BP chief's gaffes make him a lightning rod

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NEW YORK – So far, BP's CEO Tony Hayward has failed in his efforts to stop people from losing faith – or money – in his company.

But he can't stop trying.

BP's inability to contain the worst oil spill in U.S. history has focused attention on Hayward's words and deeds over the past six weeks – and the scrutiny has not yielded a flattering image.

– Three weeks into the spill, Hayward told reporters that the amount of oil was relatively small given the Gulf of Mexico's size. The U.S. government now estimates that anywhere between 21 million and 46 million gallons of oil has spewed into the Gulf, easily dwarfing the 11 million from the Exxon Valdez.

– Last weekend, Hayward angered Gulf residents when he said to reporters, "I'd like my life back." Hayward later apologized.

– Hayward also acknowledged that the company had not been prepared for a blowout on the sea floor. "We did not have the tools you would want in your toolkit," he told the Financial Times. He promised that BP would clean up every drop of oil and "restore the shoreline to its original state."

On Friday, Hayward apologized for the Gulf disaster on a conference call with shareholders, who since the April 20 explosion have lost more than $70 billion – and counting. Shares were down another 3 percent after the call despite the CEO's assurances that BP had enough cash to cover the clean up costs and pay a dividend.

Hayward acknowledged Friday that he's become a lightning rod for criticism. He says that allows his lieutenants to go about their work.

"I'm so far unscathed," he told analysts in a conference call. "No one has actually physically harmed me. They've thrown some words at me. But I'm a Brit, so sticks and stones can hurt your bones but words never break them, or whatever the expression is."

BP Board Chairman Carl-Henric Svanberg told investors he supports Hayward and his staff. Nevertheless, Hayward's misstatements since the April 20 explosion that killed 11 people hasn't helped his case with the general public – and investors have been fleeing BP's stock.

"There's an awful lot of pressure mounting up," said Chris Skrebowski, director of Peak Oil Consulting and consulting editor at Petroleum Review.

BP's shares have plunged almost 40 percent since the rig explosion on April 20, erasing nearly $70 billion in value. Also, the Justice Department announced this week it is investigating the spill. Criminal charges against BP could lead to big changes at the company.

The spill has cost the company more than $1 billion to date. Wall Street analysts say the final bill could be 10 to 20 times that amount, when fines, lawsuits and years of cleanup are taken into account. A huge toll – but not enough to sink the company, which earned more than $16 billion last year.

On Friday, Hayward wouldn't say how much he thought the spill would ultimately cost, or whether BP plans any change to its dividend. But the British oil giant is earning enough from other operations to cover both, he said.

Some lawmakers have said it's not right for the company to hand out billions to shareholders at a time when the complete cost of the oil spill is unknown.

It would be surprising if Hayward were ousted while the company is still trying to plug the well, analysts said, because any executive that took over would run into the same difficulties he now faces. Afterward, all bets are off.

"He'll be given the benefit of the doubt, but not for very long," Skrebowski said.

BP ran ads in major newspapers this week, apologizing for the spill and pledging to clean up the mess.

An estimated 500,000 to 1 million gallons of crude has been spewing into the Gulf daily, threatening wildlife and the livelihoods of Gulf residents, including fisherman and those tied to the tourism industry.

Hayward landed BP's top job three years ago, promising to focus on safety after a series of accidents, including the 2005 Texas City refinery explosion that killed 15 people. Previously, he was head of the company's exploration and production division.

Hayward joined BP in 1982 as a rig geologist and moved through a range of positions at the company, including president of BP's operations in Venezuela and group treasurer.

With oil still gushing in the Gulf, Hayward must walk a delicate line. If he reassures shareholders about the dividend, he risks angering the public for enriching investors with money that could be used for the cleanup. If the dividend is cut or suspended, he'll disappoint investors who have received more than $10 billion in each of the last two years.

BP has a generous annual dividend yield of 8.9 percent, compared with 2.8 percent for Exxon Mobil and 6.5 percent for Royal Dutch Shell.

The company's shrinking stock price has magnified the yield.

Some investors aren't waiting around.

"We've been asking, 'Do we really want to be involved with BP?'" said Jon Jensen, executive director of the Park Foundation in Ithaca, N.Y.

Last week the foundation answered, "No." It sold all 110,600 of its shares, concerned that BP is facing potential liabilities in the tens of billions of dollars.

Oppenheimer & Co. analyst Fadel Gheit pointed out there are layers of management between the rig operator and Hayward, and numerous BP officials could get pink slips if the company is found to have skirted federal safety guidelines. But if Hayward is found to have pushed exploration crews for faster results, he'd receive the blame.

"If there is any link between the management system and the accident, then his job might be in jeopardy," Gheit said.

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chascush
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chascush 06/05/10 - 09:59 am
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I sure after the leak is

I sure after the leak is stopped Hussein will insist the BP fire the CEO. He will try anything to remove any blame from himself for the lack of a quick response and the way he has mishandled this disaster.

dwb619
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dwb619 06/05/10 - 07:49 pm
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Where is Dick Cheney now? How

Where is Dick Cheney now? How about his secret energy commission? How about more de-regulation?

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