BP results set to be ‘dreadful’

Discussion in 'Stocks' started by Dogfish, Sep 25, 2007.

  1. Dogfish


    <B>BP results set to be ‘dreadful’</B>
    By Sheila McNulty in Houston and Ed Crooks in London
    Published: September 24 2007 22:30 | Last updated: September 24 2007 23:51

    Tony Hayward, BP’s new chief executive, has prepared staff for a far-reaching shake-up of the oil company as he delivered a blunt warning that third-quarter revenues would be “dreadful”.

    Mr Hayward told a staff meeting in Houston he would be announcing a streamlining of the company’s organisation next month, the Financial Times has learnt. He said that BP’s financial performance was at its lowest since the crisis of 1992-93.

    The remarks were made to a “town hall” meeting and summarised by a BP manager in a note circulated to colleagues under the heading “BP Confidential”.

    Mr Hayward’s prediction of a “dreadful” third quarter comes as analysts prepare for downbeat results in spite of record high oil prices. BP has been suffering from well-publicised problems including a squeeze on refining margins and falling US natural gas prices, as well as operational hold-ups such as damage to a North Sea gas pipeline.

    BP shake-up

    ‘There is massive duplication and lack of clarity of who does what.’
    Tony Hayward
    BP Chief Executive

    The comments show how Mr Hayward, who has said little about his plans since taking over from Lord Browne in May, hopes to turn BP around and the scale of the challenges he faces.

    Mr Hayward blamed BP’s under-performance partly on excessive complexity, adding that its fragmented structure must be simplified. He plans to consolidate it into larger operations.

    “There is massive duplication and lack of clarity of who does what,” Mr Hayward was quoted as saying. “We will reduce the number of organisation units.”

    “[We] will reduce the number of layers from the workers up to the CEO from 11 to about seven.”

    Mr Hayward also said BP needed to shift its culture and take well-judged risks. “Assurance is killing us,” he was quoted as saying.

    He said people should be in positions long enough to see the consequences of their decisions, and that he wanted a “leadership style that really listens”.

    BP needed to change its mindset so that everyone had a say in decisions, and start letting the person accountable take the decision, he said.

    Mr Hayward also blamed the under-performance relative to BP’s competitors on missing revenues from the Texas City and Whiting refineries in the US and from big production projects that have not yet started operation.

    BP has had to delay the start-up of Atlantis and Thunder Horse, its flagship projects in the Gulf of Mexico.

    Mr Hayward went on to say that the fourth quarter would improve BP’s revenues, however, as it picks up 250,000 barrels per day of production from the start of Atlantis, as well as Greater Plutonio in Angola, Mango in Trinidad and smaller Gulf of Mexico projects.

    He added that the Texas City and Whiting refineries should be at full capacity by the year’s end, according to the note, although the company has said they will not be operating at that capacity until next year.

    Mr Hayward is under pressure to improve BP’s reputation in the US, which has been undermined by the 2005 Texas City accident, which killed 15, and an oil spill in Alaska in 2006. He was in Houston for BP’s first board meeting there, so members could visit the Texas City refinery and the Thunder Horse project.

    BP declined to comment.