Daily Telegraph: In the twilight of the ‘Sun King’, a new star emerges

EXTRACT: Teasing questions about a bid for Shell will be deflected. The BP hierarchy was furious at the way the Shell “secret” found its way out of the BP locker room and is uncomfortable with the perception that BP has inherited Shell’s mantle from 2005 of “beleaguered”. The Goldman team found a deal with Shell or another major appealing because of “operational synergies” but said culture clashes and “technical barriers” would make any mega-deal unlikely.

THE ARTICLE

By Roland Gribben
Last Updated: 1:22am GMT 06/02/2007

Lord Browne is expected to mount a vigorous defence of his track record and stewardship today when he presents full-year figures for the last time as BP chief executive.

The long-time standard bearer for British management, badly bruised by a catalogue of tragedies, blunders and management shortcomings and upset at intrusions into his private life, plans to emphasise the positive as well as the negative in an early swan song before formally bowing out after the BP annual meeting.

He will occupy centre stage at today’s presentation at BP’s headquarters in St James’s Square, London, but the centre of attraction will be his successor, Tony Hayward, currently working alongside Lord Browne to smooth the way for a summer handover.

The City has already discounted the figures. Full-year profits are expected to be marking time at $21bn. Analysts are more interested in a series of other issues: whether the change at top is more than a shift in personalities; if BP will raise its dividend rather than continue to spend money on share buybacks; how far production targets will be cut; and whether Mr Hayward will be in a mood to dispose of some assets.

Mr Hayward wants to limit his contribution today to the exploration and production business he has headed but he will be tempted to enlarge on his earlier criticism of BP’s “more for less” mantra and encouraged to show his hand on management changes and strategy.

Both Lord Browne and his successor in waiting want to present a united front and emphasise how BP is implementing the many lessons from the Texas refinery tragedy and how its approach to safety has been overhauled. They must also satisfy criticism about production failures in Alaska and allegations of market manipulation.

Teasing questions about a bid for Shell will be deflected. The BP hierarchy was furious at the way the Shell “secret” found its way out of the BP locker room and is uncomfortable with the perception that BP has inherited Shell’s mantle from 2005 of “beleaguered”.

The pair want to tell the world that BP is more focused and determined. They will say that it can cope with the highly charged energy nationalism overhanging its Russian business and restore credibility in the sensitive American market.

The sun may be setting on the “Sun King” and his considerable achievements in turning BP from a “two pipeline” company – Forties in the North Sea and Prudhoe Bay in Alaska – into a powerful international business, but Mr Hayward is under pressure to show quickly that he has the management in place to avoid a re-run of last year and that he will avoid “control freakery”.

There is also a growing feeling that BP must shift from the comfort zone of having a long-term chief executive – Lord Browne and his cigars have been in situ for nine years – and limit the term of his office.

Mr Hayward, 49, could be at the BP helm even longer but his first year in the hot seat will either make him or break him. He may be comforted by the encouragement yesterday from Goldman Sachs, the investment banker with Sir Peter Sutherland, the BP chairman, and Lord Browne in its midst.

“BP’s fall from grace has been rapid, its de-rating severe. In our view, BP can put the majority of its recent troubles behind it and move forwards,” Goldman said.

Its analysts have upgraded BP from neutral to buy, arguing that while production targets will be trimmed today, the 2007-08 outlook is improving. With BP trading at a significant discount to the rest of “Big Oil”, they feel the stock is back in “attractive valuation territory”. They are looking for a price rise over the next year to 615p from last night’s close of 541.5p, up 6.5p.

The Goldman team found a deal with Shell or another major appealing because of “operational synergies” but said culture clashes and “technical barriers” would make any mega-deal unlikely. They offer Mr Hayward a tempting asset disposal – packaging BP’s remaining 1.2bn North Sea barrels could be worth close to $20bn (£10.2bn). However, after the UK refinery exit, Mr Hayward is unlikely to be comfortable with being labelled as the man who removed the ‘B’ from BP.

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