Telegraph.co.uk – July 24, 2010
The chief executive of BP, Tony Hayward, is finalising the details of his imminent exit from BP this weekend as the oil giant prepares to make an announcement on the chief executive’s future possibly within the next 48 hours.
After a weekend of detailed negotiations over Mr Hayward’s severance package, it now appears almost certain that he will announce his departure ahead of BP’s half year results on Tuesday.
According to consensus estimates, those results are expected to show that BP has made profits of nearly $10bn so far this year, despite the Deepwater Horizon disaster which has left the oil company facing bills of many billions of dollars.
It is now thought to be widely agreed by the BP board that it is only with Mr Hayward’s departure that the company can draw a line under the Gulf of Mexico disaster and plan for the future. The chairman, Carl-Henric Svanberg, is now believed to agree that Mr Hayward should go and that BP needs to announce a root-and-branch change of operational culture.
Sources close to the chairman have said that Mr Svanberg has been surprised by some of the operational systems at the company.
The board is scheduled to meet tomorrow and it only appears to be a last-minute hitch on the politically sensitive severance package that could derail the announcement. The US President and federal government will pore over any details for signs that Mr Hayward has been “rewarded for failure”.
If the details can be agreed, Mr Hayward will be paid at least £1.045m, equivalent to a year’s salary, on leaving BP but is almost certain to demand more in compensation for agreeing to go for the good of the company where he has worked for 28 years.
Under the terms of his contract, Mr Hayward is entitled to “current salary and benefits” on departure, the latest annual report states. Last year, Mr Hayward earned a total of £4.56m – made up of £1.045m in salary, a £2.09m annual bonus, an £852,000 long-term incentive payment and £440,000 by cashing in 220,000 share options.
If he departs as expected, Mr Hayward will be giving up 546,000 share options, all of which are out of the money at BP’s current share price, and a maximum potential 2m shares under the long-term incentive plan, now worth £8m. However, the long-term plans are unlikely to pay out at all given the collapse in the stock and questions about safety standards, which form part of the scheme’s targets.
Mr Hayward, 52, has built up a substantial final salary pension with the company. He has a £10.8m pension pot that will pay him £584,000 a year from the age of 60. However, he will have to wait eight years to start drawing the unreduced amount.
The BP board is likely to use the half-yearly results to tell shareholders that the company will slim down into a leaner, more profitable business following the accident on April 20 which killed 11 men and triggered the worst accident spill in history.
Bob Dudley, the director of its oil spill response unit, has enjoyed a better media profile since taking over operational control in the Gulf of Mexico and is now front-runner to succeed Mr Hayward at the top.
Analyst estimates for “clean” profits of $5bn in the second quarter of the year, stripping out the effect of inventory changes, are likely to rile BP’s critics angry about the oil spill.However, the company will take a hit when costs related to the disaster are taken into account. That could lead BP to record a pre-tax loss of up to $25bn, according to an estimate by Jason Kenney, oil analyst at ING.
Almost 100 days since the disaster, BP has capped its leak and hopes to plug the blown-out hole permanently using cement via a separate relief well.
The Sunday Telegraph can also reveal that plans to publish the initial internal inquiry into what caused the accident has been delayed until next month.
Senior BP sources said that a lack of co-operation from Transocean, which operated the well, and Halliburton, which worked on the cement plug, had meant that BP was unable to give a thorough picture of what happened.
It was originally hoped to publish the document this week.
BP has also sent demands totalling $1.6bn to Anadarko and Mitsui who shared in the ownership of the well. Neither has paid BP, with Anadarko claiming that BP had been “grossly negligent”.
The oil giant is facing mounting pressure from shareholders to sell off more assets – since the sum of BP’s parts is much more valuable than its share price suggests.