BP to set aside $32.2bn to cover oil spill costs

BBC News | 27 July 2010 | 07:31 GMT

BP says it has set aside $32.2bn (£20.8bn) to cover the costs linked to the oil spill in the Gulf of Mexico. The company said the charge gave it a loss of $17bn for the three months between April and June – a UK record. BP also confirmed that chief executive Tony Hayward would leave his post by mutual agreement in October. He will be replaced by fellow executive, Bob Dudley, who is currently in charge of day-to-day clean-up operations in the Gulf. Mr Hayward is likely to retain a role within the company. BP plans to nominate him as a non-executive director of its Russian joint venture, TNK-BP. BP also announced it would increase its asset sales over the next 18 months to $30bn, a total that includes the $7bn-worth earmarked for sale last week. The announcements were welcomed by most investors for their clear-cut approach. Peter Hitchens, of Panmure Gordon stockbrokers, said: "It’s basically a kitchen sink job… "I think it’s the board trying to wipe the slate clean."


Mr Hayward said that, now oil had stopped spilling from the Macondo well, it was a good time to leave his post. "With the leak now capped, we have reached a significant milestone. This provides a firm basis to reshape the company," he said. The $32.2bn cost of the clean-up includes the $20bn already set aside in an escrow account for compensation claims. BP admitted the total figure could rise further. In an interview with the BBC’s business editor Robert Peston, BP chairman Carl-Henric Svanberg said there was no certainty; the final bill for the spill would not be higher. Stripping out the oil spill costs, BP made a second quarter profit, on a replacement cost basis, of $5bn, compared with $2.9bn for the second quarter of 2009. For the second quarter running, the company will not pay a dividend. It has also ruled out a shareholder payment for next quarter, saying it will not consider its position on future dividends until February 2011, the time of its fourth quarter results.   

£11m pension

On Monday, the BBC revealed that 53-year old Mr Hayward will receive a year’s salary plus benefits, together worth more than £1m. He will also be entitled to draw an annual pension of £600,000 once he reaches the age of 55. Mr Hayward’s pension pot is valued at about £11m and he will keep his rights to shares under a long-term performance scheme which could – depending on BP’s stock market recovery – eventually be worth several million pounds. Carl-Henric Svanberg said Mr Hayward would be missed. "The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired," he said. The handling of the explosion on the drilling rig off Louisiana on 20 April which killed 11 workers and triggered the worst oil spill in the US raised questions about Mr Hayward’s leadership.


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