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.
"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?
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BP Said to Cast Dudley as CEO as It Looks to Rebuild - Reuters:
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