LONDON – BP's embattled Chief Executive Officer Tony Hayward will be replaced by American Robert Dudley on Oct. 1, the company said Tuesday, as it reported a record quarterly loss and set aside $32.2 billion to cover the costs of the devastating Gulf of Mexico oil spill.
Photo:Reuters – BP Plc (British Petroleum) Executive Vice President for the Americas and Asia Robert Dudley speaks at …
BP said the decision to replace Hayward, 53, was made by mutual agreement. In a mark of faith in its outgoing leader, the company said it planned to recommend him for a non-executive board position at its Russian joint venture and will pay him 1.045 million pounds ($1.6 million), a year's salary, in lieu of notice..
"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 accompanying the quarterly earnings update.
Svanberg said the April 20 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."
Hayward, who has a Ph.D in geology, had been a well-regarded chief executive. But his promise when he took the job in 2007 to focus "like a laser" on safety came back to haunt him after the explosion on the Deepwater Horizon rig killed 11 workers and unleashed a deep-sea gusher of oil.
He became the lightning rod for anti-BP feeling in the United States and didn't help matters with a series of gaffes, raising hackles by saying "I want my life back," going sailing, and what was viewed as an evasive performance before U.S. congressmen in June.
On top of the $1.6 million payout, Hayward 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 stock has lost around 40 percent since the well explosion.
Hayward, who will remain on the board until Nov. 30, will also be entitled to draw an annual pension of 600,000 pounds from a pension pot valued at around 11 million pounds.
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."
Currently BP's managing director, Dudley grew up partly in Hattiesburg, Mississippi, and has so far avoided any public missteps. He spent 20 years at Amoco Corp., which merged with BP in 1998, and lost out to Hayward on the CEO slot three years ago.
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.
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 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.
But the company also stressed its strong underlying financial position — revenue for the quarter was up 34 percent at $75.8 billion — and Hayward said it had reached a "significant milestone" with the capping of the leaking well.
Crews were restarting work to plug the leaky Gulf well after the remnants of Tropical Storm Bonnie blew through, forcing a short evacuation. The U.S. government's oil spill chief, Retired Coast Guard Adm. Thad Allen, said Monday that the so-called static kill — in which mud and cement are blasted in from the top of the well — should start Aug. 2.
If all goes well, the final stage — in which mud and cement are blasted in from deep underground — should begin Aug. 7.
BP said the bottom kill could take days or weeks, depending on how well the static kill works, meaning it will be mid-August before the well is plugged for good.
Hayward said the company expects to pay the "substantial majority" of the remaining direct spill response costs by the end of the year.
"Other costs are likely to be spread over a number of years, including any fines and penalties, longer-term remediation, compensation and litigation costs," Hayward said.
BP 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 reported that underlying replacement cost profit — the measure most closely watched by analysts — was $5 billion for the three months between April and June when adjusted for one-off items and accounting effects. That compared favorably with a $2.9 billion profit for the second quarter of 2009.
"Outside the Gulf it is very encouraging that BP's global business has delivered another strong underlying performance, which means that the company is in robust shape to meet its responsibilities in dealing with the human tragedy and oil spill in the Gulf of Mexico," Hayward said.
Higher prices for oil and gas made up for slightly lower output and a loss in gas marketing and trading in Exploration & Production, while Refining & Marketing reported increased profits as a result of strong performance in the fuels value chains and the lubricants and petrochemicals businesses.
The company said it planned to reduce its net debt level down to a range of $10-$15 billion within the next 18 months, compared to net debt of $23 billion at the end of June, to ensure that it had the flexibility to meet its future financial obligations.
Capital spending for 2010 and 2011 will be about $18 billion a year, in line with previous forecasts.
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