Woodside Energy Group Ltd (WDS) 2012 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to Woodside 2012 half year results call. (operator instructions). There will be a presentation followed by a question and answer session. (operator instructions). I must advise you that this conference is being recorded today Wednesday the 22nd of August 2012. I would now like to hand the conference over to your CEO and Managing Director, Mr Peter Coleman. Thank you sir and please go ahead.

Good morning everybody. Welcome to our 2012 half year results briefing. Thanks very much for taking the time to call in or listen online to today's teleconference. As usual and as ever, we really do appreciate your interest in our Company. I have with me Lawrie Tremaine, our Chief Financial Officer. You'll hear from Lawrie later in the briefing today. We can move to slide 2. It shows our normal disclaimer. This includes a reminder that all dollar figures for Woodside are in US dollars unless we state otherwise during the briefing. Moving to slide 3, our financial headlines, Woodside -- as we've spoken on many occasions -- really has a very strong foundation business. This is evident again in our results today. The first half operating revenue was $2.7 billion, an increase of almost 18% compared to the same time last year. This resulted from a very strong performance from our base business, including the North West Shelf and Vincent oil in addition to the start-up of Pluto. Reported profit fell 1.9%, largely due to a number of one-off items related to Pluto. However, the underlying profit increased 4.5% to $865 million. Our operating cash flow was strong and we've declared an interim dividend of $0.65 per share, increase of 18% compared to last year's interim dividend. Lawrie will go into more detail on these items shortly. We can now turn to our operational headlines on slide 4. The standout achievement for the first half of the year was the safe start-up of Pluto. We've produced first LNG in late April and have achieved strong production levels from the facility, far exceeding our expectations, which we'd benchmarked on North West Shelf trains 4 and 5. In the first half we delivered eight cargoes of LNG to our customers in the Asia Pacific region and we have focused on maintaining this reliability as we go through second half. Over at North West Shelf, oil production from the Okha floating production storage and offloading vessels increased following start-up of the gas compression system. As many of you would have seen in our investor briefing back in May, we've successfully installed the North Rankin B topsides with hook-up and commissioning works progressing to plan. The Greater Western Flank Phase 1 Project is also tracking well, with drilling activities to commence this quarter. At the Karratha Gas Plant, refurbishment continues with the completion of plant maintenance at LNG Train 4 and the trunkline offshore terminal. While these activities impacted production in the first half, they really do provide support for the long-term LNG reliability and utilisation of these facilities. Our oil assets continue to make a substantial contribution to the Company's overall production. The tie-in of an additional infill well in the Vincent field is paying dividends, almost doubling production from the previous corresponding period. Moving to slide 5, our safety performance is always a key measure of our operating performance. It's really a window into our organisation. We strive for improvement in our safety performance and I'm pleased to report that in this half, our total reportable case frequency improved to 4.18 from 5.54 in the first half of last year. While this is a positive result, really to achieve world class performance we need to continue to improve and drive this number down. That's really where our focus is. On the production side, we produced 34.2 million barrels of oil equivalent in the first half and recently increased our 2012 full year target to a range of 77 million to 83 million barrels. We took this action as a result of the strong early performance of Pluto, and I'll talk more about that later. Now I'll hand over to our Chief Financial Officer, Lawrie Tremaine, to take us through the financial results.

