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Crisis-hit BP to restructure energy operationsAFP
BP chief executive Tony Hayward
LONDON
Petroleumworld.com 10 12 07
Britain's BP on Thursday unveiled a major restructuring to breathe new life into the troubled energy giant, whose reputation has been tarnished by fatal safety errors and a boardroom scandal.
The group will comprise two divisions -- Exploration and Production, and Refining and Marketing -- compared to three currently, BP said in a statement after a six-month operational review aimed at closing the gap with rivals.
Chief executive Tony Hayward, who took the helm after John Browne resigned in May over a personal scandal, said his top priorities were safety, people and performance -- but added that job losses were "inevitable."
BP has yet to recover from the fallout of the Texas City refinery explosion in 2005, which killed 15 people and raised doubts about safety across the group's US facilities.
"BP today reiterated its determination to improve performance by simplifying how the company is structured and run," the group said in its statement, stressing that the aim was to cut unnecessary overheads.
Hayward said some of the changes were already under way.The group's Gas, Power and Renewables division would be absorbed into the other two units, the statement added.
Hayward said Thursday that the company was making "good progress" on safety.
Turning to the restructuring, he said that "while the process would yield some medium term cost reductions, the major benefit would be the revenue boost expected from greatly improved operational efficiency over the longer term."
Hayward added that redundancies would be inevitable in some parts of the company, but did not say how many jobs were under threat.
" BP's performance has materially lagged our peer group in the last three years," he said.
" It has been poor because we are not consistent and our organisation has grown too complex. At the root of all this is a need to change our behaviours."
The BP boss did not forsee any major disposals but did not rule out the sale of smaller scale assets."Our problem is not about the strategy itself but about our execution of it," Hayward continued.
The BP chief also blamed his group's underperformance on missing revenues from its Texas City and Whiting refineries in the United States.
" We expect the revenue gap to narrow as major new production comes on stream in the fourth quarter and refinery throughputs rise at Texas City and Whiting over the coming months," he added.
BP would also seek to cut its costs, which were higher in comparison to the energy titan's rivals, according to Hayward, who last month said the company's third-quarter revenues were set to be "dreadful."
He was reported to have told a meeting of BP employees in Houston that the company's financial performance was at its worst since 1992-93.
On Thursday, BP's share price closed up 2.33 percent at 593.50 pence on London's FTSE 100. The British capital's leading share index ended 1.38-percent higher at 6,724.50 points.
BP rival Royal Dutch Shell underwent its own restructuring following a public relations crisis in 2004 that arose from the mis-statement of its oil reserves.
BP is the world's third biggest energy company in terms of stock market capitalisation, behind number one and US titan ExxonMobil, and number two Royal Dutch Shell.
Business heavyweight John Browne, who transformed BP into a corporate giant, quit as chief executive last May after revelations that he lied to a High Court judge over how he had met his gay partner of four years. Browne had been due to step down in July but quit early.
Story by Roland Jackson of AFP
AFP 111631 GMT 10 07
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