WOODSIDE ENERGY GROUP LTD — Call Transcript 2014

Feb 20, 2014

ASX Announcement

Friday, 21 February 2014

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

2013 FULL YEAR RESULTS – MEDIA TELECONFERENCE

On Wednesday 19 February 2014 at 6.30am AWST Woodside hosted a 2013 Full Year Results media teleconference.

The transcript of the briefing is attached, which includes clarifications to comments made during the call.

Contacts:

MEDIA

Kate Gauntlett W: +61 8 9348 4532 M: +61 410 884 178 E: kate.gauntlett@woodside.com.au

INVESTORS

Craig Ashton W: +61 8 9348 6214 M: +61 417 180 640 E: investor@woodside.com.au

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Company: Woodside Petroleum Title: Full Year Results Media Presentation Date: 19 February 2014

This document should be read in conjunction with Woodside’s 2013 Annual Report 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 2013 full year results media presentation. At this time all participants are in a listen only mode. There will be a short introduction 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. I must advise you that this conference is being recorded today, Wednesday, 19 February 2014. I would now like to hand the conference over to your first speaker today, Peter Coleman, CEO and Managing Director. Thank you, and please go ahead.

Peter Coleman: Good morning, everybody, and thanks for joining us today for our 2013 full year results. I'd like to tell you it's a beautiful day here in Perth, although a little early for some of us. We've adopted a different approach this year, where we, firstly, have a media briefing. Then we'll follow it up with a separate investor briefing later in the morning. So I apologise to Perth media who are having a very early start today.

You will have seen our ASX announcement, which includes our financial headlines and key business achievements for 2013. We've also issued our annual report and investor slide pack early this morning. With me this morning is Lawrie Tremaine, our Chief Financial Officer, and Rob Cole, our Executive Vice President for Corporate and Commercial.

I'll just make a few opening remarks about our results before we open it up to Q&A. The real focus this year is on Q&A. 2013 was a year of hard work and positioning Woodside for growth. You'll see from our financial headlines that we achieved solid financial results, but we took some hard decisions during the year. You'll see our net reported profit after tax was almost $1.75 billion, the second highest result in the Company's history, and was only exceeded by last year's result, which included the Browse partial equity sale.

We produced record volumes of 87 million barrels of oil equivalent, despite having our Vincent FPSO off station for the majority of the year. Our disciplined capital management, record volumes and healthy profit put us in a position to provide record full year dividends of US$2.49 per share. That's a significant 92% increase on the 2012 dividends.

We also made good progress on our corporate strategy, optimising our core business, leveraging our capabilities and growing our portfolio. Our strong capital management means we've got an excellent

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financial base to support our next phase of growth. Our commitment to capital management's clear from the disciplined investment decisions that we made. We decided not to proceed with the James Price Point development for Browse because, simply, it didn't meet our commercial requirements for a positive final investment decision.

Two weeks ago we were able to finalise a memorandum of understanding for Leviathan, which provides a framework for negotiating a fully termed agreement with the joint venture participants. We also had very good results in terms of free cash flow. Over the past two years we've generated in excess of US$5.9 billion in free cash. We have low debt and we're in a strong position to fund our growth aspirations. In 2014 we're looking forward to pursuing these growth opportunities, opportunities that have a clear line of sight between our capabilities and future value. For Browse we're progressing basis of design work for the floating LNG development concept and we're targeting FEED in the second half of 2014 and FID in the second half of 2015. For Leviathan we're working towards a fully termed agreement by the end of next month. The joint venture's making good progress on development options with a final investment decision on Leviathan domestic gas targeted for 2014.

Internationally we're also growing our exploration portfolio in emerging provinces characterised by materiality and the quality of the play. This year we'll see seismic studies taking place in Ireland and New Zealand and frontier drilling in Myanmar [Clarification: This year and next will see seismic studies taking place in Ireland and New Zealand and frontier drilling in Myanmar] . Closer to home we'll be drilling three wells in the outer Canning basin of the west of Australia. We're also growing our margins. Our anticipated average realised prices across all our products in 2014 is set to increase. The increase is a result of additional oil volumes with the Vincent FPSO returning to production in November of last year, along with the impact of price re-negotiations on some of our LNG contracts.

