Annual Report
i
Woodside Petroleum Ltd | 2011 Annual Report
About Woodside
Woodside is the largest operator of oil and
gas production in Australia. We are also
Australia’s largest independent dedicated
oil and gas company. Throughout
Woodside’s 57 year history, we have
striven for excellence in our safety and
environmental performance and we aim
to ensure that wherever we operate, the
community benefits from our presence.
Woodside produces around 700,000
barrels of oil equivalent each day from an
extensive portfolio of facilities which we
operate on behalf of some of the world’s
major oil and gas companies. Our operated
facilities* include six liquefied natural gas
(LNG) trains, five offshore platforms and
four oil floating production storage and
offloading (FPSO) vessels. To build them
today would cost more than $80 billion.
We are the most active exploration
company in the deepwater provinces of
Australia, having participated in around
40% of Australia’s deepwater exploration
wells. We have been operating our
landmark Australian project, the North
West Shelf, for more than 27 years and it
remains one of the world’s premier LNG
facilities. Woodside is one of the world’s
largest non-government operators of
LNG plants.
* Five LNG trains in operation, one in commissioning phase.
Four platforms in operation, one under construction.
The natural gas we produce and market,
helps meet the demand for cleaner
energy from our customers’ in Australia,
Japan, China, Republic of Korea and other
countries in the Asia-Pacific region.
About this report
This 2011 Annual Report is a summary
of Woodside’s operations, activities and
financial position as at 31 December 2011.
In 2012, Woodside will begin production
from the Pluto LNG Project. At full
capacity, it will add more than 100,000
barrels of oil equivalent a day to our
operated production. We are seeking to
expand the Pluto facilities and build new
standalone projects including our Browse
and Sunrise LNG developments.
Through the depth of our experience, the
capability of our people, and our strong
relationships with customers, co-venturers,
governments and communities, we seek
to be the partner of choice.
Report objectives
This report meets our compliance and
governance requirements, and is designed
to provide easy to read information on
how Woodside performed in 2011 for our
stakeholders, including shareholders, staff,
customers and the community.
We aim to build on awareness of our
operations and demonstrate how we
delivered on our mission and vision while
ensuring that we maintain our values and
commitment to sustainable development.
Woodside Petroleum Ltd
(ABN 55 004 898 962) is the parent
company of the Woodside group of
companies. In this report, unless otherwise
stated, references to ‘Woodside’ and
‘the Group’, ‘we’, ‘us’ and ‘our’ refer to
Woodside Petroleum Ltd and its controlled
entities, as a whole. References to ‘the
company’ refer to Woodside Petroleum Ltd
unless otherwise stated. The text does not
distinguish between the activities of the
parent company and those of its controlled
entities.
References in this report to a ‘year’ is to
the calendar and financial year ended
31 December 2011 unless otherwise
stated. All dollar figures are expressed in
US currency unless otherwise stated.
Woodside is continuing efforts to reduce
its environmental footprint associated
with the production of the Annual Report.
Printed copies of the Annual Report
will only be posted to shareholders
who have elected to receive a printed
copy. The Annual Report is also printed
on an environmentally responsible
paper manufactured under ISO 14001
environmental management standards,
using elemental chlorine free pulps from
sustainable, well managed forests.
Annual Report
Key Statement goes here
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Annual report 2011
Visit us at
www.woodside.com.au
ABOUT THE COVER
The cover depicts a view from the back deck
of the Woodside-operated ‘Nganhurra’ floating
production storage and offloading vessel
(FPSO), situated in offshore Western Australia.
Crude oil is produced from the Enfield oil
reservoir, located in rock strata below the sea,
into storage tanks on the FPSO. The black and
yellow coiled hose in the foreground is used
while on location, to offload crude oil from the
storage tanks on the FPSO to ocean-going
transport vessels.
The ‘Nganhurra’ FPSO name is taken from
a local Indigenous word meaning “we all”,
an expression that also summed up the
unprecedented activity in the area during 2011.
The drill rig on the left of the picture is the
Nan-Hai VI which was drilling a development
well in the Vincent oil field. The FPSO to the
right is the recently acquired Ngujima-Yin
which produces crude from the Vincent oil
field. A non-Woodside operated FPSO can be
seen in the middle distance.
Our Sustainable
Development
Report
For Woodside, sustainability is about
delivering shareholder wealth through
operating our existing business and
developing new business opportunities
in an economically, socially and
environmentally responsible way.
Woodside publishes a Sustainable
Development Report annually which
details our performance across these
key dimensions.
Available on request or from the
company’s website
(www.woodside.com.au).
Woodside Petroleum Ltd | 2011 Annual Report
ii
Our mission
Our strategy
To create and deliver outstanding,
sustained growth in shareholder wealth.
Vision
To be a world-class LNG leader.
To accomplish this, we need to be the
company of choice through speed,
execution skills, commercial acumen,
cost focus and technical capability.
Through our people and our values
we will satisfy our shareholders and
deliver a sustainable future.
Values
Strong and sustainable performance
Care and respect
Integrity and trust
Initiative and accountability
Creativity and enterprise
Working together
We recognise that our business must be
profitable and sustainable. We believe
that living these values makes Woodside
distinctive and is essential to our success.
Woodside’s strategy is to continually
improve our existing base business
of world-class assets, develop our
substantial portfolio of discoveries and
pursue new opportunities which leverage
our capabilities. This strategy is guided
by a strong focus on sustained growth
in shareholder wealth. Sustainable
growth is supported by the enduring
LNG developments that characterise our
portfolio.
Our base business is comprised of the
North West Shelf Project and a fleet of oil
FPSOs. Reliable operation of these existing
assets provides us with the capacity to
grow our business.
We grow our company through exploration
and development of oil and gas volumes.
These developments include the Pluto
LNG Project, which will begin production
in 2012.
The revenues from the Pluto LNG Project
and our base business will provide the
platform to pursue the significant Browse
and Sunrise LNG developments and other
opportunities. Capturing select, value-
add opportunities will leverage our deep
experience in developing and operating
large oil and gas projects.
Welcome to Woodside’s 2011 Annual Report. The report is designed for our
stakeholders, including shareholders, staff, customers and the community to
provide easy to read information on how Woodside performed in 2011.
iii
Woodside Petroleum Ltd | 2011 Annual Report
Our areas of activity
Canary
Islands
Algeria
Libya
Beijing
Republic of Korea
Tokyo
Houston
Gulf of Mexico
Peru
Brazil
Woodside’s activities are primarily located in offshore Western Australia. There are also several locations in international
focus areas (Gulf of Mexico, Peru, Brazil, Republic of Korea). During the year Woodside exited Libya and Algeria (Ohanet)
but still retains an interest in suspended permits in the Canary Islands. Woodside’s head office is located in Perth with
regional offices in Karratha, Broome, Dili and Houston. In addition, representative offices are staffed in Japan, Republic
of Korea and China.
Dili
15
8
14
Broome
11
1
4
9
12
2 3
13
5
6
10
7
9
Karratha
Perth
Our producing assets (operated)
1 Angel platform
2 Goodwyn A platform
3 North Rankin A platform
4 Okha FPSO
5 Karratha Gas Plant
6 Ngujima-Yin FPSO
7 Nganhurra FPSO
8 Northern Endeavour FPSO
9 Pluto LNG Project*
NWS
NWS
NWS
NWS
NWS
Vincent
Enfield
Laminaria-Corallina
Pluto
Our producing assets (non-operated)
10 Stybarrow Venture MV16 FPSO Stybarrow
11 MODEC Venture II FPSO
Mutineer-Exeter
Our projects
12 North Rankin Redevelopment
NWS
13 Greater Western Flank Phase 1 NWS
Our developments
14 Browse
15 Sunrise
Browse
Sunrise
International production and/or exploration
Woodside offices and representative offices
* Production expected 2012.
Woodside Petroleum Ltd | 2011 Annual Report
1
Table of contents
Overview
About Woodside (inside cover)
Mission, vision, values and strategy
Our areas of activity
Performance at a glance
Chairman’s report
Chief Executive Officer’s report
Our people
Our health, safety and security
Woodside Executives
Chief Financial Officer’s report
LNG market report
Reserves statement
Exploration review
Community engagement
Environmental report
Business reviews
North West Shelf
Australia Oil
Pluto LNG timeline
Pluto LNG
Browse
Sunrise
International
Governance
Board of Directors
Corporate governance statement
Directors’ report:
Remuneration report
2011 Financial report
Financial report contents
i
ii
iii
2
4
6
8
9
10
12
14
16
20
22
23
24
26
28
30
32
34
36
38
40
54
55
71
Shareholder information
141
Shareholder statistics
142
Share registry: enquiries
142
Investor Relations: enquiries
142
Business directory
143
Key announcements 2011
143
Events calendar 2012
144
Units, conversion factors
144
Glossary
145
Quick reference guide
2011 summary charts
146
10 year comparative data summary 147
Woodside’s capabilities cover the value
chain from seismic through to sales.
During the exploration phase Woodside
contracts the Western Legend to conduct
a marine seismic survey to identify
prospective geological strata lying beneath
the ocean.
Once seismic and other techniques have
located a prospective target, the Maersk
Discoverer exploration rig seeks to tap into
hydrocarbon-bearing reservoirs deep within
the earth.
Prior to development, community-wide
consultation is undertaken to ensure the
best outcome for all stakeholders.
After working through the approval
processes development can proceed. The
Woodside-operated Nganhurra FPSO is
designed to produce crude oil from rock
strata below the sea. A detachable turret
mooring is located at the front of the vessel.
Should a cyclone threaten operations
the mooring can be unhooked and later
reattached when conditions allow.
Other development options include fixed
platforms like the North Rankin A platform,
located offshore on the North West Shelf,
Western Australia.
Hydrocarbons produced from the North
West Shelf offshore operations are piped
to the Karratha Gas Plant where various
products including pipeline gas, liquefied
natural gas (LNG), liquefied petroleum gas
and condensate are processed.
LNG from the Karratha Gas Plant is shipped
on specialised ocean-going LNG vessels, like
the Woodside Donaldson, to markets around
the world.
We have partnered with Green
Reports TM in an initiative that
ensures our Annual Report
obligations are not impacting
the environment.
2
Woodside Petroleum Ltd | 2011 Annual Report
Performance at a glance
Strong sales revenue underpinned another solid profit result. Woodside is
well positioned to fund its growth portfolio.
With effect from 1 January 2010 Woodside adopted a US dollar functional currency. All figures in this report are in US dollars unless otherwise stated.
Where appropriate comparative financial information prior to 2010 in this Annual Report has been converted from Australian dollars to US dollars using the
relevant historical exchange rate.
Production
Sales revenue
(from continuing operations)
Reported net profit after tax
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Production was 11.1% lower than
prior year. Less than one-third of
the change was due to natural field
decline from Woodside operated
fields with the remainder due to
one-off occurrences.
Underlying net profit after tax*
(excluding non-recurring items)
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14.5%, underpinned by continuing
strong performance from the
NWS Project and higher realised
prices.
Reported net profit after tax was
lower by 4.3% due to increased
exploration expense and mitigation
costs related to Pluto start-up delay.
Operating cash flow
Return on equity
(including non-recurring items)
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Underlying net profit after tax increased
by 16.7% due to stronger sales revenue
from higher commodity prices.
Operating cash flow increased by
6.6% due to increased receipts from
higher commodity prices.
Refer to page 12 for further detail.
Return on equity decreased from
14.2% to 11.9% due to carrying
higher equity on the balance sheet
prior to start up of Pluto production.
* Woodside’s Financial Report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). The
underlying (non-IFRS) profit is unaudited but is derived from audited accounts by removing the impact of non-recurring items from the reported
(IFRS) audited profit. Woodside believes the non-IFRS profit reflects a more meaningful measure of the company’s underlying performance.
Dividends per share
(US cents per share)
Net debt
Safety
Woodside Petroleum Ltd | 2011 Annual Report
3
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Final dividend of 55 cents per
share (cps), fully franked. The
2011 total dividend is a record of
110 cps, up 5 cps from 105 cps.
Woodside is well placed for growth with
conservative debt and gearing levels
ahead of the positive impact on cash flow
from the Pluto LNG Project.
In 2011 health and safety performance
improved significantly with decreases in
both TRCF and HPIF.
Refer to page 9 for further detail.
Additional 2011 summary charts can be found on page 146.
Refer to page 71 for the complete 2011 Financial Report.
Highlights for the year
16.7%
INCREASE IN UNDERLyING
NET PROFIT AFTER TAx TO
$1,655 MILLION
14.5%
INCREASE IN SALES
REVENUE TO $4,802
MILLION
6.6%
INCREASE IN CASH
FLOW FROM OPERATING
ACTIVITIES TO $2,242 MILLION
110
CENTS
FULL-yEAR DIVIDEND
(US CENTS PER SHARE)
8.7%
INCREASE IN NWS
REVENUE, POSTING
A RECORD ANNUAL
REVENUE OF $2,989
MILLION
17.8%
INCREASE IN
CONTINGENT RESOURCES
TO 2,136.5 MMBOE
Results for the year
Indexed ten year performance
2011
2010 % Change
Net profit after tax
Sales revenue
($ million) 1,507 1,575
($ million) 4,802 4,193
Cash flow from operating activities ($ million) 2,242 2,104
Earnings per share
(cents)
190
204
Total recordable case frequency
(TRCF)
4.78 5.98
5 year total shareholder return(1)
(TSR, %)
3.8 13.9
10 year total shareholder return(2)
(TSR, %)
53.7 66.0
Production
Proved reserves
(MMboe)
64.6 72.7
(MMboe) 1,292 1,308
Proved plus Probable reserves
(MMboe) 1,610 1,680
Contingent resources
(MMboe) 2,137 1,814
(1) Source: Bloomberg, TSR over the period divided by the number of years, US$.
(2) Source: Bloomberg, TSR over the period divided by the number of years, US$.
(4.3)
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6.6
(6.9)
(20.1)
(72.7)
(18.7)
(11.1)
(1.2)
(4.2)
17.8
Sep. 2004 NWS Train 4 start up
Apr. 2005 Pluto Gas discovery
Jul. 2007 Pluto FID
Global financial crisis impact
Sep.-Oct. 2008 NWS Train 5, Angel start up
Jun. 2011 Pluto Train 1 delay
European debt issues escalate
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Woodside (WPL)
All Ordinaries Index
Brent oil price
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Over the past 10 years Woodside has outperformed
the All Ordinaries (values are indexed to base 100 from
31 December 2001).
1011
4
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Chairman’s report
A message from Michael Chaney
Global LNG demand is expected to grow at
a rate of about 4% to 5%* each year into the
next decade. A key driver of this growth is the
Asia-Pacific region, which is set to double its
demand for LNG between 2010 and 2025.
With our portfolio of assets and long experience as a safe and reliable
LNG operator, Woodside is well placed to meet growing LNG demand.
Woodside recorded another profitable
year in an increasingly challenging global
environment and is poised to achieve
growth in production and profits.
Operating profit in 2011 was $1,507 million,
a 4.3% decrease in comparison to 2010.
Woodside paid an interim dividend of
55 cents per share and has declared a
final dividend of 55 cents per share, taking
the full-year dividend to a record annual
dividend of 110 cents per share.
The 2011 year was one of significant
change, not only for the Australian energy
industry but also in the global economic
environment.
In Australia four new LNG projects were
sanctioned during the year, two based on
coal seam gas and two on conventional
gas reservoirs. An additional conventional
project development was announced in
January 2012.
As a result, there are currently eight new
projects under construction which will
add 14 LNG trains to Australia’s existing
six trains, five of which are operated by
Woodside on the North West Shelf.
The first of these new projects to reach
completion will be Woodside’s Pluto,
which is expected to deliver its first
cargoes in 2012. While this is later than
originally planned and at a higher cost
than originally budgeted, Pluto will provide
a step-change in the company’s cash
flow and a cost-effective footprint for
expansion.
The major expansion of Australia’s LNG
export industry occurs against a backdrop
of strong and growing LNG demand from
an increasingly gas-hungry world.
The devastating earthquake and tsunami in
March 2011 and the resulting Fukushima
nuclear crisis added to the current supply-
demand imbalance and is likely to have
far-reaching consequences.
Woodside has longstanding relationships
with customers in Japan based on more
than two decades of LNG supply from the
North West Shelf Project. We value these
relationships and worked closely with
affected customers to provide additional
short-term volumes.
Beyond the short-term impact, the disaster
prompted Japan and several other major
economies around the globe to reassess
the role of nuclear power in their primary
energy mix. This has the potential to
result in a shift away from nuclear power,
providing a greater role for natural gas in
the future.
On the economic front, global growth
suffered as a result of a sovereign debt
crisis in Europe and, to a lesser extent,
subdued economic activity in the USA.
It is apparent that the level of government
indebtedness in those regions is likely to
continue to retard growth for a number
of years.
Despite this, global LNG demand is
expected to grow at a rate of about 4%
to 5% each year into the next decade*.
A key driver of this growth is the Asia-
Pacific region, which is set to double
its demand for LNG between 2010 and
2025*. Continued strong economic growth
in China will play a significant role in this
increase, in addition to the emergence of
new LNG markets, including in Thailand,
Indonesia and Malaysia.
While Australia is poised to play a
leading role in meeting this demand,
it is not without great challenges. The
unprecedented demand for construction
labour and services is creating cost and
schedule pressures which run the risk of
threatening additional projects’ viability.
* Source: WoodMackenzie, Global LNG Tool (November 2011).
FACTS Global Energy (November 2011).
Woodside Petroleum Ltd | 2011 Annual Report
5
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This highlights the need for improved
workforce flexibility and mobility, for
increased skills development and
increased skilled migration.
While our preference is for contractors
to source Australian labour on our
projects, the reality is that temporary
skilled migration will continue to be
required to fill the supply/demand gap.
Beyond labour challenges, the passage of
the Federal Government’s carbon tax in
November 2011 will add additional costs
to Australian LNG not faced by most of our
global competitors at this time.
Woodside was built on the success of
the North West Shelf Project, which
continues to deliver outstanding revenue
for our company and our joint venturers.
The continued reliability of the project
over the past 27 years demonstrates
Woodside’s LNG operational expertise
and our ongoing efforts to maximise
value from existing infrastructure.
The company’s oil producing assets
continue to make a significant contribution
to our revenue and profits; further
discoveries during 2011 will enable this
to continue, in spite of field declines.
Woodside’s portfolio of LNG growth
prospects, including Pluto expansion,
Browse and Sunrise, remains attractive.
The Browse LNG Development took a
significant step forward in 2011 with the
signing of a Native Title Agreement to
enable the establishment of the Browse
LNG Precinct near James Price Point,
about 60km north of Broome.
The agreement between Woodside,
the State of Western Australia and the
Goolarabooloo and Jabbir Jabbir Peoples
has the potential to bring about meaningful
and positive change to the economic and
social circumstances of Indigenous people
in the Kimberley.
During the year we announced that a
final investment decision on the project
would be delayed until 2013. This
illustrates the magnitude of the task
involved in the evaluation of a project
of such scale. Shareholders can be
assured that the evaluation is being
conducted in a thorough, disciplined
manner and with long-term wealth
creation as the primary driver.
Progress on the Sunrise LNG
Development had stalled in the early
part of 2011, but recent meetings
with government leaders have been
encouraging. The parties are aligned in
their desire to progress the development,
which has the potential to deliver
substantial value for Timor-Leste and
Australia.
To date, the company’s exploration
program has not discovered sufficient gas
to supply additional LNG trains at Pluto.
Further exploration will endeavour to fill
that gap and the company also continues
to investigate the possibility of supply from
other resource owners.
While LNG remains Woodside’s main
focus, we continue to review investment
proposals outside our present sphere of
operations. Such reviews are driven by a
desire to enhance shareholder value.
During the year, Woodside CEO and
Managing Director, Don Voelte, retired
after seven years with the company.
On behalf of the Board I thank him for
his significant contribution. Don’s can-
do approach and boundless enthusiasm
brought about a positive change in
Woodside’s culture and allowed the
company to capitalise on opportunities
which should prove transformative.
Following an extensive recruitment
process, the Board appointed Peter
Coleman as Mr Voelte’s successor. With
27 years of industry experience with the
ExxonMobil Group in Australia, Asia,
Africa and the United States, Peter brings
a wealth of knowledge to Woodside and
seamlessly transitioned into the role in
June 2011.
The year also saw some changes to
Woodside’s Board of Directors. The
number of Shell-nominated directors
on the Board was reduced from three
to two after Shell divested a third of its
shareholding in Woodside in late 2010.
Consequently, Tan Sri Dato’ Megat
Zaharuddin (Din Megat) and Ian Robertson
retired as Board members and we
welcomed Dr Christopher Haynes to
the Board as a non-executive director.
We thank Din and Ian for their diligent
contributions.
On behalf of the company, I thank
Peter, the executive team and all
Woodside employees for their hard
work and dedication. I am confident
that the strength of the team will enable
Woodside to continue to build on its
base business and pursue growth
opportunities in 2012 and beyond.
Michael Chaney AO
Chairman
6
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Chief Executive Officer’s report
A message from Peter Coleman
Ongoing development of the
North West Shelf and first
production from Pluto in 2012
ensures continued expansion
of our profitable base business,
supporting future growth
opportunities.
2011 Key performance highlights
Future objectives
Æ 20% improvement in Total Recordable Case
Æ Continuous improvement in key health and safety
Frequency and a 34% decrease in High Potential
Incident Frequency.
indicators.
Æ Ongoing safe and reliable production from our North
Æ Delivered sales revenue of $4.8 billion, an increase
West Shelf Project and Australia Oil assets.
of 15% on 2010.
Æ Achieved North West Shelf development milestones,
including first production from Okha FPSO, the launch
of the North Rankin B jacket and a final investment
decision (FID) on Greater Western Flank Phase 1.
Æ Advanced offshore start up and onshore
commissioning milestones delivered for the
foundation Pluto LNG Project.
Æ Purchased Ngujima-Yin FPSO to allow continuing
improvements and target extended life for the
Vincent oil field.
Æ Signed Native Title Agreement for land access for
the proposed Browse LNG Precinct.
Æ Browse front-end engineering and design nearing
completion.
Æ Safe and reliable start up of the Pluto LNG Project,
and first deliveries of LNG to foundation customers.
Æ Progress options for Pluto expansion.
Æ Progress towards FID on the Browse LNG
Development, including evaluation of tender bid
submissions for the upstream and downstream
components.
