The Hayward plan: keep squeezing the oil can: The BP chief’s watchword is efficiency and it should keep shareholders happy
Nils Pratley (Business)
Tuesday 2 March 2010 21.13 GMT
BP has been a terrible performer: rich in assets but never delivering respectable returns. This radical view was advanced today by none other than Tony Hayward, the company’s chief executive. Of course, he didn’t put it in such stark terms. BP, he said, had begun “a new phase to realise the potential of the portfolio built over the past decade”.
Hayward, despite being at the helm for two-and-a-half years, can get away with this analysis because he has clearly done much to address the perceived shortcomings. His era has seen a revival of the spirit of nuts-and-bolts engineering within BP.
Tony’s Tribe, as some in the oil industry call them, have cut costs and removed layers of central bureaucrats. Contemplation of an age “beyond petroleum” has been relegated. The message is: we have enough to get on with today.
Investors clearly approve. In share price terms, BP has outperformed Shell massively. But can it continue to do so? Shell’s fightback looks a straight copy: control capital tightly and watch those efficiency ratios improve. Given that Shell has even greater bureaucracy, the temptation among investors to switch horses is understandable.
Hayward’s response yesterday was to say that BP can make another $3bn of savings by 2012. That was the “new” story. If it seems dull, Hayward won’t mind. The prospect of efficiency improvements of that size ought to keep his investors interested, especially if BP delivers its promise of average production growth of 1%-2% a year until the end of the decade. That would ensure the safety of the dividend, currently yielding 6%, as long as the oil price (currently $79 a barrel) doesn’t dip below $60 for a prolonged period.
One day, BP investors may demand greater excitement. But Hayward is probably right in believing that, for now, more of the same will satisfy.
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