Australia's Woodside Petroleum cuts 2006 production target - MarketWatch

Update: 5:01 ET Jun 20, 2006
PERTH (MarketWatch) -- Hit by setbacks at home and abroad, Australia's Woodside Petroleum Ltd. (WPL.AU) said Tuesday that it has cut its 2006 production target by 5%.
The worse-than-expected revision was mostly caused by the poor start to Woodside's US$750 million Chinguetti oil project offshore Mauritania.
Woodside chief executive Don Voelte blamed the rest of the cut on project delays in Australia, hurricane-related problems in the Gulf of Mexico, along with cyclone shutdowns earlier this year on the North West Shelf, offshore Western Australia.
The revision, to 72 million barrels of oil equivalent from 76 mmboe, is "disappointing and the accountability lies with our management team", Voelte said.
Shares in Perth-based Woodside fell 2.3% to A$40.95 as investors digested the downgrade, which was worse than market expectations of around 73-74 million boe.
Hardman Resources, a minority partner in Chinguetti, was also hit with its shares down 4.4% to A$1.53. The overall market fell 0.8%.
The new target is still 21% higher than Woodside's 2005 production and the growth outlook over the next few years remains "strong," Voelte said.
Operator of the big North West Shelf liquefied natural gas venture, Woodside is trying to nearly double its oil and gas production by 2009.
It also plans to dramatically increase LNG exports early next decade via its 100%-owned Pluto development, which some analysts forecast may cost around US$6 billion.
Woodside's production issues highlight the intense cost and workforce pressures in the petroleum sector as companies try to bring on stream more projects to capture high oil prices.
"It is symptomatic of the industry right now - everyone is trying to grow in a challenging environment," Morgan Stanley energy analyst Stuart Baker told Dow Jones Newswires.
On Monday, Woodside warned that cost pressures are evident at the current A$2 billion North West Shelf expansion, due to a tight engineering and construction market.
Woodside's adjusted forecast came in lower than Morgan Stanley's estimate of 73.3 million barrels, Baker said.
"But it is no surprise that it has fallen away since the Chinguetti problems came to light," he said, adding that there is still "some risk" to the forecast as projects coming on line in the second half need to meet expectations.
A Woodside spokesman declined to predict what effect the production hold-ups will have on sales.
"We don't publicly forecast revenues - the impact will be known when we present our 2006 results," he said.
Chinguetti accounted for the "larger part" of the adjustment, he said. Lesser amounts were caused by delays at the Enfield (oil) and Otway (gas) projects in Australia, followed by the Gulf of Mexico and the North West Shelf, the spokesman said.
Chinguetti, Woodside's first attempt at operating a major overseas oilfield, came on line in February.
It was forecast to produce 75,000 barrels per day, but problems at two wells have caused production slump to around 40,000 barrels/day in recent weeks.
"Chinguetti has not performed as well as we initially expected," the spokesman said, adding that Woodside has plans to lift production by drilling up to three new wells in the coming months.
Woodside had expected the problems at Chinguetti, along with the Otway gas project offshore Victoria state, to be mitigated by an earlier than expected start-up of it's 100,000 barrels/day Enfield oil project offshore Western Australia.
But Enfield's floating production vessel had to be sailed to Singapore for repairs after a winch wire broke last month.
The company now expects first oil from Enfield in August, still ahead of its initial planned start date in the fourth quarter.
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