New BP chief executive in recovery pledge

Press Association
Tuesday 27 July 2010 14:25

BP's new chief executive today pledged to put the oil giant "on the road to recovery" as it reeled under a 32.2 billion US dollar (£20.8 billion) blow from the Gulf of Mexico disaster.

The financial hit sent BP crashing 17 billion dollars (£11 billion) into the red for the April-June period following the Deepwater Horizon tragedy - its first loss in 18 years.

Under-fire boss Tony Hayward will make way in October for US citizen and fellow board member Bob Dudley, who becomes BP's first ever overseas chief executive.

Mr Dudley said he did not underestimate the task ahead but added that BP was "financially robust" and boasted "enviable" assets and staff.

"I believe this combination - allied to clear, strategic direction - will put BP on the road to recovery," he said.

The huge charge includes the direct costs of tackling the spill, clean-up costs for the catastrophe and a 20 billion dollar (£12.9 billion) compensation fund agreed in June.

But the longer-term fall-out such as fines, penalties and potential legal action will inevitably add to the bill and spread the pain over a number of years.

BP also hopes to sell around 10% of its production assets over the next 18 months, with the aim of raising 30 billion dollars (£19.3 billion) to beef up its balance sheet to meet the crisis.

Meanwhile Mr Hayward, who has drawn fire for a series of PR blunders since the crisis began, leaves with a pay-off of one year's salary - £1.045 million - and an £11 million pension pot.

He will remain on the BP board until the end of November and has been put forward as a non-executive director of the firm's TNK-BP Russian joint venture.

BP chairman Carl-Henric Svanberg said the firm was "deeply saddened" to lose him but said the Deepwater Horizon explosion - which left 11 workers dead - had been a "watershed incident".

"It will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board," Mr Svanberg said.

Mr Hayward joined the company in 1982 and has been chief executive since 2007. Before the spill he had been credited for reviving the fortunes of the oil giant but said he would always feel a "deep responsibility" for the tragedy.

He added: "BP will be a changed company as a result and it is right that it should embark on its next phase under new leadership."

He added that the company had reached a "significant milestone" after the capping of the spewing well, while the sales will leave BP with a "smaller but higher quality" exploration and production business.

Shares in the firm were little moved today despite the heavy loss provisions as investors await the completion of relief wells below the sea bed which should finally cut off the flow of oil early next month.

Video: BP make £11bn loss

Collins Stewart analyst Gordon Gray said: "The succession of Tony Hayward by Bob Dudley was well flagged in recent days, but we think it should help BP start to rebuild key relationships in the US. We see further near term upside in BP's shares if it can fully seal the well in the next few weeks."

BP is a staple holding for UK pension funds although shareholders have already felt the pain after the firm scrapped dividends for the first time since the Second World War. Investors have to wait until 2011 to find out when payments will resume.

Stripping out the impact of the Gulf, BP said its underlying performance was "very encouraging", with a 72% hike profits of 5 billion dollars (£3.2 billion) - meaning that the company was in "robust shape" to meet its obligations.

The firm's refining and marketing operations posted their best performance since 2006, when refining margins were double their current levels. The US operations also returned to profit for the first time in more than a year.

Higher prices for oil and gas also helped its exploration and production business grow profits despite a 4% fall in production on last year due to disruption caused by the oil spill.

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