Feb. 5 (Bloomberg) -- Woodside Petroleum Ltd. will lower its 2007 spending budget as revenue may fall more than A$500 million ($387 million) short of target because of lower-than-forecast output, Chief Executive Officer Don Voelte said.

The company, Australia's second-largest oil and gas producer, will trim the 2007 capital expenditure plan owing to production shortfalls from the Chinguetti venture in Mauritania, and the Enfield and Otway projects in Australia, Voelte said in a Jan. 1 e-mail to staff. The budget revision hasn't been disclosed by Perth-based Woodside.

The output forecast was reduced twice last year and Woodside in November pared the 2007 estimate by 11 percent to a maximum 80 million barrels of oil equivalent from the year-earlier target. Chief Financial Officer Mark Chatterji then predicted the company would boost spending on exploration and projects by 60 percent this year to almost A$4 billion.

``I have worked with Mark Chatterji over the holidays to revise the 2007 budget to ensure that the end-of-the-year 2007 debt gearing will be equivalent to our original approved budget that was based on higher production,'' Voelte said in the e-mail. ``This is a absolute must. The decisions needed to complete this task have been finalized. Once I consult with the board, the revised budget will be released.''

Shares in Woodside, which is 34 percent owned by Royal Dutch Shell Group, today rose 52 cents, or 1.4 percent, to A$38 on the Australian Stock Exchange.

Adjust Plans

Woodside needs to adjust spending plans to suit the reduction in forecast output, said Brendan Fitzpatrick, an oil and gas analyst at Aegis Equities Research Pty. in Sydney.

``After they revised their production down twice during the year I was starting to believe there would be some follow-on effects from the lower revenue streams,'' Fitzpatrick said. ``Everything needs to be balanced in accordance with the revenue streams.''

Woodside spokesman Roger Martin confirmed the statements were contained in an e-mail from Voelte, while declining to comment further. The under-performance of the Chinguetti and Enfield projects and a delay in the start-up of the Otway natural gas project have already been announced, he said.

``We would take the view that it's an internal note to staff,'' Martin said. ``We don't consider it to be a public document so we wouldn't really make any comment on it.''

Kenya Well

Woodside and its partners in an oil exploration venture in Kenya last month scrapped plans to drill a second well after the first, $80 million-plus well failed to find oil or gas.

The liquefied natural gas projects are the company's ``first priority,'' Voelte said. The North West Shelf venture's expansion project, the Pluto, Browse and Sunrise projects, and securing LNG supply in the Atlantic Basin are ``top of the list,'' he said.

Next in line are the Vincent, Stybarrow, and Enfield oil projects in Australia, the Neptune project in the Gulf of Mexico, and the Chinguetti, Tiof and Tevet oil projects in Mauritania, Voelte said. Exploration opportunities in Kenya, offshore Libya, deepwater Gulf of Mexico and offshore Australia will also be funded, he said.

``Just about everything else gets shelved or sold,'' Voelte wrote. ``Shelved means no bodies work the assets.''

In November, Woodside said it may spend about A$419 million on exploration in 2007, about A$2.3 billion on oil and gas projects and more than A$1 billion on the Pluto LNG project, assuming the company approves Pluto for development by mid-2007.

Woodside is due to release its full-year earnings on Feb. 21.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net.

Last Updated: February 5, 2007 01:43 EST