Woodside Energy Group Ltd (WDS) 2010 Q2 法說會逐字稿

Once again, we appreciate everyone tuning in today and your continued interest in Woodside. We think we have a cracker of a report to present today. With me today I have Mark Chatterji. I'd also like to welcome Lawrie Tremaine, who is our Deputy CFO and will take over from Mark when he leaves at the end of this year. Now, I've got the rest of my management team sitting just right next door here.

Page 2 -- I'd like to draw your attention to our normal disclaimer. The only change we made this time is a reference to US currency following our change to Woodside's functional currency earlier this year. Now, all references to dollars and cents in this presentation are in US currency unless it's specifically stated otherwise.

Two further announcements today. Before I go any further I should say that with the increased commissioning processes at Pluto during the fourth quarter this year our investor briefing day will not take place in November as we usually have it because we want to take you up to the site early next year. So we'll be getting back to you about the site visit next year and we'd like to show you Pluto and how it's going once we start it up.

I'd like to also mention that we're doing something different this time. Our lawyers have told us that the script today that Mark and I are using is material and so we're going to put it up on the website as well as the ASX platform here in a few minutes so that you have that to use as a reference as we come around and see you. With that, let's go to slide 3, headlines.

First, our financial headlines; our half year financial operation and project headlines will be on the next three pages. First for the financial headlines, our reported net profit after tax of $901 million with an underlying net profit of $813 million is up 40% compared to the same period last year. I think it's a great result. I'm really, really excited about it.

Our revenue of $2.1 billion is up 45% and net operating cash flow of just over $1 billion is up about 145%, largely due to stronger commodity prices. Now, we earned $1.17 per share for the first half allowing an interim dividend of $0.50 per share.

Over to our operational headlines on Slide 4 -- our production volume for the half year was 36.7 million barrels of oil equivalent with a sales volume of 36 million. Now, that's down slightly on the same trigger last year, when you take into account the divestment of the outlay assets.

But the North West Shelf continues to deliver outstanding results. Just last week we produced on an operating basis, a daily record production of all of our commodities we produce up there, just under 800,000 barrels of oil equivalent. That's truly amazing to my mind. Now disappointingly, we've not been able to maintain a commendable safety performance achieved last year with our year to date recordable incident frequency rate riding up to 4.9 up from 3.3 last year. Now, that's based on a million man hour working.

Encouraging, our loss time incident frequency remains low at 0.82. Now, this indicates that the severity of our injuries are low. But we don't think that's good enough. Staff turnover on a rolling 12 month average has continued the positive trend seen last year. We're down to 5%. Now, this is a real vote of confidence at working at Woodside. Finally, before I hand it over to Mark, I'd like to touch on a few of the other project highlights from across our business on Slide 5.

The North Rankin gas and North West Shelf Venture Oil Redevelopment projects are progressing on schedule and on budget. Our other Australian assets continue to benefit from successful infill drilling and more wells are planned at the Corallina, Enfield, Stybarrow and Vincent oil reservoirs are all performing above expectation. More importantly the Pluto Foundation project is now 92% complete and both budget and schedule remain in line with our guidance. More later, but I think a truly amazing performance.

Our Pluto Expansion efforts are going well, quite well in fact, especially with our latest two discoveries, Larson Deep and Alaric, which open up both a new deeper play and a new hydrocarbon province, all against the backdrop of continuing discussions with other resource owners. The Browse and Sunrise LNG projects are gaining momentum and are really rolling now. I'm excited by these projects, I'm keen to get into the details with you but first we need to have Mark with the first half results which I think are stellar.

Thanks Don and good morning to everybody. I'm going to review our half year results beginning with production on slide 7. During the first six months of 2010, Woodside produced 36.7 million barrels of oil equivalent. That's down from around 40 million of oil equivalent produced in the comparable period. The difference is partially due to the natural decline of the oil portfolio and partially due to the completion of the Otway disposal in March of this year. For full year 2010 our expectation remains unchanged between 70 million to 75 million barrels of oil equivalent.

Moving onto slide 8 which is sales revenue, stronger commodity prices versus the comparable period more than compensated for lower volumes giving Woodside a first half revenue of $2.1 billion. As a reminder, we're talking in US dollars unless otherwise indicated. Revenue also benefited from the settlement of a number of LNG price outside the range negotiations.

Slide 9, oil lifting costs rose mostly due to lower production from natural fuel decline but the number also has $0.82 per barrel due to unscheduled maintenance on the gas lift riser at Enfield. Gas lifting costs rose $0.34 per boe versus the comparable period reflecting higher shut down activity at North West Shelf.

Moving on to Slide 10, operating cash flow increased substantially versus the period with most of the increase attributed to increased revenue partially offset by increases in net interest and working capital giving Woodside an operating cash flow of just over $1 billion during the half.

Slide 11, turning to reporting profit. You will again see the impact of revenue as the major driver between periods. The variance in other income is due to gain on sale of Otway offset by the absence of the unrealised FX gain on our US dollar debt in the first half of 2009. In fact going forward these unrealised FX gains and losses on our US debt have been eliminated by our adoption of the US dollar as our functional currency.

The variance and other expenses includes higher exploration and evaluation expense, the impairment of Neptune as well as the change in the US dollar book value over Australian dollar cash. Finally the move to US dollar functional currency caused one off adjustments to the deferred tax liability, positively impacting income tax expense and negatively impacting PRRT expense compared to the first half of 2009.

Moving onto Slide 12, Woodside had significant items of $88 million pending from three causes. First we recognised the $149 million gain on the sale of Otway. Second, the change in functional currency impacted both our PRRT balance and tax liability, which together produced a one off gain of $71 million. Finally, given the moratorium on drilling in the Gulf of Mexico, the Company lowered consumption on the number of additional wells that will be drilled in the Neptune field which resulted in an impairment of Neptune and also caused a write down of the deferred tax asset for a total of $132 million.

Moving on to slide 13 interim dividend, Woodside has declared an interim dividend of $0.50 per share versus the comparable period dividend of $0.46 per share. That's using the FX rate at the record date of the dividend.

The Company will continue to offer a dividend reinvestment program this period but consistent with the final 2010 dividend we will not underwrite the DRP.

The chart on slide 14 shows our current estimate of 2010 capital and exploration expenditure. We have also included the investment spending from the previous year's expressed in US dollars.

Spending on the Pluto-1 foundation project continues to dominate our expenditures this year accounting for 63% of 2010 spending.

Moving on to slide 15, our successful rights offering launched at the end of 2009 has deleveraged the balance sheet with net debt falling to $3.1 billion at 30 June of this year while gearing fell to just under 23%. The Company had almost $1.8 billion in cash and another $1.7 billion in committed but undrawn debt capacity at 30 June and with no significant debt maturities until 2012, we are well prepared to fund the growth in the LNG portfolio that Don will talk about next. Thanks for listening.

Thanks Mark. I'm on slide 16. Before I elaborate further on Woodside's very strong options for the future I'd like to follow up on comments I made at the full year presentation in February. As you may remember, I commented on the detail of the economic parameters we use at Woodside for investments, especially LNG investments. Now building on that I'd like to remind folks that for existing projects on a financial basis we concentrate on revenue enhancement, expense control and integrity continuity. In other words maintain integrity at the lower operating cost, maximise facility utilisation and sell our product at the maximum value.

Over on slide 17, the point I'm building to is very simple. If the investment world stopped and took a snapshot of existing Company assets to make their share purchase choice I would feel extremely comfortable with how Woodside would compete. We're very close to having six trains with 6.6 million tons per annum LNG equity production which we'll be able to enjoy for decades to come. Not bad for a AUD35 billion company. Add a still prolific group of oil assets with a strong but focused exploration portfolio and our base business for the size of our company and accompanying share value I think is second to none.

