The end of the road?

2010-06-12 13:42

On Monday night, a group including Vittorio Colao, head of telecoms

company Vodafone; Martin Sorrell, chief of advertising firm WPP; and John

Sawers, director-general of the intelligence agency MI6, gathered on the sixth

floor of BP’s London headquarters to show support for Tony Hayward, the

company’s beleaguered CEO.


“We have learned that he is made of steel,” BP chairperson

Carl-Henric Svanberg said as Hayward, dressed in a rumpled blue suit and dark

checked shirt, worked the room.


The 53-year-old CEO will testify ­before the US Congress this

week.


The show of support may not save Hayward. The day after the London

party, US President Barack Obama said he would have fired the BP chief if he was

working for him.

Demands for a change in leadership would probably become

irresistible, said Gudmund Halle Isfeldt, an analyst at DnB NOR ASA, Norway’s

largest bank.


“Both Hayward and the chairperson are likely to go,” he said. “That

will be down to pressure from politicians.”


Investors may start to lose patience as well. BP shares tumbled

again this week, taking losses since the ­Deepwater Horizon rig exploded on

April 20 to 40% – a drop that’s wiped about £50 billion (R565 billion) off the

value of the company.

The cost of cleaning up the spill and settling claims may

reach $37 billion (R287 billion), ­according to Credit Suisse.


Should the board seek a change, there are three leading inside

candidates to succeed Hayward, analysts said.

Andy Inglis, the head of

exploration and production, had been considered as Hayward’s likely successor.

His chances suffered after the calamity ­occurred in his unit.


Refining and marketing chief Iain Conn made a start at turning

around BP’s downstream business, where the 2005 explosion at the Texas City

refinery forced safety improvements.


Another candidate is Robert Dudley, who ran BP’s Russian affiliate,

TNK-BP, until he left in 2008 during a battle with the company’s Russian

partners. On June 5, Hayward put Dudley in charge of a special unit responsible

for the clean-up operation.


Dougie Youngson, an analyst at ­Arbuthnot Securities, said: “If he

does a great job at running the unit, there’s no reason he can’t go to the

top.”


To show the company is serious about changing the way it operates,

BP’s board may decide to bring an ­outsider in as chief executive for the first

time.


One possibility is Frank Chapman, head of BG Group, who built the

former state-owned gas driller in to the biggest British-based oil and gas

company after BP. He hugged Hayward sympathetically at the party this

week.


“BP is clearly going to require a ­renewed focus on safety,” said

David Hart, an analyst at Westhouse ­Securities.

“In deep-water drilling,

companies are pushing the bounds of technology and, perhaps industrywide, there

was not a great understanding of what would happen if things went wrong.”

 

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