BP (BP) reported a $17 billion second-quarter loss on Tuesday due to more than $32 billion in charges related to the Deepwater Horizon rig explosion and oil spill cleanup. The company also announced that embattled CEO Tony Hayward would be stepping down from his post to be succeeded by Bob Dudley, the American executive who has been heading BP's Gulf Coast Restoration Organization since June 23.
The oil giant reported a second-quarter replacement cost loss of $16.9 million, compared to a profit of $3.1 million a year ago, due to $32.2 billion in pre-tax charges related to the worst oil spill in U.S. history. Analysts had been expecting BP's earnings per share to rise 48% for the quarter due to higher oil prices which at one point topped $85 a barrel, but the expected benefits of higher crude prices couldn't offset the money spent on fighting the spill. Excluding costs related to the spill, BP reported a replacement cost profit of $4.9 billion – a 77% improvement over the same period last year.
BP also announced Tuesday that it would raise up to $30 billion in assets sales over the next 18 months to pay for continuing cleanup efforts and to fund the previously established $20 billion escrow compensation fund for businesses and Gulf residents affected by the spill.
"The tragedy of the Macondo well explosion and subsequent environmental damage has been a watershed incident," BP Chairman Carl-Henric Svanberg said in a statement. "BP remains a strong business with fine assets, excellent people and a vital role to play in meeting the world's energy needs. But it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."
Embattled CEO Stepping Down
BP confirmed widespread news reports on Monday that said Hayward had agreed to leave his post Oct. 1 to take a job with TNK-BP, the company's joint venture in Russia. BP owns half of that company, which at one point was run by Dudley and is now Russia's third-largest oil company. BP said Hayward would remain on the BP board until Nov. 30, and then he would be nominated to become a nonexecutive director of TKN-BP.
An appointment to the board of TKN-BP is a very soft landing for Hayward, whose string of well reported misstatements while handling the oil spill made him one of the most hated men in America. Known most for saying "I'd like my life back," during the height of the crisis, Hayward may be able to get a new start with the new company.
In a statement, Hayward said that as the person in charge when the rig explosion occurred, he would always feel a deep responsibility for the tragedy. "BP will be a changed company as a result of Macondo," he said, "and it is right that it should embark on its next phase under new leadership."
The company said Hayward will be paid a year's salary for agreeing to leave, but he could be due as much as $18 million in stock options earned under his contract.
New CEO's No. 1 Focus
During an interview on ABC's Good Morning America Tuesday, BP's Dudley assured that his first priority is to seal the well, clean up the beaches and restore the Gulf. "That is my No. 1 focus," he said.
In addition to the cleanup, BP's new leader faces the challenge of fixing not only BP's public image but its internal operations that experts say ran up one of the worst safety records in the business and created the climate for the Gulf explosion to happen in the first place.
It will certainly not happen overnight. "[Dudley] is the inheritor of a company that had created a culture that was already bottom-line oriented at the expense of safety," says Paul Mecray, managing director of Tower Bridge Advisors. "How quickly you can change a culture like that is unclear."