I think the investment community has now seen how difficult the environment is for building a solid long-term economically robust E&P business and in particular, LNG projects with strong reserves. In fact I believe too much media emphasis is put on the public fanfare of new project announcements versus the importance of strong economic returns from a company's base business and ability to actually execute and construct these new projects on time and on cost.

Just how many FIDs have actually been made in the past five years for new LNG projects in Australia? Yeah, it's kind of surprising. It's just two right now, Pluto and Gorgon, and despite all the fanfare we're still waiting on 100 million tons of new projects to come along. I suspect we're going to be waiting for quite a while longer.

The IOCs and the NOCs are struggling. The IOCs, including Shell, BP, ExxonMobil and Chevron, they've averaged just 5% to 16% annual return to shareholders over the last 10 years, while Woodside in that same time period has built three LNG trains and an oil business and enjoyed annual total shareholder returns averaging 88% over these last 10 years. So the market is telling you which company has the best leverage to the best economic projects.

The business environment is challenging but manageable. In fact I think it's pretty good if you have a great management team, superior employees and good contractors that know what you expect. The price environment for oil, gas and LNG is really decent and I think higher oil prices, probably much higher, are probably just 12 to 18 months out.

There's a lot, let me repeat, a lot of challenges - economically valued resources, availability of skilled labour, onerous industrial relations and government intervention, just to mention a few. But if you're good at execution and Woodside is, the environment is conducive to excellent shareholder value creation. I think we're good at this stuff. Now you just ask our competitors. You have to be just able to compete in this business and you have to be able to execute.

So let's first talk about our underlying business since that's what's paying the bills and the dividends.

On slide 18 our Australian oil business had a remarkable past few years. Building on the Northern Endeavour which commenced production in 1999 from the Laminaria and Corallina field, we saw the start up of Enfield in 2006, Stybarrow in 2007 and Vincent in 2008.

In terms of financial contribution to Woodside, over the last five years these assets have contributed just under 80 million barrels of oil to Woodside's production and generated over $5 billion in revenue. Now the average revenue per barrel of around $60 in 2009, while down on the peak in 2008, it still remains healthy and healthier today. Now it's over this same period that we have progressed Pluto from discovery through FID to its current status of 92% complete. Now we couldn't have done it without this great oil business.

Slide 19 - even as Pluto moves towards completion we're not forgetting about our Australian oil business which continues to demonstrate strong performance. Operationally we're seeing improved reservoir performance and higher availability across all of our assets. Infill drilling, particularly at Vincent and Enfield is adding developed reserves and production volumes and increased use of innovation is also positively impacting production. Financial performance is also strong with revenues high relative to the size of the financial asset base. Higher oil prices also provide significant upside.

Finally, we're continuing the recent successful Enfield drilling campaign with future wells planned at both Vincent and Enfield as well as progressing a number of tieback opportunities such as the 30 million to 40 million barrel Laverda oil discovery made in 2000.

Over to slide 20. While the Australian oil business has remained critical to Woodside's business let's move on to the North West Shelf Venture which has seen its own share of achievements and records.

On the operational front capacity improvements on Train 5 through modifications to the main cryogenic heat exchanges have seen productivity improvements of around 25,000 barrels of oil equivalent per day compared to this time last year. Now, I'll tell you, I'm really, really proud of our Woodside engineers. As usual, they've come up big. The fix on the Train 5 main cryogenic heat exchanges was done by our guys after Shell SGSI and the manufacturers had given up trying. Just like the refrigerant compressor linkage issue on Trains 4 and 5, the persistence of our Woodside folks has fixed these nagging design issues once and for all.

The addition of stabiliser 6 processing capacity has allowed liquids rich production to be accelerated, delivering around 155,000 barrels a day capacity now compared to 140,000 barrels per day previously and the addition of Frac 3 capacity has provided greater reliability during major maintenance campaigns. Our oldest trains, Trains 1 to 3, they've been running with world class reliability of over 97%. Not bad for a 20 year old girl.

All this has led to a record trade daily production. Earlier this month we almost touched 800,000 barrels of oil equivalent per day. Now my guys up there tell me they're going to get it. I have to stop though and think about - just think for a moment, as North West Shelf Venture has now been producing for 26 years. Now when I started at Woodside just over six years ago we were averaging just over 500,000 barrels of oil per day and now just below 800,000 barrels of oil a day. It's really unbelievable to me the progress that our folks have made.

Over on slide 21, not only is our operational performance setting records but financial performance is even stronger. Despite the very high commodity prices in 2008 the additional capacity realised by both Train 5 and Angel coupled with the recovery of commodity prices has seen the North West Shelf Venture record its highest first half revenue in 2010. A similar record profit after tax for the first half has also been achieved and is driving superior return on our capital input.

Other significant areas affecting favourable financial performance include the settlement of the LNG price out of range negotiations and a great outcome from the Alinta pipeline gas price review as well as a long list of operational synergies delivering an improved bottom line. It's not just about performance today but over on slide 22 we show you the performance tomorrow.

Woodside continues to invest in securing future supply to maintain the value of our North West Shelf assets. Conversion, completion and commissioning of the North West Shelf Oil Redevelopment project which includes the Okha replacement of the FPSO, continues. It's currently 83% complete.

The North Rankin Redevelopment project continues ahead of schedule and is now 54% complete. Roll-up of the largest section of the underwater jacket was completed successfully last month as well as the first main deck being successfully lifted in the fabrication yard in June.

In addition we continue to progress a number of future opportunities. The most significant is the development of the Greater Western Flank fields where selection of the preferred development concept is planned later this year with FEED studies planned for next year. But the real highlight I think of the last half year has to be the Pluto LNG foundation project.

Slide 23 - it's now just over three years since we sanctioned the project - just three years. We're now 92% complete and remain on track with previous guidance, that is, ready for start up at the end of February, first LNG by end of March. This is contingent on weather and a favourable industrial relations environment and as we've noted before we have mitigation plans in place to ensure that we meet our commitments.

So what does this really mean? What does that statement really mean in terms of schedule and cost? Even if we do experience disruptions we're not expecting significant schedule slippage now that we have a number of key critical milestones having been reached. Virtually everything offshore is de-risked except commissioning. Onshore modules are in place and all the heavy lifts have been completed. Again, just hook up and commissioning.

So now, critical path delays are thought of by our guys in days or weeks. Yes, certain domino scenarios could add up to a couple of months but we're still holding our target of start up at the end of February and first LNG by end of March now that we've de-risked a lot of the construction project.

On costs, any cost increase over our previous guidance would be based mainly on schedule. In other words, we calculate that for every week of delay past our target date you can add about one-quarter of 1% overrun. So just to simplify that, that's about 1% per month run rate. Now having said all that, I just want to remind you, our current schedule and cost projections remain our guidance and that is a truly amazing performance when compared to all the other greenfields that have been built in the LNG business around the globe.

Now more importantly we think, now that we're approaching the home straight, we need to take a re-look at how important Pluto really is to our base business.

Slide 24 - now we've recently updated the Pluto economics compared to the economics which underpinned the original FID decision in July 2007, or more specifically 28 July 2007. On the basis of our current economic assumptions, we've seen a very healthy increase in net present value or the NPV of this project. I think far more significant is the fact that an increase in the P90 reserve base of over 25% through our development drilling, we've greatly reduce the downside risk of this project.

Now when we compare Pluto to Woodside's existing business, it also demonstrates how important this project is to the Company's future. By the time Pluto is in plateau production, we think it'll be contributing about 40% of Woodside's total equity production, an estimated 40% of revenue, and approximately 50% of operating cash flow. This is a phenomenal asset, and forgetting any expansion, this asset as a foundation project is self-contained and self-sustaining.