We achieved our strong financial results in 2013 while maintaining our commitment to sustainability. We achieved a 27% improvement in personal safety performance, although we know there's still work to be done to reach our aspiration of top quartile international performance. We also launched the $20 million Woodside Development Fund which will focus on early childhood development. So we're looking forward to continued progress on our corporate strategy in 2014. It will be a significant year for Woodside in many respects, our 60[th] anniversary, 30 years of domestic gas production and 25 years of LNG exports. On that note I'll now open it up to questions.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request please press the pound or hash key. Our first question today comes from the line of Angela Macdonald-Smith from the Australian. Please ask your question.

Angela Macdonald-Smith: (Australian Financial Review, Journalist) Yeah, the AFR actually. But yeah look Peter I just wanted to ask you about capital management because it just seems to be a

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theme of this reporting season. Just wanted to understand a bit more, whether you expect to be able to continue this higher payout dividend ratio through the expected investment in Leviathan and through Browse - the first stage of Browse FID I guess.

Peter Coleman: Yes Angela we have indicated previously to the market that we expect to be able to maintain that payout ratio with our base growth projects in place. We haven't set a timeframe on that. That's going to be dependent a lot on commodity pricing as you know and then the timing of some of those start-ups. But our base development plan or business plan actually allows us to continue paying at that payout level for a number of years.

Angela Macdonald-Smith: (Australian Financial Review, Journalist) Okay, and could I ask also about the LNG renegotiations? Obviously a bit of a sensitive subject, but can we assume that that's all been sort of tied up and you've got what you now consider sort of market prices for Pluto LNG?

Peter Coleman: Yeah we've essentially completed the negotiations on the bulk of our contracts which includes Pluto. We still had some North West Shelf contracts that are under negotiation. But the major contract for us this past year has been negotiations on Pluto and those contracts. Those negotiations have been completed. So we have put some guidance in our presentation material this morning that gives an insight as to how we think that will affect overall margins for Woodside as we go through the year.

Angela Macdonald-Smith: (Australian Financial Review, Journalist) Okay, I'll have a look at that, thanks.

Peter Coleman: Okay.

Operator: Our next question today comes from the line of Matt Chambers for The Australian newspaper. Please ask your question.

Matt Chambers : (The Australian, Journalist) Oh hello Peter. With the Leviathan and a domestic gas decision this year, can you give me any indication of what sort of cost that's going to be for Woodside if you do take the 25% stake? And also when you'd sort of be looking at an FID date for an export project there?

Peter Coleman: Morning Matt. We haven't put any guidance in at the moment. We're really following operator at this point, and the operator being Noble Energy. Sorry I really can't give you any guidance. We obviously have some internal numbers that we're looking at and that's building - the early part of that is building to our 2014 forecast on CapEx. But as you can imagine it's reasonably modest this year because we'll be in the very early phases of it. So we'll wait for the operator to come out and give guidance to the market in that respect as we get closer to FID. So sorry I can't give you anything more specific on that at this point.

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The second part to your question is we expect to be going to FEED on an FLNG project sometime this year and commencing that. So we're in the - joint venture is in the final phases of preparing for an invitation to tender on that. And so if you roughly say there's 12 to 15 months of a FEED activity you can see that you'll be into late next year potentially at an FID stage for the first of the exports projects, or at least the FLNG project.

Matt Chambers : (The Australian, Journalist) Okay, alright thanks for that. And then just a follow up if I could. Are you comfortable with the sort of production profile you have with the existing growth projects, which look to be Browse I guess and Leviathan not coming on for a couple of years, or is there any sort of desire there to get some nearer term production growth, maybe through an acquisition or something?

Peter Coleman: Yeah well we're always looking forward - looking at opportunities in which we can bring forward value for our shareholders. As you know, we also did that with the partial equity sale on Browse and, as we indicated this past year, we've been negotiating hard on improving our margins.

So production volumes, as you know, are one way of doing it. The other way of doing it, though, is to knuckle down into your business and pull other opportunities forward.

But as far as what's out there in the marketplace, most of the current flowing production in the market is pretty fully priced and you can imagine that at US$100 per barrel oil, it's fully priced or if you're getting into some of the North American assets, quite low prices that - for a good reason - you've got production that's not going to stream for some period of time.

We're actually looking forward to - if you have a look at Leviathan it will show that it's going to start domestic gas production just in a very few years' time, very short period of time. So the advantage for us there is that opportunity actually does bring forward our production growth by a few years.

Matt Chambers: (The Australian, Journalist) Okay, thanks Peter.

Peter Coleman: Thank you.

