Australia’s Woodside to reduce spending by 20%, citing weak oil markets

By JAMES PATON
Bloomberg

Woodside Petroleum, Australia’s second-largest oil and gas producer, cut its spending plans by about 20%, joining global energy companies in trimming costs after a plunge in crude prices.

Woodside expects to spend about $6.2 billion in 2015 with low oil prices expected to continue for an “extended period,” the Perth-based company said today in a presentation after posting a 38% gain in full-year profit.

It wrote down the value of oil and gas assets last year by $196 million.

The slide in crude prices has forced the industry toreduce more than $40 billion in spending and lower the value of their oil holdings. Santos, Australia’s third-largest oil producer, is slashing spending, cutting jobs and considering asset sales to cope with the downturn.

Even after its $2.75 billion agreement in December to purchase stakes in Apache Corp. assets, Woodside has a strong balance sheet that may allow the company to make another acquisition and take advantage of low crude prices, according to a Feb. 18 report from Goldman Sachs Group.

Woodside has $6.8 billion in cash and available debt to fund expansion, according to the presentation.

Woodside’s Pluto gas project in Western Australia started exports to Asia in 2012, boosting revenues. The company has recorded more than $10 billion in free cash flow in the last three years, it said today.

The company also scrapped a deal last year to buy a stake in Israel’s Leviathan gas development for as much as $2.6 billion, while its $2.7 billion plan to buy back stock from Royal Dutch Shell was blocked by shareholders.

Woodside said in January it would write down the value of assets by as much as $400 million.

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