Dudley: Spill a “Wake-Up Call” for Oil Industry

The American who will take over as head of British oil giant BP says he’s not underestimating the nature and complexity of what the company must do to restore its reputation and financial strength after the massive Gulf of Mexico spill.

Robert Dudley, who will replace Tony Hayward as CEO on October 1, told reporters the spill has been a “wake-up call, not only for BP, but the oil and gas industry overall, and we will be looking deeply at our review of operational safety and what we have learned from this spill.”

Special Section: Gulf Coast Oil Disaster

As Dudley was promoted from Managing Director, BP announced a second quarter loss of $17 billion.

The oil giant has put aside another $32 billion to cover losses from the disaster in the Gulf.

“It’s of course a tragedy and it has large consequences, but we’ve no doubt that we will be able to rebuild the company,” said BP Chairman Carl-Henric Svanberg.

Dudley grew up partly in Hattiesburg, Mississippi, and has so far avoided any public missteps. He spent 20 years at Amoco Corp., which merged with BP in 1998, and lost out to Hayward on the CEO slot three years ago.

His standing within BP and along the Gulf Coast has risen since he took over response to the oil spill in June from Hayward, who will be reassigned to BP’s joint venture with Russia, TNK-BP.

Dudley said today he has great respect for Hayward and great admiration for what he has done. During Hayward’s tenure BP has expanded its reach in the United States (which accounts for 40 percent of its market).

Dudley said that BP had no intention of exiting the U.S., despite costly fines and lawsuits expected after government investigations into the spill.

“I think we have a lot to offer in the United States to the oil and gas industry and getting this right, working in the U.S., meeting those commitments and cooperating with officials is vital to BP’s future success in America,” he said.

The newly-named CEO said Tuesday his top priority was sealing the company’s blown oil well for good and cleaning and restoring the Gulf of Mexico.

Though his words weren’t all that different, Dudley delivered BP’s message – Don’t worry, we’re going to pay for all this – in a calm manner without Hayward’s public impatience and occasional whininess.

And serendipity was on Dudley’s side: He was in charge when they finally capped the spewing well, shutting off the flow of oil until a relief well can finish the job.

Bob Dudley told ABC’s “Good Morning America” he didn’t expect any more oil to gush into the Gulf as BP PLC moves to permanently plug the well with cement.

He told ABC he plans to change the company culture and make sure checks and balances are in place to prevent a repeat of the disaster.

Dudley will return to London when he takes up his appointment and will hand over his present duties coordinating the spill response to Lamar McKay, the chairman and president of BP America.

During a webcast presentation on the company’s second quarter results, Svanberg told investors, “BP will change as a result of this accident. . . . We are taking a hard look at ourselves, what we do and how we do it. What we learn will have implications for our ways of working, our strategy and our governance.”

Svanberg also said the company was determined to restore value to shareholders, after a 35 percent (or $60 billion) drop in market value, to around $116 billion, since the April 20 explosion of the Macondo well on the Deepwater Horizon platform. Under U.S. political pressure, the company also axed dividends to shareholders this year.

The stock started out marginally higher on Tuesday, but dropped 3 percent in afternoon trade on the London Stock Exchange.

“They have seen enormous loss of capital and of the dividend and the board is committed to creating value to shareholders and believes that we can deliver a stronger BP for them over time,” Svanberg said.

BP announced the sale of $30 billion in assets to streamline the company into a smaller, higher quality business. It said assets on the block will come primarily from its $250 billion Exploration and Production portfolio and will be selected “on the basis that they are worth more to other companies than to BP.”

The sell-off will help the company achieve an aim of reducing net debt to a range between $10 billion and $15 billion within the next 18 months, compared to net debt of $23 billion at the end of June, to ensure that BP has the flexibility to meet its future financial obligations.

The company has already made a start with the $7 billion sale of gas assets in the United States, Canada and Egypt to Apache Corp.

Svanberg said the planned asset sales did not necessarily reflect a fear that spill costs could soar above the $32.2 billion set aside by the company. That charge includes the $20 billion compensation fund the company set up following pressure from President Barack Obama as well as costs to date of $2.9 billion.

Executives stressed BP’s strong financial position despite a $17 billion net loss for the April to June quarter – its first in 18 years – compared with a profit of $4.39 billion a year earlier.

Revenue for the quarter was up 34 percent at $75.8 billion, and underlying replacement cost profit – the measure most closely watched by analysts – was $5 billion when adjusted for one-off items and accounting effects. That compared favorably with a $2.9 billion profit for the second quarter of 2009.

In London, Greenpeace protesters closed more than 50 service stations in a protest timed to coincide with the company’s earnings update. The environmental action group is calling on Dudley to focus the company on greener and renewable sources of energy.

2 Responses to “Dudley: Spill a “Wake-Up Call” for Oil Industry”
  1. Lauren says:

    Hi, I am working with Mitch Kashmar and The Pontiax, an acclaimed blues artist and over 30 year veteran in the blues scene.

    The band just released their new single “The Petroleum Blues,” a timely response to the mounting oil crisis.

    You can listen to and download the song here: http://www.mileshighproductions.com//images/tracks/m_kashmir/petroleum_blues.mp3.

    The song is one of two newly recorded songs from their recently reissued classic album, 100 Miles To Go.

    Here’s a sampling of the song’s lyrics –
    “100 dollars just to fill your car
    I hope you don’t have to drive too far
    Petroleum Blues
    I’ve got the Petroleum Blues
    How much money’re we gonna lose?
    Petroleum Blues

    We’re spillin n drillin down by New Orleans
    The beach is black but the money’s green
    Petroleum Blues
    The Petroleum Blues
    You can’t win, only gonna lose
    Petroleum Blues”

    I’d love to hear what you think of song.

    • I’ve reposted this thought provoking track which many must be relating too. The truth of the matter is that though many probably feels the blues at what cost to our very civilization, will others continue to neglect the harm being caused by the process of petroleum…
      Thanks for Sharing,,,,,

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