John Browne’s recent announcement that he plans to step down as BP CEO at the end of 2008 came amid a flurry of rumor and speculation. There were reports he had hoped to escape the company’s mandatory retirement policies and stay on past the age of 60. In point of fact, he has managed to escape that policy to some extent, since he’ll turn 60 in February of 2008, 10 months before his planned departure.
But on top of the age question are current performance issues for Browne, who nevertheless has made quite a mark in his 11 years, so far, at BP’s helm. His retirement announcement came July 26 as part of a quarterly earnings conference. There, he outlined replacement cost profits of $6.1 billion, up 23 percent. Those are pretty nice numbers, but more on that later.
Browne took a struggling company in 1995 and built it aggressively. His acquisition of Amoco and later ARCO made BP the largest oil producer in the United States. The refining assets have been a good deal as well.
BP’s market value grew from $37 billion when he took over to nearly $260 billion now. Along the way he added Castrol to the BP fold, and made a success of the TNK partnership in Russia.
Shell a target?According to Britain’s Financial Times and other publications, Browne had an even bigger transformation up his sleeve — a merger with arch-rival Shell. Just how serious that plan ever became isn’t clear. It appears the idea was brought up to Shell leaders in the second half of 2005 and didn’t gain much traction. In any case, Peter Sutherland, BP’s chairman, is said to have shot it down, and the company later dismissed the idea as merely “scenario planning.”
Shell’s CEO, Jeroen van der Veer, refused to comment on a possible merger in his own press appearances a day after Browne’s, dismissing the reports as speculation not meriting a response.
Tensions with chairmanBrowne alluded to tensions with Sutherland in his press appearance.
“I want to make it clear there is no rift between Peter and me; ours is a very longstanding relationship based on mutual respect,” he said. “Neither of us is a pushover,” he continued, “and I may say that, in line with everything that we do at BP, mutual respect means having a good and vigorous discussion about things.”
As far as extending Browne’s tenure, it was apparent that some major shareholders were lobbying for him to be kept on. There were reports that he was lobbying them to lobby the board and that may not have helped him.
Sutherland, the chairman, was pictured as standing firm that the company’s retirement policy should apply to everybody. The Financial Times said that Browne was echoing Sutherland’s private words when he said at the July 26 conference that “a company isn’t about one person.”
Current troublesBrowne’s position was undercut by recent events that have shaken the company repeatedly. And while BP’s profit increase was pretty hefty at 23 percent, rival ExxonMobil announced a day later that its bottom line rose 36 percent and Royal Dutch Shell reported earnings that were 40 percent above the number a year ago. Then there was that 65 percent increase at ConocoPhillips.
Browne took some pointed questions at the news conference about whether the Texas City refinery tragedy, which took 15 lives, was representative of BP’s practices across the refining sector, an allegation Browne denied. But the big spill from the North Slope pipeline and other recent safety and environmental problems in Alaska didn’t help his credibility as far as rigorous maintenance practices.
Brown also came in for some questioning about BP’s billion-dollar investment in Rosneft, which is controlled by the Russian government and gained the old Yukos assets through what some said were shady circumstances.
On top of that, the hugely expensive Thunder Horse platform in the Gulf of Mexico continues to have problems stemming from damage sustained in last summer’s hurricanes. Leaks in two subsea manifolds mean it won’t be back in operation until the early part of next year. That’s far beyond the time BP originally said would be needed for the repairs.
Upstream production continues on a steady decline at BP, for four straight quarters now. This quarter’s liquids flow of 2,531,000 barrels a day was down by 88,000 barrels a day or 3 percent compared with the number a year earlier. Natural gas production declined slightly.
In the downstream end, with Texas City still hobbled, throughputs were down 10 percent compared with the figure a year ago.
As for Browne’s life after his long career at BP, he says he won’t spend it playing golf.
“I don’t believe in retirement,” he said after his announcement. “I think the idea, which was invented by Bismarck, seems to be a touch out of date. … I am going to leave BP, but I am not retiring. I am going to change jobs. I am absolutely hooked on business.”