Æ Build momentum on the Sunrise LNG Development
through continued engagement with the Timor-
Leste Government and other stakeholders.
Æ Maintain an active exploration program to support
the existing business and provide growth options.
Æ Assess, and if appropriate, action new value-add
opportunities.
Investment growth
Total Shareholder Return (TSR)
performance against peers
Total Shareholder Return (TSR)
performance against peers
6
LNG Growth
Exploration
Foundation business
)
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0
2007
2008
2009
2010
2011
Over the past five years Woodside has made
significant investment for the future, particularly
in the area of LNG growth. That investment
will benefit the company for years to come,
especially with the start up of Pluto in 2012.
Five year annualised
Ten year annualised
65
80
)
(
%
n
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(
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The five year TSR reflects the consolidation of
Woodside’s previous growth performance against
our peer group which includes: Anadarko, Apache,
BG, CNOOC, Marathon, Murphy, Pioneer, Repsol,
Santos and Talisman.
Source: Bloomberg, TSR over the period divided by the
number of years, US$.
The excellent ten year TSR reflects the long-
term sustainability of our business relative
to our peer group which includes: Anadarko,
Apache, BG, Marathon, Murphy, Pioneer,
Repsol, Santos and Talisman.
Source: Bloomberg, TSR over the period divided by the
number of years, US$.
A message from Peter Coleman
Woodside Petroleum Ltd | 2011 Annual Report
7
O
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In 2011 I was privileged to become the
Managing Director and CEO of Woodside,
a company with an attractive portfolio of
premium assets, proven capabilities and a
great team of people.
During the year we demonstrated our
ability to continue maximising value from
our world-class foundation business. At
the same time we progressed our LNG
growth options to capitalise on the robust
energy demand in our region.
First LNG from Pluto in 2012 will create
a step-change in cash flow from our
base business, translating into new
opportunities to drive shareholder value.
Health and safety improving
We performed well in health and
safety and sustainable development
in 2011. Success in these areas is
crucial for our aspiration to be a partner
of choice for industry, government
and communities. Success in 2011
included a 20% improvement in Total
Recordable Case Frequency and a 34%
decrease in High Potential Incident
Frequency. We also received external
recognition for our partnerships in the
areas of environment and community.
Further details are outlined in our 2011
Sustainable Development Report.
Production exceeds guidance
Total production from our base business in
2011 was 64.6 MMboe, which exceeded
our mid-year guidance of 62-64 MMboe.
Although 11.1% lower than last year’s
production, less than one-third of this
change was due to natural field decline
from Woodside operated fields with the
remainder due to divestments, contract
expiry, project redevelopment shut-ins,
higher maintenance activity and higher
than normal cyclone activity. These
declines were partially offset by increased
reliability from North West Shelf (NWS)
and Australia Oil assets.
Strong operational performance
Woodside enters 2012 in strong financial
shape. We benefited from higher
commodity prices in 2011 to post a
14.5% increase in sales revenue and an
underlying net profit of $1.66 billion.
Our operating cash flow increased
6.6% year-on-year in 2011, and current
holdings of $2.2 billion in cash and
undrawn facilities have us well placed
to fund growth in 2012 and beyond.
A strong and reliable base business
2011 was a tremendous year for our base
business. We enjoyed record revenue of
nearly $3 billion from the NWS Project and
achieved further improvements in reliability
from the Karratha Gas Plant.
We achieved key milestones in 2011 to
sustain production from the world-class
NWS resource through to 2020 and
beyond. The NWS Oil Redevelopment
Project was completed, with first
production from the Okha FPSO vessel
in September. Our North Rankin
Redevelopment Project progressed well,
with the North Rankin B substructure
successfully launched and positioned
alongside the existing North Rankin A
platform. In December the NWS Project
participants approved development of the
first phase of the Greater Western Flank
Project, further extending the life of this
iconic resources development.
We continued to maximise value from our
Australia Oil business, selling cargoes at
attractive prices on the spot market while
mitigating natural field decline through
infill drilling and near-field exploration.
Discovered volumes at Laverda and
Cimatti may provide new opportunities to
expand our oil business.
Our base business production will
receive a significant boost in 2012, when
production starts from the foundation Pluto
LNG Project. At full capacity this will add
more than 100,000 barrels of oil equivalent
a day to our operated production. During
2011 we revised our cost and schedule
for Pluto, a disappointing but necessary
decision to ensure the safe and reliable
start up of this valuable project.
Growing our portfolio
Our profitable base business not only
delivers solid returns to our shareholders,
it also provides the means to grow our
business by funding our expansion projects
and developing the premium operational
capabilities that make us a partner of
choice.
We continued to progress the business
case for Pluto LNG expansion through an
active exploration program and discussions
with other resource owners, ensuring the
soundest possible basis for investment in
additional LNG trains at the Pluto LNG Park.
We made good progress on front-end
engineering and design for our Browse
LNG Development in 2011, and issued
invitations to tender for the upstream
and downstream components of the
development.
A Native Title Agreement for land access
for the Browse LNG Precinct was signed
with the Goolarabooloo and Jabirr Jabirr
Peoples and the Western Australian
Government. Woodside is very proud
of this agreement, which includes a
significant package of benefits involving
employment, education, training and
business development initiatives, some of
which are subject to FID.
Late in 2011 we announced our intention
to seek amendments to the Browse Basin
retention leases, including an extension
into 1H 2013 to allow the consideration
of an FID. This is to ensure a rigorous and
credible approach to developing a quality
resource which promises long-term value
for our shareholders.
We regained momentum on our Sunrise
LNG Development during 2011, holding
constructive discussions with the Timor-
Leste Government.
In November 2011 Woodside was
awarded seven new permits offshore
Western Australia, in the Rowley
sub-basin, the Lambert Shelf and the
Exmouth sub-basin. We have committed
to acquiring seismic and drilling eight
exploration wells in these areas over the
next three years, providing new prospects
for growing our Australian portfolio.
Maintaining competitive advantage,
delivering long-term value
Since joining Woodside I have gained
a first-hand appreciation of the unique
capabilities which have evolved within
our company over decades of operational
experience in oil and gas, including 22
years of LNG production.
These capabilities, particularly those in
areas with high barriers to entry, afford
Woodside some important competitive
advantages which in turn provide
opportunities to grow our business and
build new relationships.
Outlook
Our challenge now is to continue evolving
these capabilities in order to maintain our
competitive advantage. In early 2012,
we will continue a thorough review of
organisational effectiveness and capability
to sharpen our decision making, conduct
a health check of our strategy and confirm
our strategic direction.
Beyond our existing LNG growth options,
Woodside will examine new opportunities
in 2012 to ensure we develop a balanced
portfolio, which provides maximum upside
exposure to growing energy demand.
Building on Woodside’s unique
competencies, our focus is on premium
assets in areas where we hold a
competitive advantage. This will ensure
that future growth supports Woodside’s
mission to deliver outstanding, sustained
growth in shareholder wealth.
Peter Coleman
Managing Director and
Chief Executive Officer
8
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Our people
Our ability to attract and retain an engaged, highly skilled and
high-performing workforce continues to create sustainable
shareholder value.
2011 Key performance highlights
Future objectives
Æ On track to achieve our Indigenous
employment Reconciliation Action
Plan (RAP)* commitments with a
45% increase in directly employed
Indigenous staff.
Æ Continue to deliver on Indigenous
employment RAP commitments,
including tripling our 2009
Indigenous workforce by the
end of 2012.
Æ Top quartile employee survey
Æ Implement organisational
response rate of 82%, highlighting
high employee engagement as well
as clear improvement focus areas.
effectiveness plan, drawing on the
results of the employee survey.
Æ Deliver Gender Diversity Plan.
Æ Successful roll out of our
Developing and Leading Diverse
Teams program.
Our people
The Woodside workforce grew to 3,856
in 2011, a 5.6% increase from 2010.
Woodside’s 93.2% retention rate
was assisted by a focus on employee
development, the continuing operation
of the Employee Equity Plan and the
introduction of the new Woodside Equity
Plan enabling employees to share in
the future growth of the company. The
voluntary turnover rate, whilst having
increased to 6.8%, remains healthy in
an environment of increasing demand
for talent. Focus will continue on staff
retention and developing our vital
workforce.
In 2011, Woodside conducted its third
employee survey with a response rate of
82%, our highest yet. Initial findings from
the survey confirmed a highly engaged
workforce who provided clear messages
on areas for further improvement,
particularly organisational effectiveness,
which will be addressed during 2012.
Building capability
Woodside continued to invest in future
capability through apprentice, trainee and
*RAP commitments are further discussed on page 22 of this report.
graduate programs. A total of 104 trainees
and apprentices were participating in
training in 2011 while 53 new employees
entered the graduate program in 2011,
bringing the total number of graduate
program participants across the three year
program to 142.
Woodside’s strong focus on employee
development will be further aided by
implementation of WeLearn, a company
wide learning management system
initiated in 2011.
Advancing diversity
Woodside continued the roll out of the
Developing and Leading Diverse Teams
program in 2011 with 275 leaders having
now completed the program since its
inception in September 2010.
Women represented 26.8% of Woodside’s
workforce in 2011 and of the 531 new
employees hired in 2011, 35% were female.
Woodside will be implementing Gender
Diversity Objectives in 2012 as part of a
strategy to focus on female attraction and
retention.
Woodside continued to meet all of its RAP
employment commitments; with a total
of 84 Indigenous employees at the end of
2011 and Indigenous employment (training)
pathways participant numbers also on
target.
Number of employees and
voluntary turnover
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Indigenous workforce
Outlook
Contractors construction
Indigenous employment pathways
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11
The expectation that the labour market
will remain competitive reinforces our
continuing focus on attraction and
retention. In 2012 activities will include
the implementation of our organisational
effectiveness plan as well as delivering
our gender diversity plan and Indigenous
employment commitments.
Further information on ‘Our People’ is
available on pages 32 to 43 of Woodside’s
2011 Sustainable Development Report.
Woodside has a growing workforce with a
sustainable turnover rate.
Trainees are successfully transitioning from
traineeships to direct employment.
Ian Masson
Vice President
Human Resources
Woodside Petroleum Ltd | 2011 Annual Report
9
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Our health, safety and security
Reinforcing positive safety behaviours and implementing our revised
operating standards is contributing to an improvement in overall health,
safety and security performance.
2011 Key performance highlights
Future objectives
Total recordable cases
Æ Achieved a 20% improvement in
Total Recordable Case Frequency
(TRCF) and a 34% reduction in
High Potential Incident Frequency
(HPIF).
Æ Increased focus on contractor
engagement and improved
process safety.
Æ Improved quality of incident
investigations through increased
involvement of senior managers in
the investigation process.
Æ Established a Crisis Management
Governance Framework,
enhancing our ability to respond
quickly, decisively and effectively
to crisis situations.
Our approach
The health and safety of our people
is paramount in all our decisions – our
aspiration is ‘no-one gets hurt, no
incidents’.
Health and safety improved in 2011
Our overall health and safety performance
improved significantly in 2011.
The frequency of safety incidents, as
measured by TRCF, has declined to 4.78
compared to 5.98 in 2010 (adjusted to
include illnesses), representing a 20%
improvement from 2010.
Improvements in the identification and
reporting of occupational illnesses have
led to more accurate and reliable reporting.
There were 18 reported occupational
illnesses in 2011 compared with a mean
over the last four years of 26, reflecting a
significant improvement.
There was an overall reduction in HPIF and
loss of containment (LOC) events. There
were three recordable** LOC events in
2011, compared with nine recordable
Æ Continue improvement in all health
and safety performance indicators.
Æ Full compliance with our
revised operating standards and
procedures.
Æ Conduct a company-wide safety
culture survey and use the results
to guide action plans.
Æ Improve resilience to internal and
external fraud and corruption risks
by implementing a company-wide
control plan.
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4.82
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The TRCF improved and the number of safety
incidents continued to decrease in 2011, with
comparable exposure hours worked to 2010.
* Previously reported TRCF statistics did not include
illnesses. All TRCF figures in this annual report have been
adjusted to include illnesses.
LOC events in 2010. The number of High
Potential Incidents dropped from 54 in
2010 to 35 in 2011. The HPIF decreased
from 1.82 in 2010 to 1.20 in 2011.
Protecting people and facilities
Forum. We recommitted to ensuring
our offshore projects, production and
drilling teams implement the Common
Safety Training Program in 2012, to
ensure employees have the same
core foundation of safety skills.
We continued to work with State, Federal
and international governments’ security
agencies to protect our people, facilities,
construction sites and the workshops and
yards of our contractors and suppliers.
We continued to work with industry to
address offshore training requirements
through the Safe Supervisor Competency
Program, which will be phased in during
2012.
This included conducting four company-
wide crisis management training exercises
in partnership with contractors, industry
and government agencies to test our
capability and integrated response.
We also introduced a new fraud and
corruption control capability to improve
resilience.
Working with contractors and
industry
We were a leading participant in
APPEA’s Stand Together for Safety
event and CEO Safety Leadership
Outlook
In 2012 we will continue to focus on
implementing our revised operating
standards and procedures, reinforcing the
positive behaviours of Our Safety Culture
framework, engaging with our contractors,
improving process safety and learning from
incidents.
Further information on health and safety is
available on pages 34 to 38 of Woodside’s
2011 Sustainable Development Report.
**Includes major and significant LOC events as defined by the Reporting of Injuries Diseases
and Dangerous Occurrences Regulations (RIDDOR) hydrocarbon release classification system.
Tina Thomas
Senior Vice President
Corporate
11
10
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Woodside Executives
Woodside Executives
Meet the senior executive team that is working together to create and
deliver sustained growth for your company.
Philip Meier
Senior Vice President
Projects
BSc Structural Engineering, MBA
Rob Cole
Executive Vice President
Commercial & General
Counsel
BSc LLB
Lucio Della Martina
Executive Vice President
Australia Business
BSc Chemical Engineering, MBA
Tina Thomas
Senior Vice President
Corporate
Lawrie Tremaine
Executive Vice President
and Chief Financial Officer
BBus, FCPA
Peter Coleman
Managing Director and CEO
BEng (Civil and Computing), MBA
Woodside Petroleum Ltd | 2011 Annual Report
11
Greg Roder
Executive Vice President
Corporate Strategy & Planning
BSc (Hons), PhD, MBL
Feisal Ahmed
Jon Ozturgut
Executive Vice President
Development
BSc Mechanical Engineering
Senior Vice President
International Business
BSc Mechanical Engineering
Mike Hession
Senior Vice President
Browse
BSc, MBA, PhD
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Dr Peter Moore
Eve Howell
Vince Santostefano
Richard van Lent
Executive Vice President
Exploration
BSc (Hons 1), PhD, MBA
Executive Vice President
Health, Safety & Security
BSc Geology and
Mathematics, MBA
(Retired December 2011)
Executive Vice President
Production
BEng (Civil)
Acting Executive Vice President
North West Shelf
MSc Civil Engineering
Success at Woodside is driven by a dynamic, capable and dedicated
team, focused on value delivery.
12
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Chief Financial Officer’s report
Woodside delivered another good operating performance in 2011,
providing the foundation for a strong balance sheet and the next
phase of growth.
2011 Key performance highlights
Future objectives
Æ Operating cash flow up 6.6%.
Æ Continued financial discipline.
Æ Investment expenditure of $3.8 billion.
Æ Effective deployment of cash flows
Æ Enhanced access to capital markets.
Æ Gearing maintained below 30% as completion
of major capital project approaches.
Æ Credit ratings maintained.
from the Pluto LNG Project.
Æ Focus on cost reduction in both
development projects and operations.
Underlying NPAT versus reported NPAT #
Unit lifting costs
Realised prices
($/boe)
US$ million
Underlying NPAT (excluding
non-recurring items)
Non-recurring items after tax
Pluto delay mitigation cost
Gain on adoption of US
functional currency
Neptune impairment
Deferred tax asset
write downs
Gain on sale of Otway
Gain on sale of Liberia/
Sierra Leone
Reported NPAT
2011
2010
1,655
1,418
Oil (A$/boe)
Gas (A$/boe)
11.05
13.76
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(60)
149
89
8.53
7.77
3.93
3.35
3.37
4.02
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LNG
Condensate
LPG
Oil
1,507
1,575
07
08
09
10
11
Note: Realised prices exclude Ohanet.
Average realised price ($/boe)
76.60 59.14
2011
2010
26.96 22.01
67.46 57.60
109.24 77.72
109.19 86.71
113.80 80.90
2011 reported NPAT was negatively impacted
by non-recurring factors.
Lifting costs per boe were higher in 2011 due
to lower production volumes, higher planned
maintenance and project outages.
Realised prices for all products were materially
higher in 2011.
Drivers of Woodside’s 2011 reported net profit after tax (NPAT)
1,153
(544)
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*
*
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1
1
0
2
T
A
P
N
Woodside’s 2011 reported NPAT was lower than in 2010 due to non-recurring items including
Pluto delay mitigation costs.
* Price/ FX includes oil price, foreign exchange rates and hedging.
** Petroleum Resource Rent Tax.
Strong financial performance
Woodside delivered another strong
financial performance in 2011, reporting
a profit of $1,507 million, or $1,655 million
on an underlying basis#. Despite lower
production in 2011, Woodside recorded
its second highest annual revenue of
$4,802 million. The reported profit was
adversely impacted by higher than normal
exploration expenses and mitigation costs
related to the Pluto start-up delay.
The Board of Directors have declared a
fully franked final dividend of 55 cents
per share (cps). Together with the interim
dividend of 55 cps this results in a record
full-year dividend of 110 cps.
We invested a substantial $3.8 billion
in our business in 2011. This comprises
$3.3 billion in capital expenditure and
$0.5 billion in exploration expenditure.
# Woodside’s Financial Report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS). The underlying (non-IFRS) profit is unaudited
but is derived from audited accounts by removing the impact of non-recurring items from the reported (IFRS) audited profit. Woodside believes the non-IFRS profit reflects a more
meaningful measure of the company’s underlying performance.
Woodside Petroleum Ltd | 2011 Annual Report
13
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Strong commodity prices increase
revenues
Lifting costs rise due to planned
maintenance (Australian dollars)*
Despite the turmoil in European markets,
commodity prices improved during 2011.
The average realised sales price increased
$17/boe. LNG prices remained high
throughout 2011, reflecting the strong oil
price. Woodside has continued to achieve
premiums to Brent for its heavy, sweet
crudes from the Greater Enfield Area oil
assets. These premiums are due to strong
regional demand for diesel.
Profit drivers (2011 versus 2010)
Revenue from sale of goods –
increased by $609 million. Increase
largely due to higher realised prices
in 2011, partially offset by favourable
pricing settlements in 2010 and lower
sales volumes in 2011.
Cost of sales – decreased by
$12 million. Royalty and excise
increased $47 million with higher sales
prices while production costs increased
$75 million largely due to unfavourable
foreign exchange and higher subsea
maintenance. Insurance, inventory and
shipping costs decreased $11 million.
Depreciation and amortisation decreased
$123 million due to lower production
and positive reserves revisions.
Other income – decreased by
$116 million. This was largely
attributable to the gain on sale of
Otway in 2010.
Other expenses – increased by
$549 million. Pluto mitigation and pre-
startup costs ($304 million), write-off
of prior year capitalised exploration and
evaluation ($168 million), higher current
year exploration expense ($90 million),
partially offset by other expenses
($13 million).
Net finance income – decreased by
$44 million as a result of lower cash
balances.
Income tax – increased by $128 million
due to lower tax expense in 2010
arising from deferred tax movements on
adoption of US dollar functional currency
and assets sales.
Petroleum resource rent tax (PRRT)
– decreased by $148 million. Higher
exploration expenditure, augmentation
on undeducted expenditure and
favourable foreign exchange impacts
upon conversion to US dollar functional
currency in 2010 were partially offset
by higher revenue.
Drivers of Woodside’s 2011 reported NPAT
are graphically shown on page 12.
Total oil lifting costs increased marginally
by A$1 million to A$231 million. On a
unit basis, oil lifting costs increased from
A$11.05/bbl to A$13.76/bbl due to lower
production volumes following planned
project outages and maintenance, cyclone
impacts and natural field decline.
Total gas lifting costs increased by
A$18 million to A$185 million in 2011.
On a unit basis, gas lifting costs
increased from A$3.37/bbl to A$4.02/bbl
(excluding Ohanet) due to higher offshore
maintenance, onshore operating costs and
lower volumes.
* Lifting costs have been reported in Australian dollars as
the majority of expenditure is incurred in this currency.
See glossary on page 144 for the lifting cost definition.
Effective capital management
2011 was another successful year
from a funding perspective. In May 2011,
US$700 million of 10-year corporate bonds
with a coupon of 4.6% p.a. were issued
into the United States 144A bond market.
In December 2011, Woodside secured
additional short term funding totalling
US$400 million at highly competitive
margins. In addition, a number of 364-day
and bilateral debt facilities were renewed
during 2011.
Woodside enters 2012 with $2.2 billion
in cash and undrawn debt facilities.
Continued strong cash flows from our
foundation business, together with use
of the Dividend Reinvestment Plan,
have strengthened our balance sheet in
preparation for the next growth phase.
As we near the end of the journey on
the Pluto development expenditure
phase, our credit ratings remain in a
strong position (S&P: BBB+; Moody’s:
Baa1). Our established presence in global
capital markets, our reputation for LNG
development and operating excellence,
together with cash flows from existing
assets and from the Pluto LNG Project give
us every confidence of being able to fund
our continuing growth.
Pluto to contribute in 2012
Completion of this vast project is a great
achievement. Production volumes and
cash flow from the Pluto LNG Project will
commence in 2012, providing the next
valuable layer of funding to Woodside.
Woodside has previously disclosed that
the revised Pluto project cost included an
estimate for arrangements with customers
affected by delay in Pluto LNG cargo
delivery. Some of this additional cost was
realised in 2011 and has been charged
to the income statement. An estimate of
future costs has also been provided for in
the 2011 income statement.
Active portfolio management
In December 2011, Woodside and its joint
venture participant, Mitsui, purchased the
Ngujima-Yin FPSO from Maersk FPSOs
Australia. This acquisition facilitates plans
to extend the field life at Vincent and
allow continuing reliability and availability
improvements.
Woodside divested its Gulf of Mexico
shelf properties for cash consideration of
US$27.5 million, effective 1 May 2011.
The sale included the assumption of
future restoration liabilities associated with
these properties. On 27 October 2011
the Ohanet Risk Sharing Contract expired
having supplied a steady revenue stream
over the past eight years, in accordance
with the contract terms.
