Woodside Energy Group Ltd Q2 FY2022 earnings call

• Merger completion transformed the company, providing scale, resilience, and a strengthened balance sheet. They sold down a 49% stake of Pluto Train 2, reducing future capital expenditure.
• Operationally, they had great results with improved LNG reliability, and projects like Pluto to KGP interconnector came online ahead of schedule and under budget. However, safety performance was disappointing with a year-to-date total recordable injury rate of 1.81.
• Environmental performance was good with only one Tier 2 loss of containment. They are progressing opportunities in lower carbon products and services, and have awarded a FEED contract for the H2OK renewable hydrogen project.
• Major projects: Sangomar field development in Senegal is underway with drilling and subsea installation; Scarborough and Pluto Train 2 are seeing progress with equipment procurement and construction.

Woodside Energy's diversified portfolio generated $5.8 billion of revenue and $2.6 billion in free cash flow. They produced 54.9 million barrels of oil equivalent. The average portfolio realized price was $96.40 per barrel of oil equivalent. The first half profit was US$1.6 billion, up fourfold from the first half of 2021, with underlying profit of $1.8 billion after backing out one-off costs. The operating cash flow was $2.5 billion, remaining cash flow positive despite capital expenditure commitments.

• They expect to spend approximately $9 billion of capital on Scarborough, Pluto Train 2, and Sangomar from 1 July 2022 to the end of 2024.
• Dividend policy is unchanged at a minimum of 50% of underlying NPAT, targeting 50% to 80%, and they paid an 80% payout this half. They declared a fully franked interim dividend of 109 U.S. cents per share.
• Target gearing range is 10% to 20% through the investment cycle, currently at around 7% and expected to be around 13% after paying the interim div.
• They will perform a strategic review of their expanded asset portfolio to allocate effort and resources to highest priority opportunities.

• Safety performance: Year-to-date total recordable injury rate of 1.81 is higher than desired, and each asset is developing improvement plans.
• COVID disruption risk: For Sangomar, moving the FPSO to Singapore to manage COVID disruption risk in final construction phase.
• Inflationary pressure: Impact on asset costs, though they are managing it.
• Price shock risk: Hedging in place to protect against price shocks.

Q: On capital management, how will Woodside balance capital returns with growth over the next couple of years?

A: Meg O’Neill mentioned they have a capital management framework with guardrails like protecting investment grade credit rating and returning value to shareholders. They will consider future investment opportunities within the guardrails.

Q: On Scarborough sell-down process, how is it progressing?

A: Meg O’Neill said they continue to talk to high-quality prospective partners, not fire selling the asset, and post-FID, players have shown interest.

Q: On Sangomar, any issues with moving the FPSO?

A: Meg O’Neill said moving the FPSO to Singapore gives schedule certainty to avoid COVID disruptions, with MODEC responsible for the contracting and it keeps them on track for 2023 first oil.

Q: On dividend policy, any thought to update?

A: Meg O’Neill and Graham Tiver said they believe their current dividend policy based on NPAT is appropriate and have tested multiple scenarios, sticking with it.

Q: On Scarborough sell-down and upstream equity, thoughts?

A: Meg O’Neill said they want the right partner and fair value, continuing to talk to high-quality prospective partners.

Q: On strategic review of assets, any divestment of smaller margin or mature assets?

A: Meg O’Neill said the strategic review is just underway, premature to conclude divestment.

Q: On Browse project hurdles?

A: Meg O’Neill said three things: carbon capture solution, environmental approvals, and gas processing agreement with North West Shelf.

Q: On LNG spot exposure and hub exposure?

A: Meg O’Neill said they will provide guidance on 2023 hub exposure at Investor Briefing Day, and couldn't comment on specific timing of Pluto contract roll-off.

Q: On exploration spend?

A: Meg O’Neill said the extra spend is due to legacy commitments from BHP, focused on Gulf of Mexico, and will provide 2023 guidance on exploration spend.