Thanks Peter and good morning everyone. I'm going to review our 2012 half year financial results, again with production on slide 7. As Peter just mentioned, production for the half year 2012 was 34.2 million barrels of oil equivalent, up 7.2%. Not surprisingly, the start-up of Pluto was the major reason for this increase. Pluto has contributed 5.3 million barrels of oil equivalent to our first half production. This is more the 2 million barrels higher than our pre-start-up expectation. Better reliability during the start-up phase has been the major reason for this outperformance. Production from the North West Shelf oil fields increased by 1.1 million barrels due to the start-up of the new FDSO, the Okha, in September 2011. We've also seen improved performance on Vincent fields. Vincent production was 1.3 million barrels higher, mainly due to increase facility availability and the impact of three infill wells brought online between September 2011 and May 2012. The production increase was achieved against a background of major shutdowns of North West Shelf Train 4 and trunkline onshore terminal together with ongoing work on the North Rankin redevelopment project. Also negatively impacting the comparison was the sale of the Gulf of Mexico shelf assets in May 2011 and the expiry of the Ohanet Risk Sharing contract in October of the same year. Now to operating revenue on slide 8. Revenue for the half year was $2.7 billion. This represents a $402 million, or 17.8% increase over the first half 2011. $2.7 billion was also a record first half revenue for Woodside. The increased revenue is due in rough equal portions to higher sales volumes -- again with Pluto the main contributor -- and stronger realised prices. Average daily Brent prices were 2% higher half on half, yielding an increase in realised prices of 9%. I can once again report that we continue to achieve strong premiums over Dated Brent for our heavy Greater Enfield Area crude. These premiums are a consequence of strong Asia Pacific demand for gas oil. In the first half 2012 we achieved average premiums from the Greater Enfield Area of $6 to $7 per barrel over Dated Brent. Next, to production costs on slide 9. Just a reminder -- we report of production costs in Australian dollars. The gas production costs were AUD57 million higher than the first half 2011. AUD39 million of this was due to the start-up of Pluto. Excuse me, I have a cold. The remaining AUD18 million was largely due to the North West Shelf Train 4 shutdown and Goodwyn Well workovers, both executed in the first half of the year. There were no equivalent major shutdowns in the first half of 2011. We expect the full year unit gas production cost at North West Shelf to be lower than the AUD4.63 per boe shown in this chart. The second half result will benefit from no major shutdowns at North West Shelf and the expected strong production at Pluto. All production costs were AUD19 million higher than the first half 2011. The majority of this relates to the Vincent FPSO. We incurred almost AUD6 million once-off transition costs following the acquisition of the FBSO from Maersk. A further AUD5 million in additional costs relates to the higher production from the Vincent facility so far in 2012. We've also incurred AUD6 million in subsea remediation works at Laminaria-Corallina which are also once off costs. Winter production costs have increased on both a full cost and underlying cost basis. This is largely due to the impact of field decline on our relatively mature oil assets. Despite this unit margins remain high on all of these assets particularly given the strong oil price environment. Moving now to reported profit on slide 10. This chart shows the bridge between reported net profit after tax for the first half compared with the prior year. Starting from the shaded area on the left you can see Pluto contributed $163 million in gross margin. We also bought $81 million in start-up and mitigation costs. We don't expect these costs to reoccur. Higher prices in the foundation business boosted pre-tax by $164 million partially offset by lower volumes, which impacted us by $93 million. Cost of sale on the foundation business were $121 million higher than the first half 2011. I've already mentioned the drivers for the production cost increases. Cost of sales also included an additional $49 million in depreciation charges. This increase was due to the higher capital costs and higher production volumes of both the North West Shelf Oil and Vincent Fields. Finally the tax and other bar on this chart includes higher tax expense of $49 million. Amortisation of Pluto train two and three onshore feed costs of $20 million and impairment charges on Laminaria-Corallina assets of $21 million and higher interest costs of $27 million given we are no longer capitalising the bulk of our interest. These increases were partially offset by lower exploration expenses of $83 million. Underlying profit on slide 11. Our first half underlying profit of $865 million is 4.5% higher than the $828 million recorded in the first half of last year. We've adjusted the non-recurring items of $53 million after tax. $28 million relates to the after tax impact of Pluto delayed mitigation costs. $25 million is the tax paid to Timor-Leste in relation to the sale of a Woodside subsidiary back 2007. Turning to operating cash flow on slide 12. A cash flow of $1.5 billion is our best ever first half result and 7.5% higher than the first half of 2011. Stronger realised prices and higher volumes particularly from Pluto are the major drivers for the improved result. The result underscores Woodside's cash generating capacity at current oil prices and with continuing good production performance of Pluto we are forecasting a full year cash flow result to rival the previous best annual result back in 2008. The chart on slide 13 shows our current estimate of 2012 capital and exploration expenditure. Investment expenditure is lower across each category reflecting the recent start-up of Pluto, the start-up of the North West Shelf Oil Okha facility and advanced status of the North Rankin redevelopment project. Exploration expenditure is down from prior guidance due to farm out of the Vucko, Banambu Deep and Ananke wells. With a new turned downward trajectory together with anticipated higher operating cash flows we have an opportunity to further strengthen our balance sheet against the next phase of growth. Now to the interim dividend on slide 14. The Directors have declared a fully franked interim dividend of $0.65 per share. This compares to the 2011 interim dividend of $0.55 per share. The dividend reinvestment plan will again be offered but will not underwritten. No discount will apply to the allocation price and shares to be allocated will be acquired on market. Woodside Board has approved a dividend policy consistent with recent practice the Company will aim to maintain a minimum dividend payout ratio of 50% of underlying net profit after tax. In determining the appropriate dividend the Board will consider among other things Woodside's development profile, available cash flows and funding requirements. As always the Board maintains the discretion to determine whether or not a dividend is payable and the amount of any dividend. The full dividend policy is posted on our website. Now the capital management on slide 15. This slide provides my summary of our financial position. We are nearing the end of the heavy recent investment cycle. Our cash flows are benefiting from continued strong energy prices and the better than expected start-up of Pluto. The conditions precedent on the Browse equity sale have been satisfied and so we can expect an additional $2 billion in cash receipts from this transaction by the end of this quarter. At the first reporting period following the completion of the Pluto development we are pleased to report that we have cash in drawn debt facilities of $2.2 billion and gearing of 26%. Furthermore Standard and Poor's and Moody's rating agencies have both recently restored our long-term credit ratings to a stable outlook. In short we have the balance sheet capacity and the operating cash flows to support the next phase of growth. We will remain focused on the efficient and timely development of our great projects ensuring our cost base remains competitive and enabling us to achieve top quartile shareholder returns. We are not under pressure to mandate projects and should growth be delayed or our investment criteria not met the Company's strong balance sheet places us in a great position to return cash generated by the business to shareholders. I'll now pass you back to Peter to discuss our projects and operational performance.

