Woodside Petroleum : 23.02.2017 2016 Full-Year Results - Media 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 6.30am AWST Woodside hosted a 2016 Full-Year Results media 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.

It's been a busy year for us at Woodside. We've boosted our production, we've grown our portfolio and we've set ourselves some very exciting and challenging goals for 2017. You will see our standard disclaimer on slide 2 and just a quick reminder that this presentation does contain some forward looking statements and that all of our reported numbers are in US dollars unless otherwise stated.

With that, we'll kick off on slide 3 with our financial headlines and you'll see our net profit after tax of $868 million delivers a fully franked dividend of $0.83 per share to our shareholders over the entire year. A strong result through really what's been a low point in the commodity cycle for us in 2016. Our net cash flow from operating activities increased to $2.6 billion, and free cash to $114 million. We increased both operating cash flow and free cash flow even though realised prices were down almost 20% on the previous year. At the same time our gearing remained at around

24% and within our target range and we remain one of the very few of our peer group that was able to maintain its credit rating through the low point of the commodity cycle, something that I know we're proud of and Lawrie is very proud of as well, and he'll maybe get some questions on that later.

Moving to slide 4, I think it's fair to say that in 2016 we delivered operational excellence, we successfully managed risks and volatility and we 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 just $3.30 per BOE. We also increased our portfolio gross margins to 45%, something that we're very proud of.

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 was also significantly bolstered. 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 just $1.10 per BOE. Together these discoveries and acquisitions have added more than 30 years of resources to our portfolio when we add that of course to the acquisitions that we made the prior year.

Construction and commissioning at Wheatstone train 1 is nearing completion with first production expected mid year and this will be followed by train 2 and domestic gas production in 2018. We also sanctioned the Greater Enfield project which is pleasing and that's targeted for first oil in 2019. You can see we continue to improve our safety and environmental performances, the key look throughs to any oil and gas company. You can see that's outlined on slide 5. It's also particularly good to see our flared gas emissions down for a third year in a row with a 33% reduction from 2015.

Of course this was a result of our improved onshore facility reliability and sustained improvement of turn around practices.

Peer comparisons are on slide 6 and we highlight that we're delivering well above our competitors on what we think are a couple of the very key business measures over the long-term which are return on average capital employed and of course the dividend yield that we provide to our shareholders.

We've successfully managed risk and volatility through the cycle and are in a strong position as the oil markets re- balance through 2017. Added to this is the LNG market dynamic on slide 8 and you can see emerging markets and opportunities to create new fuel markets, coupled with strong longer term demand forecasts, show that the LNG market will continue to grow through the next decade.

Turning to LNG contracting on slide 9 and many of you have asked these questions over time, in 2017 88% of expected LNG production has been sold under oil-linked term contracts and 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.

When fully operational Wheatstone will add more than 13 million barrels of oil equivalent to our annual production in our portfolio. This year we're supporting the operator to execute a flawless start-up of train 1 and details about Wheatstone are on slide 21 in the pack.

Next 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 of two appraisal and two exploration wells with scope for an additional three wells this year. In fact, the rig arrives on site in Myanmar this week. This program will improve our understanding of the resource base and of course assist in identifying a path to commerciality in Myanmar.

Closer to home on slide 24, we're evaluating opportunities to maximise our investment in Pluto by undertaking further capacity enhancements and mid to large scale expansion. We are also looking at how we create value through accelerating development time frames and production, capturing unallocated resources from the Carnarvon and Browse Basins and creating new markets. Woodside is in a unique and fortunate position in the Pilbara having equity in both

key onshore infrastructure and offshore resources. In fact, we're the only company that has equity in both of the largest undeveloped offshore resources and then also the two onshore plants that have the earliest expansion opportunity.

As part of our drive to grow the LNG field market we're finalising plans to support supplying LNG from Pluto to fuel the local mining and marine sectors and should have a truck loading facility completed on that site by the end of this year. To bring these opportunities together we're planning to create a Burrup hub that maximises value from infrastructure and investment.

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 the challenging external environment. Before I open up for questions, I just want to mention that this will be Lawrie Tremaine's last results briefing with Woodside and I want to recognise that Lawrie has played a key leadership role at Woodside as CFO for the past six years. He really has been instrumental in navigating the company through a period of significant volatility. He's had an unswerving focus on balance sheet resilience and leaves us in a strong position in 2017. So we wish Lawrie all the best.

With that, I'll open up to questions.

Operator: Thank you. Ladies and gentlemen, if you wish to ask a question you need to press star one 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.

Once again that is star one on your telephone and wait for your name to be announced. Your first question comes from the line of Angela Macdonald-Smith from The Australian. Please ask your question.

Thanks.

We've done a lot of work over the last two years to give ourselves confidence or more confidence in the Pluto resource. As you're aware last year we drilled a well, the A5 side track. We've run 4D seismic over the field and we've also, through the expansion or additional developments with Xena and so forth, now have a much better understanding of the field and the reservoir.

That's given us confidence, together with an addition of two exploration wells in our program over the next 12 months, to start to seriously consider a small debottlenecking, or what we call a small expansion project, to start to bring forward gas from the back end of Pluto. So that's the first part of it and you'll hear more about that as we go through the year.

We're targeting to give investors a more complete update at our investor briefing day. The second part then is capturing the big gas. We've always called this big ORO and it's not big ORO any more because Woodside is actually an equity participant in both the two large undeveloped gas resources out there, being Scarborough and of course Browse.

The Pluto site is advantaged as you know. It has capacity in the offshore system. It has an additional one train of capacity, one conventional train of capacity in that system and so it's readily expandable at the site. There are environmental approvals and site preparation already in place for three trains at Pluto. So it's readily expandable at site, we're looking now to be competitive with the other option for those resources of course being floating LNG. So I think the opportunities are in front of us, we're in a unique position because we would say we're in a basin master position in many respects because we're actually the major equity owner in the four assets that need to be pulled together being Pluto, North West Shelf, Browse and of course Scarborough.

In the short-term, the reason we're looking at a Pluto expansion, which will be a smaller scale, is we think in the short- term, at least over the next two, three, four years, most of the expansions will be smaller scale, meaning in the less than 2 million tonne range, probably in the 1 million to 2 million tonne range. For a portfolio player like Woodside, the advantage of that sort of expansion size is of course we don't need market. We can actually sell it into our portfolio and get it away. So it gets back to this point where we now start to control the timing of development, which has always been a challenge in the LNG business. So actually we're quite excited by what the market provides at the moment with all these new buyers coming in.