Sometimes, the noise can’t be tuned out.
BP’s chief executive, Robert Dudley, sent a memo to company employees last week saying that management would not be “overly distracted by short-term noise.”
That noise has been rather deafening recently.
Last year, BP, amid much fanfare, announced plans to explore the Russian Arctic with the national oil company Rosneft. Those talks unraveled this spring amid conflicts with BP’s existing Russian joint venture, TNK-BP.
The loss of the deal, which was a key piece of Dudley’s strategy for reshaping BP, was a humiliating blow.
Late last month, Exxon Mobil Corp. rubbed salt in BP’s wounds by announcing a deal with Rosneft to explore the same acreage. Exxon Mobil, however, structured the deal better for its shareholders than BP did. While BP had promised Rosneft a 5 percent equity stake, Exxon Mobil offered interest in several U.S. onshore plays. If Rosneft tries to renege on the deal, Exxon Mobil can use the U.S. properties as leverage, a bit of insurance BP didn’t have.
Then, with the ink barely dry on Exxon Mobil’s deal, Russian bailiffs raided BP’s Moscow office, part of a?$3 billion lawsuit by a small shareholder of TNK-BP unhappy over the Rosneft deal’s collapse.
Trailed by Gulf disaster
Meanwhile, BP continues to wrestle with the fallout from the Deepwater Horizon accident. Just last week, Halliburton filed a new lawsuit in state court accusing BP of negligent misrepresentation and defamation over the Gulf disaster that killed 11 rig workers. Halliburton claims BP gave it inaccurate information about the Macondo well that affected Halliburton’s cement job on the well.
A week before the Halliburton lawsuit, a federal judge in Louisiana ruled that fishermen and others who claimed harm to physical property from the spill could sue for punitive damages.
That greatly increases the amount BP may pay for the spill, a tab that already has run to tens of billions of dollars. The chance to win punitive damages means business owners may be less likely to accept a payment from the $20 billion claims fund BP established after the disaster.
It also puts more pressure on BP to settle the cases before they go to trial early next year.
Trying to move forward
This is where BP now finds itself: struggling to move forward and stuck wrestling with the specters of its past.
No wonder that BP’s shares are trading more than 40 percent lower than before the Deepwater Horizon disaster a year and a half ago.
Against these concerns, Dudley offers words:
“We are making real, solid and measurable progress to build the new foundation for a strong and successful future,” he said in the memo to employees. “Our objective is always to make the right decisions for the company and its shareholders.”
He said much the same in announcing the Russia deal last year, which clearly was the wrong deal for the company and its shareholders.
Dudley, like Tony Hayward before him, would like for BP to operate in silence, to stay below the headlines while it attempts to rebuild.
What Dudley sees as “short-term noise” is actually consequence. It is the real cost BP shareholders bear for a company that continues to stumble and has yet to show it’s addressed — or even acknowledged — the cultural failures that underlie years of disasters, including the Texas City refinery explosion and the Deepwater Horizon catastrophe.
Inside BP, executives may not be able to hear it, but amid the noise, there is a disturbing ring of truth, a reminder that BP still has much to do to fix its problems.
Loren Steffy is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at firstname.lastname@example.org. His blog is at http:/blogs.chron.com/lorensteffy. Follow him on Twitter at twitter.com/lsteffy.