Woodside will continue to review its asset
portfolio, assessing the potential for early
value realisation particularly of non-core
assets, while also considering new value-
add investment opportunities.
Sucessfully managing legislative
developments
The legislation extending the Petroleum
Resource Rent Tax (PRRT) to the North
West Shelf Project has been introduced
into parliament but has not yet passed
into law. Our expectation is that, following
the passing of legislation, the North West
Shelf Project will transition to the PRRT
regime on terms that will result in a tax
position that is no more onerous than the
present.
The passage of the Clean Energy
legislation during November 2011 will apply
a price to carbon emissions in Australia
from 1 July 2012. Woodside expects to
have obligations under this legislation
related to carbon emissions arising
from projects in which it has an interest.
Government regulations are expected to
be published by July 2012. Analysis of
the new regulations will help quantify our
obligations and the corresponding financial
impact to the Company.
Woodside’s carbon price assumptions,
which are used for investment decisions
and planning purposes, are based on prices
set by government, likely scenarios of
government requirements and associated
fiscal impacts. These assumptions are
reviewed and updated on a regular basis.
Outlook
We are ideally positioned to fund our
growth plans, while continuing to deliver
strong returns to shareholders. With
$2.2 billion in cash and undrawn debt
facilities, Woodside enters 2012 in a
strong position.
Lawrie Tremaine
Executive Vice President
Chief Financial Officer
14
Woodside Petroleum Ltd | 2011 Annual Report
Overview
LNG market report
Woodside Donaldson LNG vessel arrives at the NWS Project Karratha Gas Plant to receive its LNG cargo for transport to overseas markets.
Our premier gas
assets and strong
relationships with key
industry participants
mean Woodside is
well placed to take
advantage of robust
long-term demand
trends.
Outlook: long-term LNG demand
growth is underpinned by strong
fundamental drivers
The long-term outlook for global LNG
demand growth continues to be strong,
with industry analysts expecting an
average of 4% to 5%* annual growth
out to 2025. This trend is underpinned
by high rates of growth in gas demand
in non-OECD Asian countries. In this
region sustained economic growth is
coupled with the potential for a greater
role for gas in the primary energy mix. In
many countries growth in gas demand is
supported by policies aimed at reducing
carbon intensity and dependence on
coal, as well as efforts to improve air
quality. The positive outlook for gas has
been reinforced by nuclear power issues
LNG demand by country*
90
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2015
2020
2025
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Asia- Pacific countries drive global LNG demand.
* Source: WoodMackenzie, Global LNG Tool (November 2011). FACTS Global Energy (November 2011).
following the Great East Japan Earthquake
in March 2011. Nuclear power generation
concerns have triggered energy reviews
across the region and beyond.
There are a growing number of
LNG-importing countries*
In the medium-term, the global LNG
market will continue to be dominated
by the traditional importing countries of
Japan, Republic of Korea and Taiwan.
It is expected that these core markets
combined will continue to make up
more than half of global demand until
around 2015, when the role of developing
markets China and India will become more
pronounced. China and India’s share of
the global LNG market has the potential to
grow from under 10% in 2011 to around
25% by 2025.
In addition to existing markets in the Asia
Pacific region, a number of new LNG
buying nations are emerging, including
traditional exporters such as Indonesia
and Malaysia. The combined demand for
LNG from Indonesia, Malaysia, Singapore,
Thailand, Vietnam, the Philippines and
other new markets in the region is
estimated to grow to more than 30 million
tonnes per annum by 2025. Outside the
region, recent rapid growth in new LNG
markets in South America and the Middle
East has consolidated the view that these
emerging LNG markets could become
significant in the long-term.
Woodside Petroleum Ltd | 2011 Annual Report
15
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to sell up to 19 cargoes over the period
up to 2014. These arrangements have
scheduling flexibility which will be beneficial
during Pluto ramp-up. In addition, Pluto
has sold a number of cargoes under
diversion arrangements to other third
parties. Following start up, Pluto will
investigate options for the sale of as
yet uncommitted LNG, with significant
interest having already been expressed by
a range of customers.
Woodside’s LNG trading and
shipping grew in 2011
During 2011 Woodside entered into and
implemented arrangements for the sale
and purchase of 24 cargoes, the majority
of which were sold to customers under
the Pluto framework. Woodside expects to
grow its LNG trading capability over 2012.
2011 saw all three Pluto ships enter the
Woodside controlled fleet. The vessels
have been used for cargo procurement,
LNG trading, third party sub-charters and
the delivery of Pluto’s commissioning LNG
cargo. Short-term shipping rates increased
significantly over 2011 and Pluto shipping
availability has been used profitably.
Browse marketing is advancing to
support an FID
Browse is an important conventional
Australian LNG project characterised
by close proximity to key Asian markets
and premium heating quality, which is
attractive to many Asian LNG buyers.
Browse is also able to offer an integrated
project structure with a proven LNG
operator. The window for commencement
of supply coincides with the decline in
supplies from several legacy LNG projects
in the region, and the potential retirement
of nuclear power plants in countries such
as in Taiwan and Japan.
Woodside marketing is well advanced in
seeking a range of customers for its share
of Browse LNG. Customers recognise the
importance of Browse LNG as they look
to develop their long-term portfolio supply
and discussions will continue in 2012 to
support FID.
projects currently under construction enter
the market from 2015 onwards. During
2011 there has been significant upward
pressure on short-term LNG prices, in
particular spot prices for delivery into
North Asia. One consequence of these
trends has been an increased role for LNG
diversions from the Atlantic basin. The
market tightening and Atlantic diversions
have also put increased pressure on
short-term shipping charter rates.
The market is expected to move back
towards a more balanced position as new
projects come online from 2015. However,
there are risks of delay in the start up of
these projects, which would extend this
period of tight supply.
Regional long-term LNG pricing
remains strongly linked to oil
Woodside closely monitors global LNG
pricing trends, and remains in regular
contact with the market through its
involvement in discussions with both
new and existing customers. During
2011 two price-out-of-range (POR)
negotiations were successfully concluded
for sale and purchase agreements
(SPAs) between the North West Shelf
and Japanese customers, and in 2012
Woodside will be involved in several
price reviews and a POR negotiation.
Pricing trends observed during
discussions in 2011 confirm short-term
tightness in the market and also the
need for new supply in the longer term,
supporting the view that the link between
LNG and oil prices will stay strong.
For new projects there has also been
consolidation of the trend for parallel
equity transactions to accompany sales to
foundation customers.
LNG from North West Shelf and
Pluto is well regarded and highly
sought after
In 2011 the North West Shelf shipped
255 cargoes, of which 229 were under
16 active term SPAs. Marketing of new
Greater Western Flank volumes during
2011 confirmed that the NWS continues
to have some of the most sought after
supply in the region because of its
exceptional track record for reliable supply
and delivery.
In February 2011, Pluto entered into
arrangements with Petronas of Malaysia
Reinhardt Matisons
President Marketing
New supply is needed over the
longer term
In order to meet current long-term
demand projections and offset declining
production from existing projects, industry
analysts suggest that the market requires
the equivalent of a major three to four train
project to take a final investment decision
each year from 2012 over the next decade.
However, many of the projects under
consideration around the world face major
challenges. Not all will proceed as planned,
and some may be significantly delayed.
In 2011 the industry paid considerable
attention to proposals to export LNG from
the US and Canada, based primarily on
shale gas. While the likelihood of North
American supply has increased over the
last 12 to 18 months, the outlook for large-
scale development remains uncertain.
What is certain is that Australian projects
will play a crucial role in meeting long-term
demand. Australia is set to become the
world’s largest LNG exporting nation,
with around 81 million tonnes per annum
of capacity currently operating or under
construction, and significant potential
for expansions and additional greenfield
projects.
In 2011 tightening of the market was
accelerated by events in Japan
In 2011 the global market tightened quickly.
After the surge in supply over the past
few years it had been anticipated that the
market would begin to tighten towards
the middle of the decade. This has been
dramatically accelerated by incremental
demand from Japan.
The earthquake in north east Japan on
11 March was the single largest event to
impact the global LNG market in 2011.
In addition to direct damage to energy
infrastructure, a subsequent backlash
against nuclear power is having a major
impact on electricity supply throughout
Japan. At the end of 2011 just under
14% of Japan’s nuclear power generation
capacity was operating, and there is
ongoing uncertainty over the restart plans
for many units in 2012. Much of this
power supply shortfall will continue to be
met by gas fired plants.
The LNG market, particularly in the Asia-
Pacific region, is now relatively under-
supplied, and will remain so until new
16
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Reserves statement
Contingent resources increased 322.7 MMboe primarily due to positive
revisions in the Greater Browse fields and exploration and appraisal
success in the Greater Exmouth and Greater Pluto regions.
2011 Key performance highlights
Æ The three year organic Proved
reserves replacement ratio
remains above 100%.
Æ Proved reserves life is 20 years.
Æ Net contingent resources in the
Greater Browse region increased
251.5 MMboe.
Æ Net contingent resources in
the Greater Exmouth region
increased 21.8 MMboe.
Æ Net contingent resources in the
Greater Pluto region increased
66.8 MMboe.
Woodside’s reserves(1) overview
Proved(2)
Proved plus Probable(3)
Contingent resources(4)
MMboe
MMboe
MMboe
2011
1,292.4
1,610.2
2,136.5
2010
1,308.5
1,680.1
1,813.8
Change%
(1.2)
(4.2)
17.8
Key metrics
2011 reserves replacement ratio(5)
Organic 2011 reserves replacement ratio(6)
Three year reserves replacement ratio
Three year organic reserves replacement ratio
Reserves life
Annual production(7)
Net acquisitions and divestments
Proved
75
76
84
102
20
63.7
(0.6)
Proved plus
Probable
(10)
(6)
57
88
25
63.7
(2.3)
%
%
%
%
Years
MMboe
MMboe
Proved reserves
Proved reserves annual reconciliation by product*
(Woodside share)
8
2
3
,
1
6
9
2
,
1
8
0
3
,
1
2
9
2
,
1
7
2
2
,
1
)
e
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M
(
s
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v
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e
s
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R
07
08
09
10
11
Proved reserves have remained steady over
the past five years.
Proved plus Probable reserves
8
8
6
,
1
3
0
7
,
1
1
5
6
,
1
0
8
6
,
1
0
1
6
,
1
)
e
o
b
M
M
(
s
e
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r
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s
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R
Dry gas(8) Condensate(9)
Oil
Total
Bcf(10)
MMbbl(11)
MMbbl
MMboe(12)
6,450
Reserves at 31 December 2010
Revision of previous estimates(13)
Extensions and discoveries(14)
Acquisitions and divestments
Annual production(7)
Reserves at 31 December 2011
*small differences are due to rounding to first decimal place.
6,406
(218)
105
72
(3)
122.3
2.6
1.1
0.0
(8.7)
117.2
54.6
13.7
0.0
(0.1)
1,308.5
34.6
13.7
(0.6)
(16.8)
(63.7)
51.4
1,292.4
Best estimate contingent resources annual reconciliation by product
Contingent resources at 31 December 2010
Transfer to reserves
Revision of previous estimates
Extensions and discoveries
Acquisitions and divestments
Contingent resources at 31 December 2011
Dry gas
Condensate
Oil
Total
Bcf
8,298
(28)
1,248
315
(44)
MMbbl
246.9
MMbbl
MMboe
111.2
1,813.8
(0.7)
38.1
5.7
(1.4)
(2.7)
(6.8)
31.0
(2.0)
(8.3)
250.2
92.0
(11.2)
9,788
288.6
130.7
2,136.5
07
08
09
10
11
Proved plus Probable reserves have remained
steady over the past five years.
Refer to page 18 for Notes to the Reserves Statement.
Woodside Petroleum Ltd | 2011 Annual Report
17
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Once cooled to minus 161° Celsius, LNG is placed in specially designed storage tanks prior to shipping, such as pictured above at the Karratha Gas Plant.
Proved reserves summary by region
Dry gas
Condensate
Oil
Total
Project
Greater Pluto(15)
North West Shelf(16)
Greater Exmouth(17)
United States of America(18)
Other Australia(19)
Reserves
MMbbl
MMbbl
MMboe
Bcf
3,787
2,615
0
3
0
56.0
61.2
0.0
0.0
0.0
6,406
117.2
0.0
17.0
27.6
3.7
3.1
51.4
720.4
537.1
27.6
4.3
3.1
1,292.4
Proved plus Probable reserves summary by region
Project
Greater Pluto
North West Shelf
Greater Exmouth
United States of America
Other Australia
Reserves
Dry gas
Condensate
Oil
Total
Bcf
5,002
2,761
0
6
0
MMbbl
MMbbl
MMboe
72.6
66.1
0.0
0.0
0.0
0.0
30.7
63.0
7.5
7.2
950.2
581.2
63.0
8.5
7.2
7,769
138.7
108.5
1,610.2
Best estimate contingent resources summary by region
Project
Greater Browse(20)
Greater Sunrise(21)
Greater Pluto
North West Shelf
Greater Exmouth
United States of America
Other Australia
Other International (22)
Total
Dry gas
Condensate
Oil
Total
Bcf
7,110
1,717
660
121
0
2
66
112
MMbbl
MMbbl
MMboe
191.8
75.6
10.6
3.7
0.5
0.0
0.5
6.0
0.0
0.0
0.0
17.3
97.3
2.6
8.7
4.8
1,439.2
376.7
126.4
42.2
97.8
3.0
20.7
30.5
9,788
288.6
130.7
2,136.5
The Reserves Statement has been compiled by Mr Ian F. Sylvester, Woodside’s
Chief Reservoir Engineer who is a full-time employee of the company. Mr Sylvester’s
qualifications include a Master of Engineering (Petroleum Engineering) from Imperial
College, University of London, England, and more than 20 years of relevant experience.
Mr Sylvester has consented in writing to the inclusion of this information in this report.
Governance and Assurance
Woodside, as an Australian company listed
on the Australian Securities Exchange,
reports its petroleum resource estimates
using definitions and guidelines consistent
with the 2007 Society of Petroleum
Engineers (SPE)/World Petroleum Council
(WPC)/American Association of Petroleum
Geologists (AAPG)/Society of Petroleum
Evaluation Engineers (SPEE) Petroleum
Resources Management System (PRMS).
In accordance with the PRMS guidelines,
Woodside uses crude oil price forecasts
and, where applicable, individual project
production sales contract terms or other
financial products for the purpose of
reserves estimation.
Unless otherwise stated, all petroleum
resource estimates are quoted as net
Woodside share at standard oilfield
conditions of 14.696 psi (101.325 kPa) and
60 degrees Fahrenheit (15.56 deg Celsius).
Woodside has several processes to
provide assurance for reserves reporting,
including the Woodside Reserves Policy,
the Petroleum Resources Management
Operating Standard, staff training and
minimum competency levels and external
reserves audits. On average, more than
95% of Woodside’s Proved Reserves have
been externally verified by independent
review over the past four years.
Refer to page 18 for Notes to the Reserves Statement.
Feisal Ahmed
Executive Vice President
Development
18
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Notes to the reserves statement
1
2
3
4
5
6
7
8
‘Reserves’ are estimated quantities of petroleum which
have been demonstrated to be producible from known
accumulations in which the company has a material
interest from a given date forward, at commercial rates,
under presently anticipated production methods, operating
conditions, prices and costs. Woodside reports reserves
net of the upstream (offshore) gas required for production,
processing and transportation to a reference point defined
as the inlet to the downstream (onshore) processing facility.
Downstream fuel and flare represents 12.3% of total Proved
reserves, and 12.1% of total Proved plus Probable reserves.
‘Proved reserves’ are those reserves which analysis of
geological and engineering data suggests, to a high degree
of certainty (90% confidence), are recoverable. There is
relatively little risk associated with these reserves.
‘Probable reserves’ are those reserves which analysis
of geological and engineering data suggests are more
likely than not to be recoverable. There is at least a 50%
probability that the quantities actually recovered will exceed
the sum of estimated Proved plus Probable reserves.
‘Contingent resources’ are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable
from known accumulations, but the applied project(s)
are not yet considered mature enough for commercial
development due to one or more contingencies. Contingent
resources may include, for example, projects for which
there are currently no viable markets, or where commercial
recovery is dependent on technology under development,
or where evaluation of the accumulation is insufficient to
clearly assess commerciality. Woodside reports contingent
resources net of the upstream (offshore) fuel and non-
hydrocarbons not present in sales products. Contingent
resource estimates may not always mature to reserves
and do not necessarily represent future reserves bookings.
All contingent resource volumes are reported at the ‘Best
Estimate’ (P50) confidence level.
The ‘reserves replacement ratio’ is the reserves change
during the year, before the deduction of production, divided
by production during the year. The ‘three-year reserves
replacement ratio’ is the reserves change over three years,
before the deduction of production for that period, divided
by production during the same period.
The ‘organic annual reserves replacement ratio’ is the
reserves change during the year, before the deduction of
production and adjustment for acquisition and divestments,
divided by production during the year.
‘Annual production’ is the volume of dry gas, condensate
and oil (see Notes 8 and 9) produced during the year
and converted to ’MMboe’ (see Note 12) for the specific
purpose of reserves reconciliation and the calculation of
reserves replacement ratios. The ‘Reserves Statement’
annual production differs from production volumes reported
in the company’s annual and quarterly reports due to
differences in the sales product definitions and the ‘MMboe’
conversion factors applied.
’Dry gas’ is defined as ‘C4 minus’ petroleum components
including non-hydrocarbons. These volumes include LPG
(propane and butane) resources. Dry gas reserves include
‘C4 minus’ hydrocarbon components and non-hydrocarbon
volumes, which are present in sales product.
9
10
11
12
13
14
’Condensate’ is defined as ‘C5 plus’ petroleum components
for the NWS Venture and as sales product for the Ohanet
Project and the Gulf of Mexico assets.
’Bcf’ means Billions (109 ) of cubic feet of gas at standard
oilfield conditions of 14.696 psi (101.325 kPa) and 60
degrees Fahrenheit (15.56 degrees Celsius).
‘MMbbl’ means millions (106) of barrels of oil and
condensate at standard oilfield conditions of 14.696 psi
(101.325 kPa) and 60 degrees Fahrenheit (15.56 degrees
Celsius).
‘MMboe’ means millions (106) of barrels of oil equivalent.
Consistent with international practice, dry gas volumes
are converted to oil equivalent volumes via a constant
conversion factor, which for Woodside is 5.7 Bcf of dry
gas per 1 MMboe. Volumes of oil and condensate are
converted from MMbbl to MMboe on a 1:1 ratio.
‘Revision of previous estimates’ are changes in previous
estimates of reserves or contingent resources, either up or
down, resulting from new information normally obtained
from development drilling and production history or resulting
from a change in economic factors.
‘Extensions and discoveries’ represents additions to
reserves or contingent resources which result from
increased areal extensions of previously discovered fields,
discovery of reserves in new fields or new reservoirs in
old fields.
15 The ‘Greater Pluto’ region comprises the Pluto Inner, Central
and Claudius Hubs.
16 The ‘North West Shelf’ (NWS) includes all oil and gas fields
within the North West Shelf Project Area. As the NWS
consists of a portfolio of fields, probabilistic aggregation is
more appropriate than arithmetic summation as inter-field
dependencies reflecting different reservoir characteristics
between fields are incorporated. Probabilistic aggregation
of individual fields in the NWS accounts for 11% of
NWS Proved dry gas reserves and 15% of NWS Proved
condensate reserves.
17 The ‘Greater Exmouth’ region comprises the Vincent,
Enfield, Cimatti, Stybarrow-Eskdale,Laverda and Opel fields.
18 Woodside’s resources in the United States of America
include the Neptune and Power Play fields. GOM Shelf
fields were divested on 1 May 2011.
19
20
21
22
‘Other Australia’ includes the Mutineer-Exeter, Laminaria-
Corallina and Argus fields.
‘Greater Browse’ comprises the Brecknock, Calliance and
Torosa fields. Net resources are subject to future unitisation
outcomes.
‘Greater Sunrise’ comprises the Sunrise and Troubadour
fields.
‘Other International’ includes fields in Brazil. Following
contract expiry, the Ohanet project in Algeria was successfully
transferred to a 100% Sonatrach operation on 27 October,
2011. Woodside signed a sale and purchase agreement for
the sale of its interests in Libya on 11 January 2011.
(On right) Karratha Gas Plant’s major maintenance shutdown in September involved more than 1,300
workers. Maintaining equipment at the Karratha Gas Plant is essential for long-term reliable production
from the significant volumes of NWS reserves.
Woodside Petroleum Ltd | 2011 Annual Report
19
20
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Exploration review
In 2011, we strengthened our position in Australia with successful exploration
drilling in support of our Australian business units, and continued to grow our
portfolio to prepare for future exploration campaigns.
2011 Key performance highlights
Future objectives
Æ Drilled nine exploration wells
in 2011, six encountering
hydrocarbons.
Æ Acquired or purchased over
12,400 km2 of 3D seismic data.
Æ Strengthened portfolio with
seven new Australian permits.
Æ In 2012 drill six wells in Australia,
one in the Republic of Korea and
participate in drilling in the Gulf of
Mexico.
Æ Acquire and purchase more than
12,000 km2 of new 3D seismic.
Æ Continue to strengthen our
exploration portfolio.
2011 Exploration expenditure
by country
2011 Exploration expenditure
by category
8%
5%
Australia
USA
International
excluding USA
87%
11%
13%
76%
Drilling
Seismic
Studies & other
Consistent with our strategy, the majority
of our exploration expenditure occurred in
Australia.
The majority of exploration spend was focused
on drilling in order to support our foundation
business and growth strategies.
Woodside has significant acreage in prospective exploration areas
Exploration spend by year
(US$M)
0
3
6
6
0
5
5
8
3
7
1
3
3
9
2
)
M
$
S
U
(
07
08
09
10
11
Recent high exploration activity levels have been
focused on delivering our growth strategy.
Three year running average
exploration finding costs
SEC Standard
Excluding Browse Evaluation Costs
12.67
)
e
o
b
/
$
S
U
(
t
s
o
c
g
n
d
n
F
i
i
5.71
6.12
3.60
3.35
3.02
2.62
4.52
4.76
9.29
07
08
09
10
11
Although affected by Browse evaluation costs,
three year average finding costs are increasing.