Thanks Lawrie. Can really go to without saying that we like the look of our balance. It's really a balance sheet that does give us plenty of options and before I turn to the strategy and project activities let's take a quick look at the current economic environment on slide 17. Over the recent months more and more companies operating and investing in Australia are talking about the strong head winds that their businesses face. This slide lists a number of these issues, which must be factored into any development decision that we make. While acknowledging this challenging environment I need to highlight that Woodside is well placed to continue to invest through the cycle. We have a strong balance sheet and increasing cash flows from existing and new project, which when coupled with our long term value focus and investment discipline we believe enable us to capitalise on appropriate opportunities should they arise. So with that context let's have a look at our strategy and just a quick reminder of what we're doing. On slide 18 we took considerable time to talk to you about our strategy at our investor-briefing day in May but I think it's important to remind all of us of the director we're taking. This slide outlines the three elements of our strategic focus. The first one is maximising our core, secondly leveraging our capabilities and then finally growing our portfolio to deliver superior returns. If we firstly look at maximising our core. Our facilities really have a track record of proven performance in delivering value. The world class performance was demonstrated just a few months ago with safe start-up of Pluto and we'll continue to look for opportunities to maximise value from this business and commercialise undiscovered volumes. On leveraging our capabilities I'm still very impressed by what we can achieve to the size of our Company. We are a mid-cap with some of the capabilities of the super-majors and we have the capability expertise and discipline to deliver some of the world's most complex developments. Our new technology organisation is further enhancing these capabilities and we have some focus areas that we are pursuing. On growing our portfolio we mentioned previously we've mobilised teams of very experienced people to support the business growth. The team has already assessed several growth opportunities using a discipline process to ensure they really do add value to our bottom line and align with our strategy and just as importantly our capabilities. As part of this work we've also commenced studies on prospective basins around the globe and underpinning all of this is a cultural change program across the organisation focused on keeping our employees well informed, engaged and motivated to support our vision of being a global leading in up-stream oil and gas. So that's really where our strategic direction is heading and what we're all about as Woodside. We can kind of get back to the meat and potatoes now and think about our assets. Moving to slide 19. Looking at our core business, which is really underpinned by the continued strong output from the North West Shelf. Production in the first half of this year generated a revenue of just over $1.5 billion for Woodside, just short of our previous records. Just some rounding there that was generated in the second of 2011. The Shelf delivered 111 cargoes of LNG on behalf of the joint venture compared to 132 in the first half of last year and the decrease is largely attributed to the significant refurbishment activities and ongoing maintenance that we've talked about previously combined with the impact of the North Rankin development project activities that required some shut downs of the pipeline system offshore. Refurbishment and maintenance activities during the first half included the planned major shut downs we've talked about, which really were some of the more complex that we've undertaken at the Karratha Gas Plant. I'm pleased to say that these activities were for the most part completed ahead of schedule. We can move to slide 20. We're working very hard to bring undeveloped North West Shelf gas reserves online to maintain supply to the Karratha Gas Plant. This slide provides an update of our two key projects that are currently underway. The first is the North Rankin redevelopment a AUD5 billion project that will recover about 5 Tcf of low-pressure gas. The North Rankin B platforms now in place. We have more than 450 people working offshore on hook-up and commissioning and the project remains on budget and scheduled for completion in 2013. Second project the AUD2.5 billion Greater Western Flank Phase 1 project is progressing well. Engineering and fab activities are progressing to schedule with drilling activities currently underway. The project includes a subsea tieback to the Tidepole and Goodwyn GH fields to the existing Goodwyn A platform with a phased development of the Greater Western Flank necessary to bring on -- or to unlock about another 3 Tcf of gas and up to 100 million barrels gross of condensate. This project also remains on budget and scheduled for completion by 2016. Moving to slide 21 Australia Oil. The Australian Oil Act has delivered revenue of about $780 million in the first half. That was due to a combination of higher sales volumes and slightly higher prices. In May the Vincent oil field achieved the highest monthly volume since product began in August 2008 and this was the result of strong production from the latest infill well. Of course the performance there was offset by some lower volumes at Enfield and Stybarrow given natural reservoir decline and some maintenance activities. Looking forward we'll continue to improve our understanding of the oil reservoirs and look for additional infill opportunities and we're quite confident this will extend the life and value of these assets. Just a message as we go through those charts it's really our commitment to delivering on our commitments whether they been turnarounds in our plants, whether they by major project activities or whether they're getting world class performance out of our existing assets such as (inaudible), Vincent and elsewhere. We can move on to Pluto and we'll hear a lot more about Pluto over the coming days and weeks but on slide 22 the first cargo from Pluto marked the start really of a new era for us with Woodside providing a steep change in production and revenue. As we've said before Pluto is a robust and profitable project. Once we're very happy to have in the portfolio. It's a great achievement to have gone from discovery in 2005 to first LNG just seven years later. Bring a mega-project like Pluto off the drawing board and into production is a difficult task, really requiring world class skills and capabilities right across the LNG value chain. The start-up of Pluto LNG is achieving superior performance, compared to the expected ramp up, with a delivery of eight LNG cargos in the first half of the year and the expected ramp up was based on actual performance that we saw at North West Shelf trains four and five. So we had a good base point on which to base our expected ramp up of Pluto, given that train with a look alike to those trains. We are adding a fourth LNG tanker to our Pluto fleet in the middle of next year. That tanker is already being built. It will be on a time charter of up to 20 years. That will enable us to meet the needs of the long term customers, also to enable us to take advantage of some strong demand that we are seeing the spot market. Moving to slide 23 and looking at production in more detail. From the start up to the end of June, the plant produced just under 600,000 tonnes of LNG and more than 500,000 barrels of condensate, capacity utilisation for the first two months of operation was forecast to be 36%, as I mentioned. However, actual capacity utilisation was just -- was on the order of 80%. Production in the second half of this year is expected to be more closely aligned with our normal annual deliverability plan and the plant is running per expectation. This graph illustrates the sort of performance we could expect for the remainder of the year and as we all know, this is not an exact science. The chart provides for a range of possible outcomes and the lines on the chart includes a 20 day contingency allowance for shutdowns in the second half of 2012. So, as you look at those lines, we have built in or factored into those lines a 20 day contingency allowance. As previously advised, Pluto LNG is now expected to contribute 20 million to 23 million barrels of oil, equivalent to Woodside's overall production in 2012. Moving to slide 24, while the foundation projects is outperforming expectation, progress on Pluto expansion has proved a lot more challenging. We've had disappointing exploration drilling results over the past two years, most recently with Ananke-1 and the Carnarvon Basin and at this point in time, unfortunately, we do not have sufficient discovered volumes to progress in equity gas expansion and if you recall, we had indicated we would advise the