Woodside Energy Group Ltd (WDS) 2007 Q2 法說會逐字稿

(audio in progress) your speaker today, Mr. Don Voelte. Thank you, sir. Please go ahead.

Thank you. Good afternoon, everybody. Woodside's interim results. I would like to take people through the slide pack. We have put a revised a slide pack out here just over the last hour or two.

Page 2 for everybody, the disclaimer, standard disclaimer. I want to make sure people take a look at that. Overall, let me just give a comment or two before we get started through the pack. The environment we work in, a little bit about how Woodside's working.

First off, the environment. I think on pricing you see -- what you see is what you are going to get in the coming months. We operate in an environment that's structurally changed from years ago. On LNG, we are developing markets around the world, but especially in Asia Pacific. It's playing to Woodside's strengths. The market is lining up exactly to the assets that we own in this Company.

As to the Company culture and how we are operating, I would like to just tell you that while I am getting really comfortable, I think my management team is getting really comfortable. The Company is really starting to click on all cylinders. I think we are starting to run the heck out of this company and I like where it is going right now and I like how it is operating. I just think that at the end of the day, we are on the right track and our folks are putting in a heck of an effort.

Let me run over to page 3 then and go through the financial highlights of the half-year. All my comparisons are versus the first half of 2006 results. Of course the reported profit was AUD610 million, up 16% on the year. Underlying NPAT, or net profit after tax, AUD545 million, up 11% and as you can see, the sales volume and revenues are up in the same type of relation. Net operating cash flow, which was important to us, AUD1.4 billion, up 59%.

Over on page 4, give a little bit more detail on the production increase to 17% half-year and half-year. I've got to tell you the North West Shelf and what the folks are doing up there in running our offshore facilities and the four trains putting in a heck of an effort. I like the runtimes. I like the maintenance that is being done and the shutdown capacity of keeping these trains running for the next 20, 30 years, really proud of North West Shelf and it is running very well. As you can see, we delivered 102 cargoes of LNG over the first half.

Cossack Pioneer, again, an old facility, really maintaining strong runtimes and we have had a good performance out there. Enfield has stabilized. I will show you a little bit more about that later and I will tell you about the drilling that is taking place there, but performance has improved over the year and we are running right around 50,000 barrels a day at this time on a 100% basis.

Safety and environment, they are directionally correct, but they are not good enough -- they are never good enough as long as we have any instance at all. We believe in this company that we can operate without incidence.

Half-year projects on page 5, let me just kind of quickly run through some of these. They are pretty significant, some are very significant for the half-year coming up. Our Enfield ENA-03 sidetrack is currently drilling. We are into section at this time and we hope to have it on production in the next 30 to 45 days.

Otway -- Otway -- it is in commissioning. I made some comments yesterday that one of these days and before I die, we are going to get gas through that plant. But we are still scheduled, we do have gas in the plant and we are commissioning all the facilities and we will get the export compressors going and get some sales gas out the end of that thing. We have got a schedule here for September. Hopefully, we can get it up here in the next couple of weeks.

Stybarrow and Neptune, two BHP operated out of these two oil projects -- out of our three oil projects that are on the board with Vincent. Stybarrow is nearing sail away from Singapore at this time. It is an FPSO that will be down into the Exmouth area and Vincent, one we operate there and Maersk, it has got the production modules being placed on it at this time. Neptune, down in the Gulf of Mexico, the TLP is in place. Drilling is going on. We are looking for production later this year with that.

And then two other projects we have. In the near term, our Angel platform and compression -- our facilities, very important for us in the respect of train five coming onstream of having gas for all five trains. The North West Shelf train five hookup is going along very well. We are quite pleased with it. I keep seeing things in the media that we are blowing out again. Let me just say we are bringing some cost actually back in out of contingent fee that have been for certain portions of it. My expectation is a AUD2.5 billion total. That is my expectation. That is based on 2.427, 100% cost AFE that we have in Woodside, which says that we are on a 1/6 interest basis running about AUD12 million to AUD15 million over our AFE that was put in over a year ago. So we feel very strong about being able to manage cost. I will talk about cost here a little bit more as we go along.

As to LNG, turning over to page 6, our LNG markets we say here remaining firm. They are firm and they are growing. The people requiring LNG and around the world, especially in Asia Pacific, are growing and there is a recognition of what LNG is worth and we are seeing that show up in sales negotiations.

As you know, our North West Shelf venture -- the further agreements that have been made with Kogas in Korea, Kyushu Electric and Tohoku in Japan. All eight of our foundation customers have renewed to longer-term LNG commitments.

Of course I would just say that Pluto is big news recently. I won't go over it too much today, except to say that it is all going along very well. Our teams are in place, people are really excited here at the Company about it, put a new bounce in people's step and I will just say that everything is going well. There is no additional issues to report.

As to the other comment we have in here, Pluto isn't the end of it. We are working hard at securing. We have always told you that we have been marketing our (inaudible) [incinterized] gas. We are now moving from marketing into selling this gas or at least the first stages of this process. And I just want to say it again that this is outside or in addition to Pluto sales. We are working hard on committing our other gas to very good and lucrative contracts.

Moving on, I will turn it over to Mark Chatterji, our CFO, to go through the financial results for the first half.

Thanks, Don. And good morning, everyone. I will briefly run you through some of the financials before turning it back over to Don. If you look on page 8, page 8 is our operating cash flow. As Don said before, our comparisons are for the first half of 2006 versus the first half of 2007. When you look at the growth in operating cash flow, it has been quite robust, up 59% year on year, half on half. That is largely attributable to increased production between the two periods, which in turn drove revenue and sales volumes that (inaudible) improvement in operating cash flow.

While not maybe directly attributable for the operating cash flow, it is also worth noting that we have had a much tighter management of our working capital in this area, so you will see the actual amount of cash that we have on hand at the end of the half is lower quite significantly from what we had in the previous half.

