Tony Hayward, chief executive of BP, is to leave the company, bowing to pressure over his handling of the Deepwater Horizon oil rig explosion, the aftermath of which has become America’s worst environmental disaster.
Hayward’s departure, to be announced tomorrow, follows months of speculation on his future amid a series of gaffes which have drawn scorn from US politicians.
The terms of his multimillion pound severance package are due to be agreed by board directors in London. BP said this morning that “no final decision has been made” on any management changes but confirmed that the board will meet tonight “ahead of the announcement of the second-quarter results” on Tuesday. BP is expected to report a $13bn (£8.4bn) loss as the company makes a provision for the cost of the oil spill that could top $25bn.
“Any decisions will be announced as appropriate,” BP added, but expectation that Hayward will leave the business helped the oil giant’s shares jump 10.3p to 408.9p in early trading this morning – a gain of almost £2bn.
Hayward, who riled Barack Obama by saying the amount of crude tipped into the Gulf of Mexico since the 20 April explosion was relatively “tiny” and that he “wanted his life back”, even though 11 people died in the explosion, will be replaced by Bob Dudley, a BP veteran who is currently overseeing the clean-up of the oil spill.
The move is seen by BP as the only way to rebuild the company’s shattered reputation in the US. The group, which has been the subject of takeover and liquidation speculation, was hoping to keep Hayward for as long as possible in an attempt to ensure one man took all the flak should a spate of investigations into the accident find BP seriously to blame. But it has realised in recent days that this is impossible.
BP is also aware that it is beginning to look like a group with a history of turbulence given this is its second big change of leadership in less than four years. Lord Browne, Hayward’s predecessor, left the firm after a spat with the then-chairman, Peter Sutherland, and a sinking of BP’s share price after the 2005 Texas City refinery fire which left 15 people dead.
Hayward, 52, was last night locked in meetings with the BP board about the financial details of his leaving package, but he is expected to go under basic contractual terms. That means one-year’s pay of £1m and a pension pot of more than £10m, capable of paying out more than £500,000 a year when Hayward reaches 60.
BP continued to insist “Tony Hayward remains chief executive”, and any change to this will be formally announced through the Stock Exchange. The decision to axe the boss will be rubber-stamped at a board meeting presided over by chairman Carl-Henric Svanberg in London.
Hayward has spent all his working life at BP and rose to become head of exploration under Browne. He was seen as a back-to-basics operator by the City who loved Browne’s swashbuckling style until the share price began to suffer after the Texas City fire, a pipeline spill in Alaska and a propylene trading scandal.
Svanberg was criticised for not doing enough to support his chief executive but the US media targeted Slough-born Hayward, who they described as “the most hated man in America”.
BP had privately insisted Hayward was working on a “fightback” to try to salvage his own reputation and that of a company that was once the largest on the London stock market.
The fightback was to be made on the back of the well in the Gulf finally being capped and criticism gradually extending from a sole focus on BP to the rig’s owner Transocean, which has been criticised by its own staff at recent accident hearings.
But as the week drew on and a “new BP” strategy began to take shape, both Hayward and other board members began to realise the vital US business and brand could only be salvaged under an immediate change of guard. The formal announcement is planned to be unveiled along with the first half-year financial results.
Dudley is seen as the best candidate because he is a US citizen with a very strong track record at BP and previously at Amoco. He lost out on the position to Hayward but in recent months has been called on to give credibility to the Gulf clean-up operation. Dudley was best-known as chief executive of the Russian business TNK-BP, where he performed well until being forced to flee the country in what many observers saw as a Kremlin-inspired campaign to destabilise BP there and put it under more Russian control.
Some industry commentators have predicted the demise of BP – once the most peer-respected oil company in the world after ExxonMobil. Predators have been circling since the share price fell by 40% after the Deepwater Horizon blast.
Exxon has already sounded out Washington politicians about whether they would stand in the way of a takeover of what was once its most bitter rival. Other global energy giants such as Gazprom in Russia and PetroChina have also had their names linked with either a merger or a purchase of parts in the event of a break-up.
BP has been forced by Washington to set aside $20bn into an “escrow account” that can be used to pay out the billions of dollars worth of claims expected to emanate from those who have suffered financial hardship as a result of the spill.
The company has also previously announced plans to raise $10bn through the sale of assets and last week revealed that it had already sewn up a $7bn deal to dispose of oil properties to Apache Corporation of America.
Tomorrow the company will announce plans to ramp up the sales process with a new commitment to sell up to $20bn of non-core assets. BP has been surprised by the relatively high price it was able to extract from Apache for the properties in New Mexico and Texas plus ones in western Canada and Egypt. It is keen to take advantage of this.
Work to finally halt the flow of oil into the Gulf, meanwhile, has resumed after the disruption caused by Tropical Storm Bonnie. BP said this morning that the two drilling rigs that were forced to evacuate the area on 23 July because of the approaching storm are returning to continue drilling the relief wells, which it is hoped will eventually enable the damaged well to be plugged far below the seabed. The first rig returned on 24 July and is currently attempting to reconnect with the well and resume drilling operations, which BP said will take a number of days. The second rig is also moving back into place but work on the second relief well has been suspended so as not to interfere with the other rig.