During the past three years I've consistently pronounced BP (NYSE: BP) CEO Tony Hayward an asset for the London-based company. It generally appeared that he was, until that fateful evening in April, when Transocean's (NYSE: RIG) Deepwater Horizon rig exploded in a mile of Gulf of Mexico water, killing 11 rig workers and unleashing the most horrendous environmental disaster in U.S. history.
Did Tony accidentally push the wrong button on the rig, setting off the conflagration? Of course not -- presumably, he was at home in London at the time. But he did preside over what may have been a corner-cutting corporate culture, and in the world we inhabit, the person at the top is typically held accountable for the errors or misjudgments of those down the chain of command. Tony became even more of a liability with his poor showing before Congress, or with tasteless comments in the midst of the crisis like "I'd like my life back." We can only assume that he'd now like to get that remark back.
As BP's world turns
But Monday and Tuesday became significant days for BP -- not that it hasn't experienced a score of eventful days during the past three months. Monday marked the announcement of the removal of Mr. Hayward as BP's CEO, along with the naming of Bob Dudley as the first American in the company's history to fill that position. On Tuesday, BP reported its results for the June quarter.
So that you'll have at least an inkling of BP's quarterly financials, the company's loss was a record $17.2 billion, compared with a $4.4 billion profit a year ago. This year's quarter was, of course, hit with a whopping $32.2 billion pre-tax charge related to the Gulf spill. Nevertheless, revenue for the quarter increased by 34% year-over-year to $75.9 billion.
Perhaps just as important for a company in BP's shoes, it intends to reduce its net debt to between $10 billion to $15 billion within the next year and a half, compared with $23 billion at the end of last month. Obviously, if BP is able to pull off such a reduction, it'll generate increased flexibility in dealing with its mounting obligations.
That's particularly important, since BP's partners on the well, Anadarko (NYSE: APC) and Japan's Mitsui (Nasdaq: MITSY), have refused to help with their portion of the financial load. They contend that they should be excused due to BP's reckless handling of the well.
They're playing musical chairs
Hayward replaced Lord John Browne as CEO of the company three years ago. Browne had abruptly stepped aside amid a personal scandal, as well as several breaches of safety at the company, the most serious an explosion in 2005 at its Texas City, Tex., refinery that killed 15 and injured 175.
Hayward, who promised early on to "focus like a laser on safety," will now officially step down on Oct. 1st in favor of Dudley, remaining on BP's board until Nov. 30. Further, the board will likely recommend a non-executive position for him at the company's TNK-BP Russian joint venture. He will also likely receive $1.6 million, a year's salary.
Such a posting would include a strong element of irony. Dudley spent several years at the helm of the Russian partnership, the third largest oil company in the country. The latter days of his tenure were, however, marred by constant squabbling with the venture's Russian partners, including raids on TNK-BP's offices by authorities, and the barring of work visa renewals for non-Russian technical staff.
Dudley was ultimately forced to run the venture from an unknown location outside Russia, presumably in Eastern Europe. All this occurred at a time when Russian authorities were not above playing hardball with Western energy companies. Indeed, it appeared for a time that, in a display of resource nationalism, BP would be forced to turn over its portion of the partnership -- representing a considerable part of its reserves and production -- to a Russian company.
After all, Royal Dutch Shell (NYSE: RDS-A) had received that treatment at its Sakhalin Island project, and even ExxonMobil (NYSE: XOM) found it necessary to watch its step in order to keep authorities mollified. But BP and the Russian billionaires who constituted the other half of the venture surprisingly came to terms. The partnership's affairs have been going along swimmingly ever since.
Up for the challenge
Now Dudley could be moving to a far more challenging position. At the same time, as someone raised near the Mississippi coast, he may be the ideal candidate to undertake his new task. A chemical engineer with a pair of business degrees, he spent 20 years with Amoco before it merged with BP in 1998.
Now, his bulging plate will consist of making reparations to Washington, along with the citizens and politicians of the Gulf Coast. It's also expected that he'll be conducting a restructuring of BP's U.S. operations and overseeing the sale of $30 billion in company assets, which BP has indicated will be on the block. Apache Corp. (NYSE: APA) has already bought $7 billion of gas assets in the U.S., Canada, and Egypt.
Is BP now a buy?
Long after the well has been plugged, there'll be many questions to be answered and years of litigation, much of it involving a likely involving a large portion of Mr. Dudley's time. For instance, a front-page Wall Street Journal article over the weekend dealt with reports that an alarm system on the rig had been disabled by Transocean personnel to avoid awakening sleeping crews.
So, while BP appears to have made an important step forward, my inclination is that, with innumerable questions swirling around it, Fools would be well served by gravitating toward ExxonMobil for their Big Oil investments.