So let's look at some of the individual elements of this project over on slide 25. Offshore, the platform is in place and commissioning is nearing completion. We have employed over 70 vessels in the course of construction, laid 470 kilometres of pipelines and flowlines. Now, this is the deepest water gas project in Australia to date, and we're proud of the world class performance of the offshore team.

The first portion of pipeline pre-commissioning has also been successfully completed. This consisted of flushing out the manifolds with MEG, followed by a pig train, which dewatered the two 20 inch flow lines.

Slide 26 - take a look at this picture. The site progress has even been more dramatic. This is a picture that we showed you just under a year ago. I'd like you to put a placeholder there and flick it with the next slide, slide number 27, to show you the progress. This is the site - on page 27 - the site just a month ago. This is a 10 month difference. What a difference it makes.

You might want to dwell on this slide for a bit. It's the strongest demonstration yet of actions behind words, and Woodside's ability - let me repeat - Woodside's ability to execute LNG projects. I'm almost reluctant to move on. I tell you, I just like to look at this picture and see what our folks have really done. But in the interests of time, we have to move on.

Slide 28 - let's talk about some milestones. At the site itself all 264 modules have been delivered, the final key heavy lifts have been completed. In February we said we were transitioning from civil to mechanical works. Well now we're telling you we're transitioning from mechanical work to commissioning.

Slide 29 - commissioning plans and procedures are in place, and we have the commissioning and pre-operations teams in place. We're now training and developing our operators and process engineers to get ready for the start-up.

Another indicator that we're achieving our stated goal for first gas and first LNG is that next month - in fact, I was talking to Eric today, he said that they've already implemented. We're changing our permit status from a construction site to one of gas in, to prepare for the ramp up of gas introduction in the following months, later on this year.

Slide 30 - through all this we've maintained our high standard of environmental and heritage performance. We've delivered on our Indigenous employment and participation commitments. So that's the Pluto foundation project. It's been a heck of a journey, we're really proud of it, but it's not over. There's more to Pluto.

Let's look at the expansion options. Let's go to slide 31. I'd like to continue on with a very important theme for Woodside management, and that is all about creating shareholder value. Again I want to reassure shareholders that the management of Woodside is not going to dilute our financially robust existing asset base by spending billions of dollars a train, just to build another train. The proposition of building an additional train or trains has to be a sound economic investment that returns tremendous shareholder value over its lifetime.

Therefore we have now developed, from our Pluto foundation project, multiple options for creating future shareholder value remembering of course that as a base to go forward from, the original project is a tremendous financial foundation which is self-contained and self-sustaining.

Just for argument's sake, the six successful exploration wells that we've drilled - and I'll talk about that more in a minute - create tremendous value, even if it's only for backfill, to our Train 1 volumes. This also forms a basis in setting economic hurdles for our Train 2 or Train 3 investment choices. So critical is the creation of these multiple options is the fact - it's very critical in creating these multiple options. It presents us the fact that we can now confirm that we can accommodate five LNG train footprints at Pluto.

This is really significant, because at the time of FID we could only support three trains. This is very important to keep in mind as we follow through the following discussion.

So it's clear that we had set a target, as a self, internally made up target, to make an FID decision in December 2010 for Pluto Train 2. Now, what we haven't said is why we really set that target. We set it for two main reasons. First, we had built an anticipated construction schedule for Gorgon. It dictated that we would need to schedule FID by the end of 2010 to avoid going head to head for construction skills and resources.

Second, we had anticipated that our exploration drilling program would have progressed to a point where we would have had fine definition of a gas resource base for a go/no go FID decision. So what's changed? First, the head to head resource battle with Gorgon has not turned out as we had forecast. The progress of Gorgon has not developed as we had anticipated and we now have a longer period of time to take to make an FID decision if we desire, prior to head-to-head competition over the same skill sets with Gorgon.

Second, our exploration campaign has also not progressed as rapidly as we had hoped. One of our two deepwater drilling rigs was a year late coming from the shipyard and we have had two wells run into mechanical difficulties resulting in only 10 of our wells, of the original 20 prospects, being tested. Now in reconsidering these two facts it allows us to slip the end of year FID target into 2011.

Now, how has the drilling been going? Six for 10 is pretty darn good in anybody's book but we've had one or two stumbles along the way. All in all, I've got to tell you, we are shooting above our expectations. Let's take a look.

Slide 32 - as stated, 10 wells have been drilled across four of the six potential hubs for supply of equity gas. In the inner Pluto hub we now feel we have a good handle on the ultimate resource potential. We've drilled two wells with a discovery at Eris. High quality 3D seismic also provides good calibration of the remaining potential. We really believe we know what's there, and it's good because we can subsea it directly back to the existing Pluto platform.

On slide 33, the central hub has seen the most action to date. In fact, it's been really good. In WA-404-P we have drilled five wells with Martell, Noblige, Larsen and now Larsen Deep all encountering gas. Only Hine, drilled in the far north of the block, failed to encounter hydrocarbons. That's an 80% success rate, a phenomenal result for our exploration department.

As announced yesterday the current Larsen Deep well, which is still drilling, and they tell me it's cutting more gas this morning, has encountered a gross - or we announced a gross - 50 metre column of quality gas in the mid-Triassic. This is a really good result and it sets up other prospects.

The high-pressure gas we saw in the shallower secondary objective provides significant encouragement and has reduced the risk on the follow-up Remy and Martin prospects which are planned to be drilled later this year. I won't make the statement I made last year about how certain my exploration management is on Remy and Martin, but it's pretty good. The well could be suspended - that's at Larsen Deep - for future production testing. It was an important test, and it was a good one.

The Camus and Moyet prospects are also on the sequence for drilling between now and the end of the year. In addition we also plan to drill one further discretionary exploration well, the location of which is somewhat dependant on ongoing activity. We think it could be Kelt, Hennessy, or one of the others shown on this chart. Let me just tell you, we'll get the rest of them before the end of next year.

Drilling in the outer Claudius and Cazadores hubs has been somewhat more mixed results.

Slide 34 - in the southern Cazadores hub the results have been disappointing, with the Dalia South well failing to encounter hydrocarbons. Now this is a large area, and significant work is required to understand the area's potential, but this well result has reduced the likelihood of the Cazadores area to deliver significant gas volumes for Pluto in the near term.

In the Claudius hub the Alaric well has encountered 185 metre of gross gas pay in several stacked Triassic reservoirs. The gas appears to have a significant liquids content, the sands are of excellent quality and there are a number of similar Triassic prospects within the block. This is all really encouraging. In fact it's very exciting for us.

The first well in the block, Tiberius-1, was drilled to test a very interesting Triassic pinnacle reef play. Now a lot of our competitors said it would volcanic, but it wasn't, it was a pinnacle reef. This pinnacle reef play has multiple follow-up potential. We felt excited about the play, as Triassic pinnacle reefs had never before been tested in Australia, and to our knowledge, nowhere else in the world either. The well did encounter the pinnacle reef as predicted but unfortunately no gas was seen, primarily due to a generally tight carbonate section.

Now the results of the Alaric well clearly indicates that there is gas in the area, and what we now need to understand is the history of these pinnacle reefs and how to better predict where reservoir may be developed.

Two further wells are planned for next year. We feel really good about this major expansion that Alaric has given us in the Carnarvon Basin.

So let's go to slide 35 and add it all up. We've updated the planned drilling sequence on the basis of these results. The near term focus is on the central hub WA-404-P area, where five wells are planned in the near future. Following completion of this phase of our exploration campaign, we then expect to move into appraisal activities to confirm the volumes already seen in the four discoveries to date.

More drilling in the Claudius area is planned for next year and we will also commence exploration drilling in the Ragnar hub. We may move up our Claudius plans, depending on outcomes. We intend to retain flexibility with this sequence to allow us to maximise the utilisation of our rigs, depending on the future outcome of the wells.

