WHEN: TODAY, TUESDAY, JULY 27TH
WHERE: CNBC’S BUSINESS DAY PROGRAMMING
Following is the unofficial transcript of a CNBC interview with Incoming BP CEO Bob Dudley today on CNBC’s Business Day programming.
All references must be sourced to CNBC.
DUDLEY: Thank you Maria
BARTIROMO: Let me ask you about the update on the spill at this point. Is there any oil spewing into the gulf as we speak? How much confidence do you have in terms of the cap that’s on it now?
DUDLEY: No Maria, there hasn’t been any oil spewing in the gulf since the 15ht of July. The cap is on there; we just had a tropical storm come through, sort of a low impact bull’s-eye right over the sight. The cap retained its integrity. The rigs are back on there now working down in the relief well. We are setting up something called Static Kill next weekend, which could be to pump in heavy mud and cement in the well and we have the possibility of permanently killing it, say, by next Sunday. After that the relief well is right there if, and that’s the next step if we need to use that. I’m optimistic that we will see no more oil flowing into the gulf.
BARTIROMO: So what is your expectation in terms of containment and restoring the region? Tell me what’s next.
DUDLEY: So we are all over the gulf, working with the coast guard and I talk with Thad Allan several times a day, all over the gulf looking for oil that is on the surface. Of course now that the oil hasn’t been flowing for a while it’s harder to find. Traces of oil are still around the gulf and going on the beaches but we are going to be right there cleaning it up. We have tens of thousands of people ready for a response and then once we clean the beaches we will be into the marshes and this will be a long-term restoration of the gulf. We are fully committed to that.
BARTIROMO: You’re committed to that; what’s your long-term commitment to the region? I mean, you’ve said you’re going to be there beyond the time that people are talking about this. But here’s a situation where there are obviously fatalities, killed tourism, killed so many businesses. So what does that mean; you’re going be there? What’s your long-term commitment?
DUDLEY: So it is important for BP with what I think is unprecedented corporate response to follow through. Now that the oil has been capped we’ve still got work to do to make sure the beaches are clean, remain clean, and then we begin the restoration. That is in the best long-term strategy for BP for it to do business in the United States. It has a lot of business’ in the United States, has many many many thousands of people that work along the Gulf Coast; it’s in the fabric of the company. We want to be a good corporate citizen, we want to restore our reputation, it’s going to take time. We are going to learn from this accident, we are going to change many things in BP. We are going to, the industry is going to learn a lot for it; I think the entire Gulf of Mexico energy industry is going to be altered by this accident. We are going to find its people, judgment, individuals, multiple equipment failures, many companies involved, and we are going to make sure we share all that as well.
BARTIROMO: Tell me about the change you are expecting? There are, there have been so many people, who have said there is a problem with the culture at BP. Decisions at the top are not necessarily filtered throughout the organization to the person on the ground. So how do you change that culture of bureaucracy?
DUDLEY: Well, we must change. I’m not saying its bureaucracy; what you see is a response to accidents that have happened in the US about half a decade ago. They have been rolling through and we’ve paid fines and we’ve paid penalties. Three years ago when Tony Hayward t took over; completely changed the focus of the company on safe and reliable operations. Tremendous changes in the company occurred. I can have that perspective because I was out of BP for six years, seized another adventure and came in and saw big chances in the company. Now it is very clear that we have to accelerate those changes. Do a complete analysis of this investigation and look and see what we need to change in our own organizational structure and culture and we are going to do that quickly.
BARTIROMO: How do you empower people on the ground but also hold them accountable? Is there too much of a culture of cost cutting? Cut costs at any cost.
DUDLEY: Well, if you look at what are cost reductions have been in the last two years it’s mainly been in overhead, it’s not been in our operations. I don’t believe we are cutting corners in our operations at all. What I do know is that we got to understand this very complicated accident. BP has been drilling in the waters of the Gulf of Mexico for over twenty years; has had a very good safety record; but something about this incident with what we are learning about the well, what we are learning about contractors, it’s a very interesting testimony coming out of the marine board in New Orleans gives a lot of insight in terms of the reliance on equipment. And I think that is one of the things that everyone will look at in the industry.
BARTIROMO: So you don’t think cutting corners lead to the accident?
