Woodside Petroleum : 23.02.2017 2016 Full-Year Results - Investor Teleconference

Thursday, 23 February 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

On Wednesday, 22 February 2017 at 7.30am AWST Woodside hosted a 2016 Full-Year Results investor teleconference.

The transcript of the briefing is attached.

W: +61 8 9348 5995

M: +61 418 938 660

E: michelle.grady@woodside.com.au

W: +61 8 9348 4421

M: +61 417 111 697

E: investor@woodside.com.au

This document should be read in conjunction with Woodside's 2016 Preliminary Financial Statements and

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

We'll kick off with slide three with our financial headlines. You'll see our NPAT of $868 million delivers a fully franked dividend of $0.83 per share to our shareholders. A really strong result given we've just passed through what we hope is the low point of the commodity cycle.

Net cash flow from operating activities increased to $2.6 billion and pre-cash to $114 million. We also increased both operating cash flow and free cash flow even though the realised prices year-on-year were down almost 20% and at the same time our gearing is 24% and well within our target range. We remain one of the few in our peer group that was able to maintain its credit rating through the low point of the commodity cycle in 2016.

Moving onto slide four, I think it's fair to say that in 2016 we delivered operational excellence, successfully managed risk and volatility and added near-term value growth to our portfolio. Our overall production climbed to 94.9 million barrels of oil equivalent in 2016, the second highest level on record. And our Pluto facility achieved record LNG production. Our increased focus on cost efficiencies and reliability was reflected in a 28% reduction in our unit production costs and nothing demonstrates this better than our record low Pluto unit production costs of $3.30 per BOE.

We also increased our portfolio gross margins to 45%. In a tough, external environment we completed the majority of

our North West Shelf price reviews at traditional levels and signed a Heads of Agreement for long-term supply of LNG to Pertamina.

Near-term value growth is also significantly bolstered in. Early in 2016 we announced play extending discoveries in Myanmar and during the year completed significant acquisitions in Senegal and Australia at an average acquisition cost of $1.10 per BOE. Together these discoveries and acquisitions added more than 30 years of resources to our portfolio when combined with the acquisitions in the prior year.

Construction and commissioning at Wheatstone Train 1 is nearing completion with the first production still expected mid- year and this will be followed by Train 2 in domestic gas production in 2018. We also sanctioned the Greater Enfield project which is an oil project and then we're targeting first oil from that in 2019.

We continued to improve our safety and environment performance as outlined on slide five and it's particularly good to see our flared gas emissions down for a third year in a row with a 33% reduction from 2015. This was the result of improved onshore facility reliability and the sustained improvement of our turnaround practices.

Peer comparisons on slide six show that we're delivering well above our competitors on return on average capital employed and dividends. Two of the key metrics we believe give an insight to the long-term nature of our business and whether we're delivering on our capital employment.

We also successfully managed risk and volatility through the cycle and we're in a strong position as the oil market rebalances through 2017.

Added to this is the LNG market dynamic on slide eight. Emerging markets and opportunities to create new LNG fuel markets coupled with strong longer-term demand forecasts show that the LNG market will continue to grow well through the next decade.

Turning to LNG contracting on slide nine. In 2017, 88% of expected LNG production has been sold under oil linked term contracts. I do want to note that we're still seeing demand in the market for oil linked LNG pricing.

Operational excellence and managing risk and volatility will remain core to our approach to delivering value for shareholders and as you can see on slide 10 alongside these fundamentals we're continuously building near-term value growth and expect about a 15% increase in production from 2017 through 2020. In 2017 you'll hear me talk about our priorities being Wheatstone, Senegal, Myanmar and Pluto. As most of you know, this will be Lawrie Tremaine's last results briefing with Woodside.

So before I hand over to Lawrie, I want to recognise that he's played a key leadership role at Woodside as CFO for the past six years. He's been instrumental in navigating the company through a period of very significant volatility externally but also internally as we executed our major projects. He's got an unswerving focus on balance sheet resilience as many of you will have seen and leaves us in a much stronger position than when I joined the company a number of years ago. So thank you, Lawrie, for everything you've done for Woodside and I'll hand over to you now for the CFO section.

