Woodside Petroleum : 16.08.2017 Half-Year 2017 Results - Teleconference

ASX Announcement

Wednesday, 16 August 2017

ASX: WPL OTC: WOPEY

Woodside Petroleum Ltd.

ACN 004 898 962

Woodside Plaza

240 St Georges Terrace Perth WA 6000 Australia

www.woodside.com.au

HALF-YEAR 2017 RESULTS -TELECONFERENCE

On Wednesday, 16 August 2017 at 7.30am AWST Woodside hosted a Half-Year Results investor and media teleconference.

The transcript of the briefing is attached.

Contacts: MEDIA Michelle Grady W: [phone] M: [phone] E: [e-mail]

INVESTORS Damien Gare W: [phone] M: [phone] E: [e-mail]

Company:	Woodside Petroleum Ltd
Title:	Half-Year 2017 Results presentation
Date:	16 August 2017

This document should be read in conjunction with Woodside's Half-Year 2017 Report and associated

presentation pack which is available on the company's website, www.woodside.com.au.

Start of Transcript

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Woodside Petroleum Limited 2017 half- year results presentation. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question and answer session, at which time, if you wish to ask a question, you will need to press star one on your telephone. Please be advised that this conference is being recorded today, Wednesday, 16 August 2017.

I would now like to hand the conference over to your first speaker today, the Managing Director and CEO, Mr Peter Coleman. Thank you, please go ahead.

Peter Coleman: Good morning, everyone, and thanks for joining us for our 2017 half-year results. As you would have seen already, we've released our half-year report and slide pack to the ASX this morning. Joining us on the call is our acting Chief Financial Officer, Anthea McKinnell. You'll see the standard disclaimer on slide 2, and a quick reminder that this presentation does include some forward-looking statements and that our reported numbers are all in US dollars unless we state otherwise.

If we go back, at our investor briefing day in May, we introduced to you three horizons outlining our plan to build and deliver shareholder value over the next decade and beyond. We've already begun to action those plans and today is a good opportunity to update you on our progress.

But, first, let's run through some of our achievements in the first six months of 2017. As you can see in the financial headlines on slide 3, our net profit was up some 49% to $507 million and our interim dividend for the first half was $0.49 per share. Operating cash flow rose 3% to more than $1.2 billion and free cash flow was up 170% to $445 million. We continued to reduce our unit production costs, down some 6% to $4.90 per barrel of oil equivalent, and our free cash flow breakeven price was $34 per barrel of Brent.

On slide 4, you can see that our reputation for operational excellence is underscored by the fact that our total recordable injury rate for the first half has dropped to a record low. Our facilities continue to perform strongly, with Pluto achieving several daily and weekly production records, and gas unit production costs at the North West Shelf dropping some 13% to $3.30 per barrel of oil equivalent.

Our ability to manage risk and volatility has been shored up by our low breakeven cash costs of sale at $9.60 per barrel of oil equivalent. We've executed mid-term sales and purchase agreements for up to 16 cargoes, for delivery from 2017 through 2019. Significantly, we finalised a long-term sales and purchase agreement with Pertamina which will see Woodside become a major supplier of LNG to Indonesia.

We'll get into more detail later in the pack about our prospects for near-term value growth, both in Australia and internationally. But you can see from this slide that Wheatstone commissioning is nearing completion, and we've progressed our plans for the Burrup Hub with significant developments in North West Shelf, Browse and Pluto. In Senegal we've completed a five-well drilling campaign and in Myanmar we have achieved strong flow rates on two appraisal wells with further drilling planned this year.

On slide 5, Woodside continues to focus on long-term performance and is delivering peer-leading results across key financial metrics. Here we've outlined EBITDA margins and return on average capital employed.

Slide 6 shows the rebalancing that we've been expecting is actually occurring as demand growth remains strong and inventories trend lower. We've been saying for some time that we expect oil prices to be range bound between $45 to

$60 per barrel. This leaves Woodside well positioned with the low breakeven price that I mentioned earlier.

On slide 7, you can see that, although the global LNG market is well supplied at the moment, we expect further growth in demand from Asia. The long lead times on projects mean that we'll need to get ready to meet rising demand over the next couple of years. That's why we're now working to progress the very lowest capital efficient projects that we can; low-cost developments that we expect will deliver increased production right when it's needed. That was part of our strategy out to 2021 across what we've called Horizon I.

Slide 8 outlines how that fits in with our mid to long-term plans for future growth that will deliver value to our shareholders.

With that as an opening, I'll hand over to Anthea to talk about our financials in more detail. After that, I'll just take you through the progress of some of our 2017 priorities.

Anthea McKinnell: Thanks, Peter, and good morning all. Our financial results for the first half of 2017 underscore much of what we discussed at our recent investor briefing day in May, including Woodside's capability as a low-cost, high- margin producer, ability to generate strong free cash flows and strong capital discipline. Let's start with slide 10 and a brief overview of our financial performance.

Reported profit for the first half was $507 million, an increase of 49% compared to the same period in 2016. Sales revenue was down in aggregate by $45 million on the previous period. Pleasingly though, higher average realised prices for the period, of $43 per barrel of oil equivalent, had a positive impact of $139 million on sales revenue. This was offset by the impact of lower sales volumes and the absence of one-off price review payments which were present in the first half 2016 result.

