Published: Tuesday July 27, 2010 MYT 2:30:00 PM
Updated: Tuesday July 27, 2010 MYT 3:08:58 PM
LONDON: BP PLC said Tuesday that embattled Chief Executive Officer Tony Hayward will step down on Oct. 1 — to be succeeded by American Robert Dudley — and that it has set aside US$32.2 billion to cover the costs of the Gulf of Mexico oil spill.
In a statement accompanying its quarterly earnings update, in which BP reported a record quarterly loss, the company said the decision was made by mutual agreement. In a mark of faith in its outgoing leader, it said it planned to recommend Hayward, 53, for a non-executive board position at its Russian joint venture.
"The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired," BP Chairman Carl-Henric Svanberg said in a statement.
BP PLC says Tony Hayward(left) will step down as chief executive officer from Oct. 1, to be succeeded by American Robert Dudley(right). - AP
Svanberg said the explosion of the Macondo well on the Deepwater Horizon platform run by BP in the Gulf of Mexico has been a "watershed incident" for the company.
"BP remains a strong business with fine assets, excellent people and a vital role to play in meeting the world's energy needs," he said. "But it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."
Svanberg described Dudley, 54, who was thrown out of Russia after a battle with shareholders in the company's TNK-BP joint venture, as a "robust operator in the toughest circumstances."
BP said that the $32.2 billion charge for the cost of the spill led it to record a loss of $17 billion for the second quarter.
The company said it planned to tell analysts in an update later Tuesday that it will sell assets for up to $30 billion over the next 18 months, "primarily in the upstream business, and selected on the basis that they are worth more to other companies than to BP."
That would leave the company with a smaller, but higher quality Exploration & Production business, it said.
The company said that Dudley will be based in London when he takes up his appointment and will hand over his present duties in the United States to Lamar McKay — the chairman and president of BP America.
Hayward will remain on the board until Nov. 30. - AP
Hayward's rise and fall. He boosted BP's bottom line, but not safety
LONDON: Two decades ago, Tony Hayward was a "turtle" — one of a handful of young high fliers at BP earmarked for great things, named after the cartoon warriors, the Teenage Mutant Ninja Turtles.
Fast-tracked through BP's heavy bureaucracy by the man he would succeed as CEO, John Browne, Hayward took the top job three years ago promising to focus "like a laser" on safety and change the company's champagne culture. He was supposed to get BP back to basics, and for most of his tenure shareholders were happy with the results.
Then came the rig explosion that set off the worst offshore oil spill in U.S. history, and several weeks in which Hayward repeatedly put his foot in his mouth while his company appeared incapable of stopping the gusher.
Now the former geologist is set to resign. Following weeks of speculation about his future, Hayward is to step down from the company's top job in October and will be offered a post at the company's TNK-BP joint venture in Russia, a person familiar with the matter said Monday.
The person spoke on condition of anonymity because an official announcement had not been made by the British company's board, which met Monday in London to decide the 53-year-old Hayward's fate.
Analysts were divided over whether removing Hayward was justified, but they acknowledged that it was inevitable despite his success before the Gulf spill in streamlining a bloated company.
"He was always going to be thrown out in the end to appease investors," said David Battersby, investment manager at Redmayne Bentley Stockbrokers.
But a post at BP's 50-50 joint venture with Russian oligarchs suggests that the company still holds more faith in their embattled CEO than much of the U.S. public and political establishment.
Analysts consider the venture one of BP's crown jewels, accounting for a quarter of BP production. But it is problematic, as Hayward's likely successor as CEO, Robert Dudley, well knows.
Dudley was forced to flee Russia in 2008, running the company in absentia until that became untenable, after a row with Russian shareholders. That history means that Hayward, who is still well-regarded in Europe, will be a key negotiator for his new boss.
"It's recognizing that this is a very smart guy and has good contacts," said Stephen Pope, the chief global equity strategist at Cantor Fitzgerald. "He will very good at smoothing the way."
Phil Weiss, an oil analyst with Argus Research in New York, said BP thinks highly of Hayward, "but they have to get him away from this situation."
Hayward's elevation to CEO in 2007 was supposed to herald a new era for the company after a series of accidents — including the 2005 Texas City refinery explosion that killed 15 people.
"The task is to restore confidence," he told the Texas-based Houston Chronicle newspaper shortly after his appointment.
Browne was forced to step down as CEO after admitting to perjury while giving evidence to a court to prevent a newspaper revealing details of his private life. There was little surprise that Hayward was named as his replacement.
It was Browne who, as head of exploration and production in 1991, recognized the young geologist's potential and marked Hayward out for a fast-track program for young executives. That gave Hayward entry to the inner circle.
He moved quickly through the ranks, from geologist to group treasurer to head of exploration and production — a crucial role at any big oil company.
Before becoming CEO, he was instrumental in BP's expansion into the United States, which involved a number of takeovers, including the 1998 merger with Amoco and the subsequent acquisitions of Arco and Castrol.
The eldest of seven children, Hayward had a far less privileged upbringing than his predecessor — Lord Browne of Madingley to his fellows in the House of Lords.
Browne had been known for his celebrity lifestyle as much as his business successes, and Hayward was seen as a leader who could focus BP more on the bottom line.
Not long before he took over, Hayward told a conference that BP needed to change its leadership style because it was "too directive and doesn't listen sufficiently well." He said he was concentrating on "closing the performance gap" with rivals such as Royal Dutch Shell.
Hayward stripped out layers of management and costs across a stumbling and bloated business, improving its refining efficiency and putting the firm on a stronger footing to weather a global downturn.
BP's market position improved and its reputation was rehabilitated. Cost-cutting, which saw around 7,500 positions axed, led to savings of around $4 billion.
