Oil driller W&T Offshore investigating internally after whistle-blower letter

(Bloomberg) — W&T Offshore Inc has hired Skadden, Arps, Slate, Meagher & Flom to conduct an internal investigation on management’s close relationship with information-technology vendor AAIT, according to people with knowledge of the situation.

The offshore driller began the probe after receiving a whistle-blower letter on the matter, said the people, who asked not to be identified because the details are private. 

Last month, W&T’s newly hired chief information officer and general counsel collected laptops and information for the investigation, the people said. Some employees received an email seeking all materials on services and policies tied to IT, the people said.

Lawyers at Skadden have also been interviewing former and current employees at Houston-based W&T, they said. Representatives at W&T and Skadden didn’t respond to requests for comment. AAIT, the primary IT vendor for W&T, declined to comment.

In its second-quarter filings, W&T disclosed its operations could be hampered by cybersecurity incidents and that its third-party IT service provider didn’t align with customary industry practices.

The driller said in a filing it doesn’t have any written agreements with its primary service provider, without naming the company. W&T is currently remediating the identified issues, including hiring a new CIO and transitioning away from certain legacy systems and service providers, the company said.

W&T’s primary IT service provider notified the company it plans to cease services by September 2, according to a filing. The end of services could affect the driller’s ability to monitor production and prepare results in a timely fashion.

W&T also entered into indemnification agreements with each of the company’s directors and officers on August 8. This gives broader protection to W&T’s officers and directors in case the company faces lawsuits and regulatory inquiries, the people said.

The Securities and Exchange Commission is stepping up scrutiny on how public companies manage cybersecurity risk management, governance and reporting to its investors. 

W&T was founded in 1983 by Tracy Krohn, who spent years in the oil patch and also on the racing track. It operates in the Gulf of Mexico. 

Shares fell a cent to $5.50 at 2:47 p.m. in New York.