NEW YORK (CNNMoney.com) -- Tony Hayward will step down as chief executive of BP, the company announced Tuesday, amid ongoing outrage over the oil spill in the Gulf of Mexico.
BP said Hayward will be replaced by American Robert Dudley effective Oct. 1.
Like Hayward, Dudley is a long-time BP employee with more than 30 years in the oil business. A chemical engineer by training, Dudley was put in charge of the day-to-day leadership of the Gulf Coast clean-up operation in June.
Dudley's focus will likely remain on determining what went wrong and improving safety efforts. But BP said Tuesday that BP America President Lamar McKay would now lead the day-to-day efforts of overseeing the clean-up in the Gulf.
BP said Hayward will receive a year's salary amounting to $1.6 million but further details of his severance package were not disclosed.
Given his recent performance, compensation experts say he will probably not receive the lucrative cash bonuses or stock awards given to many outgoing executives at comparable U.S. corporations.
According to BP's most recent annual report, Hayward amassed a pension worth nearly $17 million in his 28 years of service, which is expected to be doled out in annual payments of more than $900,000. It is unclear however, if Hayward, who was born in 1957, will be eligible for retirement benefits before he turns 60 years old.
The company also plans to nominate him as a non-executive director of Russian oil and gas venture TNK-BP. Executives at TNK-BP said they did not know whether Hayward would replace an existing director, nor did they provide any details about what Hayward's day-to-day involvement in the business would be.
The announcement of the change in leadership came as BP reported a second-quarter net loss of $17.2 billion. The heavy loss was due to a $32.2 billion charge the company took related to the oil disaster.
The news ends weeks of speculation about management changes at the company responsible for what has been called the worst environmental disaster in U.S. history. It also presents an opportunity for BP to put a new public face on the company as it seeks to rebuild its reputation.
As the head of the company, Hayward became a lightning rod for public and political anger since the drill rig operated by BP exploded in the Gulf of Mexico in April. The disaster killed 11 workers and ruptured a well deep below the surface.
BP Chairman Carl-Henric Svanberg called the Deepwater Horizon explosion a "watershed" moment for BP, and added that the company had little choice but to make a management change.
BP has since managed to temporarily halt the flow of oil into the Gulf. But attempts to provide a permanent fix were delayed after Tropical Storm Bonnie prompted crews to suspend efforts to create a relief well last week.
BP executives said Tuesday that the company was proceeding with efforts to seal the well permanently, a process called "static kill" involves pouring mud and cement into the well from above.
The spill, which Hayward himself called an environmental catastrophe, has fouled large portions of the coastline in Louisiana, Mississippi and Florida. It has also crippled the Gulf Coast economy and led to a government-imposed moratorium on deepwater oil drilling in the region.
The company has already committed $20 billion to compensate individuals and businesses affected by the spill. But it still could face billions more in fines and legal costs associated with the explosion.
Investors have also punished the company. Shares of BP (BP) have plunged nearly 40% since the spill, erasing about $72 billion of BP's market value.
Hayward reiterated his remorse for the Gulf disaster Tuesday, but in what might be his one of his last public appearances, also defended his personal record.
"I sought to do the right thing and communicate openly and transparently," he said. "I believe that BP has shown what corporate social responsibility really means."
Since he was thrust into the spotlight, Hayward has made a number of high-profile gaffes that critics say illustrated his lack of sensitivity for those hurt by the spill. In May, he botched an expression of sympathy by saying he'd like his life back, a slip for which he later apologized.
Despite signs that BP chose cheaper, riskier drilling tactics before the disaster, Hayward is not expected to face criminal charges. Legal experts believe some mid-level employees at BP could go to jail though.
Hayward, who grew up outside London, joined BP in 1982 after completing his Ph.D. in geology at the University of Edinburgh the same year. After stints on BP projects in Europe, China and South America, he was made a company director and returned to London in 1997.
He moved up the corporate ladder in the years after BP merged with Amoco in 1998, creating what was then the largest company in Britain. He took over as CEO in 2007.
At the time of his appointment, BP was reeling from two other major accidents at U.S. facilities - an explosion at its Texas City refinery in 2005 that killed 15 people and a massive leak in Alaska in 2006.
Hayward defended the company's safety record under his watch on Tuesday, noting that BP has made "significant progress" despite the Gulf spill.