Turning over to page 9 with lifting costs, you will see that oil lifting costs both in terms of total production costs and then also on a unit of production basis are lower. That is largely attributable to the sale of Legendre to Apache that we announced earlier in the year and also reduced costs at our Laminaria Northern Endeavor facility. Also the other things to notice is that oil projects that have come onstream such as Enfield are lower on a unit of production basis versus things like Legendre.

So if you look at the oil lifting costs, which are the AUD8.90 million and the AUD5.77 million, that is being done on an ex-FPSO basis. You can add back in the FPSO and it will tell you the same story, which is oil lifting costs have fallen if you include the FPSO from [11.34] per BOE to [6.83] per BOE, which is a 40% decrease.

Turning over to gas lifting costs, you will see there was a slight increase in the gas lifting costs both in terms of total production costs and then on an [EOP] basis. That is largely attributable to a general increase of costs in the Gulf of Mexico shelf environment. The Gulf of Mexico shelf, as you will recall, is mostly a gas production for Woodside as well as everyone else.

Moving over to page 10, as Don noted, the first half of 2007 has seen a continued growth in our profits in both an underlying basis moving from 493 to 545 and then also a reported basis, which is moving from 524 to 610. The extraordinary items for the first half of 2007 are listed on the text to the left of the graph, so that would be the sale of our Legendre facility to Apache for $57 million. We also sold our remaining interest in Papua New Guinea and recognized a gain of $8 million on that sale.

The profit drivers are largely due to the addition of production from Enfield along with continued strong performance from the Cossack Pioneer and those significant items that I just reviewed. Those effects in total outweighed the unfavorable effect of the stronger Australian dollar versus the US dollar and increased depreciation being caused by the addition of new production from facilities such as Enfield.

Moving over to page 11. Page 11 will give you an NPAT bridge that shows you kind of the reported NPAT in the first half of 2006 and how it reconciles to the first half of 2007. We have broken it down into effectively three sections -- controllable performance, non-controllable performance, which are things like price and FX, and then the interest and tax impact.

The difference in the halves was primarily driven by the commencement of production at Enfield, causing higher sales revenues to be achieved in 2007. Of course with the increased production comes an increased cost. Having said that, the gain in revenue is more than the increase in cost. Depreciation of the Australian dollar is about 117 -- AUD117 million of the total impact and that is stronger AUD, but again that was outweighed in total by the increase in revenue coming from Enfield.

Moving on to page 12. Woodside, as you know, is a strong dividend payer and that trend has continued this half. We have paid a AUD0.49 interim dividend, which is the same that we declared in 2006 and above what we declared from 2003, 2004 and 2005. I will talk about capital management in a minute, but Woodside, I think compared to its peer group, is distinguished by the fact that because we have strong operating cash flows from assets like the North West Shelf and then the future assets like Pluto, we will be able to maintain that strong dividend going into the future.

Moving over to page 13, we just wanted to give you an update on the 2007 capital expenditure forecast. You will see that compared to 2006, the largest items are of course Pluto, which we now forecast we will spend AUD1.479 billion for the full year. You will also see, as I look down and I don't know if you've got the colored charts in front of you, but if you look at the light orange section, the 845, that is referred to as Exmouth. That is collectively the greater Enfield area assets, which are Enfield, Vincent and Stybarrow and you can see the increase of capital spend as we bring those projects into fruition comes from 403 in 2006 to 845 in 2007. This is kind of offset somewhat by the decrease in spend over things like exploration in the Middle East and African business units.

Finally before I turn it over to Don, we will turn to page 14 and that is just our gearing. We have finished gearing for the half at about 21.7% and that is significantly down from where we were at the end of 2006. As was announced today, we will be activating the dividend reinvestment program again for the interim dividend and that will be for fully underwritten dividend reinvestment program. Woodside will have an intention to continue the DRP on an underwritten basis throughout the construction phase of the Pluto project.

With that, I think we'll turn it back over to Don to go through the outlook.

Okay. Let's go to 16 and just quickly -- I will just say that you know how we split up our business in three different segments. Let me start with the foundation business, North West Shelf on page 17. The Cossack Pioneer -- I was just out there actually along with all the -- done my annual kind of go-around and really proud of what the folks are doing out there in the area of runtime and also in the area of maintenance in keeping the facility up to snuff.

The Karratha gas plant continues to have strong performance on the first four trains. We are anticipating train 5 coming on next year and things up there are on the go and quite busy and it is becoming just absolutely a world-class facility in the respect not only of its efficiency, but also the size.

On our projects again, the train 5, the Angel and now our North Rankin 2, which is the compression platform that will come into effect in 2011/12. All of those are on schedule and I would say that on the projects that we operate, we are maintaining a very good cost control of our projects. All of our projects that we operate, with the exception of Otway and train 5, which we talked about earlier, and train 5 over the last 12 to 15 months has gone better than we would have expected on pricing or on costing and Otway, when you take a look at it when we signed the AFE and did the AFE, it basically is about a 20% overrun. We would have expected 30% to 35% based on the environment that we work in. But Angel, Vincent and other projects are all looking fine on our costs.

Moving over to Enfield. The production rates as I mentioned earlier have stabilized. We have our 4D seismic in and it is really fantastic to look at. We do see that we will be drilling the two wells, ENA-03, which I said were in sectional and basically the ENA -- I'm sorry -- ENC-04 which is an injector. We look forward to bringing that production on here in the next 30 to 45 days.

Vincent project is going well. We are still looking for our startup on schedule and on cost. Stybarrow Project unfortunately is a cost overrun situation. We can talk more about that during the Q&A, but still looking forward to production at either the end of this year, beginning of next. Operator advises us at least late 2007. That is a sister project basically to our Enfield in reservoir. Then we have some pictures here of Otway and next time we talk, I hope there is a little bit of a flare on one end of this thing showing you that we are producing gas through the plant.

