BP has had a lot of names over the years and has acquired quite a few. I would not be surprised to see the name BP, formerly British Petroleum, fade away once the oil spill cleanup is complete. The name most likely to survive is Amoco.
BP is in the midst of a major change. The oil spill has ruined their good name and the spill will be remembered for decade to come as the "BP spill." To get around this branding problem BP will have to change its name. In the south they are already experiencing customer boycotts and many service stations have canceled their contracts with BP and put up other brands to bring customers back. This trend could continue for a long time since the cleanup could take years. Every time a tar ball washes up on a beach it will bring back memories of the BP spill.
BP was originally called the Anglo Persian Oil Company in the early 1900s. After months of drilling dry holes in Persia the company was bailed out by Burmah Oil when they invested in the company. Exploration pressed on with the new investment and on May 26th 1908 they struck oil in Masjid-iSuleiman at 1,180 feet. The founder of the company William D Arcy had finally struck it rich or so he thought.
The company went on to find more oil in Persia but they had nobody to sell it to. They began to build a refinery in Abadan that would take their crude and turn it into usable products. Unfortunately they had to get the oil to the refinery and that required a pipeline. In 1908 building a pipeline across country meant lots of backbreaking work by men and mules. The raw pipe came from America and had to be pushed, pulled and drug across the harsh desert from the refinery to the oilfield. By 1914 Burmah Oil new subsidiary Anglo Persian Oil was near bankruptcy again. There were not enough cars in the Middle East to provide a market for the oil and the high sulfur content made the gasoline stink something terrible. That also prevented it from being sold as home heating oil.
Winston Churchill became their benefactor. Churchill believed the navy should run on oil and not coal and he believed the Anglo Persian Oil Company could be their answer to an unlimited supply that would help the navy protect British interests. Parliament passed a resolution supporting Churchill and the UK government became a major shareholder in the company. Two weeks later Archduke Ferdinand was assassinated and six weeks later Germany attacked France and the Great War had begun.
The term British Petroleum was actually used by a German firm as a way of marketing products in Britain. During the war the British government seized the companies assets and then sold them to Anglo Persian in 1917. Those assets included 520 stations, 535 railway tank cars and 1,102 road vehicles, four barges and 650 horses.
In the 1920-1930s autos became more popular. In 1921 there were only 69 pumps in Britain but by 1925 there were more than 6,000 with the BP brand. In 1935 Persia changed its name to Iran and the company became the Anglo Iranian Oil Company. The advent of World War II produced a lot of changes for Anglo Iranian.
After the war a wave of nationalism began that included Iran. The company nationalized the assets of the oil company in 1951 and immediately governments around the world boycotted Iranian oil. Within 18 months the Iranian economy was in ruins. They eventually allowed a consortium of companies including Standard Oil of Indiana and others to run the oil operations in Iran. The Anglo Iranian stake in this operation was 40%. The agreement between the Shah of Iran and William Darcy ended and the board formerly changed the company's name to British Petroleum in 1954.
Oil companies were in exploration mode around the world but they were not finding much oil outside the Middle East. BP explored in Malta, Australia, Papua New Guinea with little luck but was more successful in Nigeria, Libya and Abu Dhabi.
BP spent a decade drilling wells on the North Slope of Alaska but was about to give up. Their equipment was already packed and waiting for a freighter to pick it up for shipment but a strange thing happened. A rival consortium consisting of Atlantic Richfield (ARCO) and Humble Oil (Exxon) made BP an unusually extravagant offer for BP's Alaskan acreage. BP realized they must have found oil and immediately went back to work exploring again. In 1969 BP hit pay dirt in one of the biggest oil finds in North America. Decades later that field is still worth untold billions for BP.
The 1970s saw the discovery of the Forties field in the North Sea and BP eventually produced 400,000 bpd from that field. The Alaskan pipeline was completed and nearly 2 million barrels per day was suddenly available to west coast refineries. BP did not have enough capacity to refine the Alaskan oil. In order to partner with Standard Oil of Ohio BP took a 25% share of the company. BP's stake in the company grew over the years and BP eventually bought the remaining company in 1987 to form BP American.
In the 1990s BP and Amoco merged to form BP Amoco. ARCO, another rival was taken over by the newly formed BP Amoco. Castrol and Aral would also join the group. BP was snapping up competitors and their assets in record time. BP evolved into a global energy company with assets in every major commercially available geography in the world.
The Amoco name could be the name BP chooses to move it into the next decade. Amoco is still a prominent brand in the U.S. and one that has a rich history. Whatever name they choose the company will not be run by Tony Hayward.
Tony Hayward may get his life back but he may spend most of it in Russia. The BP CEO may be offered another position on Tuesday but he may not accept it.
After working 28 years for BP and rising to the level of CEO, Tony Hayward may be asked to move on because of his handling of the Gulf oil spill. With a severance package reportedly to be in the neighborhood of 12 million pounds he will have plenty of time and money to attend the yacht races. However, he may not be terminated completely.
The BP board may offer him the non-executive job of managing TNK-BP, a joint venture with Russian partners. BP gets 30% of its production and 10% of its profits from the TNK venture. It does not come without problems. The past CEO of TNK-BP, Robert Dudley, was driven out of Russia by the partners literally in fear of his life. His visa was canceled and he was not permitted back into the country.
The war came over different ideas on how to manage TNK-BP. Dudley wanted to reinvest the profits to upgrade production and infrastructure to make TNK even more profitable and the Russian partners wanted to take the profits out of the company. The clash was high profile and lasted for several years before Dudley was forced to leave the country.
If the BP board offers Hayward the job of TNK manager there is a good possibility he will not accept it. After all, what is his growth path from there? He is not going to be brought back as CEO of BP again so basically the posting is to keep him on the payroll until all the cleanup issues are resolved in the U.S. then they can let him go. They don't want to terminate him today because that would create a hostility factor that could go badly when he is forced to testify. It is better to have him on the payroll somewhere and beholding to BP for his income.
Amazingly the new candidate for the CEO position is Robert Dudley. He has been president/CEO of multiple BP enterprises since he joined the company through the Amoco acquisition. He is no stranger to stress and has worked through multiple events that would have sent lesser managers running for cover. Dudley is also an American so he will be better able to communicate and understand American concerns over the oil spill cleanup.
These changes should be formerly announced with the BP earnings at 2:AM ET on Tuesday. Nothing is cast in concrete and these are just rumors making the rounds Monday night.
This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.
Subscribe to Energy Picks Newsletter