BP set to replace CEO Tony Hayward

LONDON Mon Jul 26, 2010 6:38pm EDT

1 of 7. BP Chief Executive Tony Hayward leaves the energy company's headquarters in a car with special tinted windows, in London, July 26, 2010.

Credit: Reuters/Stefan Wermuth

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LONDON (Reuters) - BP Plc is expected to install an American known for diplomacy as chief executive, replacing Tony Hayward who has come under fire for his gaffe-prone handling of the worst oil spill in U.S. history.

Bob Dudley, the U.S. executive managing BP's response to the spill in the Gulf of Mexico, is poised to get the top job, a move that could soften U.S. criticism of the British oil major, sources close to the company said.

BP said it did not plan to issue a statement before 2 a.m. EDT/0600 GMT on Tuesday, the time it is due to report its results for the second quarter.

Analysts at Barclays said BP could report a loss of $13 billion for the second quarter as it makes provisions of up to $25 billion for the cost of the spill. Those figures would far exceed an expected 77 percent jump in underlying profit.

BP could begin the final procedure to kill its leaking well late next week, the top U.S. spill response official said. That will involve pumping mud and cement through a relief well that has been drilled since May 2 to a spot close to the bottom of the damaged well.

"The next thing that we need to do is get this well in the position where we can make the intercept and kill this well from the bottom," retired Coast Guard Admiral Thad Allen told reporters in Washington.

More than five 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, hitting the coastlines and economies of five states and killing or injuring countless sea creatures and coastal birds.

"CHOP HEADS"

Hayward, a 53-year-old geologist, has described Dudley as BP's "secretary of state" for his role overseeing the cleanup efforts.

Dudley, who was raised in Mississippi, would be the first non-Briton to become chief executive of BP. He was previously head of BP's Russian joint venture, TNK-BP, until he was forced to flee the country amid a spat between BP and its partners.

A source close to the matter said Hayward will be offered a directorship at TNK-BP as part of his departure deal.

Investors cheered Hayward's expected departure, sending BP shares up nearly 5 percent in London and New York even though the company is expected to report large losses on Tuesday.

BP has lost 40 percent of its market capitalization since the April 20 blast on a drilling rig that killed 11 workers and started the spill that has hit about 39 percent of the coast that stretches from Brownsville, Texas, to the Florida Keys.

Analysts said Hayward's exit was good for the stock because he had become an easy target for angry U.S. lawmakers and Gulf residents. Hayward was pilloried in the United States for complaining he wanted his "life back" weeks after the offshore rig explosion.

"It is customary that when things don't go right, you are going to chop heads and usually that starts at the top," said Steve Goldman, a market strategist with money manager Weeden & Co in Greenwich, Connecticut.

BP on Monday dropped its previous insistence that Hayward remained chief executive with the full support of the company's board and management. Sources said BP's board discussed a plan for Hayward's departure on Monday evening.

Hayward and Dudley left the board meeting separately, both without making any public comment.

ACCOUNTING FOR DISASTER

Even if Hayward steps down as chief executive, he may not escape another round of testimony before the U.S. Congress. Senator Robert Menendez said he wants Hayward to testify on whether BP influenced the release of the convicted Lockerbie bomber to further the company's business interests.

"Tony Hayward, regardless of his status whether he is going to be the CEO tomorrow or not, we believe that he was in the midst of the negotiations with the Libyans as it related to this oil deal," Menendez, a Democrat, said in New York.

BP's boardroom drama unfolded as it prepared to account for the financial impact of the environmental catastrophe, which at its worst lopped $100 billion from BP's market value.

Dougie Youngson, an analyst with Arbuthnot, said he expected BP to write down $20 billion in clean-up costs this quarter "in order to give the new CEO a fighting chance." That would mean a loss in the order of $15 billion for the quarter, he wrote in a research note maintaining his "sell" rating.

If Hayward goes, he will be the third of the last four BP chief executives forced into an early exit. John Browne left after lying in court papers about a gay love affair and Bob Horton was pushed out over strategic disagreements in 1992.

Under BP's terms of employment, Hayward would be entitled to one year's salary, or 1.045 million pounds ($1.6 million), and he could be in line for additional payouts under the company's incentive scheme, which awards shares options.

Hayward would also keep his pension entitlements, which were worth 10.8 million pounds at the end of last year.

(Additional reporting by Kristen Hays in Houston, Angela Moon and Daniel Trotta in New York and Dominic Lau and Sarah Young in London; Writing by Michael Shields and Emily Kaiser; Editing by John O'Callaghan)

($1=.6473 Pound)

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Comments (18)
STORYBURN15 wrote:
Who on earth would want the CEO job?

Jul 25, 2010 8:33pm EDT  --  Report as abuse
drj1959 wrote:
No one, but for $18mil, there is probably a huge line for the job of ex-CEO. But this golden parachute is a problem with our banks, the boards of these corporations are responsible for these obscene contracts (and the boards do well themselves) never seem to get blamed for these huge contracts.

Jul 25, 2010 9:13pm EDT  --  Report as abuse
alderman wrote:
Congratulations.

Jul 26, 2010 7:21am EDT  --  Report as abuse
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