Dudley: Never mind the bollocks, here’s BP

BP has been making headlines in the last couple of weeks, and very little of it has been welcome by the oil giant.

From a social media firestorm claiming the Macondo well is leaking again to office raids in Russia and Halliburton’s claims that BP committed fraud, the news has not been flattering.

The sustained coverage can be a bit discouraging to employees and investors alike, so  BP CEO Bob Dudley delivered a little pep talk in an e-mail to employees over the weekend.

In the e-mail (see the full text below) Dudley first says thank you to the workers for their “hard work during these ‘rough seas’,” and encourages them to remember that, “away from the headlines, we are making real, solid and measurable progress to build the new foundation for a strong and successful future.”

“We have consistently said that 2011 will be our year of consolidation,” Dudley writes. “We have large turnarounds currently underway around the world to strengthen the asset base.”

He goes on to further explain the company’s response to the recent incidents and remind workers of all the progress being made in getting the company back to solid footing.

“Every day, together we are turning around the fortunes of the company and it is this continuing focused and disciplined effort that will restore BP’s fortunes,” Dudley concludes.

You can read the full text of Dudley’s e-mail below:

Dear colleagues

Once again BP was very much in the headlines this past week, with various stories on:

Allegations of a sheenon the surface near the Macondo well in the Gulf of Mexico and speculation it was from one of the Macondo wells. While unfounded, this rumour continues to circulate on social media;

a US judge’s ruling that he should not at present rule out punitive damages for some categories of Macondo claimants;

Tropical Storm Lee which has shut-in production in the Gulf of Mexico;

a lawsuit by Halliburton in the US; and

a raid on our Moscow office.

These have led to a wide variety of media coverage and pressure on our share price in what are generally volatile financial markets across the globe.

Investors are interested in clarity and certainty and management and the Board are working hard on the firm’s long term strategy. Our objective is always to make the right decisions for the company and its shareholders, and not to be overly distracted by short term ‘noise’.

So, I am writing to you all, first to say thank you for your continued hard work during these ‘rough seas’. Also, I would encourage you to remember that, away from the headlines, we are making real, solid and measurable progress to build the new foundation for a strong and successful future. The list of this year’s achievements in building that foundation is long.

We have consistently said that 2011 will be our year of consolidation. We have large turnarounds currently underway around the world to strengthen the asset base. 2Q and 3Q were planned late last year to be the best time to complete this work. While there is some short term pain, again, this is simply good long term business. 24 of 51 upstream turnarounds have already been completed and others are well underway. Those of you working on these projects know the good progress.

To deal briefly with some of the points in the current short term media focus:

The Sheen: Following some US media reports of a sheen in the Macondo area in the Gulf of Mexico we responded, and quickly. We worked with the US Coast Guard and other government and state officials. We sent Remotely Operated Vehicles (ROV’s) to survey the Macondo wellheads and in conjunction with the Coast Guard, BOEMRE and State representatives we confirmed there is no oil leaking from the Macondo wellheads or nearby areas. We have said this to the press but it remains a popular topic on social media.

US court ruling: On August 26 the judge in the Macondo civil litigation in New Orleans issued an order containing some 16 rulings on a variety of topics. For example, the court agreed with BP and dismissed the plaintiff’s state law claims and limited the types of other claims plaintiffs may bring. However the court also ruled that the Oil Pollution Act did not prevent plaintiffs from claiming punitive damages under certain specific circumstances.

Tropical Storm Lee: We implemented our standard operational procedures and our platforms were evacuated with the formation of the storm. By the time you read this we will likely be re-manning our platforms, or close to it. A few days of production will have been lost and, as BP is the largest producer in the Gulf, we may feel the effects somewhat more than others. But the teams have done exactly as our procedures require.

Halliburton: Before the April 2011 deadline BP filed a case against Halliburton with several claims – including misrepresentation and concealment by them. Halliburton has now responded and made claims of fraud against BP, and run an associated media campaign. Such is the US legal process. We continue to believe, as the Presidential Commission found, that multiple parties contributed to the incident, including Halliburton. We vigorously oppose their position, and believe that this latest set of assertions is neither relevant nor accurate.

