BP launches image overhaul and ditches Tony Hayward

  @ibtimes on July 27 2010 3:16 PM

BP Plc's newly named chief executive on Tuesday called the Gulf oil spill a wake-up call for the entire industry as the company tallied up its losses and disclosed two U.S. investigations.

Bob Dudley, who will replace gaffe-prone Tony Hayward as CEO on October 1, said safety would be among his highest priorities as he tries to refurbish the oil company's battered reputation.

His image repair task may have become even tougher after BP said it would offset the cost of the spill against its taxes, costing U.S. taxpayers almost $10 billion.

BP reported a second-quarter loss of $17 billion, including $32 billion in charges related to the oil spill, the largest in U.S. history. It also announced plans to sell $30 billion in assets over the next 18 months to help cover its liabilities.

The U.S. Securities and Exchange Commission and Department of Justice have launched informal enquiries into securities matters related to the spill, BP said.

More than 5 million barrels of oil have spilled into the Gulf of Mexico since the undersea leak began in late April, according to U.S. government estimates. The spill, caused by an explosion that killed 11 people, has devastated communities and fragile ecosystems along the Gulf Coast, killing or injuring countless sea creatures and coastal birds.

Private lawsuits have piled up. Attorneys hoping to lead the legal fight against BP are heading to the unlikely venue of Boise, Idaho, this week as a special judicial panel considers how to handle all the cases.

BP's U.S.-listed shares dipped 1.5 percent in afternoon trading. The company has lost about 40 percent of its market value since the explosion.

Ted Parrish, co-portfolio manager of the Henssler Equity Fund in Kennesaw, Georgia, said the sheer size of BP's quarterly loss had unsettled investors.

Wall Street expected a big number, but to actually read the tape and see that number, it tends to shock people, he said.

The stock had gained on Monday after reports surfaced that Hayward would be ousted as CEO after a series of public relations blunders, including complaining he wanted his life back weeks after the start of the spill.

I believe that it is not possible for the company to move on in the United States with me remaining as the face to BP, Hayward told reporters on a conference call. So I think that for the good of BP, and particularly for the good of BP in the United States, it is right for me to ... step down.

BP's leaking well was capped two weeks ago after gushing up to 60,000 barrels per day into the Gulf, ruining fishing and tourism industries and polluting the shoreline with slimy goo.

BP Chairman Carl-Henric Svanberg said the company would take a hard look at itself in the aftermath of the spill: BP ... will be a different company going forward.

RISK TAKING

However, Dudley denied BP's culture contributed to the disaster and said the company would continue to target the industry's harder projects.

Dudley, who will be the first American to lead BP, was raised in Mississippi, a fact that seems to be working in his favor among some Gulf residents.

I think people would be more comfortable with someone running BP (who) is from the Deep South, said Rochard Angelico, a 66-year-old lifelong resident of Orleans Parish, Louisiana. Hayward was inept at public relations and speaking to people in southern Louisiana.

Some investors and analysts say BP's culture encourages greater risk-taking than rivals, contributing to more higher returns. Critics have also blamed this culture for the explosion on the Deepwater Horizon rig.

BP is also facing heat from U.S. lawmakers over whether it influenced the release of the Lockerbie bomber to promote its business interests. Senator Robert Menendez said on Tuesday that Hayward would not testify at a hearing on Thursday.

It is apparently more important to BP and Mr. Hayward to focus on his multi-million dollar golden parachute than to help answer serious linger(ing) questions about whether the company advocated trading blood for oil, Menendez said in a statement.

BP said it planned to sell assets worth up to $30 billion over the next 18 months to pay for its liabilities and create a leaner company with the potential for higher growth.

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. ... costs now being out there, Jason Kenney, oil analyst at ING in Edinburgh, said.

Industry executives said it was a good time to sell assets as relative stability in the oil price in the past nine months makes it easier for buyers and sellers to agree to deal terms.

BP agreed to a $7 billion sale of oil and gas fields to Apache Corp last week, which valued the assets at around $19.40 per barrel of oil equivalent. The rest of BP trades at an implied $7/barrel, analysts at Morgan Stanley said.

FINAL PROCEDURE

Aside from the spill, BP's business is steaming ahead with underlying quarterly profits up 77 percent on the year before, thanks to higher oil and gas prices and better refining margins.

Excluding a $32.2 billion charge for the disaster and other non-operating costs, the replacement cost profit was $4.98 billion, in line with the average forecast from a Reuters poll of 11 analysts.

Dudley said on ABC's Good Morning America he expected no more oil to flow into the Gulf, but added: we've got to really kill that well to be absolutely certain. BP could begin the final procedure to permanently plug the well late next week.

(Additional reporting by Rachelle Younglai in Louisiana, Matthew Lynley in New York, and Paul Hoskins in London; Writing by Emily Kaiser and Michael Shields; Editing by Eric Beech)

($1=.6473 Pound)

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