Woodside Energy Group Ltd

Thank you for standing by and welcome to the Woodside Energy Group Limited half-year 2024 results. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Ms Meg O'Neill, Chief Executive Officer and Managing Director. Please go ahead.

Well, good morning, everyone, and welcome to Woodside's 2024 Half-Year Results presentation. We are presenting from Sydney, and I would like to begin by acknowledging the traditional custodians of this land, the Gadigal people of the Eora Nation, and pay my respects to their elders past and present. Today, I'm joined on the call by our Chief Financial Officer, Graham Tiver. Together, we will provide an overview of our Half-Year 2024 performance before opening up to Q&A. Please take the time to read the disclaimers, assumptions, and other important information. I'd like to remind you that all dollar figures in today's presentation are in U.S. dollars unless otherwise indicated. I am very pleased to present a strong set of half-year results today. They are a testament not just to our operating performance in the past six months, but also demonstrate how we are delivering on our strategy to thrive through the energy transition. This strategy is underpinned by three goals, providing energy, creating and returning value to our shareholders, and conducting our business sustainably. During the first half of 2024, we have delivered on all three. Our project execution capabilities have been demonstrated again with the safe startup and strong ramp-up performance at Sangomar and excellent progress at our Scarborough Energy project. Our reliable and cost-competitive base business has translated into strong financial performance and returns to shareholders, with a fully franked interim dividend of 69 U.S. cents per share, once again at the top end of our payout ratio range. With our disciplined approach to cost management, we have reduced our unit production cost by 6% in an inflationary environment, and we will continue progressing actions to ensure that we can fund growth while supporting strong shareholder distributions. Looking across Woodside's global business, I've never been more confident in our ability to deliver reliable, affordable, and lower carbon energy to a world that needs it today and into the future. Our key operational and financial metrics in the half-year results demonstrate how well our base business is performing. World-class LNG reliability of 98%, and production of more than 89 million barrels of oil equivalent put us on track to deliver our full year production guidance. We're pleased to have delivered net profit after tax of $1.9 billion, translating into strong earnings per share and a healthy interim dividend for our shareholders. Ensuring everyone who works at Woodside goes home safely remains our highest priority. Our commitment to continuous improvement means taking action to strengthen our safety culture, simplify our processes, and improve our systems. The full impact of these actions will take some time, and our overall safety performance is not yet meeting our expectations. However, we are seeing some positive results. For example, the safe delivery of our Sangamar project included 30 million hours worked on the FPSO without a serious injury, a remarkable result and sets the standard for what I expect to see across the business. Let me now speak to the global market environment and our firm conviction that LNG will play an important role in the energy transitions. Starting with energy demand, the fundamentals are strong. As the world's population continues to grow and economies develop, the demand for energy is increasing. According to recent updates on progress towards the UN Sustainable Development Goals, the number of people lacking access to electricity around the world remains significant. In 2022, this reached 685 million people, the highest in over a decade. So while the precise pathway of the global energy transition remains uncertain, there is one thing we can bank on. Demand for reliable, affordable, and increasingly lower carbon energy will continue to grow. At the same time, we firmly believe that LNG will remain an important global energy source as countries seek to lower their emissions. When used to generate electricity, gas typically produces half the life cycle emissions of coal. Gas can also provide support for electricity grids powered by renewables and batteries. Therefore, for many economies, switching from coal to gas is often the most material and affordable way to reduce emissions while maintaining a reliable source of energy to underpin modern living standards. For example, in the U.S., from 2022 to 2023, coal-to-gas switching accounted for two-thirds of the emissions reduction in electricity generation. While coal use in markets like Europe has already peaked, the Asia-Pacific region currently accounts for more than 80% of global coal use. and global coal consumption is approximately eight times higher than global LNG. So we see a clear and sustained opportunity for coal to gas switching in key markets as they navigate the energy transition. These fundamental drivers for long-term demand also give us confidence that the so-called LNG glut forecast for later this decade is unlikely to have a sustained impact on demand or pricing. Recent history has shown that, due to customers' energy security and decarbonization drivers, increased supply is continuously absorbed by the market with price remaining resilient. For example, International Energy Agency concerns expressed in both 2009 and 2016 of a sustained quote-unquote LNG glut with far-reaching impacts on gas prices did not eventuate. Looking forward, we believe demand will continue to keep pace as new supply comes online. Underpinned by these strong market fundamentals, our high-quality portfolio is well positioned to provide energy and create value now and into the future. Core to this is Woodside's continued world-class operational performance, which combines consistently high reliability with reduced operating costs. We are also making targeted investments to extend the production life of our key operated assets to ensure we continue to extract value from our base business. We achieved a major milestone in June with the startup of our Sangomar project. This demonstrates clear delivery against our growth strategy, creating shareholder value as well as significant economic benefits to Senegal. I'm pleased to report strong well and subsurface performance. Nameplate capacity of 100,000 barrels per day has been achieved, and all 24 wells have been drilled and completed. This achievement has relied on the creation of strong local relationships, including with our joint venture partner, Petrosyn. We will operate this asset in the same way we do in all jurisdictions, maintaining full compliance with local requirements and positive relationships with regulators while ensuring we protect shareholder value. Moving to Australia, we have made impressive progress with our Scarborough energy project. Scarborough was 67% complete at the end of the period and is on track for first LNG cargo in 2026. Scarborough is also set to deliver domestic gas at a time the local Western Australian market needs it. The image on this slide shows the floating production unit which reached a major milestone during the half, achieving structural completion of the top sides. Other key onshore and offshore activities are progressing well, and I look forward to taking some of our investors to see firsthand our progress at Scarborough during a site visit planned for later this year. We were very pleased to welcome LNG Japan to the Scarborough joint venture and look forward to completing the sell-down to Jira. This demonstrates our ability to attract high-quality partners at a competitive price to a Woodside-operated project. Moving to Trion, we remain on track for first oil in 2028. Front-end engineering design on the FSO was completed in the period. We have also progressed engineering, procurement, and contracting activities, including the award of the subsea marine installation contract. While progressing our growth projects, we continue to look for opportunities to grow our portfolio into the 2030s and beyond to deliver long-term value for our shareholders. In July and August, we entered into agreements to acquire two significant energy projects on the U.S. Gulf Coast, which I will now turn to. Our proposed acquisition of Tellurian and its Driftwood LNG development positions Woodside as a leading independent LNG player with exposure to both the Pacific and Atlantic basins. It has potential for significant future cash generation and reduction of the average Scope 1 and 2 emissions intensity of our LNG portfolio. As we engaged with investors following the announcement, there was a desire for more clarity on Woodside's value drivers and expected returns from the Driftwood LNG opportunity. Driftwood is a pre-FID project, and we are confident it can achieve the returns of our capital allocation framework. Looking at the chart on the slide, the first two gray bars compare the return profile of a typical project finance development with the returns already achieved by some US LNG players. Some are improving returns by increasing plant capacity, selling some volumes at international pricing, and extending the life of the project. We see even more potential for Woodside. Driftwood plays to our established strengths in project execution, operations, and marketing. Our track record on reliability and trained de-bottlenecking gives us the credentials to extract more value from assets compared to other players. Another competitive advantage of Woodside is our global LNG marketing portfolio. This provides us with flexibility to serve our customers and enables global price indexation. Our long shipping position is another strength we bring to the opportunity. We've seen traditional US LNG players building out shipping fleets to allow DES sales. This is a core strength of Woodside today. Driftwood is truly advantaged. It is the only fully permitted pre-FID opportunity in US LNG and has Bechtel as the EPC contractor. We have a very compelling opportunity for sell-downs. Multiple inbounds have been received and we are in conversations with interested parties. Importantly, however, we will be focused and find the right strategic partners for this opportunity as we did for Scarborough. Now to our proposed acquisition of OCI's Clean Ammonia Project. This is another investment that positions us to thrive through the energy transition. The project is under development with expansion potential. Construction is already 70% complete, with ammonia production targeted for 2025 and lower carbon ammonia for 2026. Global ammonia demand is forecast to double by 2050, with lower carbon ammonia making up nearly two-thirds of demand total. Market forecasts show that growing demand for lower carbon ammonia will be supported by policies in key energy markets, stimulating use for ammonia beyond traditional applications to include power generation, marine bunkering, and as a hydrogen carrier. Over the past two decades, we have seen the EU leading the charge in tackling climate change through incentives like the Emissions Trading Scheme. Last year, it strengthened its lower carbon framework through the implementation of the carbon border adjustment mechanism. This policy combines a carbon intensity measurement with a mandatory carbon price, further incentivizing use of lower carbon energy sources. Lower carbon ammonia is also being used in Japan and Korea to decarbonize power generation by co-firing ammonia with coal. I'll now hand over to Graham to take you through our financial performance.

