BP’s Incoming CEO Needs to Build Trust With the City

By Richard Orange

Chief executives relish a challenge but Tony Hayward, who succeeds John Browne at the helm of BP in July, will face more challenges than most. Fourth-quarter results, released on Tuesday, showed profits down 12% to $3.89bn (Pounds 2.0bn, E3.0bn) compared with the same period in 2005. This was worse than any of BP’s peers except ConocoPhillips.

Production has been hit by corrosion in pipes at Prudhoe Bay, Alaska, oil fields sold over the year and delays to the Thunder Horse platform in the Gulf of Mexico. The numbers took a further knock from increased spending on safety following the blasts in Texas two years ago.

A year ago, Lord Browne was bullishly predicting output for 2007 of between 4.1m and 4.2m barrels per day, rising to 4.9m barrels per day by the end of the decade. Instead, production crawled in at 3.82m barrels per day in 2006 and is expected to remain “broadly flat” this year. Even by 2012, BP says production will be just 4.3m barrels per day.

Hayward refuses to be drawn on how he would better this, although he admits that improving safety will inevitably lead to slower production growth.

BP is a formidable company: full-year profits were up 15% to $22.25bn. Yet fears about the slide in production saw its shares slip further to not far off their two-year low. The shares have fallen 25% since the summer.

Like a supertanker, BP will plough on regardless of investor sentiment, yet its brand has taken a drubbing. With a company of such complexity, a clear, confident strategy would speak louder than a wealth of statistics.

As he takes the wheel, Hayward must make courting City investors a priority. Winning back their trust would be a start.

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