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BP Shares See Heavy Action Amid Shakeup

BP shares see heavy action after the company announces a big a post-oil spill restructuring.

(BP shakeup story updated for analyst comment)



) -- There's life in shares of


(BP) - Get Free Report

on Wednesday, after the British oil company announced a management shakeup concurrent with handing the CEO reins to American Bob Dudley.

ADR shares of BP were up in early trading, and the oil stock was quickly closing in on its average daily volume of shares traded passed within an hour of the market open, or roughly 9 million shares.

BP shares in London were up more than 4% after the management restructuring was announced. Notably, BP was finally nearing the $40 that has served as a ceiling ever since the Gulf of Mexico oil spill.

The changes announced by BP include the planned departure of Andy Inglis, head of exploration and production, by the end of the year. In addition, the E&P business is being split up into three units. BP will also have its own internal affairs division fanning out across its business segments and with the power to rule on issues of safety and risk management, an internal cop to be headed by the author of the BP oil spill report, Mark Bly.

>>BP Announces Management Restructuring

The changes announced by BP are buoying shares, but some should have been a given even before the oil spill rocked the company. Focusing on risk management and safety should not have been optional, and laying out a focus on risk management and safety for a company that previously prided itself on risk management and safety still leaves BP in a situation where the actions must match the easy to issue words. It's hard to forget Tony Hayward's "laser" focus on safety, and how much easier it is to talk the talk than walk the walk. The markets have "been there and done that" with BP bosses talking big about safety.

"It all sounds good, but based on what happened we need to see the evidence," said Argus Research analyst Phil Weiss. "BP has talked this story before," the analyst added.

BP also stressed in its management restructuring a thorough audit process for third-party contractors. Critics could contend that this amounts to little more than the ongoing spin that BP is pursuing in the oil-spill legal game, spreading the blame to other companies, most notably


(HAL) - Get Free Report

. The BP oil spill report authored by Bly placed much of the blame on Halliburton for "a bad cement job."

In the words of Congressman Ed Markey (D. Mass), BP accepted one-half of the blame for one out of eight factors that caused the oil spill as detailed in Bly's report.

Argus Research's Weiss viewed this development with caution. The analyst thought the audit process improvement might actually be an important step, but he also agreed that some of it seemed like BP yet again trying to protect its legal position.

As far as the risk management, the fact that BP allowed one of the worst environmental disasters and worst oil spills in U.S. history to occur under its watch, given the extent to which its E&P business is exposed to Gulf of Mexico projects in the next 5 years, would make anything less than a greater focus on risk management another sign of a dysfunctional corporate structure.

From a markets perspective, the situation has improved for BP. On Tuesday, it finally was able to get the bond deal done that it had been talking about since July, raising $3.5 billion.

The departure of Andy Inglis could also be viewed as a fait accompli. Outgoing CEO Tony Hayward ascended to the top of BP from Inglis' position as head of E&P. With Bob Dudley winning the BP CEO slot, the departure of Inglis may only partially be a "cleaning house" of the former regime. Inglis was left no room to ascend to the post he would have presumably been angling for if Hayward ever left once Dudley was named CEO. Breaking up the E&P group into three segments would result in more or less a demotion as opposed to path to the CEO post. It's not uncommon for companies and senior managers to part ways in such situations.

Argus Research's Weiss couldn't comment on the nature of Inglis' departure, but he was skeptical about the splitting up of the E&P boss role into three separate positions reporting directly to Dudley. "If I go back to the recent reorganizations in the industry, generally the oil companies are making themselves leaner and here BP is adding in layers. I'm not sure I want three more direct reports to the CEO instead of one," Weiss said.

--Written by Eric Rosenbaum in New York.

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>>BP Announces Management Restructuring

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