London, 27 July (Argus) — Robert Dudley will replace Tony Hayward as chief executive of BP, as the embattled energy group takes a second-quarter charge of $32.2bn for the Macondo oil spill in the Gulf of Mexico. This leaves it with a headline loss of $17bn after accounting for inventory changes.
But in a move to reassure investors, the company said it would shrink its debt to $10bn-15bn over 18 months from $23bn at the end of June, maintain capital expenditure levels and sell $30bn of largely upstream assets by the end of 2011, inclusive of a $7bn deal with US independent Apache clinched last week. The $30bn figure is a more ambitious sale target than $10bn previously mentioned.
BP said the asset sales would be “on the basis that they are worth more to other companies than to BP,” trying to rule out a fire sale. Its deal with Apache included assets in the US Permian basin, western Canada and Egypt. It has also agreed the sale of some US pipeline and storage assets.
The non-operating charge for the Gulf of Mexico spill includes costs to date of $2.9bn and a $20bn escrow fund demanded by the US government. Most remaining direct costs will be paid by the end of the year, the company said.
The replacement of Hayward by BP's first-ever US chief executive had been expected, although head of refining Iain Conn was also seen as a contender. Dudley will take over the role on 1 October and his current job of managing the Gulf of Mexico crisis will fall to chairman of BP America Lamar McKay. Hayward will be nominated to a board position on the UK-Russian joint venture TNK-BP, an irony given Dudley was its chief executive until conflict between the shareholders saw him driven from the post and forced out of Russia. Dudley will be based in London.
In a measured response to criticism of BP's handling of the US Gulf situation, chairman Carl-Henric Svanberg — himself under intense scrutiny — said “it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board”. As the man in charge, Hayward said he would take responsibility for the Macondo disaster “regardless of where blame is ultimately found to lie”.
Setting aside the vast provisions and the previously announced suspension of the dividend, BP's operating performance in the quarter was somewhat better than many analysts had expected. Its replacement cost profit that strips out inventory effects was $5bn, as lower upstream output was compensated for by higher prices and the refining division benefited from better margins.
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