Slide 36 - so what does all this mean? What does it mean for Pluto expansion? I'm going to try on the next three slides to illustrate volumetrically what we're talking about. First, on this slide, before we go through the detail, let me show you an example of how to read these charts since they are the first time we've ever used these publicly.

On each chart, the X or horizontal axis denotes the wells drilled, or to be drilled, in this exploration phase in the specified hubs. As you can see we've used a vertical black line to show you where in the program we're currently situated. The Y or vertical axis denotes cumulative gas volumes. The green shading shows the gas required for trains. The lower limit of each green swath indicates clustered gas near to proposed infrastructure while the higher limit of the green swath indicates volume the gas required for more dispersed gas accumulations. Against this you can portray possible volume outcomes. The lines on the left of the current position indicate cumulative discovered volumes and in this case the sum of both the mean volumes in red and the P10 volumes in blue. This gives you an idea of the range of volumes discovered to date. We've then added to these the cumulative mean success volume of the future drilling portfolio to give you an idea of potential outcomes. Now of course if we have no further success you'd end up with something like the black line, which is shown as a horizontal line from where we're at today.

Let's go over slide 37 then. So let's take a look at the inner and central hubs. Now these hubs are combined because they are relatively nearby to existing offshore Pluto infrastructure. Again, the vertical line shows where we're at right now including the discovered volumes not already committed to the foundation project and to the discoveries, that is Eris, Martel, Larsen, Larsen Deep in both the Pluto inner and central hub. Now these volumes have yet to be appraised, we have shown the range of expected outcomes. To the right of the vertical black line we've then added a possible outcome from our planned exploration program to be drilled in this phase. You can see that expansion of at least one further train is comfortably within the range of outcomes and we just need to continue to drill and appraise to reduce any uncertainties around that range. Further, one other outcome is that gas in excess to an additional train could be found so we'll be well placed for further expansion.

Let's move over to slide 38. This chart shows a similar picture for the more immature outer hubs where exploration has only just commenced, but with Alaric we have exciting potential. I want to note that we've not yet updated this chart with the just announced Alaric results because we don't have the wireline logs in yet. Obviously equity gas to support expansion to the Pluto foundation project is still alive and well and we're on our way. So what about third party other resource owner gas? Let's go over to slide 39.

The discovered gas resources of the greater Carnarvon Basin shown on this slide are significant. Yes, a large number of the fields are committed to the Gorgon development and there's also a lot of hype around about which gas will be developed with Wheatstone. Suffice it to say there's a number of other places in the Carnarvon Basin and we're continuing discussions with various parties to send large volumes of gas to Pluto for processing. I've got to tell you, we're quite enamoured with these options.

Page 40 - now I mentioned earlier we've confirmed that the Pluto site can accommodate a further four LNG trains in addition to our foundation train, so this has opened up options for us and the option to consider both equity gas development and ORO gas supply. In fact, our ORO options or other resource owners options are at a point of deliberations that we've actually reserved two LNG train footprints for the remainder of the discussions that we're having that hopefully will reach a conclusion by the end of this year. That's what helps by being able to move our target date out a bit or slip it into 2011 so we can basically get through these discussions.

Now what is of great interest to us and why we're kind of excited about making sure that we explore this opportunity, is that for building and operating the two ORO trains we can in effect secure very significant value, that's significant value for our shareholders for the footprints that we have for virtually no capital investment versus an equivalent of building it with our own gas costing billions a year, thereby vastly improving our return on capital employed.

Now for Woodside shareholders when you mix the three 50% Browse equity trains, a Sunrise 34% equity train and one or two Pluto equity trains, the ability to get a significant return on two footprints with virtually no capital investment is a huge incentive and one we just have to be interested in, and let me tell you we are. With five total footprints at Pluto, dedicating two to ORO still leaves two footprints for equity gas, so we're willing to hold the two footprints open for ORO consideration the rest of 2010, as we continue our negotiations.

Let's go to slide 41. So we are maintaining momentum on Pluto expansion options. The FEED studies for the onshore trains 2 and 3 are on schedule for completion in September. Now this FEED supports both equity or ORO gas. Our exploration program is progressing despite initial delays and we're continuing to build volumes both through our own exploration and discussions with third parties. At the same time the driver behind an end 2010 FID target to avoid potential conflicts with Gorgon has been relaxed, thus allowing us more flexibility to build certainty on volumes but really importantly, to get the mix right. Pluto expansion does remain a core focus of our company and we're really excited about it but of course there is more and there's much more. Let's go to slide 42.

For a change this time around, I thought I would touch on Sunrise first as we gave an extensive Sunrise update at the UBS Resources Conference in Sydney at the beginning of June and many of you have probably seen the presentation material on our website. But let me just remind you of a few items of importance for Sunrise. The project is blessed with a liquids rich resource in the Sunrise Joint Venture. All the partners have agreed on the contingent resource volumes of 5.13 TCF dry gas and 226 million barrels of condensate. We've unanimously selected a floating LNG as a preferred development concept for Greater Sunrise. I've got to tell you a very rigorous technical and commercial evaluation of a number of development options. Floating LNG also has very robust economics, which maximises the total revenue of over $30 billion to the governments of Australia and Timor-Leste and it also maximises the return to the Sunrise Joint Venture, who's paying the bills. The obligations under our retention leases and production sharing contracts to select a development concept have been fulfilled.

Slide 43 - from a technical perspective FLNG is the best fit for Sunrise, which is a moderately sized field remotely located in ocean with favourable metocean conditions. The Timor Sea Treaty even contemplates and makes reference to the use of FLNG at Sunrise.

Slide 44 - Woodside is committed to working with the Australian and JPDA regulators to progress the development within the regulatory framework established under the treaties. Woodside is also looking forward to the period following the Australian election when the Sunrise Commission will meet. We will therefore continue to work with regulators and governments to progress the development of Greater Sunrise to ensure it'll be a world class project which will provide considerable benefit to all stakeholders and both governments. We're also honoured - we were recently honoured to represent the oil and gas industry in congratulating Timor-Leste's significant achievement in becoming only the third country to gain Compliant Country Status under the Extractive Industry Transparency Initiative, which is a great honour for them.

Let me move over to Browse on slide 45. Now things are rapidly moving along at Browse. This is driven by a number of key milestones in early 2009 and earlier this year, which has set the timetable for Browse. Now these include the state government's selection of an area just south of James Price Point to locate our Browse LNG project. Strong state and federal government support for the earliest possible commercialisation of the Browse resources, which culminated in renewal of our retention leases with conditions that set out a clear direction on timing and the nature of the development.

Slide 46 shows you this time line. These retention lease conditions set out a very rigid timetable but an acceptable one. The conditions map out the path to enable a final investment decision in mid-2012, actually June 2012, and a work program costing $1.25 billion to get there.

Now the dual basis of design contracts were awarded in January this year and activities remain on track for delivery as scheduled in October. The upstream BOD is being carried out by a number of contractors including a joint venture between WorleySelect and Granherne for the offshore dry tree units and the central processing unit, JP Kenny for the pipelines and subsea scope and MSI for flow assurance.

For the downstream we're running with two LNG technologies through a parallel BOD process with KBR and Bechtel. We've also been spending considerable effort to acquire survey data to support the BOD activities and to prepare for FEED. We're also advancing our Taiwan CPC gas marketing KTA towards a sales purchase agreement. In addition, we are in consultations with others to lock in the remainder of our Browse equity gas as a significant portion of our greater Woodside LNG sales portfolio.

Let's go over slide 47. This is the offshore. It's pretty exciting stuff for old offshore hands like me. Since I last spoke to you we've successfully engaged the key contractors both locally and around the world. We've issued tenders for all key elements of the FEED phase. The bids for the dry tree unit FEED have been received and are under evaluation. These dry tree units represent a new technology for Woodside and present some exciting challenges and opportunities both for Browse and for future deepwater developments. We've also received and are evaluating the central processing facility bids. The CPF, or the central processing facility, involves a two platform complex with production facilities bridge linked to a living quarters and a utilities module. This is familiar territory for Woodside. It's very similar to our Angel and NRT projects with conventional jacket based facilities in relatively shallow water. The onshore development has also seen great progress.

