Woodside shares dropped by 65 cents or 3.23% yesterday to end the day at $19.45. By midday Thursday Sydney time they had recovered to $19.51.

Woodside’s September quarter production report, released yesterday, revealed the group’s 2004 production target was now 57 million barrels of oil equivalent, down from 58 million barrels previously.

Woodside said the production shortfall was due largely to a profit-per-barrel formula that determined Woodside’s entitlement to oil from the Ohanet field in Algeria. The price of crude in the September quarter reduced the volume of oil to which Woodside was entitled but did not affect its revenue from Ohanet.

But volumes from the Laminaria and Corallina fields in the Timor Sea declined, reducing revenue from $170 million to $144 million. The Cossack field in the North West Shelf was also having problems.

Woodside has responded by increasing its exploration budget. It also said its sales revenue for the quarter was 11.5% higher than the same period last year and claimed its Chinguetti, Otway and Enfield projects were still all advancing within budget and on schedule for start-up in 2006.

But the biggest single problem was the suspension of operations at BHP Billiton’s Boodarie Iron Hot Briquetted Iron plant in the Pilbara. This has cut Woodside’s expected 2004 sales by as much as 1.9 million boe. If this plant does not resume production Woodside will struggle to meet its revised targets.

It was unfortunate for Woodside that the reduced production targets coincided with the departure of its CFO. Bailey will be leaving Woodside on October 31 ‘by mutual agreement’ in a move that took insiders by surprise.

His temporary replacement is Woodside’s treasurer Troy Hayden. Woodside has begun an international search for a new CFO.

Bailey was paid about $1 million a year. He was previously managing director of Ashton Mining, the Argyle diamond miner taken over by Rio Tinto in 2001.

This is the first high-profile management change under the group’s managing director of six months, former US oil man Don Voelte. Analysts have speculated that Voelte wanted his new CFO to also have a strong oil industry background (Bailey was previously managing director of Ashton Mining).

In another unfortunate coincidence, Woodside’s major partner in its offshore Mauritanian oil venture – Hardman Resources – also lost a senior executive on Wednesday. Managing director and founder Ted Ellyard stood down for health reasons.

Executive director Scott Spencer will stand in while an international search for a permanent managing director is conducted.

Woodside holds 53% of the Mauritanian Chinguetti oil development; Hardman holds 21%. Shares in Hardman dipped on Wednesday down 2 cents to $2.18, but recovered to stand at $2.21 on Thursday.