'Dreadful' performance prompts BP restructuring

Oil giant BP today confirmed plans for a restructuring after the group's new boss spoke of the group's "dreadful" performance.

The firm said it will outline details of the overhaul before its third quarter results next month.

A Financial Times report today suggested BP's new chief executive Tony Hayward had told staff of the overhaul amid warnings that the group's latest set of figures would be "dreadful".

But BP said today that Mr Hayward was preparing staff for poor operational performance results rather than a significant hit to profits.

BP is reportedly planning to streamline the management structure, although it is unclear what impact the restructure will have on jobs.

Mr Hayward, who took over from former BP head Lord Browne in May, outlined aims to trim the number of management layers from 11 to around seven at a staff meeting in Houston late last week, according to the FT.

A BP spokesman remained tight-lipped on details of the organisational shake-up, but said: "We will be doing some restructuring and we will be describing it to our organisation next month."

BP has been dogged by a series of production problems since the start of the year, with unplanned maintenance stoppages at its refineries and lower output.

The group said at its last set of results that operational performance and production output were "not good enough".

The second-quarter figures, posted in July, revealed a slight fall in profits to £3bn (€4.28bn), with production down by 5%.

Profits for the six-month period were down 8% after low oil prices at the start of the year, but rocketing oil prices in recent months are not expected to have helped lift profits.

Mr Hayward is understood to have said in last week's Texas meeting that BP's current problems are also partly down to its unwieldy structure.

Analyst Richard Griffiths of Evolution Securities said any management restructure at the group could herald "seismic" changes at the group.

He said: "When you say you'll de-layer an organisation, and want to cut management and middle management, implicit in that is that jobs may go or people will, in effect, be demoted.

"This will have big implications."

BP's apparent admission that the structure inherited from Lord Browne is not working is a further blow to the previous chief executive.

Once credited with turning around BP's fortunes, his tenure at the firm came to an abrupt end in May when he was forced to resign ahead of his planned retirement after lying to a court over his relationship with former partner Jeff Chevalier.

His last few months at the oil giant were also tarnished when BP was heavily criticised for safety process failings at its US oil refineries following a report commissioned in the wake of the 2005 explosion at its Texas City operation, which killed 15 workers.

Shares in the group were down 3% on today's news of the structural revamp and further operational difficulties.

Barclays Wealth equity analyst Paul Singer said the third quarter results, due on October 23, may mark the "low point in the group's fortunes", with results expected to start improving towards the end of the year.

"While we believe that BP has some short-term issues to overcome, we believe that BP is on track with its strategic targets," he said.