Moving on to page 20, Oceanway. We are expecting to be deemed complete here at anytime. We think we are the number one opportunity now of getting LNG into California. We have two things going for us. Number one is we have a great technology that we are applying there and number two is we have got gas.

On the Gulf of Mexico, our production is back up. We've got the pipeline in 804, Mustang Island 804 back to being -- bringing that field back on production. We are running somewhere between 45 million and 50 million a day out there. Neptune again is our first deepwater development that will come onstream later this year, early next year. Again, Neptune is probably running over or has run over on cost from our first expectation of an AFE that was submitted several years ago.

The exploration, we have got the [Mac Smith] on site to drill the first of our deepwater group of wells that we will drill this year and into next. The Corona Del Mar, as you can see, will spud. We have got it on site and anchored in. We had a demand for the hurricane Dean and everything should be back together in a day or two.

Our second well will be the Terrebonne and as you can see here, we are going with small equity, multiple wells. It is our philosophy to make sure that we can ensure that we have exploration success and that we can get the confidence we need for the deepwater competition.

Moving over to Libya, Mauritania and Algeria. Let me just say those -- the wrap up is is that we are disappointed with our offshore drilling program in Libya at this point, back to the drawing board and back to studying it. We have drilled four wells and we were not successful in putting good reservoir and source gas together. We found one or the other usually in each of the wells.

For Mauritania, our production is averaging. I think last time I looked on the spot basis 14,800, but I think we are saying 15,000 barrels a day average. At this time, the guys are fighting through some gas lift valve issues, but are doing well with what they have.

Algeria just continues to produce strong cash growth for the Ohanet Project.

Let me just draw your attention to the comment on the bottom of page 21. Woodside is considering a range of options in relation to the Middle East. Let me just say not Middle East, but Africa -- our Africa assets and those options may include an exit.

Moving onto page 22, our targets have been set for production this year. We are expecting Otway to come in. We are expecting the Enfield ENA-03 to come in and possibly some Stybarrow and Neptune production by the end of the year.

Moving over to 23. Gee, we are on page 23 and it is our biggest project, but Pluto is basically the second platform for huge growth for our Company after the North West Shelf. Our standalone train 1, which we hope doesn't stand alone very long, we are actively looking at trains 2 and 3. As you know, we announced that earlier, the last couple -- we announced it in late July that the Board has approved that. I won't go through the particulars of that except to say that this Friday, we will stitch up in [Sydney] the gas sales agreement and equity agreement and looking forward to our -- I guess you would say our initiation of our partnership with Kansai Electric and Tokyo Gas.

We see a lot of value enhancement in the future in this area. As you know, in the second half of this year, we will be drilling several gas wells out in the area to solidify our gas position in the Northern basin.

On page 24, we show you the significance of what Pluto does to our Company. It is all about equity. At the end of the day, we are very proud of being operators because we can control a lot of things, but equity is what brings the dollar bills to the bottom line. And as you can see here, it triples our current business after you take into effect our train 5 next year coming online.

What comes after Pluto? We have got things cooking on Browse and Sunrise now. We like the gateway of Western Australia to Northern Asia, as well as other places around the world, but we see a pipeline of projects we're kind of penciling in and have an aspiration of the Company. We would like to see where we can utilize the same contractors from train to train. What our people tell us is that somewhere between 18 to 24 months is the proper staging of these trains and we clearly see five to six trains out there. So basically you can just sit there and say 2010, '12, '14, '16, '18, '20. That is the type of thing that our management is planning for for this Company and we have got the gas on the shelf to do it.

Moving over to page 26, we show you some of the opportunity sets. We have third-party gas potential for Pluto. We have additional exploration. We are very happy to get what is now called the WA-404-P permit. It was a very, very competitive bid and we know that we just won it by the -- just a very thin margin over a lot of other competitors. So we are very happy with the Cazadores block and by the way that new BHP discovery certainly makes us feel pretty darn good about what that calls for for the area there.

We show here the Browse potential and I will talk about that on the next page, page 27. We have several options and I'm not going to say any one of them are preferred at this time. So we show here three of the four or five options that we have to develop Browse and we are continuing to drill and appraise. I will tell you we are moving on the marketing to sales of the gas and at the end of the day, we are looking forward not to rest on our laurels at Pluto, but we will bring Browse in or Sunrise in behind Pluto.

28 is Sunrise. I'm not going to say much about Sunrise today. We are in that ticklish area with Timor-Leste to kind of develop which concept, concept select. And we will get the work done. We've got the people assigned to it. We've got great joint venture participation in this area and once we get agreement as to the development concept, we will be off and running with Sunrise. We got down here development needs, the special marketing, the resource -- that won't be a problem.

There is a slide here on pricing. I am not -- again, don't have to talk about it. I don't care in this Company right now in Australia if I find oil or gas because it all means the same to this Company at this point. The Asian prices for gas are quite strong and frankly people have always felt that they have been at a -- that you have to go to the US and you have to go to Europe to get good prices. We don't see that anymore. We think that is a paradigm that is now no longer in use.

Moving over to page 30, supply/demand. Let me just say I am almost at the point -- we call it a window. I don't know how big the window gets. It's definitely about as big as the window in my office. I think it is just a structural change in the market. I think LNG is now just a very legitimate hydrocarbon commodity that trades light crude and condensate. So I am going to quit calling it a window from this point on and just basically say it is a line of business that we can -- we can sell our product into.

On the bottom there again, a little bit of a headlight I guess you could say. We are in discussions with potential Asian buyers on significant volume, let me repeat significant volumes, to come to key terms agreement. So we are shifting from this marketing into a sales mode for our Browse Sunrise fields.

