - Adjustment Process Range of Estimates Underwriters might use worst case until clarity on extent of loss
Lessons Learned - Adjustment Process Range of Estimates Low High Probable Leg/Spud Can Repair/Rebuild $20.0 MM $25.0 MM $23.0 MM Jacking System Repairs $4.0 MM $7.0 MM $6.0 MM Substructure/Drilling Floor/Derrick $3.0 MM $5.0 MM $4.0 MM Main Crane $.75MM $1.5 MM $1.5 MM Control Room/Lower Rooms/Water Damage $2.0 MM $5.0 MM $4.0 MM Structural Damage $2.0 MM $4.0 MM $3.0 MM Total Physical Damage Estimate Range $31.75MM $47.5 MM $41.5 MM Sue & Labor Expense $12.0 MM $13.0 MM $12.0 MM Total Estimated Costs of Recovery and Repair $43.75MM $60.5 MM $53.5 MM
Lessons Learned - Adjustment Process Range of Estimates Underwriters might use worst case until clarity on extent of loss Salvage values can be surprisingly good to help loss situation
Lessons Learned - Adjustment Process Salvage Value Damaged Drilling Unit Example: CTL $45.5 MM IV $19.5 MM Total $65.0 MM Salvage Value ($26.0 MM) Net $39.0 MM
Lessons Learned - Adjustment Process Information / Cooperation from Assured SEC concerns Catastrophes can affect stock price
Lessons Learned - Adjustment Process Expert Resources Old vs. New Damage Metallurgical Experts Failure Analysis Experts Reservoir Engineers (LOPI ) Salvage
Lessons Learned - Adjustment Process Recoveries - Good Money After Bad? Time & Material vs. No Cure No Pay Example: Jackup Legs Rigs to Reef 3 Leg Above Jack House 49 Hull & Jack House +/-47 Air Gap 301 Water Depth 477 Total Leg Le ngth 77 Leg Penetration
Lessons Learned - Adjustment Process Business Relations / Economics of Assured Priority Conflicts Decisions can be based upon Assured s business or economic issues as opposed to minimizing claim: Ex: drilling contractors/other contractors left on standby Properties which have greater impact on bottom line may be priority - not necessarily insured properties
II. Lessons Learned The Storm IVAN Hurricane IVAN Hurricane KATRINA
KATRINA, 2005 IVAN, 2004
Lessons Learned The Storm Hurricane KATRINA
Hurricane KATRINA
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril?
Mobile, Alabama New Orleans KATRINA, 2005 IVAN, 2004 Mississippi River Delta CAMILLE, 1969 From Fugro Chance, Inc.
THE BIRDSFOOT DELTA From Fugro Chance, Inc. Head of Passes Southwest Pass South Pass Pass A Loutre NE Pass SE Pass
~1300-1400 1684 1840 2005 18 mi 1840 1684 1684 1840 2005 2005 From Fugro Chance, Inc. GROWTH OF THE DELTA
Consider this Profile line across the seafloor From Fugro Chance, Inc. GROWTH OF THE DELTA FRONT
From Coleman et al, 1980 South Pass Southwest Pass Profile line From Fugro Chance, Inc. 1979 BATHYMETRY MAP
From Coleman et al, 1980 Southwest Pass South Pass Mudflow lobes From Fugro Chance, Inc. 1979 BATHYMETRY MAP
From Coleman et al, 1980 Region of Mudflow Gullies From Fugro Chance, Inc. Region of Mudflow Lobes SEAFLOOR GEOMORPHOLOGY
Mudflow Gullies or Channels 6 10 miles Mudflow Lobes From Fugro Chance, Inc. From Coleman et al, 1980
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril? Cause = Threefold 1. Wave activity
Of course, the wave is moving Pressure increase So the seafloor pressure is also moving seafloor Pressure Decrease WAVE-INDUCED PRESSURE ON SEAFLOOR
Wave Crest Wave Trough Downward Motion Upward Motion seafloor Lateral Motion SEAFLOOR MOTION
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril? Cause = Threefold 1. Wave activity 2. Deposition on shallow areas
From Fugro Chance, Inc. Lessons Learned The Storm
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril? Cause = Threefold 1. Wave activity 2. Deposition on shallow areas 3. Potential energy / build up
Depth Below Sea Level, Feet 0 200 400 600 800 Mudlobe Advance = 2.7 mi 1979 Mudlobe in 1874 1874 Mudlobe in 1979 Pre-Delta 0 2 4 6 8 10 12 Distance from South Pass, Miles From Fugro Chance, Inc.
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril? Cause = Threefold 1. Wave activity 2. Deposition on shallow areas 3. Potential energy / build up Prevalence
Western Limit of Hurricane Force Winds Path of Ivan s Center Mudslide Area From Fugro Chance, Inc.
Lessons Learned The Storm Lessons Learned from the Storm Itself Mud Slides: Freak Occurrence or Expected Peril? Cause = Threefold 1. Wave activity 2. Deposition on shallow areas 3. Potential energy / build up Prevalence Predictability (i.e. 10-50 years)
Lessons Learned The Storm Effect of Mudslides Pipelines/Infrastructure/Inter-connecting
Lessons Learned The Storm
Lessons Learned The Storm
Lessons Learned The Storm Effect of Mudslides Pipelines/Infrastructure/Inter-connecting Subsea wells
Lessons Learned The Storm Effect of Mudslides Pipelines/Infrastructure/Inter-connecting Subsea wells Platforms
Lessons Learned The Storm
Lessons Learned The Storm 2. Water Depth Issues Repair requirements with water depth:
Lessons Learned The Storm 2. Water Depth Issues Repair requirements with water depth: Shallow (0 300 )
Lessons Learned The Storm 2. Water Depth Issues Repair requirements with water depth: Shallow (0 300 ) Intermediate (300 1,000 )
Lessons Learned The Storm 2. Water Depth Issues Repair requirements with water depth: Shallow (0 300 ) Intermediate (300 1,000 ) Deepwater (1,000 +)
Lessons Learned The Storm
Lessons Learned The Storm 2. Water Depth Issues Repair requirements with water depth: Shallow (0 300 ) Intermediate (300 1,000 ) Deepwater (1,000 +) Cost v. Water Depth
Lessons Learned The Storm Cost vs. Water Depth Cost 0 500 1000 3000 Water Depth
Lessons Learned The Storm Active GOM Leases - 1995
Lessons Learned The Storm Active GOM Leases - 2004
Lessons Learned The Storm U.S. Gulf of Mexico Deepwater Production Oil 77% Gas 26%
Lessons Learned The Storm 3. Rig Walkabouts Abandon on location vs. tow to safe water Is enough being done? Damage to offshore rigs Damage to offshore property caused by free-floating rigs
Lessons Learned The Storm Semi path Viosca Knoll Area Start Finish