Even in the immediate wake of the Deepwater Horizon explosion on April 20 with the loss of 11 workers, Hayward appeared to be able to survive.
Former BP Chairman Peter Sutherland described him as a "superb chief executive by common consent" and British-based investors and analysts were supportive.
But in the U.S., Hayward became the lightning rod for anti-BP feeling and didn't help matters with a series of gaffes. He raised hackles by saying "I want my life back," going sailing, and what was viewed as an evasive performance before U.S. congressmen in June.
President Barack Obama said then that Hayward should have been fired — although BP later cooled the political heat by agreeing to set up a $20 billion compensation fund.
Hayward was called back to London a month ago after the bruising encounter with the congressional committee and has since kept a low profile.
Tom Bower, who wrote a book called "The Squeeze: Oil, Money and Greed in the 21st Century," suggested Hayward's response to the Gulf spill was symptomatic of how he "hadn't changed the culture" at BP following the previous accidents in the U.S.
"He knew what had to be done, but he didn't do it properly. He was too slow; he wasn't inspired; he wasn't focused enough," Bower told the BBC.
But David Cumming, head of UK equities at Standard Life Investments, said that Hayward was the scapegoat for BP's "political appeasement" to help rebuild its U.S. reputation.
"I think Hayward has been harshly treated and I think Hayward's departure is premature," he said. "We still don't know the full facts of the spill." - AP
Dudley's path followed unusual turns to CEO of BP
LONDON: Bob Dudley's sudden rise to the top at BP PLC shows how the Gulf oil spill has dramatically changed the fortunes of people from local fishermen to corporate executives.
Seen as an unlikely candidate just a few months ago, Dudley is set to become the first American to lead the oil giant in its century long history. Dudley will become CEO on Oct. 1 and try to salvage the company's reputation and investments in the United States.
Dudley's standing within BP and along the Gulf Coast has risen since he took over response to the oil spill in June from current CEO Tony Hayward, who will be reassigned to Russia.
Though his words weren't all that different, Dudley delivered BP's message — don't worry, we're going to pay for all this — in a calm manner without Hayward's public impatience and occasional whininess. And serendipity was on Dudley's side: He was in charge when they finally capped the spewing well, shutting off the flow of oil until a relief well can finish the job.
BP is the largest producer of oil and gas in the United States, home to 40 percent of the company's assets and responsible for one-third of its worldwide oil and gas reserves. It has huge interests in Alaska and the Gulf, with vast tracts yet to be developed.
BP could lose access to those resources. The U.S. Congress is considering a proposal to block the awarding of any new offshore oil and gas leases to companies with bad safety records. BP would be targeted, the way the legislation is written. Also, BP's fuel contracts with the military, worth $2.2 billion last year, could be in jeopardy.
If BP is going to survive and grow, it must protect those assets, says Amy Myers Jaffe, an oil industry scholar at Houston's Rice University.
On Tuesday, the company said it plans to tell analysts that it will sell assets for up to $30 billion over the next 18 months.
In early April, nobody thought BP would soon need a new CEO. Under Hayward, the company was earning more than $20 billion a year until lower oil prices reduced earnings in 2009 to $16.6 billion. But on Tuesday, BP reported a record loss of $17 billion for the second quarter.
Dudley, 54, was a longtime executive with Amoco before BP bought that company in 1998. He had run BP's joint venture in Russia, then turned into a globe-trotting Mr. Fix-it for his bosses in London. It was that last role that landed him back along the Gulf, near where he grew up in Mississippi, after the April rig explosion that killed 11 men and spawned the oil gusher.
In that thread of biography lie several factors that elevated him above other candidates to replace Hayward, including Britons with years more experience inside BP, according to analysts.
"The two aspects of Dudley's work that make him an optimal candidate for CEO are that he's not Tony Hayward and he speaks with an American accent," says Pavel Molchanov, an analyst with Raymond James. He says by making Dudley CEO, BP is sending a message that it cares greatly about its stake in America.
Phil Weiss, an analyst with Argus Research, views Dudley as a compromise between picking another BP lifer like Hayward and choosing an outsider to clean house. Weiss thinks BP should have gone outside its ranks for a CEO to shake up a company with a safety record marred by the 11 deaths in the Gulf and 15 more at a 2005 refinery explosion in Texas.
Dudley wasn't tied to BP's exploration and production division that oversaw drilling operations including the one aboard the Deepwater Horizon. As head of that division, Andy Inglis was once seen as a potential successor to Hayward, but his chances dimmed after the Gulf accident, analysts say.
Dudley also may have been helped by his background at Amoco, which was seen as an efficient, low-cost oil producer.
Even some of Dudley's setbacks seem to have raised his profile. While running BP's Russian joint venture, he had to flee the country in 2008 amid a dispute with Russian partners and the Russian government. BP was replaced as the operating partners of the business, TNK-BP, but it retained its investment, which still makes money. Dudley ended up with a seat on BP's board London.
As head of BP's spill response, Dudley has mostly kept a low profile while shuttling between the Gulf Coast, Washington and London.
"I talk to Bob Dudley when I need to," says Thad Allen, the retired Coast Guard admiral now directing the federal response to the oil spill. "I woke him up on a number of occasions."
Dudley has adamantly defended BP's actions since the explosion. The company has pledged $20 billion to a cleanup and damages account, but said Tuesday that it has set aside $32.2 billion to cover the costs of the Gulf of Mexico oil spill.
Although a big part of Dudley's job will be looking out for the company's U.S. assets, that doesn't mean he should move to Washington, says Jaffe, the oil industry scholar.
"He needs to run the whole company," she says. "His first job is to convince people BP is going to come back and you better buy BP stock while it's cheap." - AP
http://biz.thestar.com.my/news/story.asp?file=/2010/7/27/business/20100727143641&sec=business
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