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Embattled British energy giant BP Plc (LON.BP) posted a record $17.2 billion second quarter loss, Tuesday, dragged by Gulf oil spill costs, but soothed investors' concerns by announcing that it would replace its troubled chief executive Tony Hayward with Bob Dudley later this year.

BP reported a second quarter (April-June) net loss of $17.2 billion as against a net profit of $4.4 billion in the year ago period.

The company said it took a one-time pretax charge of $32.2 billion in the recent quarter related to the oil spill, billed as the worst environmental disaster in the US history. The charge includes provision of $20 billion escrow fund which BP had set up at the insistence of US President Barack Obama.

BP said it cannot estimate the final costs of the oil spill, especially future claims made by those affected by the spill.

Ever since Deepwater Horizon, an oil rig majority-owned by BP exploded on April 20, killing 11 people, and triggered the largest offshore oil spill in the US history, surpassing that of the iconic Exxon Valdez oil spill in Alaska in 1989, BP has been roiled by rising costs.

To date, BP has spent over $4 billion in terms of clean-up, contain and payout claims and grants to the states on the Gulf of Mexico that have been impacted by the spill.

This includes $165 million BP paid for settling over 52,000 claims out of the 105,000 claims it faces from people, businesses and organizations that have been impacted by the oil spill.

BP CEO Hayward said, Tuesday, that unquantified costs "are likely to be spread over a number of years, including any fines and penalties, longer-term remediation, compensation and litigation costs."

Market analysts have put BP's oil spill costs at anything between $30 billion and $100 billion, given the litigation and fines it's facing and said the company could be a vulnerable target of a hostile takeover from rivals such as US energy giant Exxon Mobil or French oil major Total S.A.

To stave off hostile bids, cover oil spill costs and ease debts, BP said it would offload some $30 billion of assets over the next 18 months. That includes the $7 billion oil and gas assets in North America and Egypt that BP had sold to American oil producer Apache Corp. earlier this month.

The company said it plans to cut its net debt to between $10 and $15 billion over a period of months from the $23 billion debt as on June.

The company also said it has set aside capital spending of $18 billion annually for 2010 and 2011, down from previously planned $20 billion, and would consider reinstating its dividend only in February 2011. Earlier, the oil spill forced BP to announce in June that it would suspend its quarterly dividend for the rest of the year.

However, BP shares soared as the company attempted to make a fresh start by announcing that its CEO Tony Hayward would be stepping down in October and would be replaced by second-in-charge Bob Dudley. At 11.19AM (BST), shares of BP were trading up 0.53 percent at 419.15 pence on the London Stock Exchange. The company's market value has fallen about 35 percent since the April 20 explosion.

BGC Partners strategist Howard Wheeldon said that though "provisions are higher than many of us expected," BP has "attempted to draw some kind of a line on cost implications of this crisis."

Moreover, the "first changes on the BP board are more than symbolic and will go a long way towards the goal of restoring US confidence in the company," Wheeldon said.

Redmayne Bentley analyst Nick McGregor said BP's charge is "bigger than expected" but not disappointing. The decision, McGregor said, signals that BP is "trying to draw a line under this and get Bob a clean sheet to move forward."

Agrees Ambrian Capital analyst Simon Hawkins. According to Hawkins, the charge is "slightly higher that we thought" but "overall, I think it should be taken as a positive moving forward."

"They have taken steps to draw a line under what was an unlimited liability. Together with the new CEO and strong financial position going forward, on the back of asset sales, this should provide some confidence," Hawkins said.

Arbuthnot analyst Dougie Youngson said BP opted for the bigger than expected charge because they're trying to "get most of the bad news up front and out of the way."

"We should see a better second half," Youngson said.

The analysts noted that excluding the spill charge, BP's performance was strong in the second quarter, with profits of $5 billion and operating cash flow of $8.9 billion, up 31 percent from the equivalent period of 2009.

Hayward, who began his career with BP 28 years ago as a rig geologist and took over as its chief executive in 2007, faced the toughest challenge of his life ever since the Deepwater offshore rig exploded, triggering the largest offshore oil spill in the US history.

Hayward, instead of firmly steering BP through its worst crisis and accepting responsibility for the oil spill, succumbed to self-denial and became the media's favorite whipping boy after a pulling off a string of public gaffes that included joining a yacht race, telling reporters that "I want my life back," trying to convince everybody that the oil spill was "relatively tiny" compared to the "very big ocean," and lying that the oil spill didn't result in "any plumes."

Hayward was also publicly rebuked by members of the US House Energy and Commerce Committee last month for "stonewalling" questions at a congressional hearing and of "kicking the can down the road" while US President Obama was openly critical of Hayward's inept handling of the oil spill disaster response, suggesting that Hayward would have already been sacked if he had worked for him.

Not surprisingly, the tabloid New York Daily News dubbed Hayward "the most hated and most clueless man in America" and BP chairman Carl-Henric Svanberg, who is Hayward's staunchest supporter, was forced to acknowledge that "Tony has made remarks that have upset people."

In comparison, Dudley, BP's senior-most American executive, has earned some credit for his diplomatic skills that helped BP soothe tension between the company and the US government and the various states affected by the oil spill.

Market analysts believe that Dudley's American accent and heritage will be advantageous from a PR perspective. As Dudley grew up in Mississippi, he has a "deep appreciation and affinity for the Gulf Coast, according to BP.

Following the announcement of his elevation, Dudley, who has been with BP since it bought Amoco in 1998, said, Tuesday, that though he does "not underestimate the nature of the task ahead," he is certain that the company's financial standing and its asset portfolio would help put back BP "on the road to recovery."

Meanwhile, Hayward, who acknowledged, Tuesday, that the oil spill was a "terrible tragedy" and he "will always feel a deep responsibility, regardless of where blame is ultimately found to lie," is set to receive $1.8 million or a year's salary in lieu of notice and pension of around $0.9 million a year. Hayward also retains his rights to shares under a long-term performance program which could eventually be worth several million dollars if BP's share price recovers. He will become a non-executive director of BP's Russian joint venture TNK-BP.

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