Moscow: It was disappointing that the agreement to work in three blocks with Rosneft earlier this year did not materialise. We ‘moved on’ from that in May. Last week’s raid originated in a Siberian court, which ordered seizure from our office in Moscow of documents allegedly relevant to litigation we believe to be without merit. The suit argues the plaintiffs were damaged as a result of the Rosneft transaction not being completed with TNK-BP. Rosneft however made clear that they would not work with TNK-BP. We have dealt with this type of action before, as have many businesses in Russia. We have been clear that the raid was improper, and it has now been suspended while we challenge the court order. Our offices are back to normal and no documents have yet been removed. We will continue to fight this lawsuit, as we believe it is baseless. Our staff in Moscow is experienced in these matters. Most importantly our investment in TNK-BP continues to perform well, as it has done since 2003, despite the many news stories over this time.

Keep your eyes on the road

These issues are being addressed and will be resolved over time. However, much more important for the long term future of BP is the vital work we are doing to build the base for value growth.

I know the time since the Deepwater Horizon event has been frustrating for shareholders and employees, but it has been critical to have this period of consolidation, transition and renewal – resetting and rebuilding the company for the future. The reality is that we are making necessary and sweeping changes to restore our momentum – all against the background of global financial uncertainty.

We have made very strong progress on our long term agenda. In terms of safety and risk management we have new organisational structures in place to drive this across the group. Safety performance has been improving. For the first half year, our recordable injury frequency was back to the levels experienced before the accident and losses of primary containment in 2Q were the lowest on record. Well done.

Our balance sheet is strong and the financial outlook of the company is sound. First half 2011 underlying pre-tax profit of $18 billion and operating cash flow of almost $10 billion (in excess of meeting our commitments in the Gulf) are very healthy results, especially given the major operational and financial crisis we emerged from last year.

In the upstream we have had our best year in a decade in gaining new access to resources. We have entered into more than 50 blocks around the world for exploration, including the final award of four more blocks in the Gulf of Mexico. Other areas of success have included Australia, Azerbaijan, Brazil China, India, Indonesia, Namibia, Trinidad and the North Sea. There are more to come.

We have completed the transactions that give us extensive access to offshore acreage in India and Brazil – investing $10 billion and operating at scale for the first time in two of the world’s great emerging economies. We are doubling our spend on exploration, which is one of BP’s great strengths. I expect that we will have more news in the coming weeks and months on various wells across the world.

In the downstream, this has been a strong year of delivery on all fronts, including safety, operational uptime and returns. All businesses are making progress against their strategic objectives and the portfolio is well-positioned competitively, despite the realities of a tough economic environment.

In Alternative Energy our wind business continues to grow, with a 13th US farm under construction; and the biofuels team are building a world-class sugarcane ethanol operation in Brazil, with major new assets acquired this year.

These many examples of progress don’t always get the same media attention as more controversial stories. However, although they may not catch the media eye, for us and our shareholders it is the solid day-to-day successes that are vitally important. These show that the fundamentals of our firm are strong and that we are building a safe, sustainable and valuable business for the long term. That is the real story for BP and you should communicate this to colleagues, friends and family.

There will continue to be challenging headlines especially as we move towards trial in the Gulf of Mexico litigation, next February.

Do not be distracted by this. We have a great team of professionals working on these issues.

We should be proud of the way BP has stepped up to its responsibilities rather than shying away from its obligations. Unlike many of the others who share responsibility for the accident, we are meeting our responsibilities and have now spent over $7 billion compensating those who suffered in the spill, investing in the Gulf states, supporting fishing and tourism and monitoring long term impacts. I am pleased that our partners and contractors Mitsui and Weatherford have also accepted their obligations and contributed to the response funds. We expect other responsible parties to meet their obligations as well and I find it hard to imagine that they will not pay an appropriate share.

For our part, we need to carry on showing the character we have demonstrated over the past year, patiently going about the daily work of delivering safe operations and laying those strong foundations for the future. And because we are a company that has strong principles and – most important – thousands of people with great capability and commitment, the entire BP leadership team is confident we will depart 2011 with momentum.

Every day, together we are turning around the fortunes of the company and it is this continuing focused and disciplined effort that will restore BP’s fortunes.

Thank you all again for everything you do for BP.

With best wishes,

Bob Dudley

1 Comment

  1. Tommy

    I don’t think there is a tougher job out there than trying to sway public opinion and instill confidence in shareholders for a company that has been portrayed as the poster child for everything bad about the oil & gas industry.

    #1