Woodside Petroleum will slash spending and is expected to cut its dividend as plummeting oil prices hit revenue.
Prices have halved in the past six months, contributing to a 10 per cent slump in Woodside's sales revenue in the final quarter of 2014, to $1.76 billion.
Oil has continued to sink in recent weeks, hitting a five-year-year low on Wednesday.
"In light of the current challenging market conditions which has seen crude oil pricing decrease, Woodside is assessing the impact on near term profitability and cash flows, and revising investment expenditure accordingly," the company said on Thursday.
Australia's largest oil and gas producer plans to provide a further update of that review in February.
Woodside received an average of $US77 a barrel for Brent crude in the December quarter, down 25 per cent from more than $US103 per barrel in the September quarter.
Prices have dropped significantly since then, below $US50 per barrel.
Analysts don't expect the December quarter oil price falls to significantly impact Woodside's 2014 profit, with revenue for the calendar year up more than 22 per cent.
But they say any price recovery is likely to be slow.
Ongoing oil price weakness could lead to impairment charges and job losses, Fat Prophets Resources analyst David Lennox said.
"Woodside's full year result will be impacted positively on volumes but revenue is going to be a challenge," he said.
"If Woodside wants to maintain the same level of dividend it may have to borrow, but I would suggest they just take it on the chin."
RBC Capital Markets analyst Andy Williams said dividends would be affected if revenue declines.
"If the oil price is lower then it's going to impact revenue generation which should translate to less profit and should translate to a lower magnitude of dividend," he said.
JP Morgan researchers estimate Woodside's 2015 dividends could fall sharply, to 64 US cents per share if oil prices stay around $US50 a barrel, from an expected $US2.58 in 2014.
Woodside currently pays 80 per cent of its impairment adjusted profit in dividends.
It expects impairments for full year 2014 to be in the pre-tax range of $250 to $400 million.
Production in 2014 was a record 95.1 million barrels of oil equivalent (mmboe), was up 9.3 per cent from 2013.
Woodside shares were down 47.5 cents at $35.065 at 1500 AEDT.
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