BP reports record loss

LONDON, England - BP reported a record quarterly loss of $17.2-billion (U.S.) and set aside $32.2-billion to cover the costs of the devastating Gulf of Mexico oil spill.

This comes as embattled chief executive officer Tony Hayward will be replaced by American Robert Dudley on October 1.

BP said the decision to replace Hayward, 53, with the company's first ever non-British CEO was made by mutual agreement. In a mark of faith in its outgoing leader, BP said it planned to recommend him for a non-executive board position at its Russian joint venture and will pay him 1.045 million pounds ($1.6 million), a year's salary, in lieu of notice.

"The BP board is deeply saddened to lose a CEO whose success over some three years in driving the performance of the company was so widely and deservedly admired," BP Chairman Carl-Henric Svanberg said in a statement accompanying the quarterly earnings update.

Svanberg said the April 20 explosion of the Macondo well on the Deepwater Horizon platform run by BP in the Gulf of Mexico has been a "watershed incident" for the company.

"BP remains a strong business with fine assets, excellent people and a vital role to play in meeting the world's energy needs," he said. "But it will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."

Besides permanently plugging the oil leak and cleaning up the spill and the company's image, Dudley will oversee the sale of $30-billion in assets over the ext 18 months to bolster the company's finances.

Hayward, who has a Ph.D in geology, had been a well-regarded chief executive. But his promise when he took the job in 2007 to focus "like a laser" on safety came back to haunt him after the explosion on the Deepwater Horizon rig killed 11 workers and unleashed a deep-sea gusher of oil.

In a statement on Tuesday, Hayward said it was right that BP embark on its next phase under new leadership.

"The Gulf of Mexico explosion was a terrible tragedy for which -- as the man in charge of BP when it happened -- I will always feel a deep responsibility, regardless of where blame is ultimately found to lie," he said.

On top of the $1.6-million payout, Hayward retains his rights to shares under a long-term performance program which could eventually be worth several million pounds if BP's share price recovers. The stock, which has lost around 40 per cent since the well explosion, was almost flat at 417 pence ($6.45) in early trade on the London Stock Exchange on Tuesday.

Hayward, who will remain on the board until November 30, will also be entitled to draw an annual pension of 600,000 pounds from a pension pot valued at around 11 million pounds.

Svanberg described Dudley, 54, who was thrown out of Russia after a battle with shareholders in the company's TNK-BP joint venture, as a "robust operator in the toughest circumstances."

Currently BP's managing director, Dudley grew up partly in Hattiesburg, Mississippi, and has so far avoided any public missteps. He spent 20 years at Amoco Corp., which merged with BP in 1998, and lost out to Hayward on the CEO slot three years ago.

Dudley will be based in London when he takes up his appointment and will hand over his present duties in the United States to Lamar McKay, the chairman and president of BP America.

BP said the $32.2-billion charge for the cost of the spill led it to record a loss of $17 billion for the second quarter, compared with a profit of $4.39 billion a year earlier. It is the first time in 18 years that the company has been in the red. The charge includes the $20-billion compensation fund the company set up following pressure from President Barack Obama as well as costs to date of $2.9 billion.

But the company also stressed its strong underlying financial position -- revenue for the quarter was up 34 per cent at $75.8-billion -- and Hayward said it had reached a "significant milestone" with the capping of the leaking well.