market in third quarter of this year, with respect to our expectations. Since our final Pluto investment decision in 2007, Woodside has drilled 25 exploration wells in pursuit of Pluto expansion volumes, 11 of these wells intercepted gas and four of these discoveries all in WA-404-P, have reserves booked against them based on backfills to Pluto Train 1. Evaluation of Ragnar discovery continues and there will be follow up drilling in WA-430-P next year. However, discovery of Woodside equity gas is insufficient to support an expansion of Pluto LNG at this time. While it's disappointing, we are pleased to have commercial volumes to tie back into our existing Pluto facilities and we'll be taking time to pause our drilling activities, to evaluate and refresh our exploration portfolio in the regions. We see this as a natural part of the process. We've drilled all the best prospects that had in Victoria. It is now time for us to prudently pause in the program and allow our exploration team to weave those results back into the (inaudible) program. Of course, other options for us to facilitate Pluto expansion though the commercialisation of other resource owner gas. We have been in discussions with those owners in the region for some time now and I'm pleased to say these discussions remain quite active. While they're encouraging, they are inevitably complex and we are predicting it will take some time to conclude these talks. Moving onto Browse on slide 25, some happy faces in this photo. All conditions precedent have been satisfied for the sale of the minority portion of Woodside's equity in the development to a subsidiary of Japan, Australia LNG or MIMI, as they are better known, for $2 billion. This transaction is a very strong endorsement of the value of the development and it also reflects the high demand for LNG for all premium developments, such as Browse. Earlier this month Woodside welcomed MIMI to the Browse development with a signing ceremony. That's the happy faces in the picture. We particularly look forward to exploring additional opportunities with both Mitsui and Mitsubishi, under the terms of a MOU that we signed, which reflects Woodside's focus on building strategic relationships globally. Furthermore, Shell announced recently a transaction under which we will acquire all of Chevron's equity interest in Browse. The total value of this transaction is -- or the details are confidential -- but I can say the total value of the transaction is of an equivalent order to that of our transaction with MIMI. The Browse development is currently in the assurance phase. We've received all tender bids for the upstream and downstream infrastructure, as previously reported, and we have an evaluation process underway to determine project costs and economics will be in a position, as a joint venture, to make the final investment decision in the first half of 2013, in line with our retention lease conditions. Also last month, you would have seen the Environmental Protection Authority recommend condition approval of the precinct to change price point. There is a number of management plans and strategies in the strategic assessment report to ensure the precinct can coexist with the environmental, cultural and heritage values of the committee and we're very confident that we can do that. Then following the statutory appeals process of the EPA's reports and recommendations will be considered by both the State and Commonwealth ministers, who have the responsibility for making the final decisions. Moving onto Sunrise on slide 26, the conclusion of the Timor-Leste elections last month give us a clear area now to get back to the negotiating table in Timor-Leste. We've recently provided additional technical data to the Timor-Leste Government to help build our mutual understanding on the Sunrise development and we're really looking forward to the next engagement. We're building a good and positive relationship there. We are updating the costs on -- and of course, some of the uncertainties and challenges of the development concepts, in preparation for our next expected engagement which will be very soon. Moving to slide 27 on the US and international. Looking at Neptune in the Gulf of Mexico, re-completion operations of an existing well into a new zone was completed in August and in addition, the operator will be drilling a well in the north flank next year. Exploration continues to mature a portfolio of opportunities in the GOM. We have two non-operated assets which are progressing through the permitting phase, with the expectation that these wells can be drilled in 2013, subject to all the joint venture participants agreeing and rig availability. Down in Brazil Operator Repsol has indicated that the Panoramix-3 appraisal well is expected to be drilled in Q4 of this year. Again, depending on rig availability and evaluation of Panoramix and then fuel, oil and gas fields continues. Woodside does continue to evaluate a growing number of opportunities in the GOM and the Americas and will continue those evaluation activities. Looking at slide 28, closer to home, we drilled four wells in Australia this year, resulting in one gas discovery at Ragnar-1. Vucko-1, Banambu Deep and Ananke were unsuccessful. We were awarded two new permits this year at WA-472-P and 473-P as a sole equity participant. These blocks extend our acreage position on the Lambert Shelf, where we are exploring in shallow to moderate water depths and recently we were granted a third permit WA-478-P, which lies north of our Ragnar discovery and has gas potential. During the first half of this year, we also began a major 3D seismic campaign in three large Outer Canning blocks, where we're a 55% equity holder and operator with Shell. These blocks contain several very large multi TCF gas prospects. But I must caution, are high risk. When complete, the seismic survey will extend over 11,500 square kilometres, making it the largest proprietary single 3D program in WA. In addition, we've successfully acquired the Rafter 3D seismic survey in WA-275-P aimed at finding additional gas volumes adjacent to our Browse fields. So very busy in the seismic programs this year. In 2013 we'll be back to drilling. We plan to drill up to eight wells in Australia. Potential targets include two oil prospects in the Exmouth area, four gas prospects in the Greater Carnarvon Basin and North West Shelf and two prospects in the Outer Canning. Subject to approvals and rig availability, of course, and as you know, it's a very tight rig market in Australia. A further 10,000 square kilometres of 3D is planned for 2013, mostly in the northern Outer Canning blocks and in the four Lambert Shelf blocks. So you can see our seismic interpreters are going to very busy. Slide 29, internationally, our current exploration assets comprise multiple lease blocks in the deep water GOM. A large onshore permit in Peru, with oil potential and two deep water permits in the Republic of Korea and nine blocks in the Canaries. We drilled the Jujak-1 well in Korea earlier this year, which was unsuccessful and we are examining the results of this well. In the Canaries our operator, Repsol, is planning to reprocess the existing 3D seismic, ahead of recommending prospects for drilling. As I mentioned earlier, we've established a group to study exploration opportunities in basins around the world and the first evidence of this team's activities is our partnership to bid for an exploration area offshore Cyprus, where we're pursuing large gas opportunities in deep water. Looking forward, we expect to resume drilling the Innsbruk-1 well in the deep water Gulf of Mexico in late 2012, one or two more wells will likely follow in 2013. In Peru the acquisition of 2D seismic in block 108 is also expected to occur next year. Finally, Woodside has embarked on a series of global basin studies and will seek to position itself only where we really can see value. As part of this review, we are currently examining opportunities in Eastern Mediterranean, South East Asia and the Americas. Finally, slide 30, to summarise today's briefing. The first half of 2012 has seen very strong financial performance, resulting in a healthy profit and balance sheet. Our focus on our base business is really paying off, with the successful start-up of Pluto and impressive operational performance from our North West Shelf in Australia oil assets. Projects to further enhance value from the base business, including the North Rankin redevelopment in greater Western Flank Phase 1 are on track. Our renewed strategic direction has resulted in significant work to identify and progress a suite of opportunities to grow the business through potential strategic alliances and entry into new basins. With the increased cash flow being generated from Pluto, we continue to look at improvements to our capital efficiency and for ways to enhance shareholder returns. Again, I thank you very much for your support and that concludes the formal part of today's briefing and we'll move over to take questions and answers.

