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Daily Telegraph: New BP boss vows to fix problems

By Tom Stevenson
Last Updated: 12:53am BST 25/07/2007

BP’s new chief executive vowed to fix the problems at the struggling oil giant after announcing a slide in second quarter profits. Tony Hayward, who took over from Lord Browne in May, admitted that BP’s “current operational performance is not good enough”.

Dismissing rumours that BP continues to investigate a possible merger with rival Royal Dutch Shell, he opened a new chapter for the company by promising to rebuild revenues and simplify the business.

BP said its second quarter replacement cost profit fell by 1pc to $6.09bn after lower oil and gas production and problems at some of its refineries. Stripping out the benefit of the $741m disposal of the company’s Coryton refinery in Essex, profits fell by 12.5pc. The second-quarter dividend rises by 10pc to 10.8c, although the weakness of the dollar means the payout for British investors is unchanged from last year.

The half-year results were Mr Hayward’s first appearance in front of analysts and the media. He used the occasion to signal a revamp of BP’s structure, promising to rein in operating subsidiaries in favour of a more centralised management style.

Under Lord Browne, BP’s head office issued financial targets but then left divisional heads with a high degree of operational independence. Mr Hayward is thought to admire the greater “command and control” style of industry leader Exxon Mobil.

“We are not moving to a completely functional operation,” he said, “but there will be much stronger boundaries and standards within which to operate.”

BP has suffered a string of operational problems in recent years, including a fatal explosion at its Texas City refinery, pipeline leaks in Alaska and a delayed start-up at the Thunderhorse oil rig in the Gulf of Mexico.

“Thunderhorse was an issue of not having enough engineering capacity in BP at the start,” Mr Hayward said. “It’s been a hard-earned lesson and this year BP will recruit 1,500 engineers.”

Production at BP fell to 3.8m barrels of oil equivalent a day in the second quarter but analysts were relieved that the company left its full-year production target unchanged. In refining, shut-downs have resulted in sites running at only 83pc capacity on average.

Promising the end of “duplication” around the group, Mr Hayward detailed cost cuts, including the redeployment of 25pc of head office staff into the field.

BP’s shares, which fell from 712p to 507p in the year to April, closed 11.5p lower at 590p.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/07/25/cnbp125.xml

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