Let's go to page 48. The downstream LNG FEED invitation to tender has been issued and bids are due in early September. Our pre-FEED work will commence in December and it's our intention to award two parallel FEED contracts in early 2011 or just next year. Now I'm pretty excited with all this momentum on Browse. Let me tell you, the Woodside folks are really excited about Browse.

From a technical work program to our environmental studies, we have about 300 people of our Woodsiders dedicated to Browse. Let me tell you, all of our joint venture partners are working diligently via their technical folks to stay up with us. I've got to tell you, we really appreciate their efforts. They're really pushing us along. We've also recently moved into our new office in Broome, which will give us even greater access to the local community and better accommodate our expanding local team. We continue to value our working relationship with the local Indigenous and non-Indigenous community. Let me speak a little bit about that indigenous community on slide 49.

As many of you know, Woodside has taken its time in talking to the Indigenous people in the area about locating the Browse development at James Price Point, which culminated in the signing of a heads of agreement between KLC, the Kimberley Land Council, the state and Woodside.

Since the conclusion of the HOA, Woodside and the state have been engaged in good faith negotiations with the KLC and the native title claimant groups it represents. Now unfortunately, the relationship between the main native title claimant group, the Jabirr Jabirr, and a smaller associated group broke down around mid-year and resulted in legal action between one of their members and the Kimberley Land Council.

Recently I want you to know I wrote to the KLC and traditional owner representatives reconfirming that Woodside will continue our engagement in good faith negotiations with traditional owners of the James Price Point area. I again confirmed that we will deliver on the benefits we have committed to Kimberley Indigenous people. Let me repeat that last point. We intend to deliver the benefits we've committed to Kimberley land people, including Indigenous employment opportunities, training and Indigenous business participation opportunities.

Browse represents a significant opportunity to Australia, to Western Australia and to the region. We look forward to working with the traditional owners, the Kimberley Land Council, government and our joint venture to move forward on this great project.

I expect a lot of movement concerning the site over the next month or two. Let me tell you, I think a lot's going to happen in the next few months. The state is firm in their direction to us that the James Price Point site will be ready when we need it to maintain schedule that we're on.

So Browse is also moving forward, and before I wrap this up I'd like to tell you a little story about two discoveries, which really illustrates what Woodside is all about. Slide 50.

In 1994, a licence was awarded in the Carnarvon Basin. In 2002 Chevron relinquished part of that concession which was subsequently licensed by Woodside, as we believed we saw something on seismic that maybe Chevron didn't see.

Then in 2004, Chevron did drill the Wheatstone discovery. Six months later in 2005, Woodside also drilled a sister discovery called Pluto in the previously relinquished concession. Now, both of us these were pretty nice discoveries.

Let's go to slide 51. By 2007, Woodside had drilled several appraisals, entered into gas sales agreements, obtained land and permits and made a final investment and did all the things that you need to do to take an FID decision. Then you can see on the right side where Wheatstone would go.

Slide 52. Today, Woodside's greenfield train 1, Pluto project, is 92% complete with LNG production to commence in 2011. Now, Chevron is still contemplating a Wheatstone FID in 2011. Interestingly, their FID on something that was discovered earlier than Pluto, their FID will take place sometime after Pluto starts producing LNG.

For Woodside, that's important. Five years head start is a lot of value for our shareholders. You can count it in the billions of dollars.

For some, there seems to be a competition of sorts between these two projects. We think it's fair to say that for Chevron shareholders, with the Company being five times bigger than us, to match Woodside's Pluto performance would make them at the very same time have to start up either eight Gorgon trains or maybe six Wheatstone trains, just to be on a comparable basis to our 90% Pluto 1 project.

Fair to say for us, the competition is nearing a completion. In fact, it's at the finish line, with a clear winner by five years for the shareholders of Woodside, with all else being equal.

Now finally, the last slide. I know a lot of you on page 53 have hung with us here. It's been a long session, we think necessary. There's a lot going on at Woodside. I mean, there's a lot going on at Woodside, and I've got to tell you I have never been so happy to present a report such as this to our shareholders. We have six trains, we have eight more on the drawing board. We're working through them. I think the Company is performing well in a very difficult environment and our management and employees have set us up extremely well for the future. So as you can tell, I'm really pleased, and I thank you for listening to our story today.

So I think at this point we'll go to question and answers and it will be facilitated by the facilitator.

Your first question today comes from Gordon Ramsay from UBS. Please go ahead.

Thank you very much. Don, just referring to slide 37, we were looking at the inner and central hubs as potential sources of supply for Pluto expansion. Just trying to get a feel on how that relates to the drilling program going forward and, in particular I think it's Camus, Moyet and Remy.

You must have some idea of the predrill volumetrics on these wells. If one, two or three of those came in, would that be enough to get you up to your gas volume range for expansion?

Thank you Gordon for the question. I think that we have picked these wells because of what we're now able to interpret as good amplitude support on seismic. I will tell you, Remy and Martin I think are no brainers.

Camus, Moyet and then some of the other ones have a bit more I think exploration to them. Yeah, I think that as you see in our mind, if you take a look at the MSV volume line, as it travels along in the next few wells, it gives us plenty of time to get the base volumes that we anticipate to be appraised.

I think the biggest issue is to secure the volumes through exploration but, more importantly, is to appraise the volumes and make sure that everything's nip and tuck and that you have it.

There's three things you need to build an LNG train. I think a lot of people forget this, especially maybe the media. You can find all the gas in the world and it isn't worth a darn thing to you, unless you know how to build LNG trains and get them built.

But more importantly, and I think this is really important for a lot of people that are talking projects and proponents of LNG projects, they've got to be economic. For us it does no good to ruin a great existing asset base that we have, a great financial base that we have, if we're not certain that the new additional trains are going to be economically strong, robust projects to add to that base.

We want to take that, plus we want to take a look at the ORO trains, the other people, resources. Those are pretty interesting opportunities. We want to mix and match and make sure we get the right thing.

But to answer your question specifically we wouldn't continue to drill this stuff if we didn't think we'd find the volumes. These are tremendous backfield volumes for train 1 as an economic basis. Now we want to trigger the hurdle rate to find the train 2 in these volumes. Yes, we have fit these wells to figure out - in a selection process, to get what we think gives us the best chance of doing that.

But let me remind you, on the drilling schedule, the appraisal program that we will enter into to put certainty to these volumes and increase volumes. Therefore, you can see this distance between these two lines as to our expectation somewhere within that slot we should find ourselves landing at the end of the program.

Just one other, Don. You mentioned five trains potential with Pluto, two being reserved for other resource owners up until the end of 2010. That's not a long time. What happens if they don't make a decision by then?

Well, it will begin in our current drilling program, how we see it. Right now, I'd say we have placeholders for two and two. Clearly, it could go three and one or one or three. Potentially, depending on success one way or the other it could go four to [zero] that's not important.

We'll take them as they show economic opportunity for us and, frankly, kind of first up first serve. We think that people are figuring out how hard it is to build this staff. More and more gas is becoming available. We think the options that we build are interesting.

For us, with other capital needs in the Company, with how fast Browse and Sunrise, in our minds, are going, and now we see Browse going especially, to do a couple of trains of low investment but high return ORO gas could potentially be the best option for our shareholder as we stack the equity trains behind those.

Clearly, we can't build four trains, and I don't want to get overexcited here on that option, obviously, but we'll pick the best options first. We have committed to the discussions that we're under with other folks that we will reserve these footprints through to discussions, and we're happy to do that because we can now support four additional trains.