Ladies and gentlemen, we will now begin the question and answer session. (operator instructions). Your first question comes from the line of Adrian Wood of Macquarie. Please ask your question.

Hi Peter. Just a question on M&A. The growth projects that you have organically seem to be, simply putting it, would be a disappointing well program in the Carnarvon Basin for Pluto expansion and the uncertainties around Browse and Sunrise. It looks like there is very little sort of organic opportunity for growth perhaps in the current portfolio between now let's say 2018. I guess the big unanswered question here today is what comes next? Pluto start-up has been fantastic, ahead of expectations. You have, of course, bolstered the M&A team. Do you feel growing pressure from the rest of the sector that's going to be delivering transformational growth over the next three or four years? And also, if you are looking for deals, you know, we've seen several occasions where national companies have come and outbid the likes of Shell, trying to get the exposure to resource. Does that force you to look further up the chain and, if so, have the longer development timeline which probably doesn't fix the near-term production hole that may be appearing?

Look, thanks Adrian. As you know M&A is a difficult business for anybody to be in so you really need to be quite disciplined in it. If I can go back though, what we've talked about though is not just M&A activities but it's also commercialising or bringing forward value in our existing assets. We had two parts of the focus on that. One is how do we do the normal opportunity generation-type activities which is in-fill drilling and so on and then also improving our operational performance. Increasing that reliability, our turnaround performance and so forth, our cost management on base business. So it's really making sure we're in the very best shape we can in the base business. But as we've also seen on our captured resources, both on Browse, you know, recently on Browse and then into the future I think we're looking at opportunities around Pluto and elsewhere. We're looking really hard at how do we materialise or bring forward value? We strongly believe that the sale of equity in Browse to MIMI brought forward significant value to our shareholders and de-risked a lot of the value in that asset. That was quite a conscious decision on our behalf to ensure that we felt that we had a proper value out there in the marketplace for that. And, of course, you can look to the recent Shell sale then to -- or Shell purchase from Chevron, is really undervaluing that asset in the same way. So underpinning what we felt was a fair price out in the market for Browse. So I would say that we're looking very hard at our existing assets, not just at other growth opportunities. Generally, in the marketplace your observations are correct; it's a very competitive market in tough stream E&P. But we're looking all along the value change. So we've said we want to build our exploration portfolio. We acknowledge that that will take some time to do that and we're looking at opportunities to accelerate that but equally recognise it may take some time. And then we're looking at other potential entries into discovered resources. That's hard but that's an area where Woodside has some very complementary competencies that we've talked about and we've indicated previously to the market the type of activities that we're looking at. So all of those things I would tell you are underway. I'd say we've got an active list of things we're pursuing but it's hard work. And I wouldn't tell you that it's easy work at all.

Okay, great. Thanks very much indeed.

Your next question comes from the line of John Hirjee of Deutsche Bank. Please ask your question.

Hi, good morning everyone. My question relates to the newly-announced dividend policy and Peter, I just want to get your views. Do you think it's possible for Woodside to combine yield and growth in the medium term?

Thanks John. Look though, the short answer is yes I do. And what we're trying to do is combine -- we're looking at total shareholder return and, as you know, we've indicated previously we'll look at all of the aspects of that. At this point in time, we've got an opportunity to increase our dividend to shareholders but we'll also look at other ways of making sure we get good returns to shareholders. As far as the growth part of it, I think we're well positioned when you look at the -- we've talked about the debt on our balance sheet. But if you look at the current, robust cash flows that we have, we particularly look at debt capacity and we think our debt capacity is very strong at the moment. And the rating agencies are taking a similar view as they're seeing us de-risk some of our forward programs. So we're very much focused on getting the right balance between that. We're not sitting on our hands, on our laurels; our focus really is continuing to focus on growth. But the reality is, where we are today, it's a tough business to be in and we want to make sure we return value to our shareholders as quickly as we can through that phase. So very much focused on the future and we think we're in great shape because we do have that robustness in our balance sheet.

Okay thank you. And another question, if I may, and this relates to obviously the announcement regarding Shell and Chevron within Browse. So Shell assumes, you know, quite -- subject to no-pre-emption of course, 26% in the JV and starts to nearly match your equity holding in the project. Does this mean that given Shell could bring its other key operational focus, such as floating LNG come to bear on this if the tenders that you've now received for Brows indicate that it's going to be quite a marginal project.