Operator: Our next question today comes from the line of Christine Forster of Platts. Please ask your question.

Christine Forster: (Platts, Journalist) Hi Peter. Can I just ask follow-up question on Leviathan. You talked about the FID on an FLNG project. Will you also be conducting studies on the pipeline export options in parallel with looking at FLNG or is it going to be after looking at FLNG? What's the timing on that?

Peter Coleman: I'm glad you asked that, Christine, because the good thing about Leviathan over the past 15 months since we've been in deep negotiations with the joint venturers is really what I would say the expansion of the options we have with respect to exporting out of Leviathan.

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The first part of that, as you know, was really getting clarity from the Israeli government with respect to how much could be exported and that clarity is now in place. Now the joint venturers have been working very actively to develop other optionality in the system that we have there. FLNG is part of that and continues to be part of that. That's a change from when we first started talking to the joint venturers. Originally, we thought it might be an onshore based facility for LNG but it's now moved to an offshore facility.

And then secondly, on the pipeline options there have been a number of pipeline options that the joint venture has discussed and is discussing with other parties, including pipe to Turkey, pipe to Cyprus and pipe across to Jordan or down to Egypt. So all of those things are in play at the moment.

What I'd say is it's all moving in parallel so the first part of it, even though it's a domestic gas project, the domestic gas project will actually have a floating gas production facility and that facility will have the ability to export gas via pipeline.

Christine Forster: (Platts, Journalist) Okay, thanks.

Operator: Our next question today comes from the line of Matthew Stevens, of The Australian Financial Review. Please ask your question.

Matthew Stevens: (The Australian Financial Review, Journalist) Hi Peter, how are you? I'm just trying to check Peter, how much headroom do you have to drive productivity and costs with the existing production? I mean we're seeing miners take serious and material chunks of costs out of their portfolios over the last 12, 18 months. Do you have a lot of headroom in what you do, to do that sort of stuff?

Peter Coleman: Well, I'm glad you read our presentation, Matt. We haven't provided specific guidance to market in place yet. We are planning to do this during our Investor Day in the second quarter and we’ll provide some more specific guidance. I will tell you that we do have a productivity initiative under way in Woodside. It's been under way now for a number of months and we've just completed what we call the opportunity identification phase of that, and we're in the process now of discussing that with our staff and others.

We do see quite material opportunities within our business to not only reduce our cost structure overall but also to pursue other revenue enhancing opportunities, particularly when we've talked about reliability and up time with our facilities. So we're looking at a number of aspects of that and as I said we’ll provide more specific guidance in quarter.

Matthew Stevens: (The Australian Financial Review, Journalist) Is there a snazzy project name, Peter?

Peter Coleman: It's very simple. It's called the productivity initiative.

Matthew Stevens: (The Australian Financial Review, Journalist) Oh, that's good.

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Peter Coleman: We're very simple here.

Matthew Stevens: (The Australian Financial Review, Journalist) On page 12 of the slide pack there's a note that the final Pluto Train 2 and Train 3 impairments were incurred in 2013 and that led to a decline in the value of expansion costs. Can you explain to me what that means?

Peter Coleman: Look, it really just says we sat down with our external auditors and looked at what we thought was a reasonable useful life on the expansion work that is being done. So these are the pre-FEED activities.

Matthew Stevens: (The Australian Financial Review, Journalist) Yes.

Peter Coleman: Just been amortising that over time and this really was the last period of that amortisation period that we agreed. It doesn't mean that that work has no value to it today, it was just an amortisation period that we put in place.

Matthew Stevens: (The Australian Financial Review, Journalist) It doesn't carry any implications for expansions at Pluto?

Peter Coleman: Oh no, absolutely not. No, absolutely not. It's just simply an accounting treatment to make sure we treat it properly on our books.

Matthew Stevens: (The Australian Financial Review, Journalist) Thanks.

Operator: Our next question today comes from the line of Sonali Paul of Reuters. Please ask your question.

Peter Coleman: We have somebody on mute?

Sonali Paul: (Reuters, Journalist) Hi, sorry, I'm on mute. Most of my questions have been answered but I did want to follow up on Leviathan. If they do opt for the pipeline options, is this project as worthwhile to you as you first envisioned?

