Woodside Petroleum Limited

Published : August 19th, 2016

19.08.2016 2016 Half-Year Results - Teleconference

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19.08.2016 2016 Half-Year Results - Teleconference

ASX Announcement

Friday, 19 August 2016


Woodside Petroleum Ltd.

ACN 004 898 962

Woodside Plaza

240 St Georges Terrace Perth WA 6000 Australia


On Friday 19 August at 7.30am AWST Woodside hosted a 2016 Half-Year Results teleconference. The transcript of the briefing is attached.

Contacts: MEDIA

Michelle Grady

W: +61 8 9348 5995

M: +61 418 938 660

E: [email protected]


Craig Ashton

W: +61 8 9348 6214

M: +61 417 180 640

E: [email protected]

Company: Woodside Petroleum Ltd

Title: 2016 Half-Year Results presentation

Date: 19 August 2016

This document should be read in conjunction with Woodside's 2016 Half-Year Report and associated

presentation pack which is available on the company's website,

Start of Transcript

Peter Coleman: Good morning everybody and thanks for joining us for our 2016 half year results. As you would have seen this morning, we released our half year statement report and slide pack to the ASX. These include details of our key financial and business achievements for the half. Joining me this morning on our call is our Chief Financial Officer, Lawrie Tremaine, and for the first time on the call, our Chief Operations Officer, Mike Utsler. Mike will be providing an overview of our business activities this morning. As we've done in previous years, we'll make some introductory remarks before opening the call up to a question and answer session.

If I can, I'll note the disclaimers on page 2. I know you read that in lots of detail and then move onto slide 3. You'll see the focus for us has been on operational excellence, managing risk and volatility and building near term value growth across the business. We've increased our 2016 production guidance from a range of 86 million to 93 million barrels of oil equivalent up to 90 million to 95 million barrels, supported by a very strong first half production of just under 46 million barrels of oil equivalent, which is 9% higher than the first half of 2015.

Our unit production costs at $5.20 per barrel was 38% lower than the same time last year, driven by operational efficiencies and higher facility throughput, combined with an absence of turnarounds. Our focus is on managing risk and volatility by creating certainty where it's practical. We're targeting for 85% to 90% of expected 2017/18 LNG production to be committed under term contracts and we're currently extending our debt maturity profile and capacity. In addition to near term production from Wheatstone, Persephone, Greater Western Flank 2 and Greater Enfield, we continue to capture and build growth, highlighted by the back-to-back discoveries earlier this year in Myanmar and the proposed acquisition of ConocoPhillips' interests in Senegal.

On slide 4, our net profit after tax for the first half of 2016 was $340 million and our operating cash flow, more than $1.2 billion [Correction: $1.12 billion]. The profit result is down almost 50% on first half 2015, driven by lower oil prices, partly supported by better production and cost performance. Our interim dividend for the half is 34 cents per share, and that's of course US cents per share.

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

On slide 6, it really shows that the oil market is beginning to rebalance as we indicated we felt it would earlier this year. In this environment, we're continuing to look for business opportunities as competitors retreat to onshore US, international assets are sold and project investment decisions are being deferred.

On slide 7 you can see a change is happening in the LNG market as new LNG buyers are emerging as prices reduce and floating storage and regasification units become commonplace. With nearly 40 million tonnes per annum of future production deferred since the beginning of this year, we remain of the view that new supply will need to be sanctioned from 2018 onwards to meet market demand from the mid-2020s.

I'll end for now on slide 8 and you can see in addition to our strong base, we have significant near term value growth. We're currently developing more than 400 million barrels of oil equivalent, with production to commence from next year through to 2019. Our competitive position in Myanmar provides us with substantial resource potential that is located close to existing infrastructure and assets. Additionally, we're excited about our high-impact exploration drilling

prospects and continue to pursue appropriate M&A activities. With regard to M&A activity, you can expect that we will pursue acquisitions that match and complement our capabilities, technology and regional focus areas.

Lawrie will now talk about our financials in more detail, before he hands over to Mike to cover some of the business activities. Over to you, Lawrie.

Lawrie Tremaine: Thanks Peter and good morning everyone. I'll start with our profit bridge on slide 10. Oil price had a significant impact on profit in the first half, however the full impact has been partially mitigated by the quality of our LNG contract portfolio and strong business performance. Average realised prices were 26% lower than the first half of 2015, whilst the Japan Custom Cleared price was as much as 46% lower over the same period. This demonstrates the quality of our LNG contracts.