On page 31, the global demand and suppliers. Kind of we say the Asia-Pacific, Atlantic. It's still true. Middle East is a swing. But I will tell you what. Asia-Pacific doesn't take a backseat now to Atlantic Basin. The way we view it is we view it as a global marketplace. We want to access all of it and we want the capabilities to completely exploit the supply chain from molecule in the ground all the way to the burner tip and not let anybody get take any of that value away from Woodside shareholders.

Moving on to page 32, pretty proud of my management team. I am more proud of my employees in this family. We have got great employees that are really quick in all cylinders. I said that the Board of Directors didn't do Pluto, the management didn't do Pluto, the CEO certainly didn't do Pluto, but our employees did and hundreds and literally thousands of our employees have put Pluto over the line, something I am very, very proud of.

If we take a look at our management team, it has been in place now for quite awhile. Yes, we have the return to politics from Gary Gray, but other than that, it has been about 16, 17 months since I have lost anybody -- since anybody -- from the management team and we have got people that have been in place quite awhile now and it is very clear the aspiration of our Company.

When you take a look at our performance, this is kind of the report card that I work off and that is the total shareholder return, the appreciation in share price and the dividends and when you take a look at our peer group, the first slide on the left, my management team has put together and our employees, we have consistently returned a good return to our shareholders versus our peers and there has always been a question of how we do versus the ExxonMobils, the ConocoPhillips, the Shells. So we thought we would show you and on the right side versus BP, Chevron, ConocoPhillips, ExxonMobil, Shell, Occidental, Total, over the last -- since well 2004, the beginning, we have performed pretty well against them too.

So I won't say much about -- page 33, compared to the marketplace, we have performed fairly well. The big thing I would just say is that the future of this Company is bright. We're starting to click on all cylinders. I am proud of what the folks are doing and at the end of the day, not only have we performed well against our peers, we expect to continue to outperform our peers and competition.

With that, I will turn it back over to the emcee for the question period.

(OPERATOR INSTRUCTIONS). Gordon Ramsay, UBS.

Thank you very much. Don, on page 24 or slide 24, you are talking about an opportunity to book 150 million barrels of oil equivalent of additional 2P reserves. What would trigger that and what kind of timing could we look out for that booking?

Yes, last year, we booked -- on Pluto, we booked the contract capacity or the lower contract capacity for both Kansai Electric and Tokyo Gas. With the FID of train 1, we are now allowed to book what gas we have in our portfolio against the full capacity of the train and it will mean somewhere over 150 million barrels of P1, P2.

Excellent. Just one other question. You said we could take it up in the question period, just on Stybarrow. BHP in their June quarterly indicated costs were up 27% to gross US$760 million. Is that still the figure we should be working with?

Yes.

Okay. Thank you very much.

Mark Greenwood, JPMorgan.

Good day. I am interested in the comments that you are looking at signing a key terms agreement particularly for Sunrise or Browse gas. What I am interested is in your thoughts on the timing of either a Sunrise or Browse project given that the balance sheet and the capital required to invest in the Pluto project. I mean I can see -- you said today you are going to fully underwrite the DRP for the entire duration of the Pluto capital program, but still I imagine CapEx on Browse would be towards $30 billion. What is your view in terms of the timing of that project and how you can fund it?

Our gas marketing group led by [Reinhard Management] reports up to our CFO, Mark Chatterji. I will let him answer that question.

Yes, I think you actually had a couple of pieces to it, so I will see if I can tick them off. Your first one was timing. The timing for the key terms agreement -- it is coming up over the next couple of months. Obviously, we have been kind of doing front-end discussions as Don has indicated for some time.

Maybe to correct one statement you made -- the discussions that we have are not specifically related to Pluto, Browse or Sunrise. They actually deal with Woodside on a portfolio basis. One of the things we have noticed in the marketplace is customers are much more comfortable just dealing with Woodside, understanding that the projects that Woodside has under its control are subject to a number of uncertainties and what they actually want to talk about is supply from Woodside as opposed to the particular projects they come from.

In terms of the actual funding profile, as I said, the DRP is a key piece of the funding picture for Woodside and our intention is to leave it on during the Pluto construction phase. I think though when you kind of go through the math and you look at the numbers and you kind of again assume the oil prices stay where they are today over the next few years, you will actually come to the conclusion that the DRP is largely not there for Pluto. It is largely there to maintain balance sheet flexibility to advance Browse, Sunrise or Pluto expansion depending on which way the JV partners in those various projects go, depending on which way the government participants that govern those various projects go and depending on which way the customer discussions go.

Okay. So when Don referred to moving out of the marketing phase for Sunrise, Browse into the selling phase, we are not to join that with the statement that you are looking at signing a key terms agreement in the near term? They are separate issues?

Well, no. I think Don said it quite correctly, which is initially what we are doing is going around and having general discussions with our customers focused on the state of the market and what their actual demand requirements would be over the next decade. What we have progressed to is the discussion is focused around price. The thing that I was trying to indicate is that when we talk to our customers, we talk more on a portfolio basis than on any one specific project.

Okay. Thank you.

John Hirjee, Deutsche Bank.

Hi, Don. A question -- a follow-up to that remark by Mark, do you think you have the human resources to undertake another major LNG project seeing you are still in the phase of Pluto given that there is key resource restrictions in terms of contractors and service providers?

Yes, that is -- well, we have several restrictions I guess you would say or obstacles. Frankly, we think we can manage each one of them. First off is technology. We think we can have several technologies of LNG to pick from. We think we are good in deepwater and everything to do with gas has been pretty good for the Company. We have the capability, subsurface and pipeline and surface.

On LNG plants, to build one every let's just say 18 months to two years, we have capable people. We need more. We understand that. We have got action plans in place. In fact this morning, I was just notified by a person that we have offered a very lead LNG project management job, two out of the US and he has agreed to come over and work for us. So I think Woodside with the suite of projects we have is becoming an employer of choice for LNG and people see long-term career employment with our LNG portfolio. Probably more so than a lot of other companies in the -- in the global marketplace where we might have an LNG train maybe once every five or 10 years where they go from project to project. Frankly, what we do now is offer a career for our LNG people.