Peter Coleman: The answer is yes. In fact, if you look at our corporate strategies, it's pretty clear. We talk about leveraging our capabilities into new opportunities. With respect to Leviathan, Woodside actually has quite - very deep capabilities, both in domestic gas development and also into LNG. So the Leviathan development itself fits very nicely into Woodside's core capabilities. It's offshore based. These are large markets, large fields. So it's the sort of opportunity that is very attractive to us.

Sonali Paul: (Reuters, Journalist) Okay, thanks.

Operator: Our next question today comes from the line of James Paton of Bloomberg News. Please ask your question.

James Paton: (Bloomberg News, Analyst) Good morning. What can you say about the Company's efforts in terms of marketing Browse LNG and securing new contracts given the increasing LNG competition we're seeing from the US?

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Peter Coleman: Good morning James. Yes, I would say there is obviously increasing competition out there in the marketplace. We actually have stated for some period of time we welcome the competition because it means new supply is coming into the market and with new supply coming into the market it also means demand is created. We have a view, and have held a view for a while, that in fact we're not seeing real demand in the market yet because in some ways supply has been constrained. With new supply coming in, we think that demands will in fact be even potentially greater than what you're seeing in some of the forecasts.

With respect to our ability to market, we've talked about it a number of times. We're very fortunate to have been marketing into the key markets now for over 25 years. So our relationships are strong and what I can say to you is that we're quite mature in our marketing efforts and we're getting a positive reception from buyers.

Although don't expect anything until the joint venture gets more clarity around whether it's going to move into the FEED process or not. That's generally the trigger point for buyers to believe that a project's going to start to move forward.

James Paton: (Bloomberg News, Journalist) Okay, thanks a lot.

Operator: Our last question today comes from the line of Kevin Morrison of Argus Media. Please ask your question.

Kevin Morrison: (Argus Media, Journalist) Good morning. First of all on Leviathan, I know you're still working on various options but just in terms of the final customer, I mean, is it likely that whatever option you see that the customer's likely to be in the Mediterranean region, or did you see a much - a prospect of selling cargoes beyond the Mediterranean region?

Second, I've just got a question on Pluto, just following up on the write-down; can you just give an update on what the status is with Pluto in terms of expansion? Are you still in any active conversations with anybody about third party?

Finally, just on your product mix, I see you've increased the gas component. I mean, is it likely to remain like this? Just bearing in mind with all the write-downs that you've had on your oil assets and much of your future prospect is much more sort of gas orientated than oil?

Peter Coleman: Yes, alright. Well let me answer those quickly, Kevin. Firstly on customers in the Eastern Med, of course, the pipeline gas would go directly to the buyer base there, whether that's, as I mentioned, Egypt, Turkey or elsewhere. So from that point of view we think there'll be a number of options for us on pipeline.

On LNG, we have a view that in fact this gas could make its way via the Suez Canal into the Asian markets, probably into the Western Asian market, but we have a view that it could easily move its way into there. If you look at Woodside's strategy and the fact now that we have a trading vessel in our

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fleet, we've established a trading office in Singapore, we're actually positioning ourselves to be able to do this and make physical swaps in the marketplace.

So what does that mean? It means where the molecules actually end up may not be where the person who's paying for it resides, and that's a flexibility we're putting into our shipping fleet.

On Pluto expansion, we continue to talk to third parties about it. We've worked very hard on reducing our cost structure for expansion trains at Pluto. I would say those conversations kind of go up and down. It's like the flaming sands - fanning a fire every now and again. It just goes up and it goes down.

It just needs to - my view is a lot of people have got many things on their plate at the moment in Australia. I think they're trying to work through their existing projects and make sure that they stream at the right time and do that - do so safely, and then I think we'll be getting to another suite of serious discussions about expansions and so forth. So I think expansion is off many people's minds at the moment, both on the West and East coasts of Australia, until they get their trains moving.

With respect to mix, a lot of the oil decline last year was due to the fact that we took a hard choice to take our Vincent FPSO off station for what amounted to about 11 months of the year. That was due to some upgrades that we wanted to do in that facility to improve its reliability. It's now back and running, back to where it was before we took it off station, so we expect that oil mix to improve this year.

Operator: Thanks for your questions today. I would now like to hand the conference back to Peter Coleman for closing remarks.

Peter Coleman: Well guys thanks very much for spending some time with us this morning. I hope you’ve found this format a better way of giving you more clarity and some more time for the media to ask your questions and get about your business early in the day. So thanks very much for your interest in Woodside. We look forward to catching up with you over the next few days as we get on our road show. So again, thanks very much.

End of Transcript