First half production volumes were 9% higher, as shown on slide 11. Aside from the timing impacts of major LNG plant turnarounds, facility utilisation was the major driver of this strong result. Capacity increases and improved reliability, particularly at Pluto, contributed 2.5 million barrels of oil equivalent increase in production. Pluto reliability has been outstanding. We've only had two minor trips in the past 12 months, a great result for a single train facility. Pluto capacity is outperforming our assumptions at FID; an example of how we've achieved this is vibration management. We've added additional bracing in strategic areas of the plant to reduce vibration, enabling the plant to operate at higher rates.

As Peter has mentioned, our strong first half result has enabled us to lift our full year production guidance range. Taking a closer look at Pluto on slide 12, after adjusting for the additional costs associated with the Pluto turnaround in 2015, our production costs have continued to decline year on year. At FID, we assumed a unit production cost would stabilise at around $5 per barrel of oil equivalent. We achieved this target within three years of start-up and have continued to deliver efficiencies since. The implementation of a technology-enabled, Perth-based operations support centre is an example of an initiative which helped deliver the $3 a unit production costs achieved in the first half.

Moving to slide 13, this chart compares our production costs and average realised prices with that of our peers. Our low production costs and high realised prices are delivering peer-leading margins and explains the resilience of our business in the current market environment.

As shown on slide 14, our strong margins in the first half resulted in cash from operations of $1.1 billion which funded our investment spending and delivered $160 million of free cash flow. The Wheatstone development was the largest component of investment spend in the first half. Mike will provide an update on progress of Wheatstone in his presentation.

Next to slide 15, we have maintained gearing at 23%, well within our target range. We continue to fund investment through the strength of our balance sheet and operating cash flows, whilst the majority of our peers have either curtailed investment or have much higher gearing. As Peter mentioned, one of our key achievements in the first half was managing risk and volatility, both in our balance sheet and our revenue stream.

On slide 16 you can see our progress on extending debt maturities and managing liquidity. We have secured over $600 million in funding, diversified our funding sources and maintained a portfolio cost of debt below 3%. At June we had liquidity of $2 billion; our BBB+ and Baa1 credit ratings were reaffirmed during the first half.

Slide 17 provides an update on our LNG contracting position. Our objective is to reduce our spot exposure on Pluto and North West Shelf volumes to between 10% and 15%. The shaded section of the chart indicates new mid-term contracts close to finalisation and equivalent volume is under negotiation and is also expected to be finalised by year end.

Finally, there has been some misunderstanding of the risk associated with buyers taking lower volumes under LNG sales contracts. This flexibility is referred to as the downward quantity tolerance. In practice, DQT is used infrequently and only for operational reasons. In the first half of 2016, less than 1% of our volumes were impacted by buyer DQTs.

With that quick summary of our financial performance, I'll pass to Mike to provide a review of our growth activities.

Mike Utsler: Thanks Lawrie and good morning everyone. It's my pleasure to be able to take you through some of the key business activities that are ongoing for us. I start with slide 19 and a review of Wheatstone. Wheatstone consists of essentially three major areas of activities: the drilling and completions and development of the reservoirs, which are now essentially complete; the installation and tieback of the offshore central processing facility, which is ongoing; and a construction onshore of two LNG facilities, a domgas facility and the loading jetties associated with that operation.

For the onshore LNG Train 1, all the modules are on site and work is progressing to enable first LNG cargoes to be loaded mid-2017. The export jetties and LNG loading platforms are complete and Train 2 LNG is expected to be completed six to eight months following mid-2017 per the schedule. We continue to work very closely with Bechtel and the operator in sharing our construction, our commissioning and our start-up expertise by seconding people and sharing our learnings and experiences associated with that.

I'll now move to slide 20 and a review of Greater Enfield. Just prior to the end of the first half of 2016, Woodside and our joint venture partner, Mitsui, approved this exciting project. It's leveraging our technologies, the lower cost market capabilities and existing infrastructures to enable us to drill and complete 12 wells to subsea tie-back using multiphase pumping capacity to connect to the existing Ngujima-Yin FPSO. This will enable us to develop 41 million barrels of oil Woodside share, and demonstrates an ability to significantly reduce the incremental cash costs in developing and producing these resources. We're planning for first oil in mid-2019 with the Woodside share expected to be greater than 24,000 barrels of oil a day post ramp-up.

Now I'll move us to slide 21 and look at Myanmar. Again, an exciting area for our opportunity set. Two exciting discoveries, as Peter referenced, made in late 2015, early 2016 have identified 2.4 trillion cubic feet of gas discovered to date. We are looking at how we can access and pursue options to commercialise these discoveries. We're processing and evaluating currently more than 31,500 [square] kilometres of newly acquired high-quality seismic data across this basin and we're preparing for a drilling campaign in 2017 with our JV partners and the Myanmar Government. We have a significant and well-positioned offshore acreage position in this portfolio and we see this as an exciting and significant emerging basin.

