Beginning Friday, British oil giant BP's (NYSE: BP) CEO throne will be filled by the third occupant in just over three years. Robert Dudley will replace Tony Hayward, who had taken over for Lord John Browne in May 2007. Mr. Dudley is already making his presence felt by announcing the primary parts of a shakeup in the company's management and structure.
You're well aware that in April BP was the operator of Transocean's (NYSE: RIG) Deepwater Horizon rig when it exploded, burned, and sank in mile-deep Gulf of Mexico water, killing 11 workers and unleashing the mother of all U.S. oil spills. As oil gushed from the Macondo well until July, Hayward was unable to keep his tootsies from his mouth, a trait that ultimately got him the ax. In fairness, he'd likely have been removed anyway, simply for being at BP's top post at the time of the disaster.
Wobbling safety record
Hayward wasn't the first to besmirch BP's safety record. In 2005 a company refinery in Texas City, Texas, exploded, killing 15 workers and injuring 170. But the April tragedy was enough in itself to cause Congressman Henry Waxman, chairman of the Congressional Energy and Commerce committee, to accuse the company of maintaining a culture that "short-changed safety."
The congressman's reaction is particularly sobering when juxtaposed with Hayward's promise as the new CEO in 2007 to focus "like a laser" on safety. Beyond that, I've wondered since April how differently a similar event to BP's tragedy, but involving such clearly well-managed members of Big Oil as ExxonMobil (NYSE: XOM) or maybe Chevron (NYSE: CVX), might have been received.
For now, however, Dudley appears to be cracking the whip at BP, although there remain lots of unknown details to his plans. We do know that he'll create a new safety and risk unit under Mark Bly, who has been the company's top safety executive and headed the preparation of BP's investigation into the Gulf disaster. The unit will be vested with the authority to contest managerial decisions that it believes are risky.
At the same time, Dudley's new plans have caused Andy Inglis, the head of BP's exploration and production unit, to be hit by the same ax that got Hayward. Inglis will relinquish his board position on Halloween -- a date that we probably shouldn't read anything into -- and will leave the company completely at year's end. Inglis was effectively second in command in the company and oversaw drilling in the Gulf, so his departure isn't a surprise.
Changes upstream
Further, the upstream segment (exploration and production) will be divided into exploration, development, and production. Each of the three operations will be overseen by an executive with reporting responsibility directly to Dudley. The expanded structure will replace Inglis' sole control of all upstream activities.
There will also be a review of the company's relationship with its contractors. In the internal analysis of the causes of the Gulf explosion, Bly's team accepted a portion of the blame for the incident, but was only too happy to share the remainder with Transocean and Halliburton (NYSE: HAL), which was responsible for cementing the well.
That's about all we currently know about Dudley's restructuring plans. I, for one, am hopeful that the many blanks that remain will be filled in steadily in the weeks and months ahead. At this point, the laying out of the key parts of his changes is commendable -- especially since it occurred prior to his officially assuming the company's top position. But given Mr. Hayward's early promise to imitate a laser, there's also an element of déjà-vu to the situation.
This could be costly
And while the restructuring blueprints are being completed and implemented, Dudley and his minions will also be occupied by several ongoing probes into the cause of the Gulf accident. The results of these investigations are hardly insignificant: BP could be hit by civil fines of $1,100 for each and every barrel of oil spilled.
Or (and brace yourselves for this one), the amount could rise to $4,300 per barrel if gross negligence is determined to be involved on BP's part. This more serious finding would absolve Anadarko Petroleum (NYSE: APC) and Japan's Mitsui & Co., BP's partners in the well, from responsibility for the accident and related fines.
Preventing nothing
I'll also be watching the ongoing analysis of the key role of the rig's faulty blowout preventer (BOP) in fostering the accident. According to the BP internal report, "...most of [the malfunctioning parts] should have been detected by the BOP diagnostic capability that was available to the rig crew and subsea personnel by the routine BOP testing and maintenance program."
That statement clearly is BP's way of implying a lack of attention to this important piece of equipment by Transocean rig hands. The BOP was manufactured by Cameron International (NYSE: CAM), but contentions about the manufacturer having played a role in the well's explosion have been subdued.
So the beat goes on. I, for one, expect a solid performance in the CEO role from Dudley based on his track record. As such, and given BP's strong asset base and still wounded share price, I'd suggest that energy-investing Fools give the company a fresh look.