Yes John, just a couple of things. Firstly, a point of fact, as we indicated, we've waived our pre-emptive rights on Browse, as have the other joint venture partners. So as part of the transactions that we completed earlier in the week, the joint venture has waived those rights. That also helped us close on some of the other transactions that were moving forward particularly around MIMI. So that's why we're pleased to be able to report today that all of the conditions precedent on the MIMI sale are now complete and will just go through when they appear under that contract or under that agreement with MIMI. So if I can put that to the side, the conditions precedented themselves have been satisfied. Or I should say the pre-emption have been satisfied. On the technology and so forth, the key on Browse is we have a commitment on Browse under our retention lease conditions to take change price point through to a decision point and we're on track for that. So we've completed most of the geotechnical work that we needed to up on site. We do have the tenders in hand. Those tenders are huge pieces of work as you're aware. They're in five different currencies with many thousands of pages of documents and we'll work through them this year and have insurance processes with the JV. So we're still on track to make a decision on James Price Point in the first half of next year. With respect to technology, we're pleased to have Shell taking a greater interest in Browse because we think particularly Shell are the global leader in LNG. It's probably too up there, Exxon, Mobil, and Shell, but Shell probably has the lead with respect to LNG globally, and for somebody like Shell to take a larger piece of a project like this, given their global technology and capabilities in this area, we see that as a real positive. Now, what will they bring to the table? They're committed to running through James Price Point process, they know that. What I'll tell you, though, is that clearly it brings options for us in that regard, and I think Shell being able to bring those options to the table brings alternatives for us as we go down the path into the future. The James Price Point's clearly the base case for us.

Thank you very much, Peter.

Thanks John.

The next question comes from the line of Mark Greenwood of Citi. Please ask your question.

G'day. I've got a question about Pluto expansion. You've got all these results now from your exploration program, so you're in a position to make an informed decision about a third-party gas deal. Just wondering why should there be any further delay in a deal? A lot of [Sun] capital sitting there at Pluto that could be utilised, and you're saying that it could extend throughout 2013, those discussions. So should we take from this that those projects are marginal projects, even with the benefits of the existing infrastructure?

Thanks Mark. I wouldn't talk at all about another operator's project or another owner's project. What we're trying to do is match -- you're exactly right. We're trying to match the advantage of having existing infrastructure sitting at our Pluto site, and we've been talking to those owners about some of the new options we have around LNG technology and some of those we showed at the investor day where we kind of reduced the capital cost of the LNG plants. So what we're talking to them at the moment about is how do we optimise the size of those facilities with their upstream investments? The previous discussions that we've had have been based around multiples of the existing Pluto trains, which are 4.3 MTA multiples or thereabouts. They're multiples that we may look for in the future, maybe smaller trains, but far less costly trains than the ones that we established for the Pluto foundation. So that's really what it is. We're going back into a CAPEX optimisation process, and what happens out of that, then, we then have alignment discussions with respect to what equity may look like or what tolling arrangements may be put in place. So I wouldn't read anything more into it than Woodside's provided a proposal now to those other resource owners that wasn't on the table before, and that proposal has a lot of interest to them and we're talking about that.

Okay, great. And one more, if I could? You talked about optimising and maximising value for the base business. Previous management went into some detail to highlight the potential de-bottlenecking opportunities of the North West shelf and Pluto. I'm just wondering if you could update us on your ambitions for output at the North West shelf and also Pluto in the longer term.

The North West shelf, the challenge for us in the short term, short to medium term, is getting through this series of turnarounds that we have scheduled, and we're very much committed to those, because they're both reliability and integrity related, so that's really where the North West shelf opportunities are going to come from in the near to medium term on that mark is making sure that we execute those programs in the timeframes that we have, and we make sure that we do them in the years that we said we would do them. So at this point I wouldn't say we've got many plans around the North West shelf other than to continue to work on reliability and up time availability for it. And we had already squeezed that up to pretty much world-class levels, so where we are today, there's not a lot of headroom left on the North West shelf, to be frank, in that regard. Pluto -- it's early days for us. As you can imagine, as we've been looking at expansion opportunities we've now turned our engineers' minds to how can we de-bottleneck the existing Pluto train? They've got some ideas. They clearly have some ideas that they're working on. It's too early for me to give you guidance on where those ideas are heading, but I can unequivocally tell you we are turning our mind out of Pluto and what opportunities there are out of Pluto. But we've really wanted to keep the operations and engineering team focused on mid-term reliability, because that's where the biggest bang for our buck is, so to speak. We're starting to deliver on that. Once we've got that up and running and we've got all the bugs out of the system -- and there's still a couple in there -- then we'll start to make some assessments of what we think potential de-bottlenecking may deliver for us.

When's the first statutory shut on Pluto?

It's next year. It's about one year after start-up is the first statutory shut, so you'll see that in about May of next year.

Thank you.

Thanks, mate.

Your next question comes from the line of Benjamin Wilson of JP Morgan. Please ask your question.

G'day Pete and Laurie. Ben Wilson here. I just had a couple of queries on -- about the Browse development and Price Point parts specifically. I just wondered if you could let us know post the receiving of the state environmental approvals, what's the extent of your ongoing engagement with the KLC -- the Jabirr Jabirr people and also whether you're still engaged with Joseph Roe and the Goolarabooloo people up there?

Yes, well, a couple of things. Under the state environmental approvals, as you're aware there's a process where parties can go back and make comment on the approvals or on the conditions. We decided to make comment on those conditions. They're more practical comments with respect to the conditions and the way that those conditions may operate, and we don't see any impediments in those conditions that would stop us going forward with projects, so while we've made comments on them, we think -- we believe they're comments that will facilitate the execution of the conditions. With respect to the native title owners up in Browse, with both the Jabirr Jabirr and the Goolarabooloo, we continue to work quite closely with them. They've stood up their company, called Waardi, which is required under the native title agreement. The constitution has now been approved by both ourselves and the state for that agreement, and Waardi really is their project development or business development organisation that they're standing up. We had some statutory -- we had some payments that we needed to make at certain milestones and we've been making those milestones to Waardi, so we're very pleased that they're starting to gain some momentum now in their business development activities, and must congratulate them on the way that they've done that so far. With respect to the engagement with the people up there, as you know we have quite a large presence in Broome, a permanent presence of people who have committed to living in Broome, and I think our relationship is quite good, particularly with the Jabirr Jabirr. As you know, Joseph Roe continues to challenge things, and we're just dealing with Joseph in a very respectful way and working through the legal processes that are available to both parties in that regard. All I would say is Woodside's trying to be the best citizen that we can up there and work in a very respectful way.