As I move to slide 22, we'll take a look at Senegal. Subsequent to the first half, we entered into a $350 million agreement to acquire 100% of ConocoPhillips' shares in the COP Senegal BV. This company holds a 35% stake in the recognised world-class oil discovery known as the SNE field. This acquisition is subject to Senegal Government approval and while this acquisition is a great example, we believe, of Woodside delivering on our commitments that we've made to secure positions in material and quality frontier and emerging basins in our defined focus areas.

I think importantly this has been possible due to the fact that we bring, and are recognised for bringing, our technical capabilities and expertise in deep water drilling, and subsea developments and operating experiences, in our FPSO operating experiences and our proven HSE track records in challenging environments. This, combined with the financial strength and fiscal discipline, gives us the opportunity to be a partner of choice in supporting the development of this opportunity.

Finally, on slide 23, we've been able to accomplish a significant rebalancing of our global exploration portfolio since 2012. As this slide depicts, our portfolio has moved from 25% oil to now being 47% plus oil based and significantly refocusing where we're looking into emerging and frontier basins. We've leveraged our capabilities in meeting our stated objectives and we expect those capabilities to enable us to have a greater than 25% commercial discovery success rate across our portfolio, to look at replacing 120% of our annual yearly production and to be able to deliver a finding cost of

$3 per BOE. This, while we continually high grade our portfolio drillable exploration opportunities.

I think as you can see from these activities, we're strongly leveraging our capabilities as a company, we're capturing and executing new opportunities and we have an exciting set of growth opportunities in front of you. Thank you for your time and I'll now hand it back to Peter to close.

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Data and Statistics for these countries : Australia | Georgia | Japan | Myanmar | Senegal | All
Gold and Silver Prices for these countries : Australia | Georgia | Japan | Myanmar | Senegal | All

Woodside Petroleum Limited

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Woodside Petroleum is a oil exploration company based in Australia.

Woodside Petroleum is listed in Australia and in Germany. Its market capitalisation is AU$ 27.5 billions as of today (US$ 19.9 billions, € 17.4 billions).

Its stock quote reached its highest recent level on October 04, 2018 at AU$ 39.23, and its lowest recent point on March 27, 2020 at AU$ 15.03.

Woodside Petroleum has 842 440 000 shares outstanding.

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Nominations of Woodside Petroleum Limited
5/18/2011Appointment of Non-Executive Director
5/12/2011Appoints New CEO
Financials of Woodside Petroleum Limited
7/19/2011Second Quarter 2011 Report
Project news of Woodside Petroleum Limited
7/14/2016Woodside's proposed acquisition of Conoco's Senegal interest
5/5/2011Oil Discovery at Laverda North
Corporate news of Woodside Petroleum Limited
9/1/2016 Notification of dividend
8/19/201619.08.2016 2016 Half-Year Results - Teleconference
7/13/201614.07.2016 Woodside Agrees to Acquire ConocoPhillips Interes...
7/13/201614.07.2016 Woodside Agrees to Acquire ConocoPhillips' Intere...
6/27/201627.06.2016 Greater Enfield Oil Development Approved
5/19/201620.05.2016 Woodside Books Contingent Resource in Myanmar
5/19/201620.05.2016 2016 Investor Briefing Day
5/9/2016GSV Capital reports 1Q loss
2/1/201601.02.2016 Update on Wheatstone Schedule
2/1/201604.01.2016 Woodside Discovers Gas Offshore Myanmar
2/1/201621.01.2016 Fourth Quarter 2015 Report
9/21/2015Woodside Teams with Accenture to Implement Predictive Analyt...
9/14/2015Oil Search Rejects Woodside $8 Billion Offer --- Energy Jour...
9/14/2015Oil Search rejects A$11.6bn Woodside bid
9/14/2015Oil Search rejects Woodside proposal – Chairman briefing tra...
9/9/2015M&A market surges with $40bn in new deals
9/8/2015Woodside / Oil Search: it's a gas
8/19/2015Edited Transcript of WPL.AX earnings conference call or pres...
4/10/2015Apache Completes Sale of Kitimat LNG
9/6/2011Appendix 3Y (Cilento)
8/23/20112011 Half Year Shareholder Review
8/17/20112011 Woodside Half-Year Results
6/30/2011Executes Browse Native Title Agreement
6/23/2011Appendix 3Y (Coleman)
6/17/2011Pluto Cost and Schedule Update
5/23/2011Discovers Gas at Xeres-1
5/6/2011Claim Group Approves Proposal for Browse LNG Precinct
5/5/2011to issue US$700 million in corporate bonds & Appendix 3Y (Ci...
1/25/2010Gas Encountered in Noblige Well
10/6/2009DRP Notice Under Section 708A of the Corporations Act
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