BP to Replace Hayward as Chief Executive - NYTimes.com
Description: Mr. Hayward, the oil giant’s embattled chief executive, will be replaced by Robert Dudley, the American executive who is in charge of BP’s operations in the Gulf of Mexico.
Keywords: Oil (Petroleum) and Gasoline,Accidents and Safety,Offshore Drilling and Exploration,Executives and Management,Hayward Tony,BP Plc

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# As BP Lays Out Future, It Will Not Include Hayward

###### By CLIFFORD KRAUSS and JAD MOUAWAD

###### Published: July 25, 2010

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Tony Hayward, the embattled chief executive of BP, has agreed to step down and be replaced by Robert Dudley, the company’s most senior American executive who is now in charge of BP’s operations in the Gulf of Mexico, according to a person close to the company’s board.

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###### Susan Walsh/Associated Press

CEO Tony Hayward, left, may be replaced by Bob Dudley, right, BP’s most senior American executive, according to a person close to the board.

### Related

- ###### In BP’s Record, a History of Boldness and Costly Blunders (July 13, 2010)

- ###### BP Tries to Reassure Shareholders (July 8, 2010)

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###### Steven Senne/Associated Press

Robert Dudley.

The change in leadership will be discussed by the board of directors on Monday and may be announced Tuesday if the board ratifies the decision. Mr. Hayward would probably be replaced in the fall, the person said, but a decision has already been made by mutual agreement between Mr. Hayward and senior BP management.

“It is in the best interest of the company to go forward with fresh leadership,” the person said.

Mr. Hayward, who has been running BP since 2007, is the first senior executive at BP to pay the price for the largest oil spill in the United States, after the Deepwater Horizon blew up on April 20. His handling of the crisis has infuriated Gulf Coast residents and government officials alike, especially after a series of public gaffes forced him to retreat from the spotlight.

A great deal is at stake for BP, which remains under considerable pressure even though the oil has stopped gushing from its well underneath the Gulf of Mexico. A tropical storm over the weekend briefly forced BP to suspend operations to permanently plug the doomed well. Some members of Congress want to ban BP from running new offshore ventures. The Senate, meanwhile, is expected to vote on legislation this week that would hold “BP accountable,” said Senator Harry Reid, the Democratic majority leader.

And the company continues to lurch from one public relations embarrassment to another. Last week, BP admitted it posted doctored pictures of its spill operations on its corporate Web site.

And on Saturday, Kenneth Feinberg, the administrator managing the $20 billion claims fund BP set up under pressure from the White House, accused the company of holding up compensation payments to spill victims.

“I have a concern that BP is stalling claims,” Mr. Feinberg told reporters. “I doubt they are stalling for money. It’s not that. I just don’t think they know the answers to the questions” by the claimants.

This uncertainty about BP’s future business, its ultimate liabilities and its public relations debacle continue to weigh on the company’s share price, which is down about 40 percent since the spill started.

“The key issue now is whether investors and BP’s board think Tony Hayward is the right person to move the company forward,” said Matthew J. Slaughter, a professor at Dartmouth College’s Tuck School of Business. “Is this a BP problem or is this a Tony Hayward problem?”

Regardless of who leads the company, BP’s top executives have a lot to tackle. They need to convince the company’s constituents — its shareholders, regulators and government officials in the United States and other countries where BP has operations — that BP can pay all costs related to the spill, clean up the Gulf Coast, and still manage to grow its business around the world, analysts said.

In recent weeks, BP has taken steps to put the oil spill behind it. It has been busy negotiating the sale of some of its assets in Texas, Egypt and Canada to the Apache Corporation, raising $7 billion. Mr. Hayward personally sought to reassure key officials in Russia and Azerbaijan, where BP has large operations, that the company was still a reliable and safe partner.

BP also recently announced that it had won new concessions to drill offshore Egypt; alongside Chevron, it reportedly bid for an offshore exploration block in the South China Sea; and this month, it spent nearly $100 million to buy a cellulosic biofuel business.

In the gulf, there was positive news when BP finally managed to stem the flow of oil with a new cap. The company hopes to permanently shut the well within the next few weeks.

Bruce Lanni, an energy portfolio strategist at Nollenberger Capital Partners, said the fact that no more oil was spilling the gulf was “an inflection point” for BP.

“There are a lot of good things now going in BP’s favor,” Mr. Lanni said. “There has been an overreaction to the cost of the spill. BP has the opportunity to emerge as a stronger company. I think this is where investors are missing a window of opportunity.”

Some investors, however, are still concerned about the ultimate price tag for the spill. Uncertainty over BP’s liabilities is keeping its shares under considerable pressure, although they rebounded somewhat in recent weeks. BP stock closed at $36.86 on Friday, valuing the company at $115 billion.

“Right now the market is just guessing what the liability might be for BP,” Jay Singhania, a vice president at Westwood Management. “If BP could help outline exactly what the costs would be, then investors could gain more confidence.”

The final bill will depend, in part, on whether the investigation determines that BP was negligent and responsible for the blowout at its Macondo oil well. The explosion on the Deepwater Horizon drilling rig on April 20 killed 11 workers.

So far, BP said it has spent $3.95 billion on its containment and clean up efforts. The company warned in a statement, “It is too early to quantify other potential costs and liabilities associated with the incident.”

Investors and analysts also insisted that BP must rapidly tackle its safety record head-on. “It is very clear BP will need to show that its management practices will improve and instill an greater safety discipline within the organization,” said Catharina Milostan, an energy analyst at Morningstar.

Mr. Hayward, a geologist who began his career at BP and became chief executive in 2007, inherited a company with a poor safety record that resulted in a string of deadly accidents and spills in the United States. He sought to change the “top-down” style of management while trying to simplify its structure. Last year, he said it would take five years to change BP’s culture and adopt a single, companywide operating system.

Julia Werdigier contributed reporting.

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### Past Coverage

- In BP's Record, a History Of Boldness and Blunders (July 13, 2010)
- BP Begins Its Next Challenge: Reassuring Investors (July 8, 2010)
- NEWS ANALYSIS; Liability Issues Loom, for BP et al. (June 25, 2010)
- Into the Line of Fire (June 23, 2010)

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