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BP replaces CEO Hayward, reports $17B loss

BP CEO Tony Hayward prepares to testify on Capitol Hill in Washington, Thursday, June 17, 2010, before the House Oversight and Investigations subcommittee hearing on "the role of BP in the Deepwater Horizon Explosion and oil spill. (Alex Brandon)
July 27, 2010 12:00:00 AM PDT
American Robert Dudley will become BP PLC's first ever non-British chief executive, the company said Tuesday as it reported a record quarterly loss and set aside $32.2 billion to cover costs of the devastating Gulf of Mexico oil spill.The oil giant confirmed on Tuesday that Tony Hayward will step down Oct. 1.

"BP will change as a result of this accident," BP Chairman Carl-Henric Svanberg told investors during a webcast presentation on the company's second quarter results, which revealed a record $17 billion loss.

"We are taking a hard look at ourselves, what we do and how we do it. What we learn will have implications for our ways of working, our strategy and our governance."

Meantime, Dudley says that he recognizes the complexity of what BP has to do to restore its financial strength and its reputation.

The oil spill, he said, has been a "wake-up call not only for BP, but the oil and gas industry overall, and we will be looking deeply at our review of operational safety and what we have learned from this spill."

BP's priority was to stop the Gulf leak permanently and then to clean up miles of spoiled waters and beaches and compensate people whose livelihoods have been lost because of the accident.

Over the next few weeks, BP will move ahead in parallel with so-called static kill and bottom-kill operations - blasting in mud and cement from the top of the well and from deep underground - and the company said it anticipates the first relief well will be completed during August, subject to weather delays.

Svanberg added that the company was determined to restore value to shareholders, after a 35 percent, or $60 billion, drop in market value to around $116 billion since the April 20 explosion of the Macondo well on the Deepwater Horizon platform. Under U.S. political pressure, the company also axed dividends to shareholders this year.

The stock started out marginally higher on Tuesday, but dropped 3 percent to 404.2 pence in afternoon trade on the London Stock Exchange.

Latest Developments:

  • BP kicked off the revamp by announcing the sale of $30 billion in assets to streamline the company into a smaller, higher quality business. It said assets on the block will come primarily from its $250 billion Exploration and Production portfolio and will be selected "on the basis that they are worth more to other companies than to BP."
  • The sell-off will help the company achieve an aim of reducing net debt to a range between $10 billion and $15 billion within the next 18 months, compared to net debt of $23 billion at the end of June, to ensure that BP has the flexibility to meet its future financial obligations.
  • The company has already made a start with the $7 billion sale of gas assets in the United States, Canada and Egypt to Apache Corp.
  • Svanberg said the planned asset sales did not necessarily reflect a fear that spill costs could soar above the $32.2 billion set aside by the company. That charge includes the $20 billion compensation fund the company set up following pressure from President Barack Obama as well as costs to date of $2.9 billion.
  • Hayward remains well-regarded in Europe and his appointment would be a benefit for Dudley, who, as the former head of TNK-BP, was forced to flee Russia in 2008, running the company in absentia until that became untenable, after a row with Russian shareholders.
  • Hayward, who paid the price for a series of gaffes, including the comment "I'd like my life back," will receive a year's salary of 1.045 million pounds ($1.6 million) as part of his severance package. He will also be entitled to draw an annual pension of 600,000 pounds from a pension pot valued at around 11 million pounds and retains his rights to shares under a long-term performance program which could eventually be worth several million pounds if BP's share price recovers.

The Associated Press contributed to this report.


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