Dudley’s path followed unusual turns to CEO of BP
Published 7:24 pm Tuesday, July 27, 2010
Bob Dudley’s sudden rise to the top at BP PLC shows how the Gulf oil spill has dramatically changed the fortunes of people from local fishermen to corporate executives.
Seen as an unlikely candidate just a few months ago, Dudley is set to become the first American to lead the oil giant in its century long history. Dudley will become CEO on Oct. 1 and try to salvage the company’s reputation and investments in the United States.
“I do not underestimate the nature of the task ahead,” Dudley said Tuesday in a statement announcing his appointment.
Dudley’s standing within BP and along the Gulf Coast has risen since he took over BP’s response to the oil spill in June from current CEO Tony Hayward, who will remain on BP’s board until Nov. 30.
Dudley delivered BP’s message — don’t worry, we’re going to pay for all this — in a calm manner without Hayward’s public impatience and knack for off-putting comments. And serendipity was on Dudley’s side: He was in charge when BP finally capped the spewing well, shutting off the flow of oil until a relief well can finish the job.
BP is the largest producer of oil and gas in the United States, home to 40 percent of the company’s assets and one-third of its worldwide oil and gas reserves. It has huge interests in Alaska and the Gulf, with vast tracts yet to be developed.
Those resources are being threatened. The U.S. Congress is considering a proposal to block the awarding of any new offshore oil and gas leases to companies with bad safety records. BP would be targeted, the way the legislation is written. BP could also lose its fuel contracts with the military, worth $2.2 billion last year.
If BP is going to survive and grow, it must protect those assets, says Amy Myers Jaffe, an oil industry scholar at Rice University in Houston.
Dudley has adamantly defended BP’s actions since the rig explosion. He must now deliver on the company’s promise to pay for the oil spill. On Tuesday, the company said it has set aside $32 billion to cover the costs. Dudley will oversee the sale of about $30 billion in assets over the next 18 months to ensure that BP has ample reserves of cash.
He’ll need to regain the trust of shareholders, who could bail on BP if it doesn’t resume dividend payments next year. Shares have dropped 36 percent — and lost $68 billion of their value — since the oil spill started. And that’s after rallying since late June.
“His first job is to convince people BP is going to come back and you better buy BP stock while it’s cheap,” Jaffe says.
In early April, nobody thought BP would soon need a new CEO. BP earned more than $20 billion in Hayward’s first two years as CEO. Even with lower oil prices in 2009, BP still made $16.6 billion.
Dudley, 54, was a longtime executive with Amoco before BP bought that company in 1998. He ran BP’s joint venture in Russia for five years and lost out to Hayward for the CEO job in 2007. He then turned into a globe-trotting Mr. Fix-it for his bosses in London. It was that last role that landed him back along the Gulf, near where he grew up in Mississippi, after the April rig explosion that killed 11 men and spawned the oil gusher.
In that thread of biography lie several factors that elevated him above other candidates to replace Hayward, including Britons with years more experience inside BP, according to analysts.
“The two aspects of Dudley’s work that make him an optimal candidate for CEO are that he’s not Tony Hayward and he speaks with an American accent,” says Pavel Molchanov, an analyst with Raymond James. He says by making Dudley CEO, BP is sending a message that it cares greatly about its stake in America.
Dudley wasn’t tied to BP’s exploration and production division that oversaw drilling operations including the one aboard the Deepwater Horizon. As head of that division, Andy Inglis was once seen as a potential successor to Hayward, but his chances dimmed after the Gulf accident, analysts say.
Dudley also may have been helped by his background at Amoco, which was seen as an efficient, low-cost oil producer.
Even his biggest setback raised his profile. While running BP’s Russian joint venture, he had to flee the country in 2008 amid a dispute with Russian partners and the Russian government. BP was replaced as the operating partners of the business, TNK-BP, but it retained its investment, which still makes money. Dudley ended up with a seat on BP’s board London.
On Tuesday, BP chairman Carl-Henric Svanberg said Dudley “has proved himself a robust operator in the toughest circumstances.”
Phil Weiss, an analyst with Argus Research, views Dudley as a compromise between picking another BP lifer like Hayward and choosing an outsider to clean house. Weiss thinks BP should have gone outside its ranks for a CEO to shake up a company with a safety record marred by the 11 deaths in the Gulf and 15 more at a 2005 refinery explosion in Texas.
As head of BP’s spill response, Dudley has mostly kept a low profile while shuttling between the Gulf Coast and Washington. He will now be based in London.
“I talk to Bob Dudley when I need to,” says Thad Allen, the retired Coast Guard admiral now directing the federal response to the oil spill. “I woke him up on a number of occasions.”
Lamar McKay, currently the head of BP North America, will assume Dudley’s role as BP’s point man for the oil spill response.
Dudley has adamantly defended BP’s actions since the explosion. The company has pledged $20 billion to a cleanup and damages account, but said Tuesday that it has set aside $32.2 billion to cover the costs of the Gulf of Mexico oil spill.