Okay, thank you.

Next question is from John Hirjee from Deutsche Bank. Please go ahead, sir.

A question, if I can on you mentioned about the competing projects being Gorgon and the worries about the human capital issues not materialising. Could you expand on that? Are you suggesting that they're not progressing as quickly as possible?

Well, no I'm not. I was very careful to say that. They haven't announced - I think the only announcement they've made on Gorgon, if I can quote is: we think we're on schedule.

What we do is have pretty good eyes and ears and we, through the contractors, really know quite a bit about what's going on out there. We would have anticipated a little bit different construction schedule, if we were building Gorgon.

The way they built it is their business, obviously, and what we're seeing now is that we're going to have actually not just a little bit more time but quite a bit of time as we're building brownfields against where Gorgon's at.

I mean, Gorgon obviously is building the village to build the village out there at this point, the wharf and the dredging. So we will make no comment on Gorgon. It's not our position or place to make that comment. All we know is what contractors they have employed, who's going out to site, the numbers that they have going out to site and we can anticipate now forward but we know that the pressure is definitely off the marketplace for the same skilled resources we need.

So it's allowed us to fully anticipate the other people, the other resource owner, discussions first and we're not forced into making a premature equity gas decision, which by the way we wouldn't recommend to our Board anyway.

Okay, thank you. A follow up question then, if I may, how do you see that timeline in terms of that window of opportunity that you're saying has now expanded? How long do you think you have?

Yeah, you know, I'm not going to set a new target because I've got to tell you, it's extremely competitive now. We're watching contractors trying to play us off too with others. So by placing a new idea, what the timeline for that competitiveness, let me just say right now, we've got every bit full of Pluto. We've got 4000 up there. I'm pretty sure we've got a lot of contractors that want to stay with Woodside versus the other options too. So I'm not as concerned about that as I was. But I will tell you, we have more time, but I'm not going to try and guess again what that deadline might be.

Okay Don, thank you.

Next question is from Andrew Hines from the Commonwealth Bank. Please go ahead, sir.

Thank you. My question is regarding the Pluto Expansion. Don, I guess a couple of things around that. In previous presentations you've shown some slides showing moving gas volumes around from train one to train two and you can front end train two contracts with gas and you're sort of particularly borrowing from train one. Those slides aren't in the presentation today.

I'm just wondering if you've got any update on your thinking around that. The second question is on the economics around the ORO trains. You say that you won't go ahead unless they're very attractive and low capital intensity, very good returns. Can you give us a bit more colour about how you see the economics of those third party gas trains proceeding?

Yeah, two questions there. Mark's cleverly writing me some notes here which are good. Let me just say that number one, let's be very clear about this. What is contracted gas or Pluto is not included in any volumetric chart that we've shown you today for expansion trains. Those are dedicated. Can we borrow some of that gas and return it later? Yes, we can do that. That option is still available to us and it creates a good opportunity for us. Number two, your questions on the economics ORO, I can't say much because it is competitive out there, obviously as you've seen. Also, it's very, I don't want to give anything over on the negotiations we're presently have underway.

Let me just say this, we wouldn't continue the discussions if we didn't see a lot of value in it for our shareholder. We think it's also a great option for the people we're negotiating with. We think it's their least cost capability, definitely to the market place much earlier than any other options. So to us it's a win/win deal and frankly it has to offer to us a comparable type return because you know, the bus has just left the station people might think. But there's going to be another bus come along in 20 minutes, there'll be another bus in 40 minutes. The equity option, we're not trying to cancel out our equity options without getting great value for them.

The worst case is I've got to tell Lucio to go and find more land to do six, seven and eight. Now, that's talking way past where I should be talking today. I mean, we're basically just trying to get the right thing for train two or train three and we have a lot of options. We're kind of surprised at how valuable these options are in creating the ability. I would just say talk to the competitors, at least the ones that will talk to you about Woodside. But I think everybody out there says one thing about Woodside, they know how to build LNG trains in Australia and it's all about execution.

In fact, let me just say this to add a little colour, I was just talking to Eric, I'm not going to give his last name because I don't want him stolen from me, but our construction foreman up at Pluto. I was just visiting with him this morning and so called Eric somebody is - I've never heard him more optimistic in my life. He's one of these guys that the whole world's always falling, the sky's falling, everything's a problem. He's a great construction foreman, let me tell you. But obviously he works for Phil Myers so he doesn't get a lot of enthusiasm from him either. But I will just see that man, I haven't seen what he's on fire this morning but I must say he did say that things are turning right for us up there right now.

Next week he may get in a more sour mood but we've got it going pretty well for us up there and I think people understand that. We're also seeing an awful lot of conversation with contractors with other components for LNG and there's an awful lot of apparently concern about the issues we've talked about at this point. So three things again -- find the gas, build it and make sure it's economic.

Thanks.

The next question comes from Paul Garvey from Financial Review. Please go ahead, sir.

Okay Don, how are you? Just a quick question, do you feel your negotiating position in the third party discussions is strengthening thanks to the discoveries this week?

I'd leave that for you to decide. But we've never doubted that we would have more discoveries. I think people thought that we ran into a couple of dry holes. Of course we were kind of drilling what you might call the perimeters, kind of making sure that we kind of knew what we had. We suffered, I guess you'd say, from one or two dry holes but we always expected that in exploration. I tell you what, if exploration tells me they're going to get 60% discoveries, I'm pretty much on cloud nine. I will just tell you, we never doubted our explorationists. I think if you talk to explorations they will tell you management in this company is very supportive and we knew that they would get it. I'll tell you, they have.

That does basically say there's a few places you build LNG in Western Australia and yeah, the competition intensifies, doesn't it. Let me just add one more thing though, Paul. Everybody says there's a competition with Chevron, it's not. There's plenty of room in the gas market, the markets in Asia Pacific, there's plenty of room out here to build. It's the execution of building these things. You know, the thing that amazes me is that people say, Larsen Deep isn't as good as this other well because they found more gas column.

Well, that's a pretty immature thing to say when basically it's the extent of where they decide. I will tell you the horizontal extent of Larsen Deep will give you a much different volumetric answer than maybe 150 metres of net or gross somewhere else that's sitting right up against the fault line that basically is a very short array of amplitude. But people don't seem to understand that. We're pretty excited about what we have. I'm going to stay on the high road here and just say we're excited about our future and what we have.

The bottom line is we just don't have - it's the ultimate compliment to Woodside, isn't it, when some behemoth from the US is trying to compete with little old Woodside out here. Yeah, we take that as a pretty good compliment. Frankly, we think we're beating the pants off them anyway.

Good way to look at it. There's some commentary as well, in the Director's report around the industrial relations climate. Are you particularly concerned about what could happen in that landscape if Labor is returned at the weekend?

I would say that right now we're set up extremely well with whatever the citizens of Australia choose to have as a government. We will continue to carry our message to Canberra as well as to the state houses where we operate. We get a very good listen from the Labor Government. We get a very good listen from the opposition. I don't talk much to the Greens so I don't know if they give me a good listen or not. But I'll just say that we're happy either way. That's not a decision for Woodside to influence, that's not a decision for a company to influence. That's a decision for the citizens of Australia to make.

Sure. I just wondered, if I can, what stage are you at with regards to discussions around marketing of volumes from Pluto Two?

Let me hand that over to Mark. All the marketing goes through Reinhardt which is in Mark's portfolio.

Hi Paul. On Pluto Expansion as well as on Browse and Sunrise, it's fair to say we talk to a variety of customers in and around the Asia Pacific region on all of our projects. So when we go and gauge the customers we really talk about more Woodside's portfolio as opposed to one specific project.

Right. I mean, the market would like to see some value locked away for Pluto too. I mean at what point could we expect to see something there?

