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Woodside Petroleum Cuts 2008 Output Forecast

Australian oil and gas producer Woodside Petroleum cut its 2008 production forecast by up to 20 percent on Thursday, citing recent asset sales and slow start-ups at new projects, driving its shares down as much as 5 percent.

Woodside told investors at a presentation that it now sees 2008 production of between 80 million and 86 million barrels of oil equivalent (boe), down from guidance it gave last year of between 95 million and 100 million boe.

It also sees little growth in 2009 and 2010 before a jump in output as its A$12 billion (US$11 billion) Pluto liquefied natural gas (LNG) project off the coast of western Australia comes online.

"The downgrade would be disappointing for those who were expecting a much better performance next year," said David Lennox, an analyst at boutique investment firm Centric Wealth. "But with Woodside, it really is its longer-term production profile that makes the firm rewarding for investors."

Shares in Woodside fell to as low as A$49.31 before recovering slightly to be down 4.1 percent at A$49.86 in the late morning session.

Chief Executive Don Voelte told investors the production cut was in part due to the recent sales of assets in Mauritania, West Africa, and the Legendre oil field off western Australia.

"The timing of new projects coming onstream has also affected our outlook. The Neptune and Stybarrow oil projects are coming online slower than the operator has advised earlier," Voelte said.

Field Delays

BHP Billiton last month revised the production start date for the 50,000 barrels per day (bpd) Neptune oil field in the U.S. Gulf of Mexico to the first quarter of 2008.

The field, in which Woodside has a 20 percent stake, was originally scheduled to begin production by the end of 2007.

The Stybarrow field off Australia, which has an expected capacity of 80,000 bpd and which is also operated by BHP Billiton, came online earlier this month.

Voelte said technical difficulties at the Vincent oil project off Western Australia also forced Woodside to develop the project in two phases, causing a delay in the field reaching its full production potential of 100,000 bpd.

"We are a little more conservative now. Previously, we have been too optimistic about start-ups and their production capabilities," Voelte said.

Voelte added that Stybarrow, Vincent and Neptune would be the last of Woodside's current generation of projects, and he does not expect to see production growth in 2009 and 2010 until Pluto comes online. Woodside is targeting first deliveries of gas from Pluto in late 2010.

Woodside said 2007 production would rise 4-5 percent from a year ago, helped by full-year output from Stybarrow and the Otway gas project in southern Australia, along with the start of several other projects, including the fifth tranche of its North West Shelf oil and gas field joint venture.

Woodside posted record production of 67.9 million boe in calendar 2006. It cut its 2007 forecast to between 70-71 million boe last month from an estimate earlier in the year of 72-78 million boe.

It said exploration expenditure in 2008 would be A$260 million (US$234 million), down from about A$465 million in 2007.

The company sold its Mauritanian assets to Malaysia's Petronas for US$418 million in September and sold its 45 percent stake in Legendre to Apache Corp for US$65 million in February.