Forbes: Investors Applaud BP Plan

Vidya Ram, 10.11.07, 11:40 AM ET

LONDON – BP soared on the stock market after the new chief executive Tony Hayward announced the restructuring plan that was promised in September.

Shares in the energy company soared by 11 pence (22 cents), or 1.9%, to £5.91 ($12.02), in morning trading in London after Hayward said the company would simplify its operational structure by dividing the company into two main divisions – one focusing on exploration and production — the upstream part of the business, in the industry jargon — and the other on refining and marketing, known as downstream.

Hayward, who last month hit the headlines after describing the company’s upcoming third-quarter results, due on Oct. 23, as “dreadful” said that poor strategy was to blame for the company’s woeful performance over the past three years. (See: ” BP Ready To Disappoint”)

“It has been poor because we are not consistent and our organization has grown too complex,” said Hayward. “At the root of all this is a need to change our behaviors.”

Part of Hayward’s plan is to cut up to four layers of management within the company.

“The moves follow a six-month review of the group’s operational performance which identified wide-ranging duplication, overlap and excessive organizational complexity,” he added. Job losses are expected, though BP (nyse: BP – news – people ) has not offered precise figures.

Hayward took over as chief executive from John Browne in May, after the latter’s abrupt departure. (See “BP’s Browne Out”) Since then, Hayward has been under pressure to revive the company’s flagging performance. BP has been consistently underperforming the sector, weighed down by a whole host of problems including troubles at its Texas refinery, delays to projects in the Gulf of Mexico, and an oil spill in Alaska. Hayward is hoping that a simplified structure will help it gain ground on rivals such as Royal Dutch Shell (nyse: RDSA – news – people ).

Oriel Securities analyst Brendan Wilders said that there were “no surprises” in the announcement, though he remained optimistic about the company’s prospects beyond the third quarter.

“Figures on October 23rd will not be pretty, but we continue to take the view that the third quarter will mark a low point in BP’s fortunes and remain buyers for the potential for strong recovery over the next year.”

http://www.forbes.com/markets/2007/10/11/bp-tony-hayward-markets-equity-cx_vr_1011markets14.html

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