BP’s new chief executive, Tony Hayward, will cut four levels of management to remove a "lack of clarity" at the oil giant which is expecting to report “dreadful” third-quarter results next month.
He said that, relative to its peers, BP's share price was performing at its worst for almost 15 years. The remarks surprised investors who drove the shares down by almost 3 per cent to 572.5p.
A BP spokesman refused to comment on whether the company will make redundancies but it is understood that Mr Hayward's remarks applied to both operational performance, but that revenues would be hard hit.
BP employs 96,000 total staff in 100 countries and last year reported like-for-like third-quarter earnings virtually flat at around $4.7 billion.
Mr Hayward said BP planned to simplify the business by cutting the number of layers of management between workers and the chief executive from 11 to seven.
He said: “There is massive duplication and lack of clarity of who does what. We will reduce the number of organisation units.”
Mr Hayward also said BP needed to change its internal culture and become less risk-averse.
“Assurance is killing us,” he said.
Mr Hayward made the remarks in a “town hall” meeting with middle management in Houston, Texas before circulating his comments in a confidential memo to staff.
BP reached a low point in the early 1990s, when oil was $18 a barrel and it held £8 billion worth of debt. It was hamstrung by a boardroom rift under former chairman and chief executive Robert Horton, and was forced to cut its dividend.
Analysts expect third-quarter revenues to be hard hit
Barclays Wealth said in a note to investors: "Hopefully, the third quarter may mark a low point in the group's fortunes as the fourth quarter is expected to be better as several upstream projects come on strream and capacity is restored at Texas City and Whiting."
The fourth-quarter is expected to bring an addition of 250,000 barrels per day of production from the start of Atlantis, as well as other projects in Angola, Trinidad and the Gulf of Mexico.
But in the US, three of BP's five refineries are either not fully operational or production has been suspended.
At BP's Texas City refinery, where an explosion in 2005 resulted in the death of 15 workers, the plant is not yet up to full capacity but it is expected to reach 400,000 barrels-a-day by year-end and progress to full capacity of 470,000 barrels-a-day by 2008.
Its Whiting refinery, also not operating at full capacity, will be restored during the first half of 2008. However BP has not given a timetable when its Toledo plant will begin production after being closed for maintenance.
At the group’s interim results – the first since he was appointed chief executive – Mr Hayward blamed weak engineering skills for delays at the Thunder Horse and Atlantis oil production platforms in the Gulf of Mexico.
Mr Hayward, who recently took over from Lord Browne of Madingley, has been scrambling to restore confidence in the group’s operational record following the deaths of 15 workers at its Texas City refinery and an oil spill in Alaska in 2006.
The company has also faced problems in Russia, where, in June, the Kremlin tightened its grip on the country’s energy resources by forcing BP to sell Kovykta, one of the world’s largest undeveloped gas fields, to Gazprom.
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