DUDLEY: I do not. I do not. The well design we used something called the long string, I’ve heard people say they wouldn’t drill that way, there’s a tremendous amount of wells in the Gulf that have been drilled that way. The evidence doesn’t suggest that’s an issue for example. No I don’t think its cost cutting at all.
BARTIROMO: Let me ask you about the relations with the White House. You said you were on the phone with Thad Allen several times a day? How will you improve relations with the White House and this administration?
DUDLEY: So through this incident we have an engineering command center down in Houston. Secretary Salazar, secretary Chu are down there frequently. We work with a number of cabinet secretaries. After the meeting that occurred on June 16th at the white house where BP stepped up and said we would escrow 20million dollars; put it aside, to make sure we meet our commitments. We put a certain amount aside for funding, research for the Gulf Coast; we put side money for rig workers who have been impacted from the moratorium. I think the level of cooperation changed at that point. We have access to be able to talk, we get feedback from them, what their concerns are, what they’d like to focus on, how we can improve our claims process. BP is not a company that is set up to have claims facilities. We are not perfect at it but we’ve got 35 offices across the Gulf Coast, we’ve written 250million dollars worth of checks already to the businesses already quite rapidly. And when Fienberg gets involved that will put a professional in that role. I think we are doing the things that the administration has asked us to do. We haven’t always done it has fast as they would like us to, but our cooperation wit the Coast Guard is very good and I think these are the things that administration does recognize.
BARTIROMO: Do you think that there are some in Washington. Whether it is congress or the administration who want BP to get destroyed to pay for this?
DUDLEY: I don’t think so. I mean the redder rick was very heavy a few months ago, and I think what the president has said and what officials now say often is, the last thing they want to do is damage BP, a strong and violable BP is in the best interest of the United States, it’s in the best interest of the Gulf Coast. We do have commitments. We’ve begun a program of divesting assets, we’ve gotten a some very good prices for some of those assets so far. We’ve announced today 25to 30 billion dollars of asset divestment program. It’s a very big number, you have to remember the asset base of BP is around 250billion so it’s about 10% of the asset base. But putting those aside, shores up our aquidity, shores up our cash, reduces our debt, and that combined with a very visible constant commitment to meeting our obligations to the U.S., I think will come out of it wiser and stronger and have a very strong business in the united states.
BARTIROMO: What other assets can you sell?
DUDLEY: Well, with the size of the portfolio BP has globally there’s places all around the globe. We’ll look at some places where assets may be more mature that may fit into other people’s portfolios better than ours. We just sold a series of assets to Apache which was Egypt, Canada, and the US. We’ve announced the sale of assets in Vietnam and Pakistan, it hasn’t gone forward yet, it’s just announced that we will. These are sorts of things in a global portfolio that gives us a great deal of flexibility.
DUDLEY: Alaska? Don’t know. We’ve been operating in Alaska for a long time. We’ve been committed to Alaska. We will see if there are people who have approached us and show some interest. We will see.
BARTIROMO: There’s a proposal out there that says there will be no new drilling by BP in the Gulf for 7years. How badly does reduced access to the U.S. impact BP?
DUDLEY: Well we have a lot of production in the Gulf, we have a lot of exploration anchorage in the Gulf today. We believe we are good explorers; this has been a terrible tragic accident. It’s going to cause us to reflect just as you’ve seen with the country stepping back and putting a mortitorium in place. So for us, we want to do business in the United States, we want to be a good corporate citizen in the United States, and I think if we meet our commitments, we show that and demonstrate that commitment, we take the learnings from this both in terms of what you can do subsea, in terms of a response, the spill response and the logistics across the beaches, we know a lot about this now and we wont to corporate with other companies and the regulators to make sure the United States is better safer place globally.
BARTIROMO: But is now a price that stays with you as a result of this tragedy? Do you become a junior player in the U.S.?
DUDLEY: I don’t think so Maria. We may readjust our portfolio in the United States for other reasons in terms of the character of assets but we have been a big player in the Gulf. We have been very successful at finding oil and gas in the Gulf of Mexico; I think that’s good for the U.S., I think it’s good for energy security. I think we intend to do that. We are going to hold ourself now to a very high standard and the pace of that will be determined by what comes out of this investigation and things going forward. And I think again, the whole industry is going to learn a lot about this very complicated accident.
