Woodside Petroleum has provided some telling insights into how it plans to achieve $800 million in productivity gains by the end of next year; as well as chopping 600 jobs, it has slashed the number of vendors supplying its Australian business from 3,000 to 800.
In its annual investor briefing today, the Perth-based oil and gas producer disclosed that its workforce has been cut from 4,100 full-time equivalent positions at the start of 2014 to 3,500 currently.
Woodside reaffirmed it will also invest in growth projects, ahead of a major decision on its key Browse floating LNG project.
Chief executive Peter Coleman told investors in Melbourne the company was committed to a "structural cost change".
Mr Coleman said the company was "ahead of the curve with controlled re-structuring”, saying the reduction in the oil price meant a structural change in the cost base was critical
Its productivity program is on track to deliver $800 million of benefits by the end of 2016, with $560 million of benefits realised in 2014.
The $800 million target includes $680 million of cost savings, as well as process improvements and other changes.
This includes reducing contract rates by more than 10 per cent, streamlining its standards to reduce or eliminate various products and services, and slashing its vendor base from more than 3,000 to about 800.
One extreme example was reducing the number of valve suppliers from 80 to one, which helped cut spending on valves by 40 per cent to $50 million.
Woodside has also slashed the number of third-party contractors working in the business from 295 in 2012 to 88 this year.
Mr Coleman said the energy giant remained on track for a mid-2015 decision on whether to start front-end engineering and design on Browse, while a final investment decision was due in the second half of 2016.
The company has also accelerated FEED studies on its Greater Enfield oil project off the Pilbara coast.
The oil and gas producer recently paid $US2.8 billion ($A3.7 billion) for a series of LNG assets in Western Australia and Canada from US energy giant Apache Corporation.