Okay. And this is just a quick follow-up question on that, plus the Shell-Chevron transaction a couple of days ago. The WA premier's come out with some comments, a reiteration of his previous commentary and some not-so-veiled threats regarding the retention licenses. How does that sort of commentary regarding his commitment to a prices point development impact your activities with the traditional owners or with the JV parties? And secondly, can you -- are you just able to confirm the retention licenses out there, which are state mandated and which are federal related? Or are they all one or the other?

Yes, look, if I can answer the second part first because it's the easiest bit. The retention leases are a federal retention lease, but some of the resources in state waters, part of (inaudible) is refill, and is above the waterline, so that's in state waters, so you'll find any approval process goes through the state and then on to the Federal Government. So that's the comment I believe the premier was making in that regard. But it's a federal retention lease, it's not a state retention lease, but it does have the state involved on the way through. With respect to the premier's comments, I'm pleased to be working in a state where the premier really cares about development and about people meeting their commitments and is committed to having the state get behind us and progress what are very complex and difficult developments. I wouldn't read anything more into those comments than we continue to work with the State Government that's very committed to the development of James Price Point. It in no way affects our relationship with the native title owners or the agreements that we have in place.

Okay, very good. Thanks Peter.

Thanks, Ben.

Your next question comes from the line of Gordon Ramsay of UBS. Please ask your question. The line Mr Ramsay is open.

Thank you very much, sorry about that. Peter, just your comment on taking a break in the Pluto drill program. That, to me, implies you guys are thinking about a second round of drilling activity, potentially in support of Pluto expansion, which means that the whole thing could push out even further. Am I reading that correctly?

Well, two things, Gordon. You know as well as anybody on an exploration program, when you've got a drill program, as you know we've been at this, we've had about five years of activity pursuing Pluto expansion. You get to a point where you're -- the creaming curve value is starting to diminish, and as you saw from our results this year, we're starting to drill dry holes and non-commercial wells, and so there was a time for us to just call a pause on it. What we'll do now is go back and put those results back in, we'll get the guys to run through the seismic and so forth and re-evaluate it and rebuild our portfolio. So what I would say -- so that's just normal practice, as you know. With respect to does one thing get in before another with respect to [RO] gas or equity gas? No, I've been consistent over the last year. The best gas gets in first, and so if we have an RO opportunity, we'll pursue the RO opportunity. We'll be mindful about equity options, but we'll pursue the RO opportunity, but it won't be an either/or situation here, it'll be an and.

Okay, thank you. And just one more on Pluto. You haven't made any comments in terms of the performance of the plant since the 30th of June to date. Could you give us an update in terms of how it's been performing since the result?

It's been performing quite well, Gordon. It's been performing per expectations. We'll -- what we'll do, per our past practice, we'll give an update in our Q3 numbers later in the year, and at that point we also expect we'll give an update on year end outlook as well as 2013 guidance.

Okay, thank you very much.

Your next question comes from the line of Angela MacDonald-Smith of Australian Financial Review. Please ask your question.

Hi Peter. Just listening to your comments about negotiations with the East Timor Government on Sunrise. You've got the February 2013 deadline of sorts coming up under the CMACS treaty for an agreement on Sunrise. Just wondering whether you see that actually as a realistic timeframe to get to any sort of compromise deal there?

It's a good question Angela and good morning. Yes CMACS is certainly out there. It's something that I think exercises the minds of both Governments and ourselves. With respect to where we are on it, we really have no control over CMACS. CMACS is a government-to-government negotiation and is an issue between the Timor-Leste Government and the Australian Government. As you are aware, CMACS will rollover so there's a clause in there that allows CMACS to rollover if none of the parties decide they want to cancel it. At least that's my understanding of CMACS. We don't see it as a huge impediment to progress but it's certainly something that, in the background, is exercising the mind of governments. Our view is we've got to focus on development and getting the best development out there. CMACS in many ways was an enabler for development. It wasn't the development itself, it was an enabler. So I still see that whatever happens, we'll be able to come to an appropriate accommodation there.

Okay, just a follow up there. I think you mentioned about re-working cost estimates. Are you going to then be re-estimating costs for floating or for onshore Timor or for onshore Darwin?

One of the commitments that we made on re-engagements was while the joint venture still firmly felt that floating was the best option, as part of the re-engagement we would work with the Timor-Leste/Australian Government and update the cost for both Darwin and Timor-Leste LNG. So those numbers haven't been dusted off for a while and we just, as part of the re-engagement process, we said we would come back to table and, in an open book way, share our estimates. Because, of course, they had their own so we wanted to be able to lay them side by side and see where our assumptions differed to theirs.

Thank you.

Thanks.

Your next question comes from the line of Stuart Baker of Morgan Stanley. Please ask your question.

Morning gentleman, just a few details given most of the substantive stuff has been done. Just with respect to the once-off costs associated with Pluto, you've shown in the underlying the cargo mitigation costs but obviously with the segmental and elsewhere, there are other significant expenses and it's more or less in the order of, what, $80 million or $100 million. I'm just kind of -- which do look like once-off costs to me. I'd be pleased to know if that's not the case. I'm just kind of curious to know as to why you didn't back those out of the underlying figures as well.

Yes, hi Stuart, it's Lawrie. The amount, you're right was $81 million. It did include mitigation costs and we talked about that I think at some length in the -- six months ago. We did back the after-tax impact of that one out and there are a couple of other charges which essentially are start-up costs at Pluto and they are once off in nature. But because they -- well we hadn't bothered to pull them out of our reported results, but, yes, you could've. I think given the guidance we only pull costs out of underlying as an exception rather than the rule.