I think with the Pluto Expansion as Don said, we're going to be working on this into 2011. I think you expect to see the market parallel, the development of the project itself.

I suspect the customers will be very interested in the appraisal also.

Great, thanks very much.

Next question comes from Mr Stuart Baker from Morgan Stanley. Please go ahead, sir.

Morning gentlemen. I've got a lot of questions about the state of the LNG markets and pricing in particular. We've seen quite a bit of volatility in some of the longer term contracts in recent years. Looking back at the original Pluto contract, in terms of what we could expect, in terms of how that gas is sold, should we look at the Pluto One price structure as a base or a reasonable outcome on Pluto Two or Three? Could you do better than Pluto One for example? Finally how does CPC fit into this? I do recall that originally their key agreement was reasonably flexible as to where the supply could come from and I'm interested to hear that that could be converted to something more solid like a GSA. Could that be supplied from Pluto Two to underpin that for example?

Hi Stuart, it's Mark again. Look, as you well know, the requirements of every project are different and so some of our objectives as sellers will change when we're looking at marketing the brown filled expansion versus marketing a green filled project. That's the first thing to keep in mind. The second part of your question with regards to CPC, and we've spoke with them at length as this is really them selling, to my previous point, to Woodside as a company as opposed to any one project for them buying from Woodside as a company versus any one project. Certainly discussions between ourselves and them continue on that portfolio basis.

I presume from that you could sign a binding gas agreement presumably well before Browse bases at a point where you'd make a go forward decision.

Look, I think following the Government's decision on retention licences then in December it's fair to say that everybody here is working on Browse to take it to the FYD in mid 2012 to stipulate in the retention licence.

Right. Okay, thanks.

Next question is from Adrian Wood from Macquarie. Please go ahead, sir.

Hi there. Most of my questions have already been asked but just a couple of things. First of all, it does seem like WA 404 is increasingly becoming the focus for Pluto 2 gas. If that is the case and all the gas comes from there, can you give us any sense as to what you expect Woodside's ultimate equity stake to be in Pluto Two? I believe before you'd given us a range of sort of 60% to 75%. Any update there at all?

Yeah, I think people probably underestimate how much gas we have closer to a platform in our original Pluto lease so we've connected the inner and 404 together in the chart and we've done that on purpose. We don't necessarily need to drill - we had to drill Eris, we drilled Pelion, we're going to be drilling probably one or two more wells [Hess, Pixus] along the way but we have great seismic control there and we can prognose very well there. So there's probably more gas in that lease which we own 90% of than what people are probably speculating compared to 404 possibly but 404 will come on.

I suspect that somewhere - if we did - let me say if we did build the train from those two, which is still of course a negotiation with our current lessee owners, the 10% owners in the Pluto lease as well as 404 50% owner, Hess. I suspect we would be - in my mind we would be tipping the scales, the 605, 65%, 70% range in that area as a going in position.

Will it be a simple unitisation calculation or would there be some reflection of the infrastructure you already have in place that may be claws back a bit of extra equity for you?

I think that that's an area that's completely - something I don't want to talk about today because that's exactly probably some of the issues that we will need to get through.

I mean, just to clarify on the slide 36 and 37, that green band that you've got there are we safe assuming that the bottom end is a 15 year contract and the top end is a 20 year contract?

Let me just say that that's - nothing much on the 15 year contract in figuring out those volumes needed because you need that for economic returns to the investment of the trains because of the cost of the trains. Interesting enough the offshore cost of - at this - at this point when you have the greenfields built, which we do, when we get Pluto foundation in, the switch of costs go to the offshore component now versus the onshore component.

So really the - part of the negotiation that's the most interesting for us is what the engineers come up for the subsea costs applying back into existing infrastructure or new infrastructure that has to be built to extract the gas from new areas.

Okay. Fine, great and then just finally looking at the CapEx slide on 14, it looks just using the current exchange rates, that you are fully exploiting the full 10% increase to the CapEx budget announced for Pluto in - back in November last year but it also seems like you are stripping out about $350 odd million of CapEx away from the rest of the business to - to essentially fund that - that increased cost base of Pluto.

Can you just explain a little bit about where that CapEx is coming from because obviously you're saying all the development projects are remaining on track?

Yeah, look Adrian I think on your first point as we said when we first put up this CapEx slide we just went ahead and budgeted at the top end because we had to put something on the slide and so the 10% is correct. Your second question was as far as the rest of the business?

Yeah, it just looks to me like when you just do the - do the maths obviously the Pluto number has gone up quite considerably from the November guidance you gave us at the investor day and that was obviously flagged with cost overrun but the - it looks like some of that's being paid for by reduced capital spend on the rest of the business.

Now I know there's an FX change in there, we're moving from Australian to US dollars, so it looks like around about $340 million, $350 million is being sucked out of the rest of the business to direct more capital to Pluto and I'm just wondering where that cash had come from?

Well I think the first thing I'd say about that is it's not deliberately being re-programmed. As you can tell from our liquidity positions of cash in hand and in committed but undrawn facilities we're sitting quite good in terms of our ability to fund things and so it's really more kind of the various parts of the business that has swings and roundabouts in terms of their capital budgets and so some of them will come down and some of them will come up but in terms of deliberating re-programming funds from one area to Pluto that's actually not happening.

In fact, we would from a finance stand point, continue to pay accelerated activity as needed through the rest of this year without any problem.

Okay, great. Thanks very much.

Sure.

The next question comes from Peter Klinger from The West Australian. Please go ahead, sir.

Yeah, hi Don. Most of my questions have been answered too but I was just wondering if you can talk about a bit more about talks with Exxon and BHP over [Scarborough]?

Well, I don't think we mentioned any names of anything. I know some people from some of those companies have said they're talking to us and that but we have confidentiality agreements in place. Let me just say that we are talking to three, four, some odd parties which may or may not involve the people you said. So no specifics as to any particular companies but people are talking to us about everything from us processing their gas and marketing their gas to us processing their gas and then them marketing, all the way to equity involvement in trying to get - we constantly get people trying to - want to farm into our gas.

Actually one of the nice things about Alaric and also the Ragnar Hub is we own it 100%. We're going to keep it 100% and at least for the time being as we go through it. Life's a lot simpler and so we're in pretty good shape there but people have brought to us some pretty darn interesting thoughts about what we can do for them and I think they're getting a lot of direction from their headquarters about taking a look at what other people can do for them that are really good at the business.

Don, just one on a totally different level you say in your statement that you sold out of your Sierra Leone project. Can you give any sort of guidance on what the plans are for Brazil?

Yeah, we - I don't think we - we've told the terms - we got a good result for our Sierra Leone, Liberia operations. Pretty soon here with Algeria we've got one thing left there plus some Libya things which I think will come to an end here shortly. The bottom line is we're real happy with re-focusing our structure to what we do best. On Brazil, let me just say we've drilled four wells down there.

We've drilled three wells in targeted prospect opportunity areas. We drilled one appraisal. So far so good. The one we're watching real carefully is the next well, Pepe. It's a big one. It's one we want to see. We will make a determination at the end of that what happens with Brazil. Might I just say that what I was looking for in Brazil didn't eventuate exactly what I was looking for but, hey when you find oil and gas of a different type it's not a bad thing and there's value there.

So our explorations continue to create value for this company. Some of it we stick with and some of it is more valuable to other people than it is for us.

Thanks.

Especially in Sierra Leone, Liberia.

The next question is from Mr Mark Greenwood from Citi. Please go ahead, sir.

Good day, Don. Thanks for taking my question. First of all I was wondering if you could outline what the key milestones are in your mind that need to be achieved before you can take Pluto to the board for FID and specifically do you need an appraised reserve? Do you need to complete the feed study, not only for the downstream scope but also for the upstream scope and lastly do you need a binding sale agreement?

