BP Chief Dudley to Step Down Having Steered Oil Giant Through Gulf Disaster -- 3rd Update

By Sarah McFarlane 

After nearly a decade steering BP PLC through the aftermath of the Deepwater Horizon crisis, Chief Executive Bob Dudley will hand to his successor an oil-and-gas giant facing a new set of pressures -- searching for ways to turn a profit from cleaner energy sources while cutting dependence on fossil fuels.

Mr. Dudley, who is 64, will step down in February. He will pass his role to 49-year-old Bernard Looney, the chief executive of BP's upstream operations, who will be Big Oil's youngest leader. Mr. Looney will take over as CEO and join BP's board on Feb. 5, the company said Friday.

The leadership change comes as the energy industry is forced to grapple with flatlining future oil demand, along with pressure from investors to reduce carbon emissions while creating a business which can outlive fossil fuels.

Mr. Looney is expected to herald a new generation of leadership, with a focus on technology and modernization, analysts said.

BP's share price rose nearly 2% in London Friday.

BP and its peers face the challenge of making low-carbon projects such as wind and solar farms as profitable as their traditional oil-and-gas businesses. Renewable energy typically generates lower returns than oil and gas. Technology developments like electric vehicles are also changing the outlook for the world's energy mix.

BP is at an inflection point, as it moves from a defensive posture, after the Deepwater Horizon crisis in 2010 and the oil-price collapse four years later, to a more forward-looking stance, growing cash returns and investing in new energy, analysts said.

"It's a timely point to change the leadership," said Christyan Malek, JPMorgan's head of oil-and-gas research for Europe, the Middle East and Africa.

BP appointed Mr. Dudley as chief executive about six months after the 2010 Deepwater Horizon disaster, which killed 11 people in the U.S.'s largest oil spill. The American-born leader replaced Tony Hayward, a British-born businessman who is now chairman of miner Glencore PLC.

Mr. Hayward received criticism for what some observers saw as insensitivity toward the oil-spill crisis. In the midst of the ordeal, he told reporters that he wanted his life back.

Before Mr. Dudley took over, some feared the crisis would send BP into bankruptcy. The disaster resulted in a legal settlement with the U.S. government and took a total of more than $65 billion to clean up and fully resolve.

"Not many companies can deal successfully with a $67 billion event which was a near-death experience," said Irene Himona, managing director for oil-and-gas equity research at Société Générale, referring to the oil spill.

In the aftermath of the disaster, Mr. Dudley embarked on a massive divestment plan, which is on track to have the company sell $75 billion of assets by 2020. BP has also returned to making acquisitions, most recently buying BHP Billiton Ltd.'s onshore U.S. oil-and-gas assets for near $11 billion.

Through the combined efforts of Mr. Dudley and Mr. Looney, the company is better prepared to maintain profitability during times of lower oil prices. The company's cash break-even -- the oil price needed to make a profit after dividends and capital expenditure -- is around $50 a barrel, below the industry's $55-$60 a barrel level, according to JPMorgan.

Mr. Dudley also oversaw BP's focus on low-carbon energy in recent years. In the past two years, BP's investments have included stakes in European solar business Lightsource and electric-vehicle charging company Chargemaster.

His replacement, Mr. Looney, joined BP in 1991 as a drilling engineer and was appointed head of upstream in 2016. Mr. Looney has been a member of the group's executive management team since 2010, the company said.

Mr. Looney pushed for innovation in BP's upstream business, which handles oil and gas discovery and extraction operations, said Barclays PLC analyst Lydia Rainforth in a note to investors. His focus on new technology could help BP in its efforts to be seen as a cleaner, lower-carbon company.

"Given the drive for digital solutions and the work on reducing carbon emissions, it is likely that the appointment of Mr. Looney as CEO may accelerate the journey that BP is on regarding the energy transition," Ms. Rainforth added.

Write to Sarah McFarlane at [e-mail]

(END) Dow Jones Newswires

October 04, 2019 11:03 ET (15:03 GMT)

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