BARTIROMO: Some people want to know, ‘look, why are you any different than the way Tony Hayward operated?’ I mean, you could say he was a PR disaster, maybe operationally the leadership did not filter down, obviously a lot of gaps, but some people would say he has become the most hated man in America. How are you any different?
DUDLEY: Well, I have great admiration for Tony. His commitment to t he corporate response in the U.S. and around the Gulf was evident from the very beginning. When you talk to Tony he says, “look I was the captain of the ship when a terrible accident happened.” And I think he and I worked together for a long time. I come from an Amaco and a BP background the world and I think I can follow on with that; knit the culture together, make the changes that need to be done with the management team here and I think the important thing is for a smooth transition to come through with BP.
BARTIROMO: So practically speaking what are the changes you are going to implement?
DUDLEY: Well, as you know, for three months I have been almost fulltime down in the Gulf Coast and Washington. So I am going to take time, learn from this accident, we are definitely going to change the company’s culture around safety and we are going to learn from it. We will undoubtedly reorganize the company to ensure that happens and then take time, look at the portfolio, company will be a smaller company, have a higher quality set of assets with growth potential and then it is up to the board t o decide but I think then we will be able to in 20-11 look again at restoring the dividend; we’ve suspended it for three quarters as you know.
BARTIROMO: And of course so many people are impacted by this; talk to the pensioners our there who would like to know when that dividend would be reinstated.
DUDLEY: It was the right thing to do at the time because we, and no one, had a clear size of the liabilities at that time. The well was flowing, no the well has been capped we have a better estimate that we put on our books in terms of liabilities. I think we are beginning to see the size and the shape of the liabilities that should give everybody confidence that the company can get back on its feet and restore itself both financially and reputationlly. It will take time though.
BARTIROMO: But can you really put a number on it? I know you did, but how do you know? You don’t know about class action lawsuits, you don’t know necessarily how these investigations will play out, if BP is found to be negligent and solely responsible here. So can you really say what the liabilities are?
DUDLEY: Maria we’ve seen nothing that indicates we’re grossly negligent in any way. If you look at the marine board testimony last week, you begin to get an idea why we believe that. If we thought we were we would’ve put bigger numbers in terms of the liabilities. We think it’s a fair estimate- since the well has stopped flowing now, the impact on businesses- these are big numbers, there’s no question we put them aside. But now by selling the assets, rightsizing the portfolio for it, I’m confident we will be able to restore –we don’t know the exact numbers- but I’m confident we’ll get the ship righted again.
BARTIROMO: You face challenges in Russia, that business now, one of the most important for BP, what did you learn in Russia that can be helpful to you leading BP today?
DUDLEY: Well, I think the complexity of Russia- it was a fascination of changing a business completely and the culture of the business. It created an international company from two different Russian companies in BP and created quite an extraordinary vehicle of business that continues on today. And I just spoke to the owner of the Russian business today Michael Friedman, we had a good talk, ill be visiting him shortly. I think those experiences is a complicated organizational change, change in culture, and then also understanding the needs of both local communities and federal governments which was a lot of what I worked with in Russia-for completely different reasons apply it to the U.S. I think that the commitment by BP to the Gulf Coast, the people, the local communities, the states, and then Washington is going to be able to-and I’m going to make sure that BP has that commitment.
BARTIROMO: Which is also what you have to do on the ground in the Gulf with governors as well as your contacts in Washington.
DUDLEY: That’s exactly right. Cause communities along the coast have been affected and we cannot ignore that. We have to look at multiple layers at meeting these commitments.
BARTIROMO: What do you say to the critic who says “this is not a clean sweep, you’re an insider and now you are running the company. How are you going to actually affect change in culture?”
DUDLEY: I think it is a very large global portfolio. I know it well, I know the people across the company. I worked for twenty years with Amaco, then I was in Russia, now back with BP-I believe that experience will come through the many people—this was a difficult accident for the people in BP. They get up everyday, they’re very proud contributing to the energy industry and this has really shaken the company is ready for change. They want to get back on their feet and rebuild a reputation. And I think someone from outside might have a more difficult time doing that.
