BP p.l.c. (BP) Q2 2010 Earnings Call Transcript July 27, 2010 9:00 am ET Executives Fergus MacLeod – Head, IR Carl-Henric Svanberg – Chairman Tony Hayward – Group Chief Executive Bob Dudley - Managing Director Byron Grote – CFO Andy Inglis – Head of Exploration & Production Iain Conn – Head of Refining & Marketing Analysts Lucy Haskins – Barclays Capital Jon Rigby – UBS Pavel Molchanov – Raymond James Theepan Jothilingam – Morgan Stanley Alejandro [ph] – Banc of America Jason Kenney – ING Ed Westlake – Credit Suisse Lucy Haskins – Barclays Capital Robert Kessler – Simmons & Co. Mark Fletcher – Citi Mark Gilman – The Benchmark Bruce Lennie [ph] – Berger [ph] Capital Partners Alastair Syme – Nomura Lucas Herrmann – Deutsche Bank Irene Himona – Exane David Silverstein – Ecofin Tom Gibney – Credit Suisse Asset Management Presentation Unidentified Participant
Thank you and I’ll now hand over to Carl-Henric.Carl-Henric Svanberg Thank you, Fergus, and thank you all for joining us. I am joined here now by Tony Hayward, Byron Grote, Bob Dudley and the others in the management team. As you can see, we have issued two important announcements this morning. One is the first half-year results, including the impact of the Gulf of Mexico and the spill. The other one is about the departure of Tony Hayward, as our CEO, and the appointment of Bob Dudley as the new Group Chief Executive with effect from October 1. After I have my introductory remarks, Tony will say a few things about the management change and so will Bob, and then we will take a couple of questions before I hand back to Tony and Byron to go through the main points of the results announcement with questions focused on that. I will not sit through the whole presentation, and I have other appointments which mean that if you have any questions on the dividend, you should ask in that first section. But let me first say this, the tragic accident of 20 of April and the subsequent events that shocked and saddened us all, they have had a profound effect on the families of the victims, on the communities of the region, on this company and on the industry in which we operate. We deeply regret the impacts of this incident, and we are committed to healing and restoring the communities of the Gulf of Mexico to finish the immediate cleanup, to mitigate the long-term environmental impacts, and to make whole those whose livelihood has been damaged. As I speak, the well is now capped and no oil has flowed into the Gulf for nearly 2 weeks, and we all look forward to sealing the well permanently. But we also know that even when that happens, we still have much to do to make it right. I would also like to say that we’re determined to restore value to our shareholders. They have seen enormous loss of capital, and of the dividend, and the board is committed to creating value for shareholders, and believes that we can deliver a stronger BP for them over time.
Looking ahead, I want to make four points today. First, BP will change as a result of this accident. We are taking a hard look at ourselves, what we do and how we do it, what we learn will have implications for our strategy, and our ways of working and our governance [ph].Secondly, we are committed to meeting our obligations in the Gulf of Mexico, and this set of results underlines the company’s ability to do so, while providing a first estimate of our costs. Clearly the financial impact is very substantial, and as a result we have recorded a significant headline loss. But our businesses around the world are performing well, and our cash flow is strong. We have taken a charge of 32.2 billion for costs that we expect to need to cover. This charge is based on the belief that we were not gross negligent in this incident. Third, the board has been very focused for quite a while on the company’s financial position. Our liquidity position is strong, and last week we enhanced it further through the sale of assets for 7 billion, and today we are announcing our intention to extend this divestment program to a total of 25 billion to 30 billion. We expect to achieve attractive offers for assets that have a higher strategic value to others than to us. This program will reset our position and create a stronger performing portfolio, while at the same time remove any worry about our financial strength. Finally, let me then turn to the change of leadership. As we announced this morning, by mutual agreement with the board and Tony Hayward, Tony will step down on October 1. The board is deeply saddened to lose Tony as our CEO. However, the decision is typical of the principle leadership that he has shown throughout his three years in the job and a lifetime of service to BP. On behalf of the entire company, I want to thank him for all that he has achieved in that time in improving the company’s performance in so many critical ways.
But we have to recognize that the tragedy of the Macondo well explosion and subsequent oil spill has been a watershed for BP. In future, we will be a different company and the challenge of rebuilding our reputation requires fresh leadership, supported by robust governance and a very engaged board. We are fortunate to have a successor of the caliber of Bob Dudley. He has spent his working life in the industry, both in the US and overseas and he has proved himself a great operator in the toughest of circumstances.I have no doubt that he will provide the strong leadership the company needs to move forward and rebuild trust with our stakeholders. BP has strong assets and I have discovered – discovered during my short time as the Chairman great people, great motivated people, right across the company and they are determined to play a full part in restoring BP's position in the vanguard of this industry. So let me hand over for a remark from Tony. Tony Hayward Thank you Carl-Henric. Let me add my welcome to those joining the call. Today is a very sad day for me. As many of you know, I spent my entire professional career at BP. I love the company and everything it stands for. I thought long and hard about what is the right course of action. It is clear that this tragedy will leave BP a changed company, and that to move forward, particularly in the United States, it should do so under new leadership. And it is for that reason I have agreed with the board to stand down as CEO. Read the rest of this transcript for free on seekingalpha.com