Tuesday, July 27, 2010

Day 99 BP Oil Spill: Hayward Out; Dudley In; $32.2 Bln Cleanup

Jul 27: As recovery, "killing" and cleanup operations were beginning to resume following the halt of operation due to tropical storm Bonnie, the news of resigning BP executive Tony Hayward and BP's reporting of its 2nd quarter financial situation dominated the Gulf oil spill news. As expected, BP announced that, by mutual agreement with the BP board, Tony Hayward is to step down as group chief executive with effect from October 1, 2010. He will be succeeded as of that date by fellow executive director Robert Dudley.
    BP chairman Carl-Henric Svanberg said, "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. The tragedy of the Macondo well explosion and subsequent environmental damage has been a watershed incident. BP remains a strong business with fine assets, excellent people and a vital role to play in meeting the world's energy needs. But it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."

    Svanberg continued saying, "We are highly fortunate to have a successor of the caliber of Bob Dudley who has spent his working life in the oil industry both in the US and overseas and has proved himself a robust operator in the toughest circumstances."
Bob Dudley (54) is a main board director of BP and currently runs the recently-established unit responsible for clean-up operations and compensation programs in the Gulf of Mexico. He joined BP from Amoco after the merger of the two companies in 1998. He was president and CEO of BP's Russian joint venture, TNK-BP, until 2008. 

    Dudley said, "I am honored to be given the job of rebuilding BP's strengths and reputation but sad at the circumstances. I have the greatest admiration for Tony, both for the job he has done since he became CEO in 2007 and for his unremitting dedication to dealing with the Gulf of Mexico disaster. I do not underestimate the nature of the task ahead, but the company is financially robust with an enviable portfolio of assets and professional teams that are among the best in the industry. I believe this combination - allied to clear, strategic direction - will put BP on the road to recovery."
    On his appointment, Dudley will be based in London and will hand over his present duties in the US to Lamar McKay, chairman and president of BP America. Dudley said, "In this change of roles, I particularly want the people of the Gulf Coast to know that my commitment to remediation and restitution in the region is not lessened. I gave a promise to make it right and I will keep that promise."

    Hayward will remain on the BP board until November 30, 2010. BP also plans to nominate him as a non-executive director of TNK-BP.
BP said that under the terms of his contract Hayward would receive a year's salary in lieu of notice, amounting to £1.045 million ($1.6157 million).
    BP also announced that it will tell analysts today that it plans to 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. This portfolio high grading will leave the company with a smaller but higher quality Exploration & Production business. Meanwhile BP continues to access new business opportunities, with new agreements in Azerbaijan, Egypt, China and Indonesia announced since the end of the first quarter.
    The company said it was taking a prudent approach to managing the balance sheet and its financial liquidity, in order to ensure that BP has the flexibility to meet all of its future financial obligations. As a result it plans 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. BP said group capital spending for 2010 and 2011 will be about $18 billion a year, in line with previous forecasts. In reporting second quarter results, BP revealed that it is taking a charge of $32.2 billion to reflect the impact of the Gulf of Mexico oil spill, including costs to date of $2.9 billion for the response and a charge of $29.3 billion for future costs, including the funding of the $20 billion escrow fund.  The company revealed the charge as it announced a headline replacement cost loss for the quarter of $17 billion.
    Access a lengthy release on Haywood and Dudley (click here). Access a release with details on the 2nd Quarter financials (click here). Access more details on the 2Q financials (click here). Access more information on BP activities from the BP response website (click here). Access the Restore the Gulf website for more information (click here). Access the Unified Command website which contains additional information (click here).

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