BARTIROMO: As part of the rebuilding of the reputation is a name change in the offing? Do you want to go back to BP Amaco?
DUDLEY: We haven’t talked about that. What we are doing right now-shutting off the well, cleaning things up; we haven’t thought about that. I mean the BP brand globally is very strong. There is no question we are going to associated with this incident in the united states for a long time but I think Maria it is a bit aspirational but down the road when people see you know what, this company actually responded on a massive scale to a tragedy that is quite unusual. And then the seats of rebuilding our brand may be there.
BARTIROMO: This is a massive undertaking and a moment ago you said ‘it will be a smaller company, more quality assets,’ what are the assets that are most important?
DUDLEY: Well I think you have to have a mix in the portfolio. You have to have some high margin assets that are stable, production assets for example,--the growth is a mixture of all three. We have some very large production in the Gulf of Mexico, we are the largest producer in the Gulf of Mexico, we’ve got exploration portfolios in the Gulf, and we’ve got some of them mature-later life projects in the Gulf. So it is quite an interesting mix of assets, we need to have a company that has that mix across the world so that it can continue to grow, can continue and sustain an dividend so that it has a long term sustainable future. BP has a quite quite interesting portfolio globally. We need to slim it down a little, it’s not a direct slashing of the company, slim it down put that growth projectory back in, do this balancing, and meeting our commitments in the U.S. and I think the company will be wiser and stronger down the road.
BARTIROMO: Do you worry that you will have less access to the Gulf?
DUDLEY: I think there will be a time where we will hold ourselves, as I mentioned, to a higher standard and it is a possibility that the U.S. will. We have a very good set of producing assets, fantastic ones here, and we have good exploration success out in the deeper waters of the Gulf. That’s very valuable to the United States. It’s very valuable to BP. How we decide to go forward with it, it is too early to say, we are going to take our time. But we have a very very good prospective business in the Gulf of Mexico. We just now have to meet our commitments there I’m sure to be able to move forward with that.
BARTIROMO: How important is Libya to you?
DUDLEY: Libya is an exploration project, there’s been a lot of speculation about it in the past, we wouldn’t have had that project in Libya had Libya not reopened and normalized this relationship with the West, a lot of European companies, a lot of American companies that are now in Libya; its an exploration project for us.
BARTIROMO: What have you learned?
DUDLEY: What have I learned about this? Maria I have learned many things, one is, it may sound tripe, incredible perseverance and dedication with people in BP who have responded to this spill. We’ve got a thousand people across the Gulf Coast that came from Alaska, California, Ohio, Chicago, some of them still in their suitcase from 85days ago. The dedication from the people to this to make it right, fundamentally and deeply is something that has been quite astounding to me. It makes me very proud. That’s the sort of dedication to a company and the values of the company that just reinforces for me that we are going to get through this, we are going to make it right and we are going to come out of this a stronger company.
BARTIROMO: Will the 20 billion dollars that the Obama administration asked you to put together, is that going to be enough or is that number going up?
DUDLEY: Well who knows. There’s a claims process’, the admittance to the claims process’ for business’, we will undoubtedly have fines, clean water act fines, we got state and local claims, for their spill response; that number is a big number. And we put on the books today an estimate of liabilities that that plus more is a little bit more. I think that for what we know today, that is a good number. That number does not include contribution or restitution from any of our partner projects which is also something we will pursue.
BARTIROMO: Bob, would you like to add anything else?
DUDLEY: Maria, I would say that this is something that is not an incident for a single company. This is a wake up call or the energy industry globally. I think it is important that a company like BP and there are other big companies, there is few that could respond like this. We want to get back in terms of being a good corporate citizen in the United States. We want to share this learning all around the world and we need now to move the energy industry and the deepwater industry closer to having better fail-safe equipment so this never ever happens again.
BARTIROMO: Do you feel that the maintenance was there at BP?
DUDLEY: Well Maria, what I think we are going to learn as these investigations continue plus our own internal investigations and what’s coming out in these trials is that maintenance of equipment, much of it not managed by BP, decisions by individuals who maybe didn’t see warning signs as an incident unfolded has created a very low probability high impact event and we need t o make sure that that will never happens to anyone ever again
BARTIROMO: Good to have you on the program, thanks very much.
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