Poor Hayward pays the price

Poor Hayward pays the price

Tony Hayward paid a heavy price.

In stepping down as the chief executive of BP he’ll cushion the blow with a 1.6 million dollar pay-off, and that does not include his pension pot of 900,000 dollars a year.

A heavy price when we consider the Lloyd Blankfien is still the chief executive of Goldman Sachs and Toyota’s Akio Toyoda is still the president. 

It will be a matter of time before Transocean, the owner of the drilling rig BP was leasing, and oil engineering contract Halliburton have to answer for their actions. All the signs are that BP was not to blame.

Hayward is likely to get a job at BP’s Russian joint venture TNK-BP where the new CEO of BP, Robert Dudley, had to flee and is not welcome after falling out with the four oligarchs who own half of the Russian business. Hayward, like his predecessor, had good relations with the Kremlin and Russian investors.

Already questions are being asked about Dudley’s appointment. Christopher Swann of Reuters Breakingviews says Dudley

"may be a superb diplomat. But the American executive’s roots at Amoco — the oil company BP acquired in 1998, and which has been the source of most of its safety problems — make him a less than ideal choice to reform BP’s flawed corporate culture. A fresh hire from outside arguably stands a better chance of transforming BP."

And remember, TNK-BP accounts for quarter of BP's oil production. You can't appoint a new CEO who can't visit such a large operation. The stiutation is untenable and one that is likely to be rectified once Dudley gets to grips with the crisis.

BP remains a strong company despite a second-quarter loss of 17.15 billion dollars. Taking out the cost of the oil spill 32.2 billion dollars, that BP’s taken in one hit, the oil giant is generating profits of almost 5 billion dollars.

BP will continue to offload oil fields to the value of 30 billion dollars over the next 18 months.

The company admits the $32 billion hit it is taking is not the final cost – and it could head higher once it pays fines and penalties.

BP believes it can offset some of those fines -- possibly $10 billion -- against taxes. President Barack Obama and lawmakers won't be happy about that and they'll likely be closing loop-holes fast.

And finally, for those thinking BP’s stock looks cheap, I’ll leave you with the words of Christophe Gautier, fund manager at GSD Gestion:

“We thought about buying into the stock but we’ve decided to steer clear. One cannot tell what the eventual loss will be.”