A
L
S
P
AC/P 48
Argus
Torosa
Brecknock
Calliance
WA-396-P
WA-432-P
WA-429-P
WA-449-P
WA-397-P
WA-447-P
WA-466-P
WA-462-P
WA-464-P
WA-415-P
James Price Point
Derby
WA-416-P
WA-417-P
Broome
WA-347-P
WA-389-P
WA-465-P
WA-467-P
WA-348-P
WA-404-P
WA-434-P
NWS
Pluto
Port Hedland
Karratha
WA-461-P
WA-463-P
Enfield
Exmouth
Woodside permits
| Woodside fields
Gas
Oil
0
100
kilometres
200
Horizontal Datum: GDA 1994
Strong Australian focus
Within Australia, Woodside drilled wells
to support Pluto expansion; the Browse
business unit; our foundation NWS
business; and our producing oil assets.
During 2011, nine exploration wells were
drilled in total, 67% of which encountered
hydrocarbons. Internationally, the Gulf of
Mexico team was focused on maturing the
portfolio to deliver promising candidates for
the upcoming exploration campaign, while
in the Republic of Korea the Jujak prospect
was fully matured for drilling.
Expanding permit portfolio
Seven new exploration permits were
added to the Australian exploration
portfolio during 2011. These additions,
combined with three permit
relinquishments, take the total number
of Woodside exploration licences to
33, of which all but one are operated by
Woodside. The adjacent maps for the
Browse and Carnarvon Basins show
the locations of our acreage holdings.
Within Australia we remain committed to
supporting and optimising value through
our existing and planned infrastructure,
and ensuring that we remain exposed to
opportunities to create growth via new
infrastructure hubs. Internationally, we will
continue to look for new opportunities to
help balance the portfolio.
Encouraging drilling results
Six wells successfully encountered
hydrocarbons from the nine exploration
wells that were drilled during 2011.
WA-404-P, Greater Pluto, Central hub
Woodside 100% (operator)
Two exploration wells were drilled in
WA-404-P during 2011. Martin-1 was
finalised during early 2011 with the well
encountering gas within the objective
Triassic Mungaroo Formation. Kelt-1 failed
to encounter hydrocarbons.
WA-36-R, Laverda Retention lease
Woodside 60% (operator)
Opel-1 was drilled to test a prospect
adjacent to the Laverda Oil Field. Opel-1
successfully encountered gas and oil
within the primary objective Macedon
sands.
WA-34-L, Pluto Production Licence
Woodside 90% (operator)
Xeres-1 was drilled to test a fault block
adjacent to the Eris gas accumulation
within the Pluto Production Licence.
Xeres-1 successfully encountered gas
within the primary objective Mungaroo
Formation.
WA-397-P, Browse Basin
Woodside 50% (operator)
Omar-1 was drilled to evaluate the
gas bearing potential of the Plover
Formation. Encouraging gas shows were
encountered, however reservoir quality
was poor and the well was classified as a
dry hole.
WA-3-L, North West Shelf Venture
Woodside 15.78% (operator)
Seraph-1 successfully appraised the Angel
Gas Field, and drilling then continued to
evaluate deeper exploration potential.
Seraph encountered gas within the
primary exploration objective and two
secondary objectives. Reservoir quality
was poorer than predicted and as a result,
commerciality for the discovery is yet to
be determined.
WA-5-L, North West Shelf Venture
Woodside 15.78% (operator)
Tidepole East-1 was drilled to evaluate the
hydrocarbon bearing potential of a faulted
terrace adjacent to the Tidepole Gas
Field. Tidepole East-1 encountered gas,
with discovered volumes expected to be
produced via the Greater Western Flank
Project at a future date.
WA-434-P, Greater Pluto, Claudius hub
Woodside 100% (operator)
Refer to map on page 20 for location of
acreage and exploration wells.
Two wells were drilled in WA-434-P.
Cadwallon-1 encountered gas in the
primary objective; however the discovery
is sub-commercial. Genseric-1 failed to
intersect hydrocarbons.
Woodside Petroleum Ltd | 2011 Annual Report
21
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Australian outlook
In 2012, Woodside plans to drill six wells in
Australia, of which, four are in support of
LNG growth, and two are oil prospects in
the Greater Exmouth Area.
A pause from drilling will then occur to
allow time for further portfolio maturation.
In addition, Woodside expects to acquire
in excess of 12,000km2 of new 3D seismic
data in Australia, from a combination of
new proprietary acquisition and multi-
client purchases. This data will be used
to explore recently acquired acreage and
mature existing prospects.
International outlook
Woodside also retains opportunity for
growth outside Australia with exposure to
exploration and development in selected
international areas. In the deepwater
Gulf of Mexico, the Exploration Division
expects to participate in drilling in 2012.
In the Republic of Korea, Woodside holds
a 50% interest in offshore block 8/6-1 N,
and plans to drill the Jujak-1 exploration
well in 2012. In Peru, Woodside has a
20%, non-operated interest in onshore
block 108, which is currently under force
majeure conditions. Once the force
majeure conditions cease, Woodside
plans to acquire 800km of 2D seismic.
Further discussion of Woodside’s
international activities is contained on
pages 36 and 37 of this report.
Peter Moore
Executive Vice President
Exploration
22
Woodside Petroleum Ltd | 2011 Annual Report
Overview
Community engagement
Our social investment strategy is focused on supporting health, the
environment and the communities in which we operate.
2011 Key performance highlights
Æ We contributed A$7.7 million
worth of social investment to the
communities in which we operate.
Æ Our staff volunteered 3,484 hours,
valued at A$0.6 million.
Future objectives
Æ Announce our third and final tier
one social investment partner in
the Creative Energy category.
Æ Increase our social investment
contribution to meet a target of
0.5% of Profit Before Tax (PBT)
by 2015.
Woodside’s social investment
by category 2011
45%
37%
18%
Living energy - personal health and wellbeing
Natural energy - environmental health and wellbeing
Creative energy - community health and wellbeing
Woodside’s social investment strategy is a
three tiered funding model focused on health
and well being.
Woodside’s social investment by
geographic region 2011
15%
10%
7%
17%
51%
WA
Pilbara
Kimberley
National
International
NB: WA includes social investment programs which were
implemented in two or more WA locations.
Woodside’s social investment program focuses
on supporting the communities in which we
operate.
Assessing the social impact of our
business and planning for the future
Social impact considerations are included
in our project planning processes. Our
operating standards ensure stakeholder
and social impact management plans are
developed and implemented.
supporting community organisations, our
employees donated A$0.2 million of their
own money.
Our employees also participated
significantly in our corporate volunteering
program, contributing 3,484 volunteering
hours, valued at A$0.6 million.
We progressed two key social impact
assessments (SIA) in 2011:
Pluto: As construction comes to completion
an independent review is underway to
determine whether anticipated impacts
actually occurred and to assess the success
of our impact mitigation strategy. The
review involves interviews with internal
and external stakeholders. The findings
will inform business planning and decision
making for any future expansion.
Browse: The SIA for the proposed Browse
LNG Development in the Kimberley region
of Western Australia will be completed
in 2012. The SIA has been undertaken in
conjunction with the State Government’s
program of social, environmental, native title
and Indigenous heritage studies. Input from
a broad range of stakeholders has been
included. We have also spoken directly with
Broome and Dampier Peninsula residents.
This local input is helping us to develop
plans to manage potential social impacts.
Reconciliation Action Plan released
Woodside released the 2011-2015
Reconciliation Action Plan (RAP), which will
underpin our efforts over the next five years
to advance Indigenous reconciliation within
our company and the wider community.
Every commitment in the RAP, grouped
under the headings of Respect,
Relationships and Opportunities, is defined
by a set of measurable goals to be achieved
between 2011 and 2015. Woodside
will provide a public report each year to
communicate the achievements against
each commitment within the RAP.
Investing in community health and
well-being
Our focus for social investment is to
contribute to health and well-being at a
personal, community and environmental
level. Our three-tiered funding structure
supports community-based organisations
at a regional, state and national level.
This year our voluntary social investment
was A$7.7 million. Our total social
investment, inclusive of management
costs, was A$13.7 million. In addition to
our company’s financial contribution to
In 2011 we announced a second national
tier one partnership. By working closely with
Conservation Volunteers Australia a holistic
approach to national marine eco-system
conservation and environmental citizenship
was developed, the Coastal Guardians
program.
Our partnership program with Ngala
‘Nurturing the Pilbara’ won a global
Excellence Award for Social Responsibility
at the 20th World Petroleum Congress in
Doha, Qatar. The program began in Karratha
in 2008, it provides proactive parenting
education, resources and support to families
living and working in remote and rural
communities.
Our social contribution internationally
focuses primarily on Timor-Leste.
Specifically, we and our Sunrise joint
venture participants support projects like
the Be’e Ba Moris ‘Water for Life’ program
through World Vision. In 2011, we and
our Sunrise joint venture participants
contributed $US500,000 to fund this
initiative which has significantly improved
sanitary conditions in the Baucau district.
The approach to delivering cultural heritage
projects in the Pilbara has been extended
to the Kimberley and South West regions
of Western Australia in 2012. Cornerstone
projects include a repatriation program
delivered through the Kimberley Aboriginal
Law and Culture Centre and cultural
leadership development programs facilitated
by the South West Aboriginal Land and
Sea Council.
Outlook
In 2012 the start up of our Pluto LNG Project
will provide us with further opportunity to
contribute to community development and
capacity building in the Pilbara region of
Western Australia. We remain focused on
completing our social impact assessment
for the Browse LNG Development and
outlining a strategy in which we can deliver
positive outcomes to the Kimberley region
of Western Australia.
Tina Thomas
Senior Vice President
Corporate
Woodside Petroleum Ltd | 2011 Annual Report
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Environmental report
Our long term business success depends on our ability to understand our
current and future operating environments, the potential impact of our activities
and ability to implement appropriate management and mitigation strategies.
2011 Key performance highlights
Flare gas and intensity
Environmental incidents*
Æ Flared gas emissions intensity
reduced by 14%.
Æ The newly commissioned
Okha FPSO is up to 30% less
emissions intensive than the
FPSO it replaced.
Future objectives
Æ Maintain low level of environment
incidents.
Æ Continue to mitigate, manage and
monitor potential environmental
impacts from our operating
activities.
Our Approach
Our activities are conducted in accordance
with an environmental management
framework that forms part of the broader
Woodside Management System.
Woodside adopted the following strategic
imperatives in 2011, as part of our
Environment Strategy:
Maximise resource efficiency
Design to minimise life cycle costs
Maintain environmental compliance and
integrity
Control environmental impacts
Facilitate effective approvals; and
Work with stakeholders.
Excellent environmental
performance
Woodside did not receive any
environmental fines or penalties related
to environmental incidents in 2011. We
reported six incidents to regulators in
accordance with our legal requirements.
Of these, five resulted in no measurable
environmental impact and one related to a
release of diesel from a line at the Karratha
Gas Plant which was contained to site.
During 2011, our flared gas intensity
decreased to 8.0 tonnes of gas flared
per tonne of hydrocarbon produced,
partly as a result of improved production
)
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Total gas flared for operated ventures
Woodside portion of flaring
Intensity flared gas (tonne)/
hydrocarbon production (kilotonne)
During 2011 our flared gas emissions
intensity decreased to 8.0, partly as a result
of improved production reliability across our
operated facilities.
reliability across our operated facilities.
A total of 221,528 tonnes of gas was
flared. Flare reduction initiatives included
the recommissioning of the re-injection
compressor on the Ngujima-Yin FPSO
which had been damaged by fire in 2009,
allowing excess gas to be injected into the
reservoir rather than being flared.
In 2011, the greenhouse gas emissions
from Woodside-operated facilities
decreased by about 450,000 tonnes CO2e
to 7.9 million tonnes CO2e. Woodside’s
share of these emissions is approximately
1.9 million tonnes. The decrease arose
from operational factors including planned
maintenance events of the Karratha Gas
Plant and retirement of the Cossack
Pioneer FPSO.
Funding award-winning research
Woodside continues to fund robust
scientific research with key partners
to understand our current and future
operating environments. This research
is used to underpin our decision making
processes, and allow us to manage
and minimise potential environmental
impacts. Since 1993 Woodside has
invested, on behalf of the Browse joint
venture participants, over A$80 million
to understand the marine and terrestrial
environments of the Kimberley region.
This Scott Reef Environmental Research
Program undertaken with the Australian
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* Environmental incidents reported to regulators.
Woodside reported six incidents in 2011 in
accordance with our legal requirements.
Institute of Marine Science and the Western
Australian Museum is one of the longest
running and most comprehensive studies
of an offshore coral reef ecosystem ever
undertaken. The findings of this research
program are highlighted in the Scott Reef
Status Report which was released in 2011.
This research and knowledge has
underpinned our development decisions
and the recently released draft Browse
Upstream Environmental Impact
Statement.
Our collaborative approach to
environmental understanding and
management is demonstrated by our
long-term partnership with the Western
Australian Museum. The research,
which has been undertaken in the
waters of the Pilbara and Kimberley,
has identified 10,700 species to date,
including discovering 495 new species.
In recognition of this partnership, the
Exploring the Marine Biodiversity of
Northern WA project won the 2011
Western Australian Premier’s Award for
Excellence in Public Sector Management.
Further information on our community
engagement, social investment and
environmental performance is available on
pages 18 to 31 and 44 to 53 respectively
in Woodside’s 2011 Sustainable
Development Report.
Tina Thomas
Senior Vice President
Corporate
2021846
24
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
North West Shelf
North Rankin B topsides on the heavy lift ‘Heerema’ barge, commences the journey from the Republic of Korea construction yards to the North West Shelf.
2011 Key performance highlights
Future objectives
Æ Record North West Shelf (NWS)
revenue of almost $3 billion.
Æ Achieved best recorded safety
performance at Karratha Gas
Plant.
Æ Commission North Rankin
Redevelopment Project and
achieve start up in 2013.
Æ Delivery of 3500th LNG cargo.
Æ Continue to progress
Æ Record 98% LNG production
refurbishment program.
The North West Shelf
Project continues to be
a strong and proven
world-class performer
for Woodside with
excellence in production
and development.
reliability.
Æ Achieved final investment
decision for the $2.5 billion
Greater Western Flank (GWF)
Phase 1 Project.
NWS Project
Interest
NWS Venture
Domestic Gas JV
16.67%
50.00%*
Incremental Pipeline JV
16.67%
China LNG JV
CWLH (crude oil)
12.50%
33.33%
Operator Woodside
Facilities
North Rankin A platform
Goodwyn A platform
Angel platform
Okha FPSO
Location
Water
depth
Products
Karratha Gas Plant
~130 km north-west of Karratha,
WA
80 - 130 metres
LNG, pipeline gas,
condensate, crude oil and LPG
First
production
1984 (pipeline gas)
*During 2011 Woodside’s average share of
pipeline gas production was approximately
40%. Woodside’s exact share of domestic
gas production depends on the quantities
and aggregate rate of production.
NWS contribution to Woodside's
total production (MMboe)
NWS key metrics (Woodside share)
Sales revenue
($ million)
2,989
2,749
2011
2010
Net gas
production
Net liquids
production
Proved plus
Probable
reserves
(MMboe)
37.8
38.5
(MMbbl)
8.9
13.3
(MMboe)
581
649
Acreage
(km2)
Gross
3,941
Net
651
NWS gas and condensate
NWS oil
Woodside other
%
71
1
28
During 2011, NWS made a significant
contribution of 46.7 MMboe to Woodside’s
annual production of 64.6 MMboe.
Solid 2011 production performance
The NWS Project continues to underpin
Woodside’s financial performance,
delivering record revenue of $2,989 million
contributing about 62% of Woodside’s
revenue during the year.
In 2011 Woodside’s share of production
from the NWS Project was 46.7 MMboe.
Progress on the Reliability Improvement
Plan has continued with overall LNG
production reliability in 2011 at 98.0%,
compared to 94.3% in 2010 and ahead of
our 2013 target of 97.5% reliability.
Safety remained a priority with the
Karratha Gas Plant (KGP) recording its
best safety performance on record with
over 120 days without a Total Reportable
Case (TRC).
The annual May and September
shutdowns were completed successfully.
The annual shutdown work programs at
the KGP included routine and integrity
maintenance on LNG Train 1 and routine
major maintenance on LNG Train 5.
Further modifications on LNG Train 5 main
cryogenic heat exchanger have resulted in
increased production capacity.
A significant refurbishment program
commenced at the KGP in 2011
which is designed to ensure safe and
reliable production for years to come.
The refurbishment of Stabiliser 1
was completed and online external
corrosion inspection and repair works
on LNG Train 2 commenced.
These achievements resulted in Woodside
delivering 255 cargoes of LNG in 2011, of
which 26 were sold on the spot market.
Woodside’s share of total LNG sales
volumes for 2011 is 2.51 million tonnes.
Pipeline gas production continued to
meet customer demand in 2011 with
100% reliable delivery of 85,338 TJ
or 14.0 MMboe (Woodside share) to
customers in Western Australia.
Extending production with an active
development program
In recent years the NWS Project has
committed more than A$9 billion in
reserves and infrastructure development,
including the NWS Oil Redevelopment
Project, North Rankin Redevelopment
Project and more recently the GWF Phase
1 Project.
NWS Oil Redevelopment Project
achieved first oil
The A$1.8 billion (A$600 million Woodside
share) NWS Oil Redevelopment Project
included replacement of critical subsea
infrastructure and conversion of the Okha
to a FPSO. The Okha replaced the Cossack
Pioneer FPSO.
Production commenced in September
2011 into the Okha FPSO facility, with
three offtakes completed in the year. The
Okha FPSO is expected to produce around
30,000 barrels per day gross (Woodside
share 10,000 barrels of oil equivalent a day)
once steady state operations are achieved.
North Rankin Redevelopment Project
progressing to schedule
The Project will recover low pressure gas
from the North Rankin and Perseus gas
fields and is expected to cost approximately
A$5 billion (A$840 million Woodside
share).
At year end, overall progress was
87% complete and the project remains on
schedule and budget for completion
in 2013.
In September the North Rankin B (NRB)
jacket was launched and positioned 100
metres from the existing North Rankin A
(NRA) platform. In Indonesia, the NRA-
NRB bridges were completed, and in the
Republic of Korea fabrication of the NRB
23,000 tonne topsides were completed
for sail-down to the North West Shelf in
early 2012.
GWF Phase 1 Project approved
The Greater Western Flank (GWF)
area consists of 16 fields located to the
south-west of the Goodwyn A platform
and is estimated to hold up to 3 Tcf of
recoverable gas and up to 100 MMbbl of
recoverable condensate (100% project).
In December 2011 the NWS Project
participants approved development of
the first phase of the GWF Project off the
north west coast of Australia. The total
investment for the GWF Phase 1 Project
is about A$2.5 billion (A$425 million
Woodside share) with project start up
expected early 2016.
Woodside Petroleum Ltd | 2011 Annual Report
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The GWF Phase 1 Project will develop
the Goodwyn GH and Tidepole fields
with a subsea tie-back to the existing
Goodwyn A platform. Additional phases of
GWF development are anticipated. GWF
represents the next major development for
the NWS Project.
Outlook
Maintaining safe and reliable production
has been Woodside’s focus for the past
27 years, and remains key to sustaining our
exceptional return on invested capital.
Major refurbishment will continue at the
KGP with refurbishment of the Trunkline
Onshore Terminal and LNG Train 2 during
shutdowns in 2012. The NWS Project will
aim to maximise production and return on
invested capital within these constraints.
The NWS Project will continue to
develop reserves and maintain supply
deliverability from the NWS assets
through the execution of the North
Rankin Redevelopment and GWF
Phase 1 projects. We will also progress
development of subsequent phases of
GWF as well as the Persephone and
Lambert Deep fields on the eastern flank
of the NWS acreage.
The North Rankin Redevelopment is a
major undertaking on a global scale and
one of the most complex developments
Woodside has undertaken. A number
of shutdowns will be required in 2012 to
integrate the NRB platform into the NWS
system.
The execution of these significant projects,
in addition to NWS Project production
operations amounting to 600,000 barrels
of oil equivalent a day, demonstrates
Woodside’s capability as a leading operator
and is paving the way for the NWS Project
to deliver top quartile performance for
decades to come.
Richard van Lent
Acting Executive Vice President
North West Shelf
26
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
Australia Oil
The Nganhurra FPSO, in offshore Western Australia, gathers, stores and offloads crude oil that has been produced from Enfield oil field.
Australia Oil (non-NWS) key metrics
(Woodside share)
2011
2010
Sales revenue
($ million) 1,677
1,272
Net gas
production
Net liquids
production
Proved plus
Probable
reserves
(MMboe)
0.0
0.9
(MMbbl)
15.0
15.5
(MMboe)
70
80
Acreage
(km2)
4,123
2,166
Gross
Net
In 2011 we actively
pursued exploration
and appraisal activities,
advanced key growth
opportunities and
largely offset natural
production decline.
2011 Key performance highlights
Æ Production above target.
Æ Laverda exploration and appraisal
success.
Æ Continued successful infill drilling.
Æ Pursued growth opportunities.
Future objectives
Æ Maintain steady oil production.
Æ Enhance asset reliability.
Æ Progress robust Cimatti
development.
Æ Build on successful Laverda
appraisal.
Australia Oil (non-NWS) contribution to
Woodside’s total production (MMboe)
Vincent oil field
Interest
Operator
Facilities
Location
WA-28-L
Woodside
Ngujima-Yin FPSO
45 km off the
North West Cape, WA
350-400 metres
Crude oil
Water depth
Products
First production August 2008
60%
A third infill well at Vincent, VNB-H7, will
be completed and brought online in 1H
2012.
We jointly purchased the Ngujima-Yin
FPSO with our co-venturer Mitsui E&P
Australia Pty Ltd in December 2011. This
important acquisition will facilitate plans
to extend the field life at Vincent and
allow continued reliability and availability
improvements from the facility. We plan
to assume full operatorship of the FPSO
in 2012.
While 2011 was a challenging year for
Vincent, the Ngujima-Yin achieved a
significant milestone in May 2011 with oil
production exceeding 20 million barrels.
Production levels in 2012 will be similar
to recent years with allowances for
further significant maintenance activities
throughout the year.
Vincent has produced 27.0 MMbbl of
oil since start up in 2008, with 2011
production of 8.5 MMbbl (5.1 MMboe
Woodside share).
In September 2011 we significantly
boosted Vincent’s overall production
rate with the start up of two infill wells
(VNB-H5 and VNB-H6). This resulted in the
Ngujima-Yin floating production storage
and offloading (FPSO) vessel achieving
its highest ever production rate of almost
53,000 barrels a day.
