London - BP's embattled CEO Tony Hayward will be replaced by American Robert Dudley on October 1, the company said on Tuesday, as it reported a record quarterly loss and set aside $32.2bn to cover the costs of the devastating Gulf of Mexico oil spill.
BP said the decision to replace Hayward, 53, with the company's first ever non-British CEO was made by mutual agreement. In a mark of faith in its outgoing leader, BP said it planned to recommend him for a non-executive board position at its Russian joint venture and will pay him £1.045m, a year's salary, in lieu of notice.
"The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired," BP chairperson Carl-Henric Svanberg said in a statement accompanying the quarterly earnings update.
Svanberg said the April 20 explosion of the Macondo well on the Deepwater Horizon platform run by BP in the Gulf of Mexico has been a "watershed incident" for the company.
"BP remains a strong business with fine assets, excellent people and a vital role to play in meeting the world's energy needs," he said. "But it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."
Besides permanently plugging the oil leak and cleaning up the spill and the company's image, Dudley will oversee the sale of $30bn in assets over the next 18 months to bolster the company's finances.
Hayward, who has a Ph.D in geology, had been a well-regarded chief executive. But his promise when he took the job in 2007 to focus "like a laser" on safety came back to haunt him after the explosion on the Deepwater Horizon rig killed 11 workers and unleashed a deep-sea gusher of oil.
He became the lightning rod for anti-BP feeling in the United States and didn't help matters with a series of gaffes, raising hackles by saying "I want my life back", going sailing, and what was viewed as an evasive performance before the US congress in June.
In a statement on Tuesday, Hayward said it was right that BP embark on its next phase under new leadership.
"The Gulf of Mexico explosion was a terrible tragedy for which - as the man in charge of BP when it happened - I will always feel a deep responsibility, regardless of where blame is ultimately found to lie," he said.
On top of the $1.6m payout, Hayward retains his rights to shares under a long-term performance program which could eventually be worth several million pounds if BP's share price recovers. The stock, which has lost around 40% since the well explosion, was almost flat at 417 pence in early trade on the London Stock Exchange on Tuesday.
Hayward, who will remain on the board until November 30, will also be entitled to draw an annual pension of £600 000 from a pension pot valued at around £11m.
Svanberg described Dudley, 54, who was thrown out of Russia after a battle with shareholders in the company's TNK-BP joint venture, as a "robust operator in the toughest circumstances".
Currently BP's managing director, Dudley grew up partly in Hattiesburg, Mississippi, and has so far avoided any public missteps. He spent 20 years at Amoco Corp., which merged with BP in 1998, and lost out to Hayward on the CEO slot three years ago.
Dudley will be based in London when he takes up his appointment and will hand over his present duties in the United States to Lamar McKay, the chairperson and president of BP America.
Record lossBP said the $32.2bn charge for the cost of the spill led it to record a loss of $17bn for the second quarter, compared with a profit of $4.39bn a year earlier. It is the first time in 18 years that the company has been in the red. The charge includes the $20bn compensation fund the company set up following pressure from President Barack Obama as well as costs to date of $2.9bn.
But the company also stressed its strong underlying financial position - revenue for the quarter was up 34% at $75.8 billion - nd Hayward said it had reached a "significant milestone" with the capping of the leaking well.
Crews were restarting work to plug the leaky Gulf well after the remnants of Tropical Storm Bonnie blew through, forcing a short evacuation. The US government's oil spill chief, Retired Coast Guard Adm. Thad Allen, said Monday that the so-called static kill - in which mud and cement are blasted in from the top of the well - should start Aug. 2.
If all goes well, the final stage - in which mud and cement are blasted in from deep underground - should begin Aug. 7.
BP said the bottom kill could take days or weeks, depending on how well the static kill works, meaning it will be mid-August before the well is plugged for good.
Hayward said the company expects to pay the "substantial majority" of the remaining direct spill response costs by the end of the year.
"Other costs are likely to be spread over a number of years, including any fines and penalties, longer-term remediation, compensation and litigation costs," Hayward said.
BP said the sale of $30bn in assets over the next 18 months will be "primarily in the upstream business, and selected on the basis that they are worth more to other companies than to BP".
That would leave the company with a smaller, but higher quality Exploration & Production business, it said.
- AP