Yeah, if you're taking about a FID there's literally dozens of things that we need. You mentioned some of them and some of them are well underway. Obviously right now Lucio and Niall Myles and the gang are parallel tracking a lot of that along with the exploration efforts, along with the team that's working with other resource owners.

The feed for the onshore puts us in good stead. The offshore, depending where we put the gas together, the right mix you might say, depends on the offshore feed of what we have to get done of that. Of course we've got to market the gas. We won't build speculative trains. So we'll put that together. We're not too concerned about the market for gas, we have several parties that we are constant communication with.

So that's not really too much of the issue. What is the issue is, is for this management team, let me repeat, this management team, to have the confidence that we put together an economically robust proposition to take to the board of directors and to our shareholders that we say, this is a project that enhances the asset base of our company and we're proud of it.

Like I said all this gas that Peter and his exploration team is finding is phenomenally valuable as backfill gas for us at Pluto and by the way it's valuable as backfill not only now but backfill for other trains as they may come through for other people's resource or mix and match. So there's tremendous different levers in this thing and it makes it kind of complicated to talk to you about but there is all those opportunities and Mark let me just reassure you it all has to come to a package that's robust economically and is substantial in the respect that the pieces are put together and there is no missing links.

All right. Just judging on the presentation there on slide 35 which has got your appraisal into sort of the first half of next year, after you complete that would you then look to go into a feed study for the upstream scope?

Well, let me just say this, that you - you - you want to appraise to make sure - we've got darn - what we're looking at right now, we've got pretty darn good seismic control and the offshore concept, let me just say, is not something that we're not working on already. We've got a team down in Houston that are working - studying some deepwater gas facilities on a cost basis to enhance our knowledge. We've hired a few people in here that are deepwater gas facility experts and they're really good.

The feed doesn't have to take a long time because we've got a lot of work. The (inaudible) group is doing a great job on it and it's coming along. So it's not like some day we flip on a switch and say, oh we've got to do an offshore feed. It's well underway already.

Okay and just moving on to Pluto 1, in particular your guidance for start up, when you talk about the first planned LNG for the end of March I'm just wondering whether that's the first drop of LNG or the first cargo sold because I understand there can be a couple of months of cool down in between the two?

Yeah, let me just say this, that our first ready for start up, that means ready to do stuff, we have about a 26 day gap between first LNG. The time we actually take a cargo of LNG out after we make the first droplets of LNG is variable. It could be a fairly short period or very long, depending on how many times we have to take the train up and down for issues that we might find. So talking about ramp up is something that Vince and his team get real nervous about, because sometimes these things just turn on and run like a top, sometimes they bounce up and down for a while. In one case that we had, we had a real difficulty where when we brought it up we had to shut it down for 30 days.

So bottom line to all of it is that it is a bit variable but we've seen these things start up in virtually a week, 10 days. Then we've seen it take well over - we just estimate it'll probably take - I think they've got 26 days in the plan or something like that, from the time we start it up to the time we think we're making LNG. We have the other components of course, the condensate and other things that we'll be taking out of there too. So bottom line is that it's hard, it's variable, but the LNG cargoes will come out of there as required.

Remember we have about four trains' worth of LNG storage available, so we could actually hold onto it for quite a while before we have to get it out of there. It's not a tank top situation. I think the 2011 production guidance - we will give you that later on this year. I know a lot of you thought, oh if you're not doing investor briefing date when are you going to give us production guidance? We'll provide the marketplace guidance on 2011 production, probably somewhere around mid-November this year.

Okay. Just one final quick one. On the Neptune impairment, is there a reserve downgrade also associated with that?

Yeah, it's pretty minimalist. We do our reserves, as you know, February of every year. Let me just forecast this for you, because it is so small. It's 2.2 million barrels I think, latest calculation, for a Woodside share of it. This is not something that maybe the other companies' partners are doing. We just felt that the number - you know, what's going on in the Gulf of Mexico right now, and no letup of the moratorium. Just taking BHP's operator ship plans into effect, we didn't feel comfortable as management - that was a big part of that decision - in keeping the number of wells on the ticket.

So we thought let's bring it down to a more justifiable number, and I think it's four wells that we planned to drill, versus a higher number. We said if we do that, we really do need to take the impairment. So I will be very happy here in the future to write those assets back up if we drill those wells. To us it's more of a what makes best sense and what is the best P50 that we believe will happen out there.

Thanks Don.

The next question is James [Loewen] from Merrill Lynch. Please go ahead sir.

Hi Don. My question's on long lead items for Pluto 2. I'm just wondering when you'd have to order those if you were going to have first gas by say end of 2013, which has been the previous schedule?

Well we'll give you guidance on that. Just because we are saying we can take a little bit more time to study the other people resource options versus our own options, we didn't say anything this time about RFSU.

Let me just tell you that the onshore piece - there's very little LLI that we're going to need for it. Frankly, some of the LLI is spare parts for North West Shelf, which you can't touch by the way without their permission. But we do loan them an awful lot of stuff from Pluto right now to help them along. But also we have the spare parts for our Train 1 that we can use for some of those long leads. The other thing with the long leads is that we feel very comfortable that we could sell them back and forth onto the spare shelf of the contractor inventory.

The bigger issue is the offshore. Where does the gas come from, and the long lead times for the offshore piece of this. But we think this is all pretty conventional stuff, and frankly we don't see long leads to b e nearly the issue that it was with the greenfields where we were building LNG tanks and everything like that. So we expect the long leads for Train 2, no matter who builds or what we build, using whose gas, to be not nearly the issue that we had with Train 1.

Thanks for that.

I think I'm going to be able to take two more questions, from what they're telling me here.

The final questions now will come from [Jet Ling Tan] from Barclays Capital. Please go ahead.

Good morning, thanks for taking the call. Most of my questions have been answered, but just curious on the Pluto to FID. You mentioned it's now been pushed towards 2011, and just wondering if you can be more specific in terms of the timeline?

Well if I knew how long it was going to take to negotiate with these other companies who are bringing us some good options, and if I knew how long it was going to take me to drill a few of these wells, I'd be willing to stick something out there on the table. But I think you're going to have to have a little faith in Woodside management, that we know what we're doing.

At the end of the day, the years it takes and the billions of dollars to build these trains, to me the front end definition of what the best deal is, with what is the best mix of gas and what is the most economic deal I can make - if I take one, two, three, four, five, six extra months to get that right, then I'll take the punishment that you'll give me for setting a target date that I thought I was going head to head with Gorgon and an exploration where I didn't get a rig. I'll take that punishment any day of the week to make sure I get the right decision for our shareholders.

For me, it's all about getting the right decision for the shareholders. You don't have to do much for economics in these things to swing 10%, 15%, 20%, 30%. We want to make sure that we maximise that value for the shareholders, and I'll take that on as just the right thing to do.

One last question.

The question comes from Mark Wiseman from Goldman Sachs. Please go ahead.

Hi Don, thanks for the update. This should be a fairly basic one. Just on slide 37 on the equity gas schematics, just want to confirm that you're including 100% of your gross discoveries to date.

Yeah, I'm glad you made that comment. All of these graphs that we're showing are 100% gas, no matter who the owner is on those leases. We've got very willing joint venture partners on these blocks. They all want to maximise their opportunity here. When you hear the Hess thing that goes on, recognise they have other gas in the area that we don't have equity to, and that's probably some of the confusion that goes on out there.

So let me just wrap up and say that we're really pleased that we've had - they're telling me how many people are on the phone. Thank you very much for everybody. We're going to be starting our road show that goes almost about 45 days and all around the world. We'll be on the east coast tonight and coming up and down Melbourne and Sydney over the next couple of days. So we're looking forward to seeing everybody. We'll get over to Asia and then Europe and then North America, to talk about what we're doing here at Woodside. Thanks again for your participation.