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Bloomberg: Woodside Says Rising Costs May Lead to Asset Sales (Update2)

By Angela Macdonald-Smith

April 19 (Bloomberg) — Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, said rising costs may lead it to sell assets and scrap exploration ventures in riskier countries.

High levels of exploration and production are driving up costs, particularly in Western Australia, Chairman Charles Goode said today in an address to be delivered at the Perth-based company’s annual shareholder meeting in the Western Australian state capital. Woodside’s two largest proposed investments are the Pluto and Browse liquefied natural gas projects in Australia.

Woodside, 34 percent owned by Royal Dutch Shell Plc, yesterday said first-quarter sales jumped 25 percent after the start-up of the A$1.48 billion ($1.2 billion) Enfield oil field in Australia boosted output. The company produces in Mauritania and Algeria, as well as the Australia and the U.S., and explores for oil and gas in countries such as Kenya and Canary Islands.

“Woodside has a number of projects in development, so has heavy commitments on the capital expenditure side and on exploration,” said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. “It’s an industrywide phenomenon that the cost of funding new developments is rising. It’s only logical that something has to give.”

Shares in Woodside fell as much as 25 cents, or 0.6 percent, to A$38.90 on the exchange. They were at A$39.13 at 11:52 a.m. in Sydney.

`Shelved, Divested’

In exploration “you can expect to see those parts of the portfolio we consider to be of lower materiality, or no longer strategic, to be shelved or divested,” Managing Director Don Voelte said in his address, a copy of which was lodged with the Australian Stock Exchange. “You will see us increasingly target opportunities in the proven petroleum provinces.”

Spending on LNG projects such as Pluto and Browse is set to take priority over other areas. Woodside is due to approve the first phase of the Pluto LNG project about mid year. The project may eventually have two or three production units producing as much as 12 million metric tons a year, Voelte said. The Browse project, 50 percent owned by Woodside, may produce as much as 15 million tons a year, he said.

“As Woodside accelerates its spending on Pluto and Browse prudent management of our exploration portfolio and budget will be necessary,” Voelte said.

Woodside reiterated its February forecast that 2007 output will increase to between 72 million and 78 million barrels of oil equivalent as new projects start up.

To contact the reporter on this story: Angela Macdonald-Smith through the Sydney newsroom at [email protected] .

Last Updated: April 18, 2007 21:58 EDT and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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