Hayward out, Dudley in as BP plummets to record loss

BP posts a massive $17bn quarterly loss thanks to soaring clean-up costs - but it's not all bad news.

by
Last Updated: 31 Aug 2010

The headline numbers from BP's quarterly results statement today aren't pretty: it's put aside a whopping $32.2bn to pay for the clean-up operation in the Gulf of Mexico, and this meant a loss of $17bn in the three months to June - the worst result in UK corporate history. And as expected, CEO Tony Hayward is off, to be replaced by Bob Dudley. On the other hand, it looks as though it can cover its costs via asset sales - and since the rest of its business seems to be holding up pretty well, its future looks a lot more secure now than it did a few weeks ago...

That higher-than-expected $32.2bn charge - which covers compensation already paid, the $20bn fund it was strong-armed into creating by President Obama, and any future costs from fines and lawsuits - is the first time BP has put a figure on the full costs of the clean-up job. And it makes sense for BP to take as much of the pain as possible at once. But in fact, the final bill could be higher: chairman Carl-Henric Svanberg told the BBC that this figure was predicated on BP not being found 'grossly negligent' for the explosion - and the courts may beg to differ on that point.

Meanwhile Dudley becomes the first American to run what was once British Petroleum - a clear indication of BP's shifting power base. BP's key Russian partners are happy enough with that, according to the Telegraph, despite their spectacular fall-out while he was running Russian JV TNK-BP (it was never personal, apparently...). And in a neat twist, it looks as though Hayward - who despite his supposed lack of political skills, helped to smooth over that little row - is going to join the board of TNK as a non-exec. Since he also gets a £1m pay-off and a £600k pension, he's not done too badly - which we'd argue is not unreasonable for someone who's served BP with distinction for 30 years.

The change at the top gives BP a chance to wipe the slate clean. And better still, it plans to raise about $30bn by flogging some 'non-core' oil and gas fields; this will hopefully mean it doesn’t need to tap shareholders or external investors for extra cash. Since its underlying performance (i.e. stripping out the Gulf) was up 72% to $5bn, and its share price is enjoying a rally, the chances of it being taken over by an opportunistic predator are diminishing by the day.

But it's not out of the woods yet, of course. It still faces a huge battle to rebuild trust in the US, while the courts may push up its final clean-up bill. And it could still do with beefing up its board - possibly starting with the chairman, who hasn't exactly covered himself in glory in the last few months...

In today's bulletin:
Hayward out, Dudley in as BP plummets to record loss
Ofcom slams ISPs for misleading advertising
Halfords sales head downhill - but profits remain on track
Editor's blog: The lessons of Tony Hayward
Scardino hints at an exit as Pearson announces record profits

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