As to operators, we have doubled up operator training. We are basically hiring today for Pluto. We already know who will manage the Pluto plant when it starts up and we are getting that person adequately trained at another site and we have some exchange opportunities with other companies come up. So that clearly is a hurdle that we have to overcome, but we think we have the management capability to implement that. We will be growing our resources as we grow our opportunity set.

So Don, the question therefore is can you commit to FID of let's Browse or Sunrise while you are in the construction phase of Pluto?

Oh yes, we absolutely plan to. I mean people don't think this Company stops after Pluto. This was the first in a line of opportunity sets that this Company has. Now the question is you have to grow smart and you have to grow wisely and you have to grow absolutely financially soundly. So even if we have the people and the capability, we have to make sure that we have the financial capacity and our financial folks have got a plan in place that says that our aspirations should not be limited by the financials.

All right. And that leads me to a question for Mark if I may. Mark, do you require asset sales to really augment your balance sheet?

Hey, John. Look, the answer is obviously it depends on how much activity is going on at any one point in time. I think the last time we spoke during the full-year announcement, Don made a comment that's probably worth repeating because he was asked the question well, what is coming next in terms of the specific projects and I think the answer that he said was actually a two-part answer.

The first one is well, we don't know and the second one is effectively we are not going to back a particular winner because there is a lot of different variables that go into this, as I mentioned earlier, a [JVP], government, project approvals. So instead of trying to pick a winner, we are quite happy to run all of the horses in tandem until one actually gets through the funnel.

As Don indicated, there are very real resource constraints in Australia, which if managed properly ought to allow us to build a train about once every two years, but until you get to a specific point, you can afford to move these things forward at the same time and that is exactly what we intend to do.

All right. Thanks, Mark.

Stuart Baker, Morgan Stanley.

Yes, morning, gentlemen. Hi, Don. A couple of questions unrelated. Firstly, just on the dividend, which was kept flat in the half-year. I know I was a little surprised at that given the history of relatively strong growth. I would have thought it would have been hard to tick it up a point or two, which would at least continue to send a positive message at least (inaudible). I just think keeping it flat kind of sends the wrong signal. So I was just wondering if you've got a commentary on that.

Yes, I think you said two parts. Let me just stop you with the one and talk to you about that. For the amount of growth and share appreciation that I certainly expect that would be created from the project approvals as we go forward and the implementation of projects, if AUD0.50 or AUD0.51 versus AUD0.49 is a stopper then frankly probably investing in the wrong shares.

The fact of the matter is is that we provide something that very few of our peers can do and that is a great growth profile and a great value equation. So we're very proud of our dividend and we are very proud of our growth profile and we think at the end of the day, it is going to lead to the same type of performance you have gotten from this Company in the last several years.

Fair enough, then. Just moving onto something different, just on LNG and you will have noticed, as we all have, a couple other companies around the place that seem to have schemes to develop, half million, one million kind of projects that what might appear to be a couple hundred million US, which look materially different to the top [end] down where their projects cost billions and I am just wondering if those kind of projects do (inaudible), bringing scale down to what appears to be very low cost. Obviously that is sort of a significant strategic threat and what is your view of those kind of projects? Is it all just wind or will they work and if they do, is it an issue for you?

Well, one thing we do know after working in this business for about 33 years is scale matters and at the end of the day, these little half million -- they are really not -- they are cryogenic plants are what they are. They are really not full LNG trains, but the fact to the point is is that you need shipping, you need this or you need that. Once you add the operating costs up to this lack of scale, I have seen some of the economics and things. More power to them. There is plenty of room in the marketplace for these small, short-term projects and frankly I know the folks at some of these plants, I know the people individually and they are making do with what they have.

Just a final question then, now that we are seeing I guess well advanced and developed drilling on Stybarrow and Neptune. etc.; just wondering if there is any indications on whether we should expect surprises in either direction when we see the reserves, and/or perhaps revise the production for all of them?

Yes, the only thing I can say on that is that we are still drilling Neptune and we are still drilling Stybarrow. So there are still results to be found on the wells. But one of the things I think that we do in error in this industry, and Woodside is probably a part of that, is we put numbers out there and those are like P50 expectations. What we plan on is the P90 and the P10 [caves], and we look for a wide range of opportunities and that is how we do our economics.

So, you know, if production comes in 10% under or 10% over or whatever, these are all within what you might call an expectation range for us at our company. So you have to take it with a grain of salt, you know, that if you use one number before you drill, there is a wider range of opportunity sets.

The one thing we do know is we understand the Enfield related reservoir at Stybarrow quite well and we kind of know what to expect and I think that BHP has picked up several pointers from us in the respect of what we have found at Enfield. Hopefully, they utilize those learnings in a positive way.

On Neptune, we are still in the drilling phase. We got a late start there because of the Hurricane Katrina damage to the [DV1]. Drilling is a bit lagging, so we are just analyzing some of the results and some of the completions. We expect that their reservoirs will be probably in the range -- I think you have to go back to the operator and listen to the operator. The operators are the ones that have the reservoir engineers fully engaged on this and have the latest update. So it is a good question to ask Mike Yager.

Anthony Bishop, Goldman Sachs JB Were.

Yes, just in relation to production guidance, I note that you have reaffirmed production guidance for '07 in the most recent production projection you have provided. You are looking for around 100 million barrels or in excess of that for '08. There has been quite a few changes since that last projection was advised. Can you give us an update on the outlook for '08 and '09 in terms of what you are looking for in MMboe?

Yes, we normally don't put out the projections until the November investor briefing day and we will do that again this time. There is a lot of changes that have taken place in this Company. I expect more changes to take place between now and November.