The improved design of the new Vincent
wells lifted productivity indices beyond
expectation to nearly three times that
achieved from previous drilling phases.
Enfield
Laminaria-Corrallina
Stybarrow
Mutineer–Exeter
Vincent
Woodside other
%
6
3
6
>1
8
77
During 2011, Australia (non-NWS) oil fields
contributed approximately 23% of Woodside’s
annual production.
Enfield oil field
Interest
Operator
Facilities
WA-28-L
Woodside
Nganhurra FPSO
~40 km off the
North West Cape, WA
Water depth
400 - 500 metres
Crude oil
Products
First production July 2006
Location
Since start up in 2006, Enfield has
produced 64.3 MMbbl of oil with 2011
production of 6.9 MMbbl (4.1 MMboe
Woodside share).
In 2011 Enfield production continued to
exceed expectation with excellent facility
uptime, well optimisation and reservoir
performance. At the end of 2011, Enfield’s
Nganhurra FPSO was producing around
20,000 barrels a day.
The Cimatti oil accumulation, located to
the north-west of Enfield, was discovered
in November 2010. Throughout 2011, we
progressed development studies, selecting
a development concept for Cimatti based
on a tie- back to the Nganhurra FPSO.
We expect to finalise the preferred design
concept for Cimatti in a basis of design
in 2012, then proceed with front-end
engineering and design in preparation for a
final investment decision targeted for early
2013.
In 2011 we completed the fifth 4D seismic
survey at Enfield. We are continuing to
evaluate survey data and identify future
infill well drilling opportunities in the field
for execution in the 2014 time frame.
The Enfield Development currently
includes eight oil-production wells, eight
water-injection wells and two gas-injection
wells tied back to the Nganhurra FPSO.
Stybarrow oil field
Interest
Operator
Facilities
Location
WA-32-L
BHP Billiton
Stybarrow Venture FPSO
~50 km off the
North West Cape, WA
825 metres
Crude oil
Water depth
Products
First production November 2007
Stybarrow has produced 50.6 MMbbl of oil
since start up in 2007. Production in 2011
was 7.8 MMbbl (3.9 MMboe Woodside
share).
Facility reliability and availability remained
strong through 2011.
Woodside Petroleum Ltd | 2011 Annual Report
27
8.20%
Location
60%
The Stybarrow North Development, which
was brought online in late 2010, continued
to perform above expectation throughout
2011. As expected the well is now
producing water with the crude oil and
future production rates will follow natural
field decline.
4D seismic work at Stybarrow was
completed in 2011 and the results
are being evaluated for future infill
opportunities.
Mutineer oil field
Interest
Operator
Facilities
Location
WA-26-L; WA-27-L
Santos
MODEC Venture II FPSO
~150 km north of
Dampier, WA
~165 metres
Crude oil
Water depth
Products
First production March 2005
Mutineer-Exeter has produced
55.7 MMbbl of oil since start up in
2005, and produced 2.0 MMbbl
in 2011 (0.2 Woodside share).
In 2011 Woodside and its co-venturers
explored options to extend field life
through a near field tie-back. A Heads
of Agreement was subsequently
signed between the Mutineer-Exeter
co-venturers and the co-venturers of
the Fletcher Finucane development to
tie-back to the existing Mutineer-Exeter
FPSO.
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At the end of 2011, the Northern
Endeavour FPSO was producing 7,300
barrels of oil a day, bringing total annual
production to 2.7 MMbbl (1.7 MMboe
Woodside share).
Laminaria-Corallina currently comprises
four production wells and one gas-injection
well tied back to the Northern Endeavour
FPSO.
Laverda oil field
Interest
Operator
60%
WA-36-R
Woodside
~50 km off the
North West Cape, WA
Water depth
~800 metres
The Laverda oil field was discovered in
2000 and is located approximately 10 km
west of the Woodside operated Enfield oil
field. An appraisal program, including both
seismic and wells was initiated in 2010 and
resulted in significantly improved reservoir
understanding and an increased resource
estimate.
Wells drilled at Laverda North (1 and 2),
Opel and Laverda West all intersected oil
at the Macedon level. The Laverda North
wells discovered oil in a new horizon
and this discovery was confirmed by an
additional appraisal well at Laverda East-1.
Further appraisal of the newly discovered
oil bearing sands will take place in 2012
with the drilling of Norton-1. This may lead
to additional appraisal in 2012-13.
Laminaria - Corallina oil field
Outlook
Interest
Operator
Facilities
Location
Laminaria
Corallina
AC/L5
59.90%*
66.67%
Woodside
Northern Endeavour FPSO
Timor Sea, 550 km
north-west of Darwin
~340 metres
Crude oil
Woodside is well positioned to optimise
investment in its oil business, with a fleet
of FPSOs, strategic acreage, and long-
standing safe and reliable operatorship in
challenging and sensitive offshore areas.
In 2012 we will continue to assess infill
development opportunities, as well as
near-field drilling prospects.
50%
Water depth
Products
First production 1999
* Interests on a post-unitisation basis, i.e. after agreeing
to pool Woodside’s interest with other field owners
and to exploit the field as a single venture.
The Laminaria-Corallina field has been
a significant production success for
Woodside, having produced more
than 197.9 MMbbl of oil since starting
production in 1999. Despite natural
field decline and some production
and maintenance outages in 2011, the
Northern Endeavour delivered a high rate
of production and overall strong asset
performance.
Jarvas Croome
Vice President
Australia Oil
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Woodside Petroleum Ltd | 2011 Annual Report
PLUTO LNG
Progressed from construction
to commissioning during 2011.
Production to start in 2012.
2005
2006
2007
Woodside discovers the Pluto gas field in
April and announces a standalone LNG
development in August. Woodside and
Tokyo Gas sign a Heads of Agreement for
the sale of LNG.
Woodside’s Board approves front-end
engineering and design (FEED). Woodside and
Kansai Electric sign a Heads of Agreement
for the sale of LNG. The xena gas field is
discovered.
Woodside’s Board approves the foundation
Pluto LNG Project on 27 July, conditional
on environmental approvals. Engineering,
procurement, construction and management
contracts are awarded. State and
Commonwealth environmental approvals are
granted. Construction begins at the Pluto LNG
Park and Gap Ridge accommodation village.
Woodside Petroleum Ltd | 2011 Annual Report
29
2008
2009
2010
2011
Sale and purchase agreements with Tokyo
Gas and Kansai Electric completed with each
acquiring a 5% equity interest in the project.
Construction work at the Pluto LNG Park
progresses with the first modules for the
LNG train arriving from Thailand.
The Woodside Donaldson LNG tanker
launched. Construction of Pluto A platform
is completed.
Last of the 264 LNG train modules arrives from
Thailand.
Gas flows from the Pluto reservoir for the first
time following offshore completion. Woodside
commissions the first greenfield LNG plant in
Western Australia in 23 years.
2012
Pluto LNG first cargo scheduled for 2012 with
the opportunity for future additional trains.
The impressive scale of the Pluto LNG plant and associated infrastructure is
revealed as the construction and commissioning process draws to a close.
30
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
Pluto LNG
LNG and condensate bound for international customers will be loaded from the Pluto jetty.
2011 Key performance highlights
Future objectives
Æ First gas flows from Pluto
Æ Safe and reliable start up.
Æ First cargo delivery to foundation
customers.
Æ Produce 17 – 21 MMboe from
Pluto LNG during 2012.
reservoir.
Æ First greenfield LNG plant to
be commissioned in WA in
23 years.
Æ A$7.6 billion of local content
delivered during construction
phase.
Æ Around 15,000 Australian jobs
created over the course of Pluto
LNG Project construction.
Execution of the project,
from discovery of the
gas field in 2005 to LNG
cargoes scheduled for
2012, demonstrates
Woodside’s upstream
and downstream
capabilities.
Pluto LNG
Interest
WA-34-L
WA-269-P
WA-347-P
WA-348-P
WA-350-P
WA-389-P
WA-404-P
WA-428-P
WA-430-P
WA-433-P
WA-434-P
WA-448-P
WA-451-P
Operator Woodside
Location
Pluto and Xena fields, 190 km
north-west of Karratha, WA
Water depth 400 - 1,000 metres
Greater Pluto
Proved +
Probable
Reserves*
Acreage
5,002 Bcf dry gas,
72.6 MMbbl condensate
(km2)
Gross
90%
66.67%
90%
90%
90%
65%
100%
70%
70%
70%
100%
50%
100%
Location of Woodside’s petroleum titles in the Greater Pluto area
Cazadores Hub
WA-348-P
Martel
Remy
Noblige
Martin
WA-347-P
Central Hub
WA-389-P
WA-404-P
WA-269-P
Inner
Pluto
ub
H
WA-350-P
Pluto
Eris
Xena
WA-34-L
WA-448-P
Ragnar Hub
WA-433-P
WA-428-P
WA-430-P
WA-451-P
Karratha
WA-434-P
Claudius Hub
Net
Exmouth
24,955
21,521
0
50
100
Kilometres (approximate only)
Datum: GDA 1994
*Woodside share
Woodside permits
| Wells
Gas | Woodside fields
Gas
Pluto production to start in 2012
Pluto LNG will deliver a step change in
production for Woodside in 2012 through
the company’s 90% equity in the project.
Moving into the second half of the year
the main flare tower became operational
in October, allowing major commissioning
activities to begin.
Underpinned by 15-year sales contracts
with foundation customers and
participants Tokyo Gas and Kansai Electric,
Pluto will provide significant long-term
value to Woodside shareholders.
Pluto has harnessed and built on the
extensive experience gained from
constructing and operating five trains at
the North West Shelf Project. As we near
start up, Pluto has seen Woodside develop
contemporary knowledge and experience
in project construction and operations.
Pluto remains an outstanding achievement
for Woodside – from discovery of the gas
field in 2005, through to final investment
decision in 2007, to first LNG cargo in
2012.
2011, a year of important milestones
The year began with completion of a sale
and purchase agreement with Asean LNG
Trading Co. Ltd (ALTCO), a subsidiary of
Petronas International Corporation Ltd, for
the supply of uncommitted cargoes from
the Pluto LNG Foundation Project.
The agreement involves a high degree
of flexibility for Woodside to sell up to
19 cargoes to ALTCO through to 2014.
In March, commissioning gas from the
Dampier to Bunbury Natural Gas pipeline
was introduced into the onshore plant.
The pipeline gas allowed the plant’s four
40 megawatt gas turbine generators to be
started up for the first time.
Pipeline gas was used in April to pressurise
some 240 km of offshore pipelines out
to the Pluto gas field, in readiness for
production from the Pluto reservoir.
In May the plant’s Central Control Room
was ‘handed over’ to the Production
team, prior to completion of activities
on the Pluto A platform and offshore
infrastructure.
This was followed by offshore ready for
start up in November. Natural gas then
flowed from the Pluto gas reservoir,
through the Pluto A platform into the
180 km trunkline to the beach valve at
the onshore plant.
In early January 2012 the jetty, storage and
loading facilities were declared ready for
start up and handed over to the Production
team, enabling cooling of the LNG tanks
and LNG transfer lines.
During the first quarter of 2012 final
preparations for LNG production are
being carried out.
Cost and schedule review
In June 2011 the date for first cargo from
Pluto LNG was revised to March 2012
following a regular review of project
progress. The cost of the project was
revised to A$14.9 billion (100% project)
including estimates for cargo mitigation.
Health and safety improved in 2011
All Pluto key health and safety metrics
improved markedly in 2011, including a
reduction in recordable injuries of around
35% compared to 2010.
A number of education and communication
activities were undertaken on site during
the year to ensure the workforce managed
changing construction risks as the project
matured from a construction site to a live
gas plant.
Building a better future for
Indigenous people in the West
Pilbara
In 2011 Pluto’s A$34 million Conservation
Agreement with the Commonwealth
Government continued to provide funding
for a suite of programs which recognise,
protect and conserve the National Heritage
Values of the Dampier Archipelago.
Programs and activities covered arts,
culture and heritage management,
business development and employment
opportunities, and community
development. These activities also helped
to build skills and capabilities within the
Roebourne community.
Woodside Petroleum Ltd | 2011 Annual Report
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Investing in our communities
Pluto funding provided financial and in-kind
support to a range of local community
projects and activities in 2011, which
enhance social, cultural and economic
capacity in the West Pilbara.
Woodside’s Pluto employees volunteered
their time to various not-for-profit
organisations within the community,
both of their own accord and through
the company’s volunteering program.
Additionally, an annual call for employees
to nominate community groups to receive
a donation has helped link Pluto employees
to community investment.
To keep the West Pilbara communities
informed about the project’s
commissioning and start-up activities,
11 individual community engagement
sessions were held and information
leaflets were sent to all Karratha and
Dampier residents.
Refer to page 22 for further information
on our community engagement and
social investment.
Expansion plans progressing
Exploration offers opportunities to build on
the value created by the foundation project
and to leverage existing infrastructure,
knowledge and capabilities.
Expansion drilling continued throughout
2011 with a commercial gas discovery at
Martin-1. Appraisal work also progressed,
with Noblige-2 completed during the year.
Work is continuing into 2012 to build equity
gas volumes.
Discussions continued with other resource
owners regarding development of
additional trains at Pluto.
Outlook
With first cargo scheduled for 2012, our
key focus area for this year is the safe start
up and reliable operation of Pluto LNG. As
the Pluto story unfolds we will continue to
focus on the delivery of safe and reliable
production and in meeting our stakeholder
commitments. In addition, value
enhancement of the Pluto infrastructure
will be pursued through cost-effective
expansion from additional LNG trains.
Lucio Della Martina
Executive Vice President
Australia Business
32
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
Browse
Signing of the historic native title agreement with Goolarabooloo and Jabirr Jabirr Peoples.
2011 Key performance highlights
Æ 61 Indigenous people are
directly employed by Woodside,
our contractors, or on training
pathways, for the Browse LNG
Development.
Future objectives
Æ Successful FEED assurance.
Æ Evaluate Engineering, Procurement
and Construction (EPC) tender
bids.
Æ Finalise environmental approvals.
Æ Complete preparations for a final
investment decision.
A focus on high
quality outcomes in
engineering design,
commercial activities
and environmental
assessments puts the
project in a strong
position to progress
and maximise the
value of this resource.
Location of Woodside’s petroleum titles in the Browse area
A u s t r a l i a
Argus
Torosa
Brecknock
Calliance
Æ Invitations to tender for major
infrastructure issued.
Æ Contingent resource increase
from 13.3 Tcf to 15.5 Tcf dry gas
and 360 MMbbl to 417 MMbbl
condensate (100% project).
Æ Native Title Agreement with
Goolarabooloo and Jabirr Jabirr
Peoples signed.
Æ Draft Upstream Environmental
Impact Statement completed and
released for public comment.
Æ Successfully completed 2011 3D
seismic survey over Torosa field.
Browse
Interest
Operator
Location
50%
50%
25%
25%
50%
70%
70%
60%
100%
100%
75%
TR/5; R2; WA-30-R
WA-31-R; WA-32-R
WA-28-R; WA-29-R
WA-275-P
WA-396-P WA-397-P
WA-429-P
WA-432-P; AC/P48
AC/RL8
WA-415-P; WA-416-P
WA-417-P
WA-447-P; WA-449-P
Woodside
Offshore 425 km
north of Broome, WA
Water depth 400 - 800 metres
Contingent
Resources*
7,110 Bcf dry gas,
191.8 MMbbl condensate
(km2)
Gross
Acreage
Net
36,470
*Woodside share. Net resources are subject to unitisation
outcomes.
46,534
James Price Point
Broome
0
50
100
150
kilometres (approximate only)
Datum: GDA 1994
Woodside titles
| Woodside fields
Gas
Woodside Petroleum Ltd | 2011 Annual Report
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A new frontier for Woodside
The Browse Basin is set to become
Australia’s next major offshore gas
production province, and Woodside is well
placed to capitalise on its success.
Woodside is the operator of the
Browse Joint Venture, which includes
three gas and condensate fields,
Brecknock, Calliance and Torosa. Located
approximately 425 km north of Broome in
Western Australia, the Browse Basin holds
Woodside’s most significant resources
outside the North West Shelf. Woodside
also holds a number of other petroleum
titles in the area. The resource volumes
identified in the Calliance and Torosa fields
have been revised as a result of ongoing
analysis of seismic data. Total Browse
contingent resources have been increased
from 13.3 Tcf to 15.5 Tcf of dry gas, and
from 360 million to 417 million barrels of
condensate (100% project).
Woodside is the foundation proponent
at the Western Australian Government’s
proposed Browse LNG Precinct. The
Precinct is designed to maximise the
benefits and minimise the environmental
and social effects of LNG processing in
the Kimberley, by co-locating multiple LNG
proponents at a single, suitable site.
Competitive FEED process to drive
innovation and cost efficiency
After the successful completion of basis of
design studies in 2010, the Browse Joint
Venture entered the front-end engineering
and design (FEED) phase to further
progress the development in line with the
Browse retention lease conditions.
To drive innovation and cost efficiency, dual
FEED contractors were selected for the
downstream (onshore) project and for the
upstream (offshore) drilling and production
facilities. The selected major consortia and
contractors have been invited to participate
in a competitive tender for the engineering,
procurement and construction of this
important infrastructure.
FEED was supported by 420 Woodside
staff and 2,000 contractors in 14 offices
around the world. At the Precinct and
offshore we made significant progress
with the technical, environmental and
heritage studies necessary to support the
robust design and execution of the project.
Invitations to tender for major infrastructure
were issued in the second half of 2011,
and bids are expected to be received in the
first half of 2012.
The Browse Joint Venture has written
to the Commonwealth Minister for
Resources and Energy and the WA
Minister for Mines and Petroleum seeking
amendments to its Browse Basin retention
leases. The request includes amending the
condition relating to readiness for a final
investment decision (FID) from mid 2012
to the first half of 2013.
our environmental management plans for
the project. Our commitment to excellence
in environmental research was recognised
during the year, when the company’s
partnership with the WA Museum won
the WA Premier’s Award for Excellence in
Public Sector Management.
Historic native title agreement signed
Woodside entered into a historic native
title agreement with the Goolarabooloo
and Jabirr Jabirr Peoples and the Western
Australian Government. The agreement
was reached after discussions dating
back to 2007, and will provide a significant
package of tangible initiatives and benefits
to Indigenous people in the Kimberley,
subject to a positive FID.
Woodside’s commitments include at least
300 jobs for Kimberley Indigenous people
during the construction phase. There will
also be business opportunities over the life
of the development, structured education
programs, and training opportunities
to help Kimberley Indigenous people
participate in the oil and gas industry.
The native title agreement paves the way
for the State to create the Browse LNG
Precinct near James Price Point, about
60 km north of Broome. Woodside has
started delivering on its commitments
under the agreement, and is building
strong relationships with Indigenous
stakeholders in the Kimberley.
At the close of the year, Woodside
had employed 12 Indigenous people in
full-time work on Browse, including ten
employees from the Kimberley. Another
30 Indigenous people are undertaking
traineeships. Our sub-contractors engaged
an additional 19 Indigenous people, while
a number of Indigenous businesses in
the Kimberley are providing products and
services to the development.
Approval milestones reached
Two major environmental approvals
milestones were reached in 2011. The
Strategic Assessment Report for the
Western Australian Government’s Browse
LNG Precinct completed its public
review and the final documentation was
submitted to regulators for assessment.
The draft Environmental Impact Statement
for the upstream component of the
development was released for public
review in November. We expect the
environmental approvals process to be
completed in 2012.
The Browse LNG Development has
invested more than A$80 million in
baseline environmental studies to underpin
Positively engaging with local
communities
Woodside commenced a major social
impact assessment project in Broome
and surrounding communities, which
will underpin our engagement with the
community over the expected 30-plus
year life of the proposed Browse LNG
Development. This will lead to a range
of social impact management plans to
ensure we continue to act as a responsible
member of the communities in which we
operate.
We have established a significant presence
in the town of Broome and are working
closely with people in the Kimberley to
identify opportunities for our project to
support the local community.
Refer to page 22 for further information
on our community engagement and social
investment.
Further evaluation to assist resource
definition
Woodside conducted a 3D seismic survey
over the Torosa field in October and
November of 2011. Known as Tridacna,
the survey was undertaken using ocean
bottom cable technology to collect
additional subsurface data. This follows
on from the pilot Gigas 2D survey that
was conducted at north Scott Reef in May
2008. The survey was finished on time
and on budget.
We expect the final data from Tridacna to
be available in 2012. Further review of the
Browse resources are planned for 2012.
Outlook
Woodside expects to complete the
approvals for both upstream and
downstream components of the project
in 2012.
In 2012 our major focus will be preparing
for the execute phase of the Browse LNG
Development. This means conducting a
rigorous assurance of the FEED data, and
evaluating the engineering, procurement
and construction bids in order to be ready
to make a final investment decision in the
first half of 2013.
Michael Hession
Senior Vice President
Browse
34
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
Sunrise
The Sunrise joint venture participants sponsored the Dili ‘City of Peace’ marathon as part of its ongoing social investment program.
2011 Key performance highlights
Future objectives
Æ Woodside’s CEO visited Dili
to meet key Timor-Leste
stakeholders.
Æ Build on the positive
relationships with the Australian
and Timor-Leste Governments.
Æ These visits generated positive
dialogue and a forward-looking
relationship with the Timor-Leste
Government.
Æ Continue engagement to gain
a better understanding of the
expectations and needs of key
stakeholders.
Æ All parties involved with
Greater Sunrise, including both
Governments, confirmed their
desire to see this resource
developed.
Æ Agree a mutually beneficial
development outcome.
Æ Grow and develop the social
investment program in Timor-
Leste.
Positive engagement
between key stakeholders
in 2011, and a common
desire to see the valuable
Greater Sunrise resource
developed, will underpin
ongoing dialogue in 2012.
Sunrise
Interest
PSC JPDA 03-19;
PSC JPDA 03-20;
NT/RL2; NT/RL4
33.44%
(unitised)
Operator Woodside
Location
Offshore 150 km south-east
of Timor-Leste and 450 km
north-west of Darwin, Australia
Water depth Less than 100 metres to
greater than 600 metres
1,717 Bcf dry gas,
75.6 MMbbl condensate
(km2)
Contingent
Resources*
Acreage
Gross
Net
Location of Woodside’s petroleum titles in the Greater Sunrise area
Dili
TIMOR-LESTE
Sunrise and
Troubadour
JPDA
AUSTRALIA
Darwin
*Woodside share
2,998
958
Woodside permits
| Woodside fields
Gas
Woodside Petroleum Ltd | 2011 Annual Report
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outcomes for the Timor-Leste people.