Lower sales volumes were attributable to lower LNG production, lower North West Shelf pipeline gas volumes as a result of changes in venture equity and customer demand, and operations discontinued in 2016. Production costs were

$33 million lower, in part due to the impact of discontinued operations, reduced equity interest in North West Shelf pipeline gas and reduced turnaround activity.

Exploration drilling for the half predominantly focused on exploration appraisal in Senegal and Myanmar. Overall exploration expense has decreased, principally due to lower well write-offs, lower general permit activities and lower seismic activities. Lower depreciation expenses also made a significant positive contribution to our first-half results. This was largely driven by reserve movements. These included greater Pluto developed reserves, increasing 19% at the end of 2016 following start-up of the PLA05 side track well, and the booking of Greater Enfield reserves following FID in June 2016, partially offset by higher production volumes from Okha FPSO and North West Shelf LNG.

Turning to slide 11, our focus on low-cost production has been a hallmark of Woodside's performance in recent years. The same structural cost reductions and operational excellence continue to underpin our cost base, as demonstrated by our unit production costs reducing 6% relative to H1 2016. We continue to target further operational cost reductions across our assets.

Slide 12, low production costs and high-quality assets underpin our gross margin of 48%, up from 43% in the first half of 2016. As Peter mentioned earlier, we continue to maintain a peer-leading EBITDA margin which is supported by a low cash cost of sales.

Moving to slide 13, the strong cash generated from our assets has allowed us to maintain our 80% payout ratio for the current dividend. We've declared a fully-franked 2017 interim dividend of $0.49 per share. This is a 44% increase compared to H1 2016.

Next slide, 14, looking at sources and uses of cash. Our strong operating cash flows have allowed us to fund the 2016 final dividend from free cash flow generated of $445 million for the half.

On slide 15, we maintained focus on our cost of operations and capital discipline and this allowed us to continue to produce our assets and invest in growth at an extremely competitive breakeven cash cost. This chart demonstrates our strong competitive position relative to our peer group.

Turning now to the balance sheet and slides 16 and 17, we continue to maintain a strong liquidity position of $2.6 billion at period end, consisting of available cash and undrawn debt facilities. Gearing at 24% has remained within our target range of 10% to 30%. Our portfolio cost of debt is currently a competitive 3.4% and we continue to diversify our sources of funding and manage our debt maturity profile as appropriate.

Finally, on slide 18, our estimated full-year total investment expenditure remains unchanged. Our expected full-year spend on Wheatstone has increased slightly. However, this is expected to be offset by a reduction in our base business expenditure. We're investing in near-term growth, with approximately 70% of total capital expenditure in the first half relating to sanctioned projects that are expected to underpin approximately 15% production growth between 2017 and 2020.

So it's been a strong half for us that's seen profit increase by 49%, a 44% increase in interim dividend, together with a reduction in our portfolio unit production costs. Our strong business performance and capital discipline are important contributors to the development of Woodside's growth portfolio, and with this in mind I'll now hand back to Peter to talk to the progress we've made on our 2017 priorities.

Peter Coleman: Great, thanks Anthea. We talked at the start of the year about our priorities of Wheatstone, Senegal, Myanmar and Pluto and of course in the first half of 2017 we added Browse to that list. On all of those developments we've seen good progress so far. At Wheatstone the platform and pipeline are fully operational and the final commissioning of LNG Train 1 is well advanced and nearing completion.

Of course Chevron is leading but we've had 25 Woodside people embedded to aid the safe and reliable start-up, and when fully operational Wheatstone LNG is expected to contribute more than 13 million barrels of oil equivalent to Woodside's annual production. That's one of our Horizon I projects which we've said are being developed over the next four years.

Senegal on slide 21 is another that falls into this category, targeting first oil in 2021 to 2023. It's been a busy six months for the joint venture in Senegal with the five well drilling campaign now completed. Woodside has recently taken over as the SNE development lead and we're planning the transition to operator. The joint venture is reviewing the potential for further drilling operations next year.

We classify Myanmar on slide 22 as one of our Horizon II projects to be developed between 2022 and 2026. So far we've had a 100% success rate with our exploration drilling program in Myanmar and we've just, in recent weeks, had our third discovery in the Rakhine Basin where Woodside is the largest acreage holder. Our holdings have expanded as we're completing the acquisition of three blocks, AD-1, AD-6 and AD-8, and more drilling is planned during the latter part of this calendar year.

On slide 23 we continue to progress Pluto expansion options and are considering the relative merits of capacity enhancements of a small LNG train or a transfer pipeline to the North West Shelf. We've run tests during first half that have shown that the capacity is there in the plant if we opt to enhance the existing facility, but we're also considering expressions of interest for a small standalone train, and we'll hopefully be able to make a decision on the concept to move forward in the second half of this year.

We began talking in the first half of 2017 about the prospect of bringing Browse gas through the Karratha Gas Plant, and it's pleasing that the Browse joint venture is very much aligned on this as a reference development concept. Of