Woodside to Reduce Operating Costs by A$250 Million

Woodside Energy Ltd. plans reductions in total operating costs, including expenditure managed on behalf of joint venturers, rising to 20% per year by 2005 as a result of its Profitability Enhancement Program.

Total net savings in operating expenditure, as compared to 2002, are estimated at A$250 million between 2003 and 2005. This result includes implementation costs of A$35 million over the three years. About A$60 million of the total net savings in operating costs is Woodside share in that period. The balance of A$250 million will flow back to joint venturers as savings to them through cost-sharing arrangements.

The program, instigated at the end of 2002, is part of Woodside's business strategy of optimizing current production, accelerating new projects and growing reserves through exploration.

In addition to savings in operating expenditure, at least A$300 million in savings in capital and exploration costs have been identified over the next three to four years. These savings will be achieved through improved delivery of currently planned project development and exploration activity. Between 40%-45% of this, or between A$120 million and A$135 million, will flow directly to Woodside.

Woodside's Director of the Profitability Enhancement Program, Jack Hamilton, said the company aimed to achieve a 20-30% improvement in efficiencies through working smarter with greater cost discipline. Savings have been identified ranging from 10-40% across different areas of the company's activities.

"The savings initiatives, some of which have been implemented, include improving and simplifying business processes, an organizational restructure, and new approaches to working," Dr Hamilton said. Examples include improved approaches to strategic procurement, drilling and internal processes such as human resource management.

About 300 jobs from current activities will be lost over the next two years as a result of the program through natural attrition, redundancies and re-deployment.