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BP PLC (NYSE ADR: BP) confirmed Tuesday that embattled Chief Executive Officer Tony Hayward is being replaced by Robert Dudley - an American and a company insider - in a move that's intended to improve the oil giant's battered image.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
Dudley, who takes over Oct. 1, will have to take on a double-edged challenge. He has to continue the cleanup effort that he's headed since June. And he must also persuade the U.S. government that BP should be allowed to continue offshore drilling work in the Gulf of Mexico - the region it has targeted for 25 of its 40 future production operations over the next five years.
Because he's led the BP oil-spill-response efforts since June, Dudley has developed a much closer rapport with U.S. officials than his predecessor. Make no mistake: The respect he commands was a key reason for BP's swap at the top.
"I've spent the last three months, every day, on the Gulf Coast," Dudley told reporters in London. "And I'm going to focus for the next month and a half on what we're doing in the Gulf Coast, our relationships in the Gulf Coast and in Washington."BP is hoping Dudley, who grew up 80 miles north of the Gulf Coast in Hattiesburg, Miss., can spearhead the creation of a new BP culture that pays more attention to safety and responsibility.
"Overall we see BP being reinvigorated by the new strategy in play, a new CEO and the worst news for the company concerning U.S (Gulf of Mexico) costs now being out there," Jason Kenney, an oil analyst at ING Groep NV (NYSE ADR: ING) in Edinburgh, told reporters.
BP's earnings report released Tuesday included a second-quarter after-tax loss of $17 billion after a pre-tax charge of $32.2 billion in cleanup costs. Other than spill-related expenses, BP's second-quarter financials were strong, with $5 billion in profits and operating cash flow of $8.9 billion, up 31% from the same period in 2009.
BP already sold $7 billion in assets to Apache Corp. (NYSE: APA) and plans to have total sales of $30 billion over the next 18 months to cover spill-related expenses.
BP Chairman Carl-Henric Svanberg said BP will be a "different company going forward, requiring fresh leadership."
Dudley's efforts and demeanor since the spill have drawn praise from a U.S. government that's frustrated with Hayward's missteps and his highly criticized lack of action.
"[Dudley] is cool, calm, collected," said Kenneth Feinberg, who oversees the $20 billion claims fund BP set up under U.S. government pressure. "He is proactive. He reached out to me and expressed the desire for BP to be as responsive and cooperative as possible."
But Hayward's big gaffes have caused a public distaste for BP that won't go away overnight. Hayward has angered Gulf residents and environmentalists with his poorly chosen comments that conveyed a severe lack of perspective.
In May he told reporters that "there's no one who wants this over more than I do. I would love my life back." Earlier that month he referred to the amount of oil in the Gulf as "tiny" and the impact of the spill "very, very modest." Hayward's behavior nabbed him the title of "the most hated - and clueless - man in America" according to the New York Daily News. And it didn't end there. Once news of his long-rumored ouster became official on Tuesday, Hayward groused to the BBC News that he had been "demonized and vilified" as the public face of the disaster.
This brings us to the latest Money Morning "Question of the Week": Will BP's makeover efforts salvage its damaged reputation? By swapping Dudley for Hayward, can BP regain the confidence of investors, Gulf-area businesses and the U.S. government? Will Wall Street respond favorably to BP's moves or has the company - with the oil spill and Hayward's miscues - drilled a hole from which it cannot escape? If so, what do you think will happen to BP?
Send your thoughts, questions and concerns to mailbag@moneymappress.com.
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News and Related Story Links:
- Money Morning News Archive:
BP Stories
- Money Morning News Archive:
Oil Spill Stories
- Money Morning:
BP Hopes for a CEO Savior in American Robert Dudley
- Bloomberg:
Dudley Faces Challenges to Ensure U.S. Future for BP
- The New York Times:
BP Is Expected to Replace Chief With American
- Bloomberg:
BP Said to Cast Dudley as CEO as It Looks to Rebuild
- Reuters:
BP set to replace CEO
- CNBC:
Who is Robert Dudley?
- Money Morning News Archive:
Question of the Week Feature
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Tags: BP, Gulf Oil, Gulf Oil Spill, Oil Prices, Oil Spill
Yes, I think BP can salvage their reputation. First, people have short memories. For example, if this disaster hadn't happened, how many people would have even remembered the Exxon Valdez disaster? Second, what did they really do that was wrong? They tried to meet this country's insatiable appetite for oil and at the same time make a profit. That's what businesses do: make profit. It is unfortunate that all the backup systems that were in place failed but government (local, state, and federal) must also take responsibility for not doing a better job of monitoring offshore oil platforms. Making sure that the emergency systems were so redundant that this couldn't have happened. Testing those systems over and over again, several times a month if necessary. Third, all they have to do is mention the hundreds, if not thousands of jobs that the oil industry creates directly or indirectly. Finally, the potential for the same disaster exists at other platforms yet no other platforms have shut down. Has the government even inspected those other rigs to make sure that this can't happen again? In short, something else will come along to divert the country's attention elsewhere and BP will continue doing business as usual because no one will make them accountable.
BP, disaster or was it.
Lets just look into the disaster,
BP leased an American Companies Drilling Rig.
The American Wellhead Control failed.
The American Blowout preventer Failed.
The American Oilrig spilled oil for weeks into the Ocean.
American Senators wanting Television Airtime ostrasized BP for the Blowout and the Oilspill for their own political position.
Can any American Company Cap an Oil Wellhead Undersea at the Depths BP had to.
Given similar circumstances or timescale, seems I cant remember any US Company before BP, perhaps someone will inform me I am wrong.
Knocking BP has informed the World. Just how good BP is.
I beleive that maybe BP made a good move in changing thier command structure.
ButI also beleive that BP should be held in total responcability for the Gulf Mess.
They need to put a permenent plug in this well now, and maintain such plug for eternity!
They should be held responcable for every cent spent and lost in the Gulf Clean up.
I think they should be held responcable for every lost cent of income for thee fishermen and all who make their living either directly in the Gulf and in any waters that connect or drain into the gulf
I do not thing any other deep water well should be drilled anywhere with out the proper safety precautions, and proper hourly inspections on their work. If a hole drill into the well at an angle is the way to stop the problem, then that should be required to be indrill and in place before drilling on the main hole ever starts!
I beleive BP should have to pay a retainer or security deposit equal to the moneys spent and lost one this one bad decision. And have that money locked in place for any furture problems concerning this one well.
THEN, I beleive once all of this mess is cleaned up to our satisfaction, BP should be politely asked to never drill on our soil our near our water again, let them go home and make their millions, we have oil rigs laying stacked out all over this country, they don't need to be here taking money out of our eeconomy.
We have sent them a running home before, lets do it again!
BP will cease to exist by 2012.
What the hell does it matter what their "image" is? They will make money in the future no matter who is at the helm.Do people not use or purchase Exxon products because of the Exxon Valdez spill in 1989? I don't love them or hate them. They are doing what any of their fellow oil thieves would have done in the same situation. The larger problem was a lack of leadership from the white house. Do any of you really believe the stories coming from BP, or the White House? people that worry about crap like this are playing right into their hands.
in my view "its doesn't matter any thing what he was earlier rather the important point is here that the current situation in BP is totally different, and nobody can predict what will be the effect of him, its all depent on his first few steps.
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