Several examples of initiatives supported
in 2011, include World Vision Timor-Leste’s
’Water for Life’ program and the Dili ‘City
of Peace’ Marathon.
Refer to page 22 for further information
on our community engagement and social
investment.
Outlook
In 2012 Woodside and the Sunrise
Joint Venture will build on the positive
engagement with the Australian and
Timor-Leste governments established
during 2011.
Engagement will focus on obtaining a
common understanding of the respective
expectations and needs of the Timor-Leste
and Australian Governments, and the
Sunrise Joint Venture, resulting from the
development of the Greater Sunrise fields.
This understanding will inform discussions
aimed at agreeing a mutually beneficial
development outcome.
In 2012, Woodside and the Sunrise Joint
Venture will continue to grow and develop
its social investment program in Timor-
Leste.
The development of the Greater Sunrise
fields offers both Australia and Timor-Leste
a significant opportunity to generate a
stable cash flow and other opportunities
over a period of 30 years, and provides
Woodside the opportunity to create
shareholder value and deliver growth.
Background
The Sunrise and Troubadour gas and
condensate fields, collectively known as
the Greater Sunrise fields, are located
approximately 150 km south-east of Timor-
Leste and 450 km north-west of Darwin,
Northern Territory.
The fields were discovered in 1974
and hold a total contingent resource of
5.13 Tcf of dry gas and 225.9 million
barrels of condensate. These volumes
were independently certified in 2010 and,
once developed, will add significantly to
Woodside’s reserves.
According to the International Unitisation
Agreement (IUA) signed by Australia and
Timor-Leste, approximately 20% of the
Greater Sunrise fields are attributed to
the Joint Petroleum Development Area
(JPDA), which is jointly administered by
the governments of Australia and Timor-
Leste, with the remaining 80% attributed
to Australia.
Following ratification of the IUA and the
Treaty on Certain Maritime Arrangements
in the Timor Sea (CMATS), Woodside and
the Sunrise Joint Venture recommenced
work on the Sunrise project.
The Sunrise Joint Venture undertook
a detailed technical and commercial
evaluation of three concepts, namely
Floating LNG, a brownfield expansion of
Darwin LNG and a greenfield gas plant
located in Timor-Leste (Timor-Leste LNG).
The Sunrise Joint Venture unanimously
selected Floating LNG in April 2010 as its
preferred development concept for Greater
Sunrise and prepared documentation
detailing the basis of the selection.
In September 2010, at the request of
the JPDA regulator, Woodside provided
three Concept Evaluation Reports to
the Australian and JPDA regulators.
The reports detailed the technical and
commercial evaluation of Floating
LNG, Darwin LNG and the Timor-Leste
Government’s preferred concept of
Timor-Leste LNG.
The Timor-Leste Government continued
to publicly voice its preference for
Timor-Leste LNG during 2011.
Momentum in 2011
In the second half of 2011 Woodside’s
CEO Peter Coleman visited Dili on
two occasions and held productive
meetings with senior Timor-Leste
Government representatives and other key
stakeholders. Woodside and the Sunrise
Joint Venture also continued to engage
with Australian and JPDA regulators on the
way forward for Greater Sunrise.
During this positive dialogue, all
stakeholders have confirmed their desire to
see the Greater Sunrise fields developed,
and the benefits from the development
realised by the Governments and people of
Australia and Timor-Leste.
The Sunrise Joint Venture remained
strongly aligned and committed in 2011 to
progressing the development of Greater
Sunrise, as demonstrated by positive
engagement with key project stakeholders.
Woodside and the Sunrise Joint Venture
also continued their long standing social
investment program in Timor-Leste in
2011. This includes ongoing support for
a range of initiatives that deliver positive
and sustainable community development
Jon Ozturgut
Senior Vice President
International Business
36
Woodside Petroleum Ltd | 2011 Annual Report
Business reviews
International
The Neptune tension leg platform in the Gulf of Mexico, producing oil and gas.
2011 Key performance highlights
Future objectives
Æ Obtained US exploration plan
Æ Progress efforts to drill one
approvals under new regulatory
requirements.
appraisal well and re-complete
one existing well at Neptune.
Æ Received full entitlement from
Ohanet.
Æ Participate in exploratory drilling
in the deepwater Gulf of Mexico.
Æ Divested non-core Gulf of Mexico
Shelf assets.
Æ Completed Libya divestment.
Æ Advance efforts to drill the
Panoramix-3 appraisal well in
Brazil.
Æ Drill and operate the offshore
Jujak-1 exploration well, in the
Republic of Korea.
In 2011 Woodside
continued to consolidate
its focus on its core
international assets and
move key development,
appraisal and exploration
projects forward.
Gulf of Mexico key metrics
(Woodside share)
2011
2010
Sales revenue
($ million)
Net production
(MMboe)
Proved plus
Probable reserves
(MMboe)
93
1.1
8.5
Acreage
Gross
2,220
(km2)
117
2.2
11
Net
982
International key metrics, excluding
Gulf of Mexico (Woodside share)
Sales revenue
($ million)
Net production
(MMboe)
Proved plus
Probable reserves
(MMboe)
Acreage
(km2)
2011
2010
43
1.8
0.0
55
2.3
1.9
Gross
29,923
Net
9,473
Gulf of Mexico
Ohanet production
Gulf of Mexico production
Woodside other
2%
98%
During 2011, United States production was derived
from gas, condensate and oil operations in the Gulf of
Mexico and contributed 1.1 MMboe to Woodside’s
annual production.
Ohanet production
Woodside other
3%
97%
During 2011, other international production was
derived from condensate and LPG operations in
Algeria and contributed 1.8 MMboe to Woodside’s
annual production. The Ohanet risk sharing contract
expired in October 2011.
United States
Neptune oil field
Interest
Operator
Location
AT 573-575;
617; 618
BHP Billiton
WI 20%
NRI 17.5%
Atwater Valley, 220 km
offshore Louisiana, USA
~ 2,000 metres
Water depth
Products
First production July 2008
WI - Working interest , NRI - Net revenue interest
Oil and gas
Neptune is a multi-well subsea
development tied back to a standalone
tension leg platform (TLP).
The operator continued field optimisation
efforts through a bottom hole pressure
reduction campaign for the producing wells
during 2011. This campaign has allowed
the field’s production to remain relatively
steady since Q2 2011.
The near-term development plan for
Neptune includes additional appraisal
drilling and the re-completion of one
existing well.
Power Play oil field
Interest
GB 302
WI 20%
NRI 16.3%
Operator
Location
Anadarko
Garden Banks, 200 km
offshore Louisiana, USA
Water depth
700 metres
Products
Oil and gas
First production June 2008
WI - Working interest , NRI - Net revenue interest
Power Play is a subsea tieback to the
deepwater Baldpate facility. The current
producing zone at the Power Play well
continued to outperform expectations
during 2011.
The near-term development plan for
Power Play includes a well recompletion
to a higher rate zone once the current
producing zone is depleted.
Divested Gulf of Mexico Shelf assets
Woodside executed a sale and purchase
agreement in 2011 and subsequently
divested all of its Gulf of Mexico Shelf
assets for a cash consideration and the
purchaser’s assumption of future plug and
abandonment liabilities associated with
these properties.
Woodside Petroleum Ltd | 2011 Annual Report
37
Permitting momentum continues
Canary Islands
Exploration plans for two of Woodside’s
prospects were approved in September
2011 in accordance with new regulatory
requirements. Woodside continues to
work closely with regulators to advance
regulatory approvals for its exploration
portfolio.
Outlook
Woodside will focus in 2012 on reducing
the effects of natural field decline for its
Gulf of Mexico properties. At Neptune,
Woodside expects the Joint Venture to
progress efforts to drill one appraisal well
and re-complete one existing well.
Woodside expects to participate in
exploratory drilling operations in the
deepwater Gulf of Mexico in 2012.
Other
Woodside 30% (non-operator)
Woodside holds a 30% interest in blocks
1-9 operated by Repsol. Activity remains
suspended until such time as a Royal
Decree will provide full rights to permit
activity.
Brazil
Woodside 12.5% (non-operator)
Woodside holds a 12.5% interest in
two concession agreements covering
1,400 km2 in the Santos Basin, offshore
south-east Brazil. The blocks are about
180 km south-east of Sao Paulo.
Woodside continues to evaluate the
Panoramix oil field. The Joint Venture
has elected to relinquish an area covering
1,062 km2 to focus on drilling the
Panoramix-3 appraisal well in late 2012.
Ohanet condensate and LPG
Peru
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15%
Woodside 20% (non-operator)
Woodside has a 20% interest in onshore
block 108 which is operated by Pluspetrol.
Covering approximately 12,000 km2, block
108 includes the entire, highly prospective,
Ene Basin with numerous large leads and
oil seeps. The exploration block is currently
under force majeure conditions. Once the
force majeure conditions cease, the Joint
Venture plans to acquire 800 km of 2D
seismic, potentially in 2013.
Republic of Korea
Woodside 50% (operator)
Woodside holds a 50% interest in offshore
block 8/6-1 N, which covers 9,922 km2.
Woodside and the Korea National Oil
Corporation had planned to drill the Jujak-1
exploration well in late 2011. The drilling
has been postponed to 2012 due to a delay
in the availability of a suitable drilling rig.
Interest
Operator
Facilities
Location
Ohanet North;
Ohanet South;
Askarene Guelta;
Dimeta West
BHP Billiton
Ohanet Gas
Processing Plant
Onshore Illizi Basin,
Southern Algeria
LPG and condensate
Products
First production October 2003
In 2011 the Ohanet Joint Venture
received its full revenue entitlement
of US$43.6 million (Woodside share),
which equals 1.1 million barrels of
condensate and 88,521 tonnes of LPG.
These volumes were calculated using
the ten-year oil price prevailing at the
time of initial production. Woodside’s
Risk Sharing Contract for Ohanet
production ceased on 27 October 2011.
Libya
Woodside 45% (operator)
On 11 January 2011 Woodside signed
a sale and purchase agreement for the sale
of its interests in the EPSA* III contract
and has received the cash consideration
of $6 million.
* EPSA - Exploration Production Sharing
Agreement.
Jon Ozturgut
Senior Vice President
International Business
38
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Board of Directors
Directors’ details are listed on this page and the next in order of appearance from left to right.
Michael A Chaney, AO
Chairman
BSc, MBA, Hon LLD (UWA), FAICD
Term of office: Director since November
2005. Chairman since July 2007.
Chancellor: The University of Western
Australia (since 2006).
Melinda A Cilento
BA, BEc (Hons), MEc
Director: The Centre for Independent
Studies Ltd (since 2000).
Term of office: Director since
December 2008.
Member: JP Morgan International Council.
Independent: Yes.
Independent: Yes.
Age: 61.
Experience
22 years with Wesfarmers Limited,
including Managing Director and CEO from
1992 to 2005. Three years with investment
bank Australian Industry Development
Corporation (1980 to 1983), and prior to
that eight years as a petroleum geologist
working on the North West Shelf and in
the USA and Indonesia. Previously a non-
executive director of BHP Billiton Limited
(1995 to 2005) and BHP Billiton Plc (2001
to 2005).
Committee membership
Chair of the Nominations Committee.
Attends other Board committee meetings.
Current directorships
Chair: National Australia Bank Limited
(director since 2004), Gresham Partners
Holdings Limited (director since 1985),
Commonwealth Advisory Council on
International Tertiary Education (since 2011)
Peter J Coleman
Managing Director and CEO
BEng, MBA
Term of office: Director since May 2011
Independent: No
Age: 51.
Experience
27 years experience with the ExxonMobil
group in the global oil and gas business,
culminating as Vice President Development
Company, with responsibility for leading
development and project work in the Asia
Pacific.
Committee membership
Attends Board committee meetings.
Age: 46.
Experience
Significant public and private sector
experience in economic policy development
and analysis. Deputy Chief Executive
(2006 to 2010) and Chief Economist
(2002 to 2010) of the Business Council of
Australia. Previously worked with County
Investment Management (now Invesco)
as Head of Economics, the Department of
Treasury and the International Monetary
Fund.
Committee membership
Member of the Human Resources
& Compensation, Sustainability and
Nominations Committees.
Current directorships
Current directorships:
Member: The University of Western
Australia Business School Board (since
2011) and the Executive Committee of the
Australia Japan Business Co-operation
Council (since 2011).
Commissioner: West Australian Football
Commission (since 2012).
Director: Wesfarmers General Insurance
Limited (since 2010).
Co-chair: Reconciliation Australia (director
since 2010).
Councillor: Victorian Division of the
Australian Institute of Company Directors.
Woodside Petroleum Ltd | 2011 Annual Report
39
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Member: Advisory Panel of the Australian
Scholarships Foundation and Advisory
Council of the Global Foundation.
Erich Fraunschiel
BCom (Hons)
Term of office: Director since
December 2002.
Independent: Yes.
Age: 66.
Experience
More than 18 years experience in senior
executive positions with Wesfarmers
Limited, including 10 years as CFO and
Executive Director.
Andrew Jamieson, OBE
F.R.Eng., C.Eng., F. Inst Chem E.
David I McEvoy
BSc (Physics), Grad Dip (Geophysics)
Term of office: Director since
February 2005.
Term of office: Director since
September 2005.
Independent: Yes.
Independent: Yes.
Age: 64.
Experience
Age: 65.
Experience
Former Executive Vice President Gas
and Projects of Shell Gas and Power
International BV with more than 30
years experience with Shell in Europe,
Australia and Africa. From 1997 to 1999.
Dr Jamieson was seconded to Woodside
as General Manager North West Shelf
Venture. Retired from Shell in June 2009.
34 year career with ExxonMobil involving
extensive international exploration and
development experience.
Committee membership
Chair of the Sustainability Committee.
Member of the Audit & Risk and
Nominations Committees.
Current directorships
Director: Acer Energy Limited (since
2002), AWE Limited (since 2006) and
Po Valley Energy Ltd (since 2004).
Committee membership
Committee membership
Chair of the Audit & Risk Committee.
Member of the Sustainability and
Nominations Committees.
Current directorships
Chair: Wesfarmers General Insurance
Limited (since 2003).
Director: The WCM Group Ltd
(since 2005) and WorleyParsons Limited
(since 2003).
Christopher M Haynes, OBE
BSc, DPhil, CEng, FIMechE
Term of office: Director since June 2011.
Chair of the Human Resources &
Compensation Committee. Member
of the Sustainability and Nominations
Committees.
Current directorships
Director: Leif Hoegh & Co Ltd (since
2009), Oxford Catalysts Group PLC (since
2010) and Seven Energy International
Limited (since 2011).
Pierre JMH Jungels, CBE
PhD (Geophysics and Hydraulics)
Term of office: Director since
December 2002.
Independent: Yes
Age: 64.
Experience
38 year career with Shell including as
Executive Vice President, Upstream
Major Projects within Shell’s Projects
and Technology Business, General
Manager of Shell’s operations in Syria and
a secondment as Managing Director of
Nigeria LNG Ltd. From 1999 to 2002
Dr Haynes was seconded to Woodside
as General Manager of the North West
Shelf Venture. Retired from Shell on
31 August 2011.
Committee membership
Member of the Human Resources
& Compensation, Sustainability and
Nominations Committees.
Current directorships
Director: WorleyParsons Limited
(since 2012).
Independent: Yes.
Age: 68.
Experience
Former CEO of Enterprise Oil plc and
President of the Institute of Petroleum.
More than 30 years experience in the
international oil and gas industry.
Committee membership
Member of the Human Resources
& Compensation, Audit & Risk and
Nominations Committees.
Current directorships
Chair: Oxford Catalysts Group PLC
(since 2006) and Rockhopper Exploration
plc (since 2005).
Director: Baker Hughes Inc (since 2006).
Directorships of other listed entities
within the past three years: Imperial
Tobacco Group PLC (2002 to February 2012).
40
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Corporate governance statement
Contents
Corporate governance at Woodside
Board of Directors
Committees of the Board
Shareholders
41
41
45
47
Promoting responsible and ethical behaviour 48
Risk management and internal control
External auditor relationship
Diversity
ASX Corporate Governance Council
recommendations checklist
49
50
51
53
Woodside Petroleum Ltd | 2011 Annual Report
41
1 Corporate governance at
Woodside
Woodside is committed to a high level
of corporate governance and fostering
a culture that values ethical behaviour,
integrity and respect. We believe that
adopting and operating in accordance with
high standards of corporate governance
is essential for sustainable long-term
performance and value creation.
This statement reports on Woodside’s key
governance principles and practices. These
principles and practices are reviewed
regularly and revised as appropriate to
reflect changes in law and developments
in corporate governance.
Woodside’s corporate governance model
is illustrated below. The Woodside
Management System (WMS) sets out
how Woodside provides management
governance and assurance. It defines
how Woodside will deliver its business
objectives and the boundaries within which
Woodside employees and contractors are
expected to work. The WMS establishes
a common approach to how we operate,
wherever the location.
The company, as a listed entity, must
comply with the Corporations Act 2001
(Cwlth) (Corporations Act), the Australian
Securities Exchange (ASX) Listing Rules
(ASX Listing Rules) and other Australian
and international laws. The ASX Listing
Rules require the company to report on
the extent to which it has followed the
Corporate Governance Recommendations
contained in the ASX Corporate
Governance Council’s (ASXCGC) second
edition of its Corporate Governance
Principles and Recommendations (August
2007). Woodside believes that, throughout
the 2011 year and to the date of this report,
it has complied with all the ASXCGC
Recommendations.
A checklist cross-referencing the ASXCGC
Recommendations to the relevant sections
of this statement and the Remuneration
Report is provided on page 53.
Information on Woodside’s governance
framework is also provided in the corporate
governance section of Woodside’s website
(www.woodside.com.au).
The website contains copies of Board and
committee charters and copies of many
of the policies and documents mentioned
in this statement. The website is updated
regularly to ensure it reflects Woodside’s
most current corporate governance
information.
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2 Board of directors
2.1 Board role and responsibilities
ASXCGC Recommendations 1.1, 1.3
The Constitution provides that the
business and affairs of the Company are
to be managed by or under the direction
of the Board. The Board has approved a
formal Board Charter which details the
Board’s role, powers, duties and functions.
Other than as specifically reserved to the
Board in the Board Charter, responsibility
for the management of Woodside’s
business activities is delegated to the
CEO who is accountable to the Board.
The Board Charter and the delegation of
Board authority to the CEO are reviewed
regularly.
The central role of the Board is to set the
company’s strategic direction, to select
and appoint a CEO and to oversee the
company’s management and business
activities.
In addition to matters required by law to
be approved by the Board, the following
powers are reserved to the Board for
decision:
the appointment and removal of the
CEO and the Company Secretary and
determination of their remuneration and
conditions of service;
Woodside Corporate Governance Model
Shareholders
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Human Resources
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Committee
Chief Executive Officer
Nominations
Committee
Sustainability
Committee
Independent
Assurance
External
Auditors
Internal
Audit
Major Project
Assurance Checks
Management Governance and Assurance
Strategy
Risk
Management
Mission
Vision
Values
Policies
Management Review and
Improvement
Management Standards
Operating Standards
Woodside Management System
Authorities
Framework
Operating
Structure
Management
Committees
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Woodside Petroleum Ltd | 2011 Annual Report
Governance
approving the appointment and, where
appropriate, the removal of executives
who report directly to the CEO together
with their remuneration and conditions
of service;
approving senior management
succession plans and significant
changes to organisational structure;
authorising the issue of shares, options,
equity instruments or other securities;
authorising borrowings, other than in
the ordinary course of business, and the
granting of security over the undertaking
of the company or any of its assets;
authorising expenditures which exceed
the CEO’s delegated authority levels;
the directors have regard to the following
principles:
the Chairman should be non-executive,
independent and an Australian citizen or
permanent resident;
the role of the Chairman and the CEO
should not be filled by the same person;
the CEO should be a full-time employee
of the company;
the majority of the Board should
comprise directors who are both non-
executive and independent;
the Board should represent a broad
range of qualifications, diversity,
experience and expertise considered of
benefit to the company; and
approving strategic plans and budgets;
the number of Shell-nominated
directors, as a proportion of the Board,
should normally be in the proportion
that Shell’s holding of fully paid ordinary
shares in the company bears to all of the
issued fully paid ordinary shares in the
company.
Section 2.6 on Board succession planning
provides further information on the mix
of skills and diversity the Board seeks to
achieve in membership of the Board.
The Board considers that collectively
the directors have the range of skills,
knowledge and experience necessary to
direct the company. The non-executive
directors contribute operational and
international experience, an understanding
of the industry in which Woodside
operates, knowledge of financial markets
and an understanding of the health, safety,
environmental and community matters
that are important to the company. The
CEO brings an additional perspective to the
Board through a thorough understanding of
Woodside’s business. While the directors
on the Board represent a diverse range of
nationalities and backgrounds, the Board
recognises the current gender imbalance
and the opportunity to address this upon
future retirements of non-executive
directors.
The Constitution provides that the
company is not to have more than ten, nor
less than three, directors.
2.3 Chairman
ASXCGC Recommendations 2.2, 2.3
approving the acquisition, establishment,
disposal or cessation of any significant
business of the company;
approving annual and half-year reports
and disclosures to the market that
contain or relate to financial projections,
statements as to future financial
performance or changes to the policy or
strategy of the company;
approving policies of company-wide or
general application;
the appointment of directors who will
come before shareholders for election at
the next annual general meeting (AGM);
and
establishing procedures which ensure
that the Board is in a position to
exercise its powers and to discharge its
responsibilities as set out in the Board
Charter.
A copy of the Board Charter is available
in the corporate governance section of
Woodside’s website.
2.2 Board composition
ASXCGC Recommendations 2.1, 2.2, 2.3,
2.6
The Board is comprised of seven non-
executive directors and the CEO. Details of
the directors, including their qualifications,
experience, date of appointment and
independent status, are set out on pages
38 and 39.
The Board and its committees actively
seek to ensure that the Board continues to
have the right balance of skills, knowledge
and experience necessary to direct
the company in accordance with high
standards of corporate governance. In
assessing the composition of the Board,
between directors and management
that are open, cordial and conducive to
productive cooperation. The Chairman’s
responsibilities are set out in more detail in
the Board Charter.
