By Liam Denning and Matthew Curtin A DOW JONES COLUMN You know your company's in a hole when the man viewed most likely to be the next chief executive is lauded for his twang. There is likely some marginal PR value in Robert Dudley's American identity as BP tries to rebuild its reputation in the U.S. Fortunately, Dudley has a bit more than his accent going for him as a candidate for CEO, not least his experience of managing tricky situations at the frontiers of BP's business. Besides running the response to the current crisis in the deepwater Gulf of Mexico, Dudley has also run operations in Russia. It is this latter experience that raises difficult questions. As CEO of the TNK-BP joint venture, Dudley was sent packing in 2008 when relations with Russian partners hit a low point. Might his appointment soothe nerves in the U.S. only to jar them in a country which also accounts for 25% of BP's oil and gas output? There is reason to think not. Having secured more influence at TNK-BP during the 2008 bust up, BP's Russian partners are now likely to want to preserve the status quo. Attacking Dudley could raise the prospect of BP selling out to a state-linked group like Gazprom. No prizes for guessing who would be the junior partners in that relationship. If Russia proves quiescent and the acute phase of the U.S. disaster is ending, any new CEO at BP still has much work to do. Incumbent chief executive Tony Hayward was riding high until the Deepwater Horizon explosion undercut his self-proclaimed "laser" focus on safety. Convincing outsiders that BP can operate safely will be tough and can only be achieved over time. But to demonstrate willing, a new CEO could make changes that address challenges BP faced even before disaster struck in the Gulf. If a new CEO is announced Tuesday, alongside second-quarter results, BP will likely take an outsized provision for disaster-related costs to provide its new leaders with a protective cushion. In addition, the earlier suspension of BP's dividend provides latitude to reconfigure the investment case. Like most majors, BP's scale has not won it a higher multiple for its stock, as it has struggled to grow and reinvest profitably. Buybacks and dividends haven't fired investors' enthusiasm either. However, the pressure to milk mature assets for cash to fund the dividend is now reduced. Moreover, the company is raising $7 billion by selling various assets to Apache Corp. at a net asset valuation per barrel twice that of the rest of BP's portfolio, according to Credit Suisse. Embracing a broader strategy to shrink BP in this way could provide a compelling reason to own the stock again and demonstrate a willingness to make concrete changes. Dudley surely knows that mere words, however they are pronounced, will not suffice to lift the cloud that hangs over BP today. (Liam Denning joined The Wall Street Journal from the Financial Times, where he wrote for the Lex column. Previously, he was an investment banker at Goldman Sachs. He can be reached at 212-416-3618 or by email at liam.denning@wsj.com) (Matthew Curtin has been a financial journalist since 1990, and has written on international finance and business for Dow Jones Newswires-from South Africa, Singapore and France-since 1994. He can be reached at +331 4017 1746 or by email: matthew.curtin@dowjones.com) (TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) (END) Dow Jones Newswires July 26, 2010 13:14 ET (17:14 GMT)
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