Fair enough. Just to follow up a question also regarding slide 10. Looking at the other costs for mitigation and Laminaria impairment et cetera.

Yes.

The bar chart there was for after-tax costs. I'm wondering if the figures that you give on the left are pre-tax or post-tax. I don't see a tax reconciliation in the financials. I'm just curious to know what the pre-tax figures would be to go with those.

Yes each of the bars in the -- on the chart on slide 10, each of the items are pre-tax other than the tax bar obviously. The commentary I provided are all pre-tax comments.

Okay, thanks for that.

And just because you mentioned it, there are a number of individual items there and they're all in mainly one off in nature. For example, the impairment at Laminaria-Corallina, well we wouldn't expect to be reporting that as a matter of course. There's also mention on the fly, a one off tax item so that was the tax that we paid to Timor-Leste on that -- on the disposal of that subsidiary back in 2007. So those items are all sort of once off in nature. So although we haven't adjusted all of them out of our reported profit back to underlying profit, I've tried to give you some guidance as to what's recurring and what's not.

Thanks for that. Then just one final question regarding other growth projects. There's no mention in the current pack about where you're at re Laverda. I do understand their problem that previous presentations the development studies are underway looking for a concept selection in 2013 and wonder if you could give us an update on whether that is progressing positively or whether there have been some setbacks to timeline or potential commercial outcomes.

Yes, good question Stuart and thanks for reminding us. Yes, no, Laverda is still on track. As you know, we drilled a couple of wells on Laverda. It's really firmed up the resource for Laverda. So we're very much on track in that regard for moving forward on Laverda.

Okay, thanks very much gentlemen.

Thank you.

Your next question comes from the line of James Paton of Bloomberg News. Please ask you question.

Good afternoon guys. What, at this stage, do you see as the most likely outcome with Shell's remaining stake in Woodside. I know you said in the past there was interest among investors in that stake but obviously nothing has come of it so far.

Hi James, yes, Lawrie again. We've seen the part, but we've had some discussions with Shell. It was also said that there's really been no -- nothing crystallised out of those discussions that we can report. I must say, I think our focussing in conversations with Shell recently have been more about the share buying -- Shell transaction and our own transaction with MIMI. So there's certainly been no progress with respect to their shareholding in Woodside.

Okay, and Peter, just a quick follow up question. I wanted to ask you about the LNG -- emerging LNG supply competition toward the end of the decade. How do you see that affecting your growth plans in Australia, especially with regards to, say, East Africa?

Yes, James I've mentioned our view is -- we watch the world pretty closely, as you know, from a global point of view, because while we're Australian-based and the majority of our assets are here, we're competing in a global commodity market. Clearly, East Africa is an extraordinarily -- it's an extraordinary gas province that's been discovered in Mozambique and could go north. What does that mean? It's likely that LNG will be in development there. I think the question will be the timing of those developments. How quickly they're able to get into market and so forth. So while I see that as another competitive source coming in, we don't see it as fundamentally changing the market in that respect. We don't see it affecting our projects directly. We won't be going head to head with that particular gas. But it does provide others supply options, I think, in other sectors of the market.

Thank you.

Thanks. We probably have time, I think guys, for about one more question.

And your final question comes from the line of James Bullen of Merrill Lynch. Please ask your question.

Good morning gentlemen. Just firstly on the DRP. You've elected to keep it in effect for this period. When will you be looking to shut that off?

Yes, I think our approach with the DRP has been that it has been a very useful mechanism for us to ensure that there's been an equity component of our -- funding our growth program. We wanted to maintain the capacity in the program that exists today. So it's for that reason we didn't want to turn it off. We know that there are investors that appreciate the opportunity to continue to step up in their Woodside shareholding. Having said that, we will continue to measure the proximity of our growth projects and we'll make our decisions on the DRP on a six-monthly basis, depending on that growth. Remembering, frankly, I'm really talking about the Board who retain that responsibility.

James, I would add that the program as it's currently designed is designed not to be diluted. So this is a change in the program. So as you'll note in the details, it's designed not to be dilutive. It's really designed to maintain the option there, both for ourselves to access that capital if we require it, and then also for our shareholders who wish to have a facilitated way of reinvesting in our stock.

Great, thanks, and just one on exploration. I guess, based on the presentation at the Strategy Day, you are looking to expand your exploration. You also noted during the presentation today that you've been disappointed with the results of the past two years. I'm just curious as to how you're going to go about improving the performance from your exploration department.

Yes, there's two parts to exploration. One part is the sandbox that you work in. So what we're really focused on now is expanding the opportunities for us in the regions of the world where we can actually go and explore in. So that's the first part to that, and that's really where the focus is now. It's making sure we're exploring in the very best and most prospective parts of the world. We've said we want to have a balance in that program between mature emerging and frontier regions in the world. So you won't find it's all greenfield frontier. It'll be mix of the three. So that's how we're rebuilding the program. That's really -- where do we want to be. We have been acquiring spec sites in certain areas to enhance our knowledge and understanding of that. The second part then is building our team. We're currently in a rebuild process and so we've been active in the market place in targeting specific skillsets that we believe we require to move forward to improve our performance and to broaden our knowledge base. So we're working -- we recognise and we're working on those two aspects.

Great. Thanks very much.

All right. Well guys, thank you again very much for your time this morning. We'll get a chance to speak to some of you over the next few days. But again, thanks a lot for your interest in Woodside, your continuing support. The quality of your questions indicate very strongly to us the interest that you're taking in our Company. I hope we're communicating in a very positive and open way with you. We believe our performance is starting to determine that path that we're going to go down and demonstrate that we are really focused on meeting our commitments. We'll continue -- hopefully we'll continue on this journey together as we work on this. But it is a journey. It's not a sprint. But I think today's a pretty good milestone in that journey. So again, thanks very much for your time and I look forward to meeting with a number of you over the next few days.