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Woodside Freezes Wages, Cuts Budget After Oil Drops

By Angela Macdonald-Smith

May 1 (Bloomberg) — Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, said it will freeze salaries and has made “substantial” cuts in its 2009 budget as the global recession causes a slump in energy prices.

Uncertain economic conditions are making cost controls “critical,” Michael Chaney, chairman of the Perth-based company, said today in an address to shareholders sent to the Australian stock exchange.

Oil has dropped more than 60 percent since reaching a record $147.27 a barrel in New York in July. Exxon Mobil Corp., the world’s largest company by market value, yesterday posted its lowest profit in more than five years because of falling oil and gasoline prices, joining Royal Dutch Shell Plc and BP Plc in reporting earnings declines.

“The current downturn is providing challenges for businesses like ours,” Woodside Managing Director Don Voelte said in a separate address. He reiterated a full-year output target of between 81 million and 86 million barrels of oil equivalent, adding that profit this year will inevitably drop because of the decline in oil prices.

Woodside, 34 percent owned by Royal Dutch Shell Plc, boosted first-quarter output by 20 percent after starting fields in the U.S. and Australia, countering a drop in prices. It said last week it cut the 2009 budget by as much as 9.6 percent to conserve funds for liquefied natural gas expansion.

Salary Freeze

Woodside gained 0.9 percent to A$38.72 at 2:29 p.m. in Sydney trading. The stockhas advanced 5.5 percent this year, lagging behind the 9.2 percent rise in the exchange’s benchmark energy index.

Salaries for Woodside employees, except those being promoted, will be frozen for at least the next six months and possibly longer, Chaney said.

Woodside may need to raise more funds next year, Chaney said. The oil company’s overall funding costs are “relatively modest” and are mostly in the “middle single-digits,” he said. Funding requirements for 2009 have been largely put in place.

Woodside expects the LNG market to continue to expand for at least the next decade, growing by about 7 percent a year to about 400 million metric tons by 2020, up from about 180 million, he said.

Construction work on the A$12 billion ($8.7 billion) Pluto LNG project is 60 percent complete and may be 90 percent complete by year-end, Voelte said. The success of the Martell-1 exploration well in February “has increased the immediate case” for an expansion at the project, he said.

Exxon Mobil’s first-quarter net income dropped 58 percent to $4.55 billion, the Irving, Texas-based company said yesterday. The earnings decline was Exxon Mobil’s biggest since 2002.

Shell, Europe’s largest oil company, reported a 62 percent decline in first-quarter profit, to $3.49 billion on April 29. London-based BP said April 28 that its net income dropped 64 percent to $2.56 billion.

To contact the reporter on this story: Angela Macdonald-Smith in Perth on[email protected]

Last Updated: May 1, 2009 00:41 EDT 

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