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Daily Telegraph: Hayward sets out BP’s direction

Last Updated: 1:06am GMT 27/02/2008

BP chief executive Tony Hayward will today set out the oil major’s future direction. The annual “strategy briefing” will provide him with another chance to stamp his mark on the company.

Investors will be watching this year’s briefing more closely than past events as the announcement will be a good guide to how Hayward intends to deliver on his promise to revive the company.

Why wasn’t the strategy set out during this month’s results announcement?

BP often combines its strategy update with its fourth-quarter profits statement. But this year’s briefing on BP’s future was seen as being important enough to warrant a separate announcement. The profits statement compares and contrasts past performance but what analysts and investors really want is guidance on BP’s medium-term outlook.

And what is that outlook?

Hayward will be frank about BP’s problems and challenges. He has already criticised that bloated, bureaucratic corporate structure that was allowed to emerge under his predecessor, Lord Browne of Madingley. Hayward has already said that the company’s operational performance has been dismal and far behind its peers, such as Royal Dutch Shell.

So will the briefing be more of the same?

Not quite. Expect to hear a lot about how BP intends to dig itself out of its hole. There will be plenty of talk about how BP will grow production and bring its reserves of oil and gas to market. One bit of good news is likely to be details of exactly when the massive – but long-delayed – Thunder Horse field in the Gulf of Mexico will be running fully. But BP will not be setting precise production growth targets – something that will disappoint analysts.

Some oil experts think BP has left it too late?

There is concern that BP has not invested enough in exploration and production (E&P) to take advantage of the high oil price. If, as many people expect, oil prices fall from their current record highs, this will make it harder for BP to increase profits. Hayward will probably use today’s briefing to set out spending plans for E&P – and how to improve efficiencies in the troublesome refineries division.

Why is BP abandoning its green “Beyond Petroleum” image?

It isn’t, and Hayward will attempt to underline BP’s environmental credentials. Since going into Canada’s oil sands fields, BP has been criticised by environmentalists and much has been written about how Hayward wants to be rid of Beyond Petroleum. But today’s briefing will put a lot of emphasis on the revamped Alternative Energy division and BP’s investment plans for green energy initiatives.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/02/27/ccbp127.xml

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