Okay. In terms of D&A costs, there has been a significant increase there year on year with the CCP I should say, up [17.3]%. Can you just talk through the drivers behind that? Are there any unusual amounts that we need to take into consideration and then just some outlook comments about where you expect to hedge into sort of '08, '09?

Yes, I mean I think on depreciation and amortization, the main driver is the increase in production that you see. I mean when you get more production out of the ground, you are going to get a higher absolute number for D&A. Some other things that I think you are aware of already, Anthony, is that when we looked at different scenarios for Enfield last year, we did do some reduction in reserves for Enfield. That reduced for example D&A per BOE on Enfield I think quite heavily. We had a bit of a boost, but D&A per BOE as well and so that factors in as well. But I think when you think about the absolute change, it has got to be measured against the absolute change in production.

In terms of [rag] per BOE, Mark, are you expecting major increases into '08, '09 or similar to sort of these existing levels?

Well, I think in the case of 2008, '09, you have to factor in our new production and in that case, you have got a fairly low depreciation on the existing trains at North West Shelf, obviously one, two, four. With new production, you always bring in -- and with the higher revenue, you are going to bring in higher depreciation.

Okay. In terms of -- there's an impairment charge of about AUD5.6 million. I know it is a small amount, but I was just curious to understand what drove that and what asset it related to?

Yes, the AUD5.6 million of impairment was related to one of the shelf fields in the Gulf of Mexico.

It watered down a little earlier than we expected to production.

Okay. No worries. Thank you very much.

Angela Macdonald-Smith, Bloomberg News.

Hello, Don. It is Angela. Look, you sounded quite optimistic about getting approval for Oceanway in California. Can you just outline what that is based on and what the critical factors will be I guess heading up to that decision?

Well, I'm sorry I sounded that optimistic. I probably should have been a little more careful in my words then because I am just saying is we are probably the number one best opportunity set out there because everything else has failed. At the end of the day, you give it a 50-50 shot. What we have learned is not to spend big dollars over there until we get a permit. Getting a permit and building a facility is two separate things. We are attempting to build the permit because we think it is a good thing for California, it is a good thing for their economy to have another source of energy import into what is I guess the sixth or seventh largest economy in the world. We would like to do that. There are other ways possibly to get gas in there, but it is a lot higher cost we believe.

So at the end of the day, let me just say this that we have kept our costs low. We had a great technology and we are working very closely with the state and government officials over there and we are getting nothing that concerns us that it is dead on arrival. In fact, we are getting some encouragement to continue on from state and government officials. So let me just say this that I am optimistic. What optimistic in California is is you probably have got a 50-50 shot and we have told everybody that we are trying to keep a 50-50 shot at it. Mark, you might have other comments.

No. Hey, Angela. I think Don characterized it correct. We don't at all think it needs to grow. If you look at the previous projects in California and what the history has been, certainly it has not been particularly encouraging. On the other hand, the local staff that we have got over there based in Los Angeles has been working hard with both the city of Los Angeles and the state of California government officials to come up with an acceptable project that meets their requirements and meets our requirement. The project that we do have I think voids some of the obvious policies. It is not a nearshore facility, which is the first thing that plagued a number of previous projects there.

Number two, this is actually an integrated project. As far as Woodside has its portfolio of gas that it can supply the facility with, which again if you think of some of the potential -- sorry -- some of the proposals out in California today that come from proposed project promoters, which really don't have the sources to fine line. They are just trying to build the facility.

Let me just finally say on this point, we have been -- when BHP ran into some problems with their permit application, we were quickly given encouragement by state and city officials not to let this impact our thinking and our project. So we have been given encouragement in that respect to continue on.

Okay, thanks. Could I just ask one other thing regarding the African business? If you do take this into exit there, would that include like Mauritania, Algeria, Libya, everything there?

Well, let me just say this that Woodside in 1999, 2000 kind of looked at several things to do because LNG wasn't the easiest thing to commoditize -- to monetize -- excuse me. And we looked at what else we were good at. We found a lot of oil in Mauritania. We found oil and gas in Libya onshore. We have a nice project in Ohanet in Algeria. But taking a look at where the world is turning environmentally for us and also in market availability to what we have in our company and our capability, it is really one of focus and one of what is material for the Company.

We have created value in Africa, but at the end of the day, it is something we want to continue to go forward with versus the LNG opportunities that we have in Australia and outside of Australia, so it is a selection process at this time. It isn't because of failure; it is a selection process of where we want to go forward. Maybe another corporate structure let's just say over our African asset would allow those assets to be more fully valued and more fully developed than what our focus at this time is for our Company. So I view it as a win-win type of situation that we are trying to set up.

Okay. Thank you.

Paul Garvey, Australian Financial Review.

Just following on from the comments there about the African sale, have you had any expression of interest from any parties at the moment?

Well, let's back up for a minute here. We didn't -- when we said we were looking at options including an exit, we didn't say sell in particular. Let me just go through the range of opportunities for you.

Number one is we could sell. Number two is we could trade assets and number three is maybe we could demerge the Company and get it structured into a company that focuses in on the type of assets they are. Maybe we spin it and IPO it. Maybe at the end of the day, we figure out a way internally to set up a company within a company. So I wouldn't just jump to the conclusion it is going to be a sale.

All right. And Chinguetti's recent performance, do you see much upside on that 15,000 figure or is that as good as it gets there?

Yes, I'm glad you asked because our folks that work that facility both here in Perth and in Mauritania, they work it really hard. At the end of the day, let me just say this, we need to change out some gas lift valves and get them sized properly for the production. We will get several thousands of barrels back for just that. We expect that into the -- have a two in front of that. Then we expect to go into phase 2 drilling next year. The rig is scheduled for that to return into the end of the first and second quarter next year and there will be a phase 2 of multiple wells that have already been long lead itemed purchased. So there is upside to that number clearly.

Okay. Thank you.

[John Fosseas], West Australia News.

