For BP, removing Tony Hayward is just the beginning.
The departure of the man who became the vilified public face of the Gulf oil spill changes very little for BP. His successor still faces what could be decades of cleaning up and paying for one of the worst environmental disasters in American history.
Experts said on Sunday that the new chief must also persuade thousands of employees to embrace a culture of safety that Mr. Hayward apparently failed to instill. He’ll need to mend fences among BP’s partners in the Gulf and convince the U.S. government and public they can trust it to safely do business here.
And the stock market will be watching carefully as well. Any sign of financial trouble, or that BP won’t resume its dividend, could discourage both current and prospective shareholders. BP shares have dropped $77 billion in value since the April 20 rig explosion that set off the spill, even with a recent rally.
“I’m not sure if one person can do it all,” John Hofmeister, former president of Shell Oil, said.
BP can’t repair its tarnished reputation overnight. Many Gulf residents feel too much damage has already been done. And some U.S. lawmakers want to ban BP from drilling another well in the U.S. What the new CEO can do is bring a fresh start with residents, businesses and lawmakers along the Gulf Coast, Mr. Hofmeister said.
That could make Managing Director Robert Dudley, who replaced Hayward as the head of BP’s oil response team in June, a logical choice as CEO. Mr. Dudley, an American, has so far avoided the public relations gaffes that made Mr. Hayward a lightning rod for criticism. The British CEO’s comments made people even angrier at BP than they had been. Possibly the most damaging comment came in late May, when Mr. Hayward told reporters, “I want my life back,” as Gulf residents struggled with the effects of the spill.
BP spilled as much as 184 million gallons (696 million litres) of oil into the Gulf over 85 days. The oil has coated beaches and sensitive marshlands and fouled fisheries and wildlife habitats.
Richard Charter, senior policy adviser for Defenders of Wildlife, says under a new CEO, BP must do more than scrub beaches. It should prepare to pay agencies to monitor turtles, whales, deep—sea coral and other threatened wildlife for at least another five years.
BP will likely be paying for the spill throughout the new chief’s tenure. It faces government fines and numerous lawsuits. As of Saturday, BP had paid claims totalling $243 million. It has committed another $20 billion to be distributed by a government appointed official. The company also will be judged by how quickly it responds to reports of environmental damage.
Mr. Hayward, a former rig geologist, took the CEO job in 2007 with a promise to improve BP’s tarnished safety record following a Texas refinery fire that killed 15 people and a major pipeline spill in Alaska. Instead, BP stands accused by lawmakers and some workers on the sunken rig of cutting corners and neglecting maintenance in favour of profits.
Oppenheimer & Co. analyst Fadel Gheit says the new CEO will need to not only scour the company’s safety procedures, but fill the company’s top ranks with a new generation of executives committed to safety.
“He needs to be more ruthless,” Mr. Gheit said. “The worst thing is for BP employees to go back to their normal routine.”
BP must also deal with combative partners. Anadarko Petroleum Corp. and MOEX 2007 LLC, who could owe billions of dollars in damages, have refused to pay their share of damages so far. And the other major oil companies, Exxon Mobil, Chevron Corp., Conoco Phillips and Shell Oil, have accused BP of failing to follow the industry standards in operating the blown—out well.
Experts also say smaller companies that invest in deep—sea projects and do contract work on the rigs will think twice before working with BP again.
One piece of good news for the new CEO- This person is inheriting a company with vast resources. Most experts believe BP has deep enough pockets to clean the Gulf and turn around its sullied reputation.
Its far—flung operations should generate $30 billion in cash this year as long as oil prices don’t fall. The company has announced asset sales totalling $7 billion and has other properties that can generate billions more. It’s also withholding dividend payments to conserve cash.
On Tuesday, BP is expected to announce another robust quarter with an estimated $4.7 billion of profits on revenue of $72.6 billion.