A copy of the Board Charter is available
in the corporate governance section of
Woodside’s website.
Mr Chaney is also chairman of National
Australia Bank Limited (NAB). The Board
considers that neither his chairmanship of
NAB, nor any of his other commitments
(listed on page 38), interfere with the
discharge of his duties to the company.
The Board is satisfied that Mr Chaney
commits the time necessary to discharge
his role effectively.
2.4 Director independence
ASXCGC Recommendations 2.1, 2.6
The independence of a director is
assessed in accordance with Woodside’s
Policy on Independence of Directors.
A copy of the Policy on Independence
of Directors is available in the corporate
governance section of Woodside’s
website.
In accordance with the policy, the Board
assesses independence with reference to
whether a director is non-executive, not a
member of management and who is free
of any business or other relationship that
could materially interfere with, or could
reasonably be perceived to materially
interfere with, the independent exercise of
their judgement.
In making this assessment, the
Board considers all relevant facts and
circumstances. Relationships that the
Board will take into consideration when
assessing independence are whether a
director:
is a substantial shareholder of the
company or an officer of, or otherwise
associated directly with, a substantial
shareholder of the company;
is employed, or has previously been
employed in an executive capacity by
the company or another Group member,
and there has not been a period of at
least three years between ceasing such
employment and serving on the Board;
The Chairman of the Board, Mr Michael
Chaney, is an independent, non-executive
director and a resident Australian citizen.
The Chairman is responsible for leadership
and effective performance of the Board
and for the maintenance of relations
has within the last three years been
a principal of a material professional
adviser or a material consultant to the
company or another Group member, or
an employee materially associated with
the service provided;
Woodside Petroleum Ltd | 2011 Annual Report
43
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is a material supplier or customer of the
company or other Group member, or
an officer of or otherwise associated
directly or indirectly with a material
supplier or customer; or
has a material contractual relationship
with the company or another Group
member other than as a director.
The test of whether a relationship or
business is material is based on the nature
of the relationship or business and on
the circumstances and activities of the
director. Materiality is considered from the
perspective of the company and its Group
members, the persons or organisations
with which the director has an affiliation
and from the perspective of the director.
To assist in assessing the materiality
of a supplier or customer the Board
has adopted the following materiality
thresholds:
a material customer is a customer of
Woodside which accounts for more than
2% of Woodside’s consolidated gross
revenue; and
a supplier is material if Woodside
accounts for more than 2% of the
supplier’s consolidated gross revenue.
The Board reviews the independence of
directors before they are appointed, on an
annual basis and at any other time where
the circumstances of a director changes
such as to require reassessment. The
Board has reviewed the independence of
each of the directors in office at the date of
this report and has determined that seven
of the eight directors are independent. The
director that is not considered independent
is Mr Peter Coleman as he is an executive
director and a member of management.
Dr Christopher Haynes and Dr Andrew
Jamieson were nominated to the
Woodside Board by Shell and were both
previously executives of Shell. Dr Haynes
and Dr Jamieson retired from Shell
on 31 August 2011 and 30 June 2009
respectively and continue to serve on the
Woodside Board.
The Board is satisfied that Dr Haynes
and Dr Jamieson have no continuing
association with Shell that would
interfere with their independent exercise
of judgement, and that each is an
independent director.
Mr Erich Fraunschiel and Dr Haynes serve
on the board of directors of WorleyParsons
Limited, a supplier of engineering services
to Woodside. The value of services
provided by the WorleyParsons Limited
group of companies to Woodside in
2011 exceeded the Board’s materiality
threshold relating to suppliers. The Board,
having regard to the nature and value of
the commercial relationship between
Woodside and WorleyParsons Limited,
is satisfied that Mr Fraunschiel and Dr
Haynes remain independent. Where a
matter involving WorleyParsons Limited
comes before the Board, the Directors’
Conflict of Interest Guidelines apply (refer
section 2.5 below).
Certain non-executive directors hold
directorships or executive positions in
companies with which Woodside has
commercial relationships. Details of other
directorships and executive positions held
by non-executive directors are set out on
pages 38 and 39.
Three of the non-executive directors have
been employed by Woodside in the past
and a significant period of time has elapsed
since they ceased employment. Dr Haynes
and Dr Jamieson were both seconded
to Woodside as General Manager of the
North West Shelf Venture from 1999 to
2002 and from 1997 to 1999 respectively.
Mr Chaney was employed by Woodside as
a petroleum geologist in the 1970s.
The independent status of directors
standing for election or re-election is
identified in the notice of AGM. If the
Board’s assessment of a director’s
independence changes, the change is
disclosed to the market.
2.5 Conflicts of interest
The Board has approved Directors’ Conflict
of Interest Guidelines which apply if
there is, or may be, a conflict between
the personal interests of a director, or
the duties a director owes to another
company, and the duties the director owes
to Woodside. Directors are required to
disclose circumstances that may affect,
or be perceived to affect, their ability to
exercise independent judgment so that
the Board can assess independence on a
regular basis.
A director with an actual or potential
conflict of interest in relation to a matter
before the Board does not receive the
Board papers relating to that matter and
when the matter comes before the Board
for discussion, the director withdraws
from the meeting for the period the matter
is considered and takes no part in the
discussions or decision-making process.
Minutes reporting on matters in which a
director is considered to have a conflict of
interest are not provided to that director.
However, the director is given notice of the
broad nature of the matter for discussion
and is updated in general terms on the
progress of the matter.
2.6 Board succession planning
ASXCGC Recommendation 2.6
The Board manages its succession
planning with the assistance of the
Nominations Committee. The committee
annually reviews the size, composition
and diversity of the Board and the mix of
existing and desired competencies across
members and reports its conclusions to
the Board. In conducting the review a skills
matrix is used to enable the committee to
assess the skills and experience of each
director and the combined capabilities of
the Board. The results of this review are
considered in the context of Woodside’s
operations and strategy. Where the
committee identifies existing or projected
competency gaps, it recommends
a succession plan to the Board that
addresses those gaps.
Recognising the importance of Board
renewal, the committee takes each
director’s tenure into consideration in its
succession planning. As a general rule
directors are not expected to serve on the
Board beyond 10 years.
The Nominations Committee is
responsible for evaluating Board
candidates and recommending individuals
for appointment to the Board. The
committee evaluates prospective
candidates against a range of criteria
including the skills, experience, expertise
and diversity that will best complement
Board effectiveness at the time. The Board
may engage an independent recruitment
firm to undertake a search for suitable
candidates.
In its evaluation of candidates for the
Board, the Nominations Committee
will have regard to normally accepted
nomination criteria, including:
honesty and integrity;
the ability to exercise sound business
judgement;
appropriate experience and professional
qualifications;
44
Woodside Petroleum Ltd | 2011 Annual Report
Governance
absence of conflicts of interest or other
legal impediments to serving on the
Board;
willingness to devote the required time;
and
availability to attend Board and
committee meetings.
In considering overall Board balance, the
Nominations Committee will give due
consideration to the value of a diversity
of backgrounds and experiences among
the members, and to having some of the
directors based in the centres of operation
of Woodside.
With the exception of the Managing
Director, directors appointed by the Board
are subject to shareholder election at the
next AGM.
A copy of the Nominations
Committee Charter and a description
of Woodside’s procedure for the
selection and appointment of new
directors and the re-election of
incumbent directors is available in
the corporate governance section of
Woodside’s website.
CEO succession planning is considered by
the Nominations Committee and during
Board sessions without management
present. In October 2010 Mr Don Voelte
advised that he intended to retire from
Woodside during the second half of 2011.
The Board directly engaged executive
recruitment specialists, to conduct an
extensive internal and external search
for the company’s next CEO. The search
culminated in the appointment by the
Board of Mr Coleman as the CEO and
Managing Director of Woodside with
effect on 30 May 2011.
2.7 Directors’ retirement and
re-election
ASXCGC Recommendation 2.6
Non-executive directors must retire at
the third AGM following their election or
most recent re-election. At least one non-
executive director must stand for election
at each AGM. Any director appointed to
fill a casual vacancy since the date of the
previous AGM must submit themselves to
shareholders for election at the next AGM.
Board support for a director’s re-election is
not automatic and is subject to satisfactory
director performance (in accordance with the
evaluation process described in section 2.9).
2.8 Directors’ appointment, induction
training and continuing education
All new directors are required to sign and
return a letter of appointment which sets
out the key terms and conditions of their
appointment, including duties, rights and
responsibilities, the time commitment
envisaged and the Board’s expectations
regarding their involvement with
committee work.
Induction training is provided to all new
directors. It includes a comprehensive
induction manual, discussions with
the CEO and senior executives and
the option to visit Woodside’s principal
operations either upon appointment or
with the Board during its next site tour.
The induction materials and discussions
include information on Woodside’s
strategy, culture and values; key corporate
and Board policies; the company’s
financial, operational and risk management
position; the rights and responsibilities of
directors; and the role of the Board and its
committees and meeting arrangements.
All directors are expected to maintain
the skills required to discharge their
obligations to the company. Directors
are encouraged to undertake continuing
professional education including industry
seminars and approved education
courses. These are paid for by the
company, where appropriate. In addition,
the company provides the Board with
regular educational information papers and
presentations on industry-related matters
and new developments with the potential
to affect Woodside.
2.9 Board performance evaluation
ASXCGC Recommendations 1.3, 2.5, 2.6
The Nominations Committee is
responsible for determining the process for
evaluating Board performance. Evaluations
are conducted annually and have produced
improvements in Board processes and
overall efficiency.
The Board performance evaluation process
is conducted by way of questionnaires
appropriate in scope and content to
effectively review:
the performance of the Board and
each of its committees against the
requirements of their respective
charters; and
the individual performance of the
Chairman and each director.
The questionnaires are completed by each
director and the responses compiled by an
external consultant. The reports on Board
and committee performance are provided
to all directors and discussed by the Board.
The report on the Chairman’s performance
is provided to the Chairman and two
committee chairmen for discussion.
The report on each individual director
is provided to the individual and copied
to the Chairman. The Chairman meets
individually with each director to discuss
the findings of their report.
The performance of each director retiring
at the next AGM is taken into account by
the Board in determining whether or not
the Board should support the re-election
of the director.
The Human Resources & Compensation
Committee reviews and makes
recommendations to the Board
on the criteria for the evaluation of
the performance of the CEO. The
Board conducts the evaluation of the
performance of the CEO.
A description of the company’s
process for evaluation of the Board, its
committees and individual directors is
available in the corporate governance
section of Woodside’s website.
The Remuneration Report on pages 55
to 69 discloses the process for evaluating
the performance of senior executives,
including the CEO. In 2011, performance
evaluations for the Board, its committees,
directors and senior executives took place
in accordance with the process disclosed
above and in the Remuneration Report.
2.10 Board access to information and
independent advice
ASXCGC Recommendation 2.6
Subject to the Directors’ Conflict of
Interest Guidelines referred to in section
2.5, directors have direct access to
members of company management and to
company information in the possession of
management.
The Board has agreed a procedure under
which directors are entitled to obtain
independent legal, accounting or other
professional advice at the company’s
expense. Directors are entitled to
reimbursement of all reasonable costs
where a request for such advice is
approved by the Chairman. In the case of a
request made by the Chairman, approval is
required by a majority of the non-executive
directors.
Woodside Petroleum Ltd | 2011 Annual Report
45
At each scheduled Board meeting there
is a session for non-executive directors to
meet without management present. This
session is presided over by the Chairman.
Membership of the committees is based
on directors’ qualifications, skills and
experience. Each standing committee is
comprised of:
2.11 Directors’ remuneration
Details of remuneration paid to directors
(executive and non-executive) are set out
in the Remuneration Report on pages
55 to 69. The Remuneration Report also
contains information on the company’s
policy for determining the nature and
amount of remuneration for directors and
senior executives and the relationship
between the policy and company
performance.
Shareholders will be invited to consider
and approve the Remuneration Report at
the 2012 AGM.
2.12 Board meetings
During the year ended 31 December 2011,
the Board held six Board meetings. In
addition, site visits and a strategic planning
session were held in conjunction with the
June Board meeting. Details of directors’
attendance at Board meetings are set out
in Table 1 on page 46.
The Chairman, in conjunction with the
CEO and the Company Secretary, sets
the agenda for each meeting. Any director
may request matters be included on the
agenda.
Typically at Board meetings the agenda will
include:
minutes of the previous meeting and
matters arising;
the CEO’s report;
the CFO’s report;
reports on major projects and current
issues;
specific business proposals;
Copies of Board papers are circulated
in advance of the meetings in either
electronic or hard copy form. Directors are
entitled to request additional information
where they consider further information is
necessary to support informed decision-
making.
2.13 Company secretaries
Details of the Company Secretaries
are set out on page 54 in the Directors’
Report. The appointment and removal of a
Company Secretary is a matter for decision
by the Board. The Company Secretaries
are responsible for ensuring that Board
procedures are complied with and that
governance matters are addressed.
3 Committees of the Board
3.1 Board committees, membership
and charters
ASXCGC Recommendations 2.4, 2.6, 4.1,
4.2, 4.3, 4.4, 8.1, 8.2, 8.4
The Board has the ability under the
company’s constitution to delegate its
powers and responsibilities to committees
of the Board. This allows the directors to
spend additional and more focused time
on specific issues.
The Board has four standing committees
to assist in the discharge of its
responsibilities. These are the:
Audit & Risk Committee;
Nominations Committee;
reports from the chairs of the
Human Resources & Compensation
committees on matters considered at
committee meetings; and
Committee; and
Sustainability Committee.
minutes of previous committee
meetings.
The Board works to an annual agenda
encompassing periodic reviews of
Woodside’s operating business units and
site visits; approval of strategy, business
plans, budgets and financial statements;
and review of statutory obligations and
other responsibilities identified in the Board
Charter.
The CFO, the General Counsel and the
Company Secretary attend meetings of
the Board by invitation. Other members
of senior management attend Board
meetings when a matter under their area
of responsibility is being considered or as
otherwise requested by the Board.
The committees operate principally in
a review or advisory capacity, except
in cases where powers are specifically
conferred on a committee by the Board.
Each committee has a charter, detailing its
role, duties and membership requirements.
The committee charters are reviewed
regularly and updated as required. Prior
to the commencement of each year, the
committees set an annual agenda for
the coming year with reference to the
committee charters and other issues the
committee members or Board consider
appropriate for consideration by the
committees.
Each committee’s charter is available
in the corporate governance section of
Woodside’s website.
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only non-executive directors;
at least three members, the majority of
whom are independent; and
a chairman appointed by the Board who
is one of the independent non-executive
directors.
The Audit & Risk Committee and the
Human Resources & Compensation
Committee have additional membership
requirements which are discussed in
sections 3.2 and 3.4.
The composition of each committee and
details of the attendance of members at
meetings held during the year are set out
in Table 1 on page 46.
All directors are entitled to attend meetings
of the standing committees. Papers
considered by the standing committees
are available on request to directors who
are not on that committee. Minutes of the
standing committee meetings are provided
to all directors and the proceedings of each
meeting are reported by the chairman of
the committee at the next Board meeting.
Each committee is entitled to seek
information from any employee of the
company and to obtain any professional
advice it requires in order to perform its
duties.
Each standing committee participates in
a regular review of its performance and
effectiveness. As a result of the 2011
review, the Board is satisfied that the
committees have performed effectively
with reference to their charters.
Ad hoc committees are convened to
consider matters of special importance or
to exercise the delegated authority of the
Board.
3.2 Audit & Risk Committee
ASXCGC Recommendations 4.1, 4.2, 4.3, 4.4
The role of the Audit & Risk Committee is
to assist the Board to meet its oversight
responsibilities in relation to the company’s
financial reporting, compliance with legal
and regulatory requirements, internal
control structure, risk management
procedures and the internal and external
audit functions.
The Audit & Risk Committee’s charter,
which sets out further details on the
role and duties of the committee, is
available in the corporate governance
section of Woodside’s website.
46
Woodside Petroleum Ltd | 2011 Annual Report
Governance
The committee’s charter requires that the
committee be composed of directors who
are financially literate, with at least one
director possessing accounting or related
financial expertise and qualifications, and
at least one director who has experience
in, and an understanding of, the oil and gas
industry. The chairman of the Audit & Risk
Committee cannot be the Chairman of the
company.
Members of the Audit & Risk Committee
are identified in Table 1 below which sets
out their attendance at meetings. Their
qualifications are listed on pages 38 and
39.
Key activities undertaken by the Audit &
Risk Committee during the year included:
monitoring developments in accounting
and financial reporting relevant to
Woodside;
approval of the scope, plan and fees for
the 2011 external audit;
review of the independence and
performance of the external auditor;
review of significant accounting policies
and practices;
review of Internal Audit reports and
approval of the 2012 Internal Audit
program;
review of the Group’s key risks and risk
3.3 Nominations Committee
management framework;
review of reports from management
on the effectiveness of the Group’s
management of its material business
risks;
monitoring progress of the Woodside
Management System and matters
arising under the Code of Conduct and
the Whistleblower Policy; and
review and recommendation to
the Board for the adoption of the
Group’s half-year and annual financial
statements.
The external auditors, the Chairman, the
CEO, the CFO, the General Counsel,
the Group Financial Controller, the head
of Internal Audit, the head of Corporate
Risk and the head of Taxation are regular
attendees at Audit & Risk Committee
meetings. At each committee meeting,
time is scheduled for the committee to
meet with the external auditors without
management present.
The Committee meets semi-annually
with Woodside’s internal auditors without
management present.
ASXCGC Recommendations 2.4, 2.6
The role of the Nominations Committee
is to assist the Board to review Board
composition, performance and succession
planning. This includes identifying,
evaluating and recommending candidates
for the Board.
The Nominations Committee’s charter,
which sets out further details on the
role and duties of the committee, is
available in the corporate governance
section of Woodside’s website.
All non-executive directors are currently
members of the Nominations Committee.
Table 1 below sets out their attendance at
committee meetings.
Key activities undertaken by the
Nominations Committee during the
year included:
review of the size and composition of
the Board;
Board and CEO succession planning,
including recommending that the
Board appoint Mr Coleman as CEO and
Managing Director and Dr Haynes as a
non-executive director;
Table 1 - Directors in office, committee membership and directors’ attendance at meetings during 2011
Director
Board
Audit & Risk
Committee
Human Resources
& Compensation
Committee
Sustainability
Committee
Nominations
Committee
(1) (2)
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Executive Director
PJ Coleman(3)
DR Voelte (CEO)(4)
Non-executive directors
MA Chaney
MA Cilento
E Fraunschiel
C Haynes(5)
A Jamieson
PJMH Jungels
DI McEvoy
D Megat(7)
I Robertson(7)
4
2
6
6
6
4
6
6
6
2
2
Legend:
Notes:
4
2
6
6
6
4
6
6
6
2
2
4
2
4
5
6
1
2
6
6
2
6
6
6
2
3
2
5
7
3
7(6)
7
3
6
6
3
6
6
2
7
3
7
7
3
4
2
4
6
6
3
6
4
6
2
2
1
4
4
4
2
4
4
4
2
2
4
4
4
2
4
4
4
2
2
Current Chairman
Current member
Prior Chairman
Prior member
(1) ‘Held’ indicates the number of meetings held during the period of each director’s tenure.
(2) ‘Attended’ indicates the number of meetings attended by each director.
(3) Mr Coleman was appointed a director with effect on 30 May 2011.
(4) Mr Voelte retired with effect on 29 May 2011.
(5) Dr Haynes was appointed to the Board and the Nominations Committee with effect on 1 June 2011 and to the Human Resources &
Compensation and Sustainability Committees on 15 June 2011.
(6) Dr Jamieson was appointed chairman of the Human Resources & Compensation Committee on 19 April 2011.
(7) Messrs Megat and Robertson retired with effect on 20 April 2011.
Woodside Petroleum Ltd | 2011 Annual Report
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making recommendations to the Board
regarding the directors seeking re-
election at the 2012 AGM; and
monitoring progress against measurable
objectives in respect of gender diversity;
and
approval of the process for the annual
reviewing and making recommendations
Board performance evaluation.
to the Board on:
3.4 Human Resources &
Compensation Committee
ASXCGC Recommendations 8.1, 8.2, 8.4
The role of the Human Resources &
Compensation Committee is to assist the
Board in establishing human resources
and compensation policies and practices
which:
enable the company to attract, retain
and motivate employees who achieve
operational excellence and create value
for shareholders; and
reward employees fairly and responsibly,
having regard to the results of the
Group, individual performance and
general remuneration conditions.
The Human Resources &
Compensation Committee’s charter,
which sets out further details on the
role and duties of the committee, is
available in the corporate governance
section of Woodside’s website.
The committee’s charter requires at least
one member to have been a director of
Woodside for not less than three years
and states that it is desirable that at least
one member has an understanding of
remuneration policies and practices.
Members of the Human Resources &
Compensation Committee are identified
in Table 1 on page 46 which sets out their
attendance at meetings.
Key activities undertaken by the Human
Resources & Compensation Committee
during the year included:
monitoring legislative and corporate
governance developments in relation to
employment and remuneration matters
relevant to Woodside;
reviewing the company’s remuneration
policies and practices and
recommending for adoption by the
Board an internal procedure on the use
of remuneration consultants;
reviewing the company’s recruitment
and retention strategies;
approval of the appointment and
remuneration packages of executives
reporting directly to the CEO;
remuneration for non-executive
directors;
the remuneration of the CEO;
the criteria for the evaluation of the
performance of the CEO;
incentives payable to the CEO and
senior executives;
employee equity based plans; and
the annual Remuneration Report.
Review of the 2011 performance of the
CEO and executive succession planning
was conducted by the Board.
The Chairman, the CEO, the head of the
Corporate function and the head of the
Human Resources department are regular
attendees at the Human Resources &
Compensation Committee meetings.
The CEO was not present during any
committee or Board agenda item where
his remuneration was considered or
discussed.
3.5 Sustainability Committee
The role of the Sustainability Committee
is to assist the Board to meet its oversight
responsibilities in relation to the company’s
sustainability policies and practices.
The Sustainability Committee’s charter,
which sets out further details on the
role and duties of the committee, is
available in the corporate governance
section of Woodside’s website.
Members of the Sustainability Committee
are identified in Table 1 on page 46 which
sets out their attendance at meetings.
