Woodside Adopts "Successful Efforts" Approach To Exploration

Woodside is planning a major growth thrust over the next few years. In preparation for this, Woodside advises that it will modify its accounting approach with respect to exploration costs effective the 2002 financial year.

This will align Woodside's treatment of exploration costs with the "successful efforts" approach adopted by most of the major exploration and production companies world-wide.

As a result of the changes Woodside will now expense the costs of drilling all exploration wells unless they result in the discovery of commercial hydrocarbons. All other exploration costs, including general permit activity and geological and geophysical costs will be charged to exploration expense when incurred.

The adoption of this accounting approach will result in a total one-off reduction to Woodside's accumulated exploration and evaluation costs of between A$700m and A$800m after tax, reducing the company's reported net profit for 2002 by that amount. The current year component of the adjustment to the accumulated exploration and evaluation costs is expected to be around 10% of the total. As part of the change, the area of interest basis employed for the capitalization of costs has been redefined from a broader geological basin, region or country to a field level. An area of interest will now be established only if commercial hydrocarbons are discovered. All subsequent costs relating to that area of interest will then be capitalized. In summary, the changes lead to a closer relationship between the results of the exploration and evaluation activity and Woodside's reported financial performance. It will result in lower carried forward exploration and evaluation costs and lower amortization charges in the longer term.

Woodside's Chief Financial Officer, Doug Bailey, said the change is an appropriate move for the company at this stage of its development.

"The change will have no impact on cash flow or Woodside’s ability to pay franked dividends", Mr. Bailey said. "It will facilitate easier analysis and comparison of Woodside's financial performance and financial position with international companies operating in the oil and gas industry."

The ratings agencies, Standard & Poor's and Moody's, have both confirmed Woodside's credit rating will not be affected as a result of the changes.