Thanks, Meg, and hello, everyone. Our financial performance and balance sheet have remained resilient because of our strong underlying business and our consistent approach to capital management. I would like to highlight here that our capital management framework remains unchanged. This framework provides the flexibility for funding value accredit growth while continuing to deliver strong shareholder returns. Underpinning our capital management framework is discipline. We run our business with consistent cost focus and have managed our unit production costs down despite inflationary pressures. We will further tighten our belts and continue to rationalise discretionary spend. We are disciplined with our investment decisions. The acquisitions of Tellurium and OCI's Clean Ammonia project are both aligned with Woodside's corporate strategy and our capital allocation framework. As the operator of these opportunities, we control the spend, allowing us to phase the development, bring in partners at our determination and use the contractors we want. The sell downs of equity in the Scarborough Joint Venture bring quality partners into the project and cash back into the business. the sale proceeds of $910 million received from LNG Japan, and an estimated total consideration of $1.4 billion coming from Jira. And we are disciplined in how we position the balance sheet to achieve our goals. We know the importance of dividends to our shareholders, and when we evaluate financial scenarios, we assume a dividend payout ratio at the top end of our range, even at stress case pricing. We target a gearing range of 10% to 20% through the investment cycle. With the recent acquisitions, we expect to access debt markets in the near term. Our gearing will likely go above the top of our range for a period of time. This is expected to reduce back to within our target gearing range by utilising the various levers at our disposal. Moving to our financial performance in the period, despite lower average realized prices, our base business continues to perform very well. Costs are down and we're demonstrating excellent operational discipline and resilience across our financial metrics. This is translating into a healthy dividend payment representing a half-year annualized yield of 7.3% at June 30. Cash flow generation through the first half of 2024 was strong, delivering a cash margin above 80%, which has been sustained over the past five years. Importantly, we have achieved positive free cash flow of $740 million in a heavy capital investment year and with significant tax payments. This is in line with the previously provided outlook for free cash flow. We expect to update our outlook to include acquisitions and sell downs once we complete the transactions. Our balance sheet is well positioned with our gearing at the lower end of our target range and a strong cash generative portfolio of assets. This is how we have created and returned value to shareholders in the first half. I'll now hand back to Meg.