New York Times: BP Names Its Next Chief; Succession Pace Stepped Up

(Tony Hayward, above, BP’s head of exploration and production, will take over as chief when John Browne steps down in July 2007.)

By HEATHER TIMMONS
Published: January 13, 2007

LONDON, Jan. 12 — The beleaguered energy giant BP unexpectedly named a successor on Friday for its chief executive, John Browne, and said Mr. Browne would step down more than a year earlier than expected. 
 
BP, the world’s third-largest oil and gas producer after Exxon Mobil and Royal Dutch Shell, has been reeling from the fallout of a series of accidents and mishaps. In one particularly damning recent revelation, a United States safety panel found in late October that BP knew about problems at its Texas refinery before 15 people were killed in an explosion in 2005, but did not fix them.

Tony Hayward, BP’s head of exploration and production, will take Mr. Browne’s place when he retires in July 2007. Mr. Browne had been expected to stay until the end of 2008, when he turns 60, BP’s mandatory retirement age.

Analysts and investors said that market pressure drove him out early. Since the beginning of August, BP has lost nearly £20 billion ($39 billion) in market capitalization as its stock plunged. In addition to the Texas explosion, the company has been criticized for a leak, caused by corrosion, that shut its Alaska pipeline last year, and United States regulators threatened in December to press civil charges against BP after an investigation into allegations of manipulation of the gasoline futures market.

BP is also more exposed than its rivals to Russia, through a joint venture, at a time when that country is taking back control of its natural resources. Market opinion reached a new low this week after BP said Tuesday that production in the fourth quarter of 2006 was down 5 percent, worse than expected.

“There has been a lot of disappointment” for investors, said Mark Lovett, head of British and European equities for RCM, a division of Allianz Global Investors. The most powerful way to gauge the market impact of the company’s problems is to “put Exxon’s chart against BP,” he said.

“Both companies,” he said, “have the same production issues, but Exxon has hugely outperformed BP.”

BP’s stock shot up on the New York Stock Exchange after the announcement was made, and was up 4.95 percent, or $3.05, for the day, closing at $64.64.

Mr. Browne is widely credited with transforming BP into a global energy colossus through a string of deals, and paying heed to the environment long before any of his oil and gas peers.

He is “the greatest British businessman of his generation,” Peter Sutherland, BP’s chairman, said in a statement. “His vision, intellect, leadership and skill will be difficult to follow.”

During Mr. Browne’s tenure, BP’s profits and market capitalization have grown fivefold, and its share price has increased 250 percent.

Many analysts and investors view the company’s recent problems as an unfortunate end to what was a stellar career, but the series of problems have also raised questions about how well Mr. Browne was actually managing the company that he built.

Mr. Browne’s successor, a BP veteran, was widely praised in the market on Friday.

“He’s one of the brightest sparks at BP,” said Fadel Gheit, Oppenheimer’s oil and gas analyst in New York, who said he had recently spent time with Mr. Hayward at BP’s operations near the Caspian Sea. “He’s extremely smart and very diplomatic,” Mr. Gheit said.

He added that Mr. Hayward was “going to be a breath of fresh air, after the unfortunate incidents over the past few years.”

Mr. Hayward has been with BP since 1982, and was the group’s global treasurer before becoming chief executive of exploration and production. He was not available to comment on the move.

The decision to name a successor now was Mr. Browne’s, Mr. Sutherland said, but he described Lord Browne’s early departure as a corporate choice. The board “came to the conclusion that a six-month handover would be more appropriate than 18 months,” he said.

Lord Browne has stressed in meetings in the last year that his retirement from BP would not be his retirement from working. “I am going to change careers,” he told a group of journalists at an earnings conference last summer, though he did not give any specifics about what he would do next. He sits on the board of Goldman Sachs.

Analysts said he would probably be in high demand. “People need to put time frames into perspective,” Mr. Lovett said, speaking of Mr. Browne’s career. “What he achieved is incredibly strong performance, and his strategic positioning was extremely well timed.”

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