http://www.nytimes.com/2010/07/28/business/global/28oil.html?emc=na
BP Envisions Leaner Future Under Its New Chief
Toby Melville/Reuters
From left, BP Chief Executive Tony Hayward, Chairman Carl-Henric Svanberg and Managing Director Bob Dudley outside BP’s headquarters in London on Tuesday.
By JULIA WERDIGIER and JAD MOUAWAD
Published: July 27, 2010
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Adam Hunger/Reuters
Robert Dudley is to become BP’s first non-British chief executive at the beginning of October, replacing Tony Hayward.
But even as BP increased the money set aside for spill-related costs to $32.2 billion, executives reiterated that the April 20 Deepwater Horizon explosion was not a result of gross negligence by the company. BP said it would release the results of its investigation in a report next month.
“It is clear that this accident was the result of multiple equipment failures and human mistakes involving many companies,” said Tony Hayward, who is stepping down as BP’s chief executive after criticism of his handling of the spill.
BP said it planned to sell $25 billion to $30 billion in exploration and production assets within the next 18 months, or as much as 13 percent of its production assets around the world. The planned sales represent a sharply higher target than BP’s previous goal of selling $10 billion in assets to help pay for the spill.
The new strategy will be led by an American executive,Robert Dudley, who worked for Amoco until BP bought it in 1998. BP said Mr. Dudley would take over as chief executive on Oct. 1, after a two-month transition period.
“We will look at what we have learned from this incident. We will look at our culture and our safety and operations,” Mr. Dudley said in a telephone interview with a small group of reporters. “We are looking at a slimmer company, not a smaller company.”
BP’s allocation of $32.2 billion for spill costs led to record loss of $17 billion for the second quarter. That compared with a $4.4 billion profit in the quarter a year ago.
The new strategy reverses years of rapid growth at BP, which transformed itself in recent years from a middle-size European company into a rival ofExxon Mobil, overtaking Royal Dutch Shell.
BP said the planned asset sales would be focused mainly on its upstream business, which includes oil and gas production platforms, and leave it with a smaller portfolio of higher-quality exploration and production assets.
“They are trying to draw a line under this and get Bob a clean sheet to move forward,” said Nick McGregor, investment manager at Redmayne-Bentley, a stock brokerage firm in Britain. “But the difficulty is that the litigation challenge persists.”
The company’s global production assets — which do not include its refining or marketing business — are worth about $230 billion, according to estimates by J. P. MorganCazenove.
BP has already agreed to sell gas fields in Canada, Egypt and Texas to Apache for $7 billion, and is negotiating the sale of its operations in Vietnam and Pakistan, Mr. Hayward said. It is also seeking buyers for its 60 percent stake in Pan American Energy, an Argentine oil company, as well as part of its 25 percent holdings in the Prudhoe Bay field in Alaska, which it operates.
Evgeny Solovyov, an analyst at Société Générale in London, said the company might also consider the sale of operations in Colombia or its stake in the Russian oil companyRosneft, which is worth about $1 billion. “The latest deal with Apache showed that they could get quite some good deals,” Mr. Solovyov said.
Investor reactions were mixed. BP’s shares were down about 1 percent at midday in New York on Tuesday, paring some of their gains from the previous day, when directors met to discuss the leadership changes. The shares have lost about 35 percent of its market value since the April 20 explosion of the Deepwater Horizon rig, which killed 11.
Mr. Dudley, 54, grew up in Mississippi and has been in charge of BP’s response to the spill for the last month. His appointment was widely expected among analysts and investors, who are hoping that he can help repair BP’s reputation in the United States.
He pledged that BP would stick with its commitments in the Gulf of Mexico, which includes cleaning up the oil and compensating residents. The United States is critical to the company, accounting for about a third of its business and 40 percent of its shareholders and employees.
“Getting it right, and working and cooperating with investigators in the United States is vital to BP’s future success in America,” Mr. Dudley said in a conference call with analysts.
During an earlier briefing in London, he said, “We will fulfill the promises we’ve made. Meeting our commitments is critical for BP’s long-term success. Taking over this role, I will not reduce my commitment in the region. It’s not our intention to exit the U.S., nor do we believe we will have to. We fully intend to maintain those businesses and restore our position in the gulf.”
To increase its financial flexibility, BP plans to reduce its debt, now about $23 billion, to $10 billion to $15 billion within 18 months.
Mr. Hayward angered American policy makers and gulf residents with the way he handled the spill. He is the second BP chief executive to leave after a major accident. His predecessor, John Browne, resigned in 2007 when he lost the support of the board after a string of setbacks including a blast at its Texas City, Tex., refinery in 2005 and leaking oil pipelines in Alaska.
When he leaves, Mr. Hayward, 53, is entitled to one year of salary as severance, worth a little more than £1 million, or about $1.6 million. He will also get an annual pension of £600,000, or about $932,000, from a fund worth about £11 million, which he amassed over the 28 years he worked for BP.
BP said it planned to nominate Mr. Hayward as a nonexecutive director of TNK-BP, its Russian joint venture.
Mr. Hayward is still running the company, but in various presentations to analysts and reporters Tuesday, he frequently deferred to Mr. Dudley about BP’s future strategy.
Mr. Hayward said his departure would allow BP to repair its reputation. “It’s a very sad day personally,” he said. “I love this company and everything that it stands for. For it to move on, particularly in the U.S., it needs a new leadership.”
Asked how he felt about the oil spill, given his pledge to improve safety after the Texas City explosion, Mr. Hayward told reporters that the company had worked hard to improve its safety standards in the last three years.
But, he added, “sometimes you step off the pavement and get hit by a bus.”
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