$831 million pre-tax. However, we were able to mitigate much of this impact through continuing strong operating performance particularly in our LNG business. Our average realised prices were 18% lower than 2015. The LNG benchmark price was an average 36% lower over the same period demonstrating the value of our LNG contract portfolio.

Production volumes on slide 14, we had a great year in our operations exceeding the top of our production guidance delivering our second highest total result and setting a new LNG production record. Pluto facility utilisation was a major driver of this result. We achieved 99.5% reliability in 2016 with 300 days of uninterrupted production and exceeded the original design capacity by 16%. Liquids production was lower in 2016 mostly due to the Okha FPSO turnaround and vessel dry-docking in the first half.

We are very proud of what we have achieved over the past three years in driving our costs lower. Slide 15 shows the cost performance of both North West Shelf and Pluto. Pluto unit production costs, as Peter said, were $3.30 per barrel of oil equivalent, 50% lower than our 2013 productivity program base line. We have delivered these cost reductions while completing 99% of our planned maintenance activities for the year.

Moving to slide 16, this chart compares our EBITDA margins with those of our peers. Woodside's ability to generate cash margins has consistently outperformed our peer group over this period. Our EBITDA margin for the year was 67% highlighting our strong competitive position which reflects the quality of both our assets and offtake contracts and world class operating performance.

On slide 17, we generated free cash flow of $114 million in a year which started with oil prices as low as $28 a barrel and after funding two significant acquisitions. Our investment expenditure in 2016 was focused on delivering near-term growth with 70% of our base capital expenditure invested in projects due to deliver production within three years.

Wheatstone and the Greater Enfield oil development are the most significant of these projects.

Turning to the balance sheet on slides 18 and 19 we've maintained our gearing within a target range of 10 to 30%. We continue to fund the company with relatively low cost debt. Our portfolio cost of debt is currently 3.2%. We had $2.7 billion in available cash and undrawn debt facilities at year end and we have negligible debt maturing in 2017.

Consequently we maintain the flexibility to fund our growth plans and to capture additional value accretive growth opportunities.

With that very quick summary, thank you for listening and I'll pass you back to Peter.

When fully operational Wheatstone will add more than 13 million barrels per year of annual production to our portfolio. This year we're supporting the operator to execute a flawless start-up of Train 1.

At the SNE oil field in Senegal a two-well appraisal program is underway to improve our understanding of the reservoir and inform development planning ahead of first oil between 2021 and 2023.

In Myanmar we're about to start a significant drilling program that includes a minimum two appraisal and two exploration wells with scope for an additional three wells this year. In fact the rig arrives shortly. This program will improve both our understanding of the resource base and will form the basis for identifying a pathway to commerciality. Closer to home we're evaluating opportunities to maximise our investment in Pluto by undertaking further capacity enhancements and mid to large scale expansion.

We're looking at how we create value to accelerating development timeframes and production capturing unallocated resources from the Carnarvon and Browse Basins and creating new markets for our product. Woodside is in a unique position in the Pilbara having equity in both key onshore infrastructure and offshore resources. In fact we're the only company who has equity in both the largest undeveloped offshore resources and the two onshore plants that have the most ready expansion capability.

As part of our drive to grow the LNG fuel market, we're finalising plans to support supplying LNG from Pluto to fuel the local mining and marine sectors and to bring these opportunities together we're focused on creating a Burrup hub that will maximise value from existing infrastructure and investment and to ensure that those facilities are able to maximise their investment life.

To recap on 2016, our production performance, reduction in operating costs, improved margins and the progress of our key projects delivered value for shareholders despite what was a challenging external environment, particularly driven by the commodity markets and new supply in LNG.

With that I'll close the formal part of this session and I'll open up to questions.

Operator: Thank you. Ladies and gentlemen if you wish to ask a question you need to press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, you need to press the pound or hash key. Your first question comes from the line of Dale Koenders from Citigroup. Please ask your question.