Don, just following on on the African situation, you mentioned earlier that the African -- the whole thing is -- not necessarily -- doesn't include the Middle East assets, but does include the African assets. Does that include therefore Algeria or do you consider that part of your Middle East business and is the Kenyan acreage also potentially up for grabs?

Yes. Hey, it is Mark Chatterji. I think when Don said Middle East, he was meaning to say Africa and if you look at the slide, it says Africa. Woodside's operations are actually in Africa in terms of the African continent being Libya, Algeria, Mauritania, Kenya, Sierra Leone is where we have other exploration acreage projects under development or production and when we talk about reviewing, we will be reviewing that entire business itself.

We just happen to have it headquartered out of Dubai right now, so we always say Middle East and Africa unit. What we specifically are saying here is the African asset.

Okay. Thanks.

Andrew Blakely, McQuarrie.

Hello, guys. I had almost given up hope. I was just going to ask you a quick question regarding some of the equity split following on some of the previous questions considering the future capital requirements for developments like Browse. In terms of the Browse asset, you're sort of sitting at around 50%. Is that unitized equity that you think you would have and also what would you consider the optimum equity forward in that facility going forward? Would you want to maintain operatorship and control with the higher equity?

Well, let me just start out by saying that I think you have got it right. We talked about equity. Equity is the dollar bills for the Company. One of the things that didn't get highlighted very well when we made our Pluto announcement is that we were clearly directed and we recommended to the Board and received their reassurance that there was no intent to sell equity at Pluto other than the 25% equity piece. We like the idea of control and we like the idea of controlling that asset and the underpinning of it. That doesn't mean that we won't be able to bring outside gas into it, but we will control the infrastructure and the base [true-up] part.

Now as to Browse, yes, we own somewhere I guess right now if you look at it with the way the three fields are being appraised somewhere between 46% and 50% of it. At this time, we have no intent to sell any of it. You just don't find these big scale LNG projects lying around the world in very safe environments like Australia and the value of these -- it is just like a big oilfield now. There is no difference. And at the end of the -- in fact, there are some aspects that are better about it.

So at the end of the day, we think we can financially engineer the underpinning of these projects to maintain our value for our shareholders and at this time, we just absolutely don't have any LNG assets up for sale because we believe that is the driver of our Company and it is the growth vehicle that we love to have been in this Company. It is what we are good at. Just take a look at North West Shelf. If I could have more than 1/6 there, I would love to have more than 1/6 interest there.

But in terms of -- I think recently you talked about the potential for Browse to even be developed back through the North West Shelf in terms of if there were ever a train 6 or train 7. Would there be a requirement for that type of development for a divestment to the other equity partners to give their positions more relevance?

Yes, we said that was one of four or five different options and at this time, we don't have one preferred over the other, but let's just talk about that. An easy way to handle something like that, let's just say another option of that option for instance. If we have 46% to 50%, let's just strip a 30% equity share off of that and go down and do 100% train at Pluto, put the rest of it into North West Shelf and you probably at that point are pretty close on equity split for the rest of it. So I mean there is a huge number of business options we have that we can drive home at the point. So it is nothing that isn't managed in a commercial negotiated sense.

Okay. And just one other question. There has been a lot on Africa already and it's probably been largely answered, but I mean it is always good to keep -- I know you are saying that in terms of focus, you want to focus more on LNG and that is obviously a key driver for the firm, but I think it is always good to have a diverse portfolio of businesses and if you were to pull out of Africa, is there another area that you see as more attractive for exploration at this time given the issues in Mauritania?

Yes, I got Agu Kantsler sitting here who is our exploration manager and he can of course chime in on this, but number one is we have got fantastic Australian exploration opportunities. We fill that basket first. Anything that Agu wants in Australia exploration he gets, number one. Number two, we have some ideas about LNG potential around the world. What we are looking for is this gateway from Australia to the Asia-Pacific markets, but we are also very interested in some other supply aspects around the world to supplement our LNG.

As to oil of course, we are developing three oil projects right now -- Neptune, Stybarrow and Vincent. If you take a look at our Gulf of Mexico, we anticipate oil for our Corona Del Mar, if we hit that opportunity and also the other options that we have for additional wells in the Gulf of Mexico could be oil or gas.

I don't think we are limited in exploration, but when you have got the development portfolio like we have, we can be very selective and we can high grade and we can be technically very sound in what we drill. Agu, would you like to add to that?

Yes. Hi, Andy. The thing is that there is a really healthy competition for capital going on everywhere in the Company and that means that we do need to focus on things that contribute to the core elements of strategy and things that contribute to a little bit of portfolio diversification and with the rise of LNG, we are just rebalancing and [rejigging] the exploration portfolio to suit the Company's needs going forward and as Don said, that doesn't mean that we are making a decision to get out of anything, it just means that we are having a look at how we are going to or how we could restructure our exploration portfolio to focus it more with some of the new strategic themes that are emerging.

Diane Brookman, Citigroup.

Hi, Don. I initially had a question on Africa, so that has largely been answered, but I have one question here. In regards to Libya and the exploration that is expensed in the segment's results, can you tell us how much is expensed there regarding Libya exploration?

Yes, hang on one second. Let's get the exact answer here.

Yes, just while they are getting the answer, I can tell you that the four optional wells were drilled for an average Woodside net share of about US$11 million so the deepwater drilling has actually been quite cost-effective even though the results weren't everything that we had hoped.

Right. So there was AUD109.7 million there. So what is that -- AUD60 million or so of that number relates to the Libyan offshore.

The drilling for those four wells, the expense was about AUD48 million.

Thank you. Okay. And having a look at the segmented results for the United States, I noticed that the gross margin there is almost half. It is down at 28% year on year. Are there any plans there regarding this particular area? Are you going to get bigger or move on?

Yes. When we -- we work the shelf to build our workforce down there and to do a little bit of that. With our deepwater portfolio now, we have pretty well shut down the shelf exploration program because the materiality and because of the cost of wells have gone up to a point where it wasn't as effective as we wanted it to be. At the end of the day, Neptune is coming on. The entire financial performance of the US Gulf of Mexico will be overwhelmed by that asset when it comes on. So it will change the parameters of the financial indicators quite significantly coming up here very shortly and with some success, we will build on that.

But it doesn't take away from the fact that those existing resources, which you have in the Gulf of Mexico, are actually not performing quite as well as you would have expected?

I don't agree with that. In fact, when I take a look at the cost of production and the unit performance, I guess I would just say that number one, it is a very small part of our business at this point. We are building it with bigger material assets, so the materiality issue isn't much at this point. But frankly I have to take a look. I suspect it may be under depreciation area, but as to my knowledge of the cost of production and how the facilities are being run, I have been pretty happy with them.

Okay. Looking at the CapEx figure, is there any guidance on what the exploration capital now might be for the full year? Has that changed?

I think as you saw on the slide, it remains at [419] at this point in time.

Thank you. That's all.

Bernard Picchi, Wall Street Access.

Hi, Don. You sounded pretty enthusiastic about this new lease that you picked up in the Carnarvon basin, WA-404. Could you talk about the reasons for your enthusiasm and what your work commitment is and also what the drilling schedule might be there?

Well, since it is running onto 1 o'clock in the morning for you, I am going to let Agu, our head of exploration, answer that one.

Yes, let me say it is a block which is adjacent immediately to the giant (inaudible) biofield. It is a block in which on the existing 2D seismic data that we have, we can see several structures where the prime reservoir objective shows quite reasonable amplitude -- seismic amplitude response and for that reason, the fact that we have abundant proven charge in the area, we can see reservoirs, which are giving every indication of being gas filled, at least a couple of the structures that we can see with 2D data. We are reasonably enthusiastic about the block and as you can see, it is very strategically placed to provide additional volumes to any Pluto project.

And where in the sort of schedule of drilling, exploratory drilling, all of these leases would you put 404?

404 will begin to be drilled heavily in the mid-2009, the 3D seismic, which is wall-to-wall, begins in February 2008. That is when the ship will arrive to do that work.

Excellent. Don, I guess your guidance on Enfield production only goes out through this year. You were talking about 50,000 barrels a day. Do you believe that Enfield proper, I am not talking about greater Enfield, but just the Enfield deal itself, will ever achieve production at the old goal of 100,000 barrels a day growth? Could you get production higher than 50,000?

Yes, I think that the answer to that is number one is the water flood performance, which we are concerned about in the beginning, the actual field mechanics are working quite well. Number two, the forecast of production out to the end of this year, we think we are well within that range at this point, especially with the drilling that we have going on now. The drilling is actually later than we had planned.

I think the most encouraging thing is in our major wells, we haven't really got a water cut yet, so the push, the drive of the water flood is actually sweeping the reservoir we believe quite well. So what I believe will happen is, to answer your question specifically, no, I do not expect 100,000 barrels a day. I expect more than where we are at right now just with ENA-03 coming on and potentially some more drilling. But the water flood is working so well right now that we have cut down dramatically the number of wells that we have planned possibly to put it in phase 2 and we are going to watch the reservoir perform.

My suspicion is that production will be a little longer and the decline won't be as great and so the potential of production will be not peeking as an event with the heavy decline as much as a more elongated production curve.

Great. And my final question, could you discuss what you expect in the next year or two on your DomGas price? I know that prices have improved quite a lot I guess on the margin in Western Australia. What would your own expectation be for your own realization?

That's a good question. You know what? I am sorry we didn't mention that in this slide pack because we see that as another line of opportunity for our Company. Whereas DomGas was not the thing we tried to promote very well in the past because of the pricing. I think the big industrial powers here like Rio and BHP and Alcoa have been so favorably impacted by their commodities that the prices they receive, they realize now they are going to have to pay a world scale price for gas.

You have seen a couple of recent contracts done at prices much different than they were in the past. [R.T. Spence] made a speech here just recently. I believe the speech is on our website. It is a really good one to take a look at. What it shows is that we are looking now at opportunities to expand our North West Shelf DomGas plant potentially. That would have to take approval of our partners.

But the other thing we're looking at is we don't have a commitment to sell DomGas off of our Pluto facility until 2016 at least. Frankly at the prices and what the molecule sees, even though we have got fantastic LNG pricing on Pluto, if we get some of this pricing up to where we expect it might get to, we may accelerate and make domestic gas another line of business as early as the end of 2010 when we initiate Pluto. It is an opportunity set for us.

That's great. Thanks, Don.

Gordon Ramsay, UBS.

Sorry, Don. Just one other question. On slide 30, you've talked about you are in discussions with potential Asian buyers, re significant volumes. I just thought somebody else would ask the question what significant means?

I don't know. Let my CFO answer that one.

Mark, are you there?

Yes, yes. I am trying to think about how to do this without breaching all sorts of confidentiality and I haven't come up with a way, so I can't answer your question. It is significant in the context of if a deal gets signed, it would cover a reasonable portion of Woodside's equity share in any of its projects.

Okay. So it is fair to say that these volumes aren't necessarily like spare fifth train or Pluto, you can go beyond that?

Yes, I think so. You need to also realize one other thing. In the slide on page 30 on the second to last bullet, it says discussions with an s and buyers with an s. Things are breaking loose for us right now in this industry and people are trying to grab large chunks of gas, so that is just basically where we are at. I think also this might have to be the last question from some other commitments we have here.

Thank you very much.

Ladies and gentlemen, that is the final question for today's conference. I will now turn it back over to your speakers.

Okay. Well, I'd just like to say thank you very much for everybody attending and we will be off on some roadshows here and I'm sure we will see some of you there. So thank you very much for dialing in and thanks for your continuing interest in our Company.