Key activities undertaken by the
Sustainability Committee during the year
included:
review of the Group’s environmental,
health, safety and process safety
performance, incidents and
improvement plans;
monitoring Australian government policy
development in respect of climate
change and reviewing Woodside’s
initiatives to reduce greenhouse gas
emissions;
review of delivery against Woodside’s
Reconciliation Action Plan
commitments;
review of social investment themes and
planned expenditure; and
approval of the annual Sustainable
Development Report.
Further information on the activities
of the Sustainability Committee
is provided in the Sustainable
Development Report which is available
in the sustainable development section
of Woodside’s website.
The Chairman, the CEO, the head of
the Corporate function, the head of the
Health and Safety function, the head of
the Production function and the head of
the Environment department are regular
attendees at Sustainability Committee
meetings.
4 Shareholders
4.1 Shareholder communication
ASXCGC Recommendations 6.1, 6.2
Directors recognise that shareholders, as
the ultimate owners of the company, are
entitled to receive timely and relevant high
quality information about their investment.
Similarly, prospective new investors are
entitled to be able to make informed
investment decisions when considering
the purchase of shares.
Woodside’s Continuous Disclosure
and Market Communications Policy
encourages effective communication with
its shareholders by requiring:
the disclosure of full and timely
information about Woodside’s activities
in accordance with the disclosure
requirements contained in the ASX
Listing Rules and the Corporations Act;
all information released to the market
to be placed on Woodside’s website
promptly following release;
the company’s market announcements
to be maintained on Woodside’s
website for at least three years; and
that all disclosures, including notices
of meetings and other shareholder
communications, are drafted clearly and
concisely.
A copy of the Continuous Disclosure
and Market Communications Policy is
available in the corporate governance
section of Woodside’s website.
Briefings on the financial results, and other
briefings with institutional investors and
analysts containing material information
not previously released to the market,
are webcast and made available on
Woodside’s website.
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Governance
Shareholders are notified in advance of
the date of investor briefing webcasts.
Presentation material from briefings or
speeches containing material information
not previously released, is disclosed to the
market via ASX and posted to the website.
The company produces a short form
annual and half-year shareholder
review. The Annual Report, Sustainable
Development Report and short form
shareholder reviews are available on the
company’s website, or shareholders can
elect to receive hard copies. Shareholders
can elect to receive email notification
when these reports are posted to the
website. Shareholders can also receive
email notification of Woodside’s ASX
announcements and media releases.
Any person wishing to receive
email alerts of significant market
announcements can subscribe through
Woodside’s website.
The company recognises the importance
of shareholder participation in general
meetings and supports and encourages
that participation. The company has direct
voting arrangements in place, allowing
shareholders unable to attend the AGM
to vote on resolutions without having
to appoint someone else as a proxy.
Shareholders are also able to register their
voting instructions electronically.
The company’s AGM is webcast live and
is archived for viewing on Woodside’s
website. The company also makes
available podcasts of the AGM. Copies
of the addresses by the Chairman and
the CEO are disclosed to the market
and posted to the company’s website.
The outcome of voting on the items of
business are disclosed to the market and
posted to the company’s website after the
AGM.
All of Woodside’s directors attended the
company’s 2011 AGM and are expected to
attend the 2012 AGM.
The company’s external auditor
attends the company’s AGM to answer
shareholder questions about the conduct
of the audit, the preparation and content
of the audit report, the accounting
policies adopted by the company and the
independence of the auditor in relation to
the conduct of the audit.
4.2 Continuous disclosure and
market communications
ASXCGC Recommendations 5.1, 5.2
Woodside is committed to ensuring that
shareholders and the market are provided
with full and timely information and that
all stakeholders have equal opportunities
to receive externally available information
issued by Woodside.
A Disclosure Committee manages
compliance with market disclosure
obligations and is responsible for
implementing reporting processes and
controls and setting guidelines for the
release of information. The Disclosure
Committee is comprised of senior
executives.
Woodside’s Continuous Disclosure and
Market Communications Policy, referred
to in section 4.1, and associated guidelines
reinforce Woodside’s commitment
to continuous disclosure and outline
management’s accountabilities and the
processes to be followed for ensuring
compliance. The policy also describes
Woodside’s guiding principles for market
communications. Each Woodside
employee is required to ensure potentially
price-sensitive information concerning
Woodside is assessed with reference to
the Continuous Disclosure and Market
Communications Policy and associated
guidelines as soon as the employee
becomes aware of the information.
A copy of the Continuous Disclosure
and Market Communications Policy is
available in the corporate governance
section of Woodside’s website.
5 Promoting Responsible
and Ethical Behaviour
5.1 Code of Conduct and
Whistleblower Policy
ASXCGC Recommendation 3.1
Woodside has a Code of Conduct which
outlines Woodside’s commitment to
appropriate and ethical corporate practices.
The Code of Conduct describes
Woodside’s mission, vision and values
together with the business principles
approved by the Board. It sets out the
principles, practices and standards
of personal and corporate behaviour
Woodside expects in daily business
activities. The Code of Conduct covers
matters such as compliance with laws and
regulations, responsibilities to shareholders
and the community, sound employment
practices, confidentiality, privacy, conflicts
of interest, giving and accepting business
courtesies and the protection and proper
use of Woodside’s assets.
The Code of Conduct is available in
the corporate governance section of
Woodside’s website.
All directors, officers and employees
are required to comply with the Code of
Conduct. Senior managers are expected
to ensure that employees, contractors,
consultants, agents and partners under
their supervision are aware of the Code
and foster an environment that encourages
ethical behaviour and compliance with the
Code. Employees are required to complete
online Code of Conduct training upon
appointment and thereafter annually.
Failure to comply with the Code of
Conduct is a serious breach of Woodside’s
policy and will be investigated. Breaches
may result in disciplinary action ranging
from a verbal warning through to
termination of employment. All breaches
are required to be recorded.
The Sustainable Development Report,
which is available in the sustainable
development section of Woodside’s
website, provides further information
on the Code of Conduct.
Directors and senior management are
required to provide annual certification
of their compliance with the Code of
Conduct and Securities Dealing Policy. In
addition, all executives and key finance
managers complete a questionnaire
from the directors on a half-yearly basis
which includes questions on compliance
by the manager and all employees
and contractors within their area of
responsibility with the Code of Conduct,
Securities Dealing Policy, Whistleblower
Policy, and Continuous Disclosure and
Market Communications Policy. The
responses to the questionnaire, together
with a report on breaches of the Code
of Conduct and matters raised through
the Whistleblower helpline (refer below),
are considered by the Audit & Risk
Committee.
Woodside’s Whistleblower Policy
documents Woodside’s commitment to
maintaining an open working environment
in which employees and contractors are
able to report instances of unethical,
unlawful or undesirable conduct without
fear of intimidation or reprisal.
Woodside Petroleum Ltd | 2011 Annual Report
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The purpose of the Whistleblower Policy
is to:
help detect and address unacceptable
conduct;
help provide employees and contractors
with a supportive working environment
in which they feel able to raise issues
of legitimate concern to them and to
Woodside;
provide an external confidential helpline
which can be used for reporting
unacceptable conduct; and
help protect people who report
unacceptable conduct in good faith.
A summary of the Whistleblower
Policy is available in the corporate
governance section of Woodside’s
website.
5.2 Securities ownership and dealing
ASXCGC Recommendation 8.4
Woodside’s Securities Dealing Policy
applies to all directors, employees,
contractors, consultants and advisers.
This policy provides a brief summary of
the law on insider trading and other
relevant laws; sets out the restrictions on
dealing in securities by people who work
for, or are associated with, Woodside; and
is intended to assist in maintaining market
confidence in the integrity of dealings
in the company’s securities. The policy
is aligned with the ASX Listing Rules
on trading policies and associated ASX
guidelines.
The policy prohibits directors and
employees from dealing in the company’s
securities when they are in possession
of price-sensitive information that is not
generally available to the market. It also
prohibits dealings by directors and certain
restricted employees during “black-out”
periods, including during the periods
between the end of the financial half-year
and the announcement of the half-year
results and the end of the financial full-year
and the announcement of the full-year
results.
Directors are required to seek the approval
of the Chairman (or in the case of the
Chairman, the CEO) before dealing in the
company’s securities or entering into any
financial arrangement by which Woodside
securities are used as collateral. Restricted
employees are required to notify their
manager and the General Counsel before
dealing in the company’s securities. In
addition, executives reporting directly to
the CEO, and the Company Secretaries,
have notification requirements in respect
of entering into any financial arrangement
by which Woodside securities are used as
collateral.
The Board has adopted a requirement for
non-executive directors to have a minimum
holding of 2,000 shares in Woodside.
Non-executive directors who have less
than the minimum holding are required
to direct 25% of their net fees to the
purchase of shares in Woodside until the
minimum holding requirement is satisfied.
This requirement does not apply to non-
executive directors that do not receive their
directors’ fees directly.
Non-executive directors (other than
directors who are both nominated
and employed by Shell) are eligible to
participate in Woodside’s non-executive
directors’ share plan. Under the plan
a proportion of the director’s after tax
remuneration is applied to the purchase
of shares in Woodside. These shares are
acquired on market at market value at
predetermined intervals.
Any dealing in Woodside securities by
directors is notified to the ASX within five
business days of the dealing.
It is a condition of the Securities Dealing
Policy that directors, and executives
participating in an equity-based incentive
plan, are prohibited from entering into any
transaction which would have the effect
of hedging or otherwise transferring to
any person the risk of any fluctuation in
the value of any unvested entitlement
in Woodside securities. This prohibition
is also contained in the terms of the
Executive Incentive Plan.
A copy of the Securities Dealing Policy
is available in the corporate governance
section of Woodside’s website.
5.3 Political donations
Woodside’s Code of Conduct prohibits
donations to any political party, politician or
candidate for public office in any country
without prior Board approval. In certain
circumstances Woodside representatives
may attend a party-political function which
charges an attendance fee without Board
approval. Attendance at these functions
must be approved by the head of the
relevant business unit or function, and a
register of attendances and the cost of
attending each function is maintained by
Woodside at a corporate level.
6 Risk management and
internal control
6.1 Approach to risk management
and internal control
ASXCGC Recommendations 7.1, 7.4
The Board recognises that risk
management and internal compliance and
control are key elements of good corporate
governance.
Woodside’s Risk Management Policy
describes the manner in which Woodside:
identifies, assesses, monitors and
manages business risk;
identifies material changes to the
company’s risk profile; and
designs, implements and monitors the
effectiveness of the internal compliance
and control system.
A copy of the Risk Management Policy
is available in the corporate governance
section of Woodside’s website.
Woodside recognises that risk is inherent
to its business and effective management
of risk is vital to delivering on its
objectives, success and continued growth.
Woodside’s approach to risk enhances
opportunities, reduces threats and sustains
Woodside’s competitive advantage.
Woodside is committed to managing all
risk in a proactive and effective manner.
The Woodside Group operates a
standardised enterprise-wide risk
management process that provides an
over-arching and consistent framework
for the identification, assessment,
monitoring and management of material
business risks. Woodside has a Corporate
Risk department, separate to Internal
Audit, and aligns its risk management
process with the International Standard
for risk management (ISO 31000 Risk
Management). Risks are identified,
assessed and ranked using a common
methodology. Where a risk is assessed as
material it is reported to and reviewed by
senior executives.
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6.2 Risk management roles and
responsibilities
ASXCGC Recommendations 7.2, 7.4
The Board is responsible for reviewing and
approving Woodside’s risk management
strategy, policy and key risk parameters,
including determining the Group’s appetite
for country risk and major investment
decisions.
The Board is also responsible for satisfying
itself that management has developed
and implemented a sound system of risk
management and internal control. The
Board has delegated oversight of the Risk
Management Policy, including review of
the effectiveness of Woodside’s internal
control system and risk management
process, to the Audit & Risk Committee.
Management is responsible for designing,
implementing, reviewing and providing
assurance as to the effectiveness of
the Risk Management Policy. This
responsibility includes developing
business risk identification, implementing
appropriate risk treatment, strategies
and controls, monitoring effectiveness of
controls and reporting on risk management
capability and performance. Within each
major business and functional area there
is a designated risk and assurance person,
with specific responsibilities designed to
guide compliance and reporting.
Every organisational unit has a risk
management section within its annual
business plan, and these plans are
discussed at regular performance reviews.
The Corporate Risk department is
responsible for the risk management
process; risk management capability;
and providing reports to the Audit &
Risk Committee on the corporate risk
profile and the Group’s risk management
performance.
In 2011, both the Audit & Risk Committee
and the Board reviewed the overall risk
profile for the Group and received reports
from management on the effectiveness
of the Group’s management of its
material business risks. The reported
risks considered Woodside’s health and
safety, financial, environmental, legal
and compliance, social and cultural,
reputational, and security exposure.
Internal Audit is responsible for providing
an independent appraisal of the adequacy
and effectiveness of the Group’s risk
management and internal control system.
6.3 Internal Audit
Internal Audit is independent of both
business management and of the
activities it reviews. Internal Audit provides
assurance that the design and operation of
the Group’s risk management and internal
control system is effective. A risk-based
audit approach is used to ensure that
the higher risk activities in each business
unit or function are targeted by the audit
program. All audits are conducted in a
manner that conforms to international
auditing standards. Internal Audit has
all necessary access to management
and information and is staffed by
industry professionals including qualified
accountants and engineers.
The Audit & Risk Committee oversees
and monitors Internal Audit’s activities
and reviews Internal Audit’s performance.
It approves the annual audit program
and receives reports from Internal Audit
concerning the effectiveness of internal
control and risk management. The Audit &
Risk Committee approves the appointment
of the head of Internal Audit. The head of
Internal Audit is jointly accountable to the
Audit & Risk Committee and the General
Counsel. The Committee members
have access to Internal Audit without the
presence of other management. Internal
Audit has unfettered access to the Audit &
Risk Committee and its chairman.
Internal Audit and external audit are
separate and independent of each other.
6.4 CEO and CFO assurance
ASXCGC Recommendations 7.3, 7.4
The Board receives regular reports on the
Group’s financial and operational results.
Before the adoption by the Board of
the 2011 half-year and full-year financial
statements, the Board received written
declarations from the CEO and the
CFO that the financial records of the
company have been properly maintained
in accordance with section 286 of the
Corporations Act, and the company’s
financial statements and notes comply
with accounting standards and give a true
and fair view of the consolidated entity’s
financial position and performance for the
financial period.
The CEO and the CFO have also stated
in writing to the Board that the statement
relating to the integrity of Woodside’s
financial statements is founded on a sound
system of risk management and internal
control and that the system is operating
effectively in all material respects in
relation to financial reporting risks.
In addition, all executives and key finance
managers complete a questionnaire from
the directors on a half-yearly basis. The
questions relate to the financial position
of the company, market disclosure,
the application of company policies
and procedures (including the Risk
Management Policy), compliance with
external obligations and other governance
matters. This process assists the CEO and
the CFO in making the declarations to the
Board referred to above.
7 External auditor
relationship
ASXCGC Recommendation 4.4
In accordance with Woodside’s
External Auditor Policy, the Audit & Risk
Committee oversees detailed External
Auditor Guidelines covering the terms
of engagement of Woodside’s external
auditor. The guidelines include provisions
directed to maintaining the independence
of the external auditor and assessing
whether the provision of any non-audit
services by the external auditor that
may be proposed is appropriate. Such
provisions are referenced to the Code
of Ethics published by the International
Federation of Accountants (IFAC).
The External Auditor Guidelines contain a
set of controls which address threats to
the independence of the external auditor
including, in particular, any threat which
may arise by reason of self-interest, self-
review, advocacy, familiarity or intimidation.
The External Auditor Guidelines classify a
range of non-audit services which could
potentially be provided by the external
auditor as:
acceptable within limits;
requiring the approval of the CFO;
requiring the approval of the Audit & Risk
Committee; or
not acceptable.
The services considered not acceptable for
provision by the external auditor include:
internal audit;
acquisition accounting due diligence
where the external auditor is also the
auditor of the other party;
transactional support for acquisitions or
divestments where the external auditor
is also the auditor of the other party;
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book-keeping and financial reporting
activities to the extent such activities
require decision-making ability and/or
posting entries to the ledger;
the design, implementation, operation
or supervision of information systems
and provision of systems integration
services;
independent expert reports;
financial risk management; and
taxation planning and taxation
transaction advice.
The External Auditor Guidelines require
rotation of the audit partner and audit
review partner at least every five years and
prohibit the reinvolvement of a previous
audit partner in the audit service for
two years following rotation. In 2011, in
accordance with these requirements,
Mr Russell Curtin of Ernst & Young
became the audit partner of Woodside,
replacing Mr Greg Meyerowitz of Ernst &
Young.
In addition to incorporating safeguards to
ensure compliance with sections 324CI
and 324CK of the Corporations Act in
respect of employment of a former partner
of the audit firm or member of the audit
team as a director or senior employee of
Woodside, the Guidelines also require
assessment of the significance of a
potential threat to the external auditor’s
independence before any employment of
a former partner or audit team member.
Any employment of a member of the audit
team or a partner of the audit firm also
requires the approval of the Audit & Risk
Committee.
Information on the procedures for
the selection and appointment of the
external auditor and for the rotation of
external audit engagement partners is
available in the corporate governance
section of Woodside’s website.
8 Diversity
ASXCGC Recommendations 3.2, 3.3,
3.4, 3.5
Woodside recognises that a talented and
diverse workforce is a key competitive
advantage and our success is a reflection
of the quality and skills of our people.
To this end a key focus of leadership
at Woodside is the development of a
workplace climate that promotes diversity
as a key contributor to our business
success, including diversity in gender, race
and geographic location.
A copy of Woodside’s Diversity
Policy is available in the corporate
governance section of Woodside’s
website.
Woodside’s policy is to recruit and
manage on the basis of competence and
performance regardless of age, nationality,
race, gender, religious beliefs, sexuality,
physical ability or cultural background.
Woodside aims to meet its ongoing
commitment to diversity by, among other
things:
respecting the unique attributes that
each individual brings to the workplace
and fostering an inclusive and supportive
culture;
providing diversity education and
training as well as undertaking
diversity initiatives and measuring their
effectiveness;
the Board reviewing Woodside’s
diversity strategy at least annually; and
the Board annually reviewing the
measurable objectives it has set for
achieving improvement in the diversity
mix of Woodside and the progress in
achieving those objectives.
During 2011, Woodside continued to
meet its specific commitments under
its Reconciliation Action Plan to increase
Indigenous participation at Woodside.
Woodside increased Indigenous
employment by over 45% and now
has 84 Indigenous employees and 64
people on Indigenous pathway programs.
Woodside implemented a leadership
program for middle management in 2011,
focusing on Woodside’s commitments
within the Reconciliation Action Plan along
with programs to support Indigenous
employees such as formal mentoring
and supervisor training. 465 employees
completed cultural awareness training
across all of Woodside’s geographical
locations.
Woodside continued to undertake diversity
initiatives in 2011, aimed at assisting
gender diversity across the organisation,
particularly at senior executive levels and
in underrepresented roles. A key initiative
during 2011 was the implementation of
a diversity awareness workshop across
the organisation which aims to assist
Woodside leaders better understand all
aspects of diversity in the workplace.
Most senior managers participated in the
program in 2011 and the workshop will
continue to be rolled out to the next layer
of management in 2012.
A diversity council was established in
2011, comprised of senior executives
from across the business. The group will
have an important role in the company’s
diversity strategy in 2012, particularly in
supporting implementation of the strategy
throughout Woodside’s business units and
functions.
During 2011, the percentage of female
attrition remained steady and there was
a slight overall increase in the proportion
of women across the organisation.
Women are represented at all levels
within the organisation, with women
filling approximately 10% of senior roles.
The focus in 2012 will continue to be on
building a strong pipeline of female talent
to fill senior roles in the future.
Table 2 on page 52 sets out Woodside’s
2011 measurable objectives, as disclosed
in the 2010 Annual Report, and progress
made towards achieving those objectives.
The 2012 measurable objectives agreed
by the Board to improve gender diversity
are set out below. Woodside will report on
progress in achieving these objectives in
its 2012 annual report.
Graduates
Achieve gender balance in Woodside’s
graduate intake.
Senior management development
Increase the representation of women in
senior management roles.
Executive development
Increase the number of senior women
who are ready to move into executive
leadership roles.
Remuneration
Remuneration equity between men and
women on salary line and job level basis.
Voluntary turnover
Female turnover levels no greater than
organisational turnover levels.
Attraction and retention
Increase overall percentage of women
employed by Woodside.
Education and awareness
Leading Diverse Teams program rolled
out to 300 managers.
Equal Employment Opportunity program
rolled out to 150 managers.
Selection and promotion program rolled
out to 100 managers.
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Table 2 - Woodside’s 2011 measurable diversity objectives
2011 measurable objectives
Progress
300 senior employees per annum
to attend Woodside’s diversity
awareness program
Since its inception in September 2010, 275 senior employees have attended Woodside’s diversity
awareness program, representing almost all senior managers at Woodside. The focus in 2012 will
be to engage the next layer of Woodside’s management in the program.
Reduction in the rates of attrition
in female employees identified
as high talent, through a formal
mentoring program for female
employees
Continued promotion of career
opportunities in the resource
sector including presentations at
career expositions, schools and
universities and other suitable
forums
Senior managers to meet or
formally contact women on
parental leave at least quarterly
Senior executives to review
the career development plans
of female middle management
employees annually to
ensure their appropriateness
in developing and retaining
Woodside’s female talent
During 2011 Woodside encouraged all women identified as high talent to take part in the
company’s formal mentoring program. At 31 December 2011, almost half of those employees
had entered into a formal career mentoring relationship. Many of the women mentored have now
gone on to become mentors for other women in the organisation. In 2011, the attrition rate for
female employees identified as high talent was 3.5%, 3.3% lower than the overall attrition rate at
Woodside for 2011.
Woodside continued to promote career opportunities in the resource sector in 2011, including
presentations to the International Conference on Women in Science and Engineering and
to secondary and tertiary students at the Australian Oil and Gas Exhibition and Conference.
Presentations were also given by Woodside at a number of career expositions, schools and
universities during the period. Woodside’s involvement with major industry bodies provides the
opportunity for the company to profile some of its high talent female employees on external
reference groups, in addition to being submitted for awards that recognise excellence in their
chosen fields. Woodside worked closely with APPEA in 2011 to provide input to an industry
specific careers video that targets schools and universities.
Woodside has had a formal guideline in place since 2007 which continues to apply. It aids both
employees and managers with the transition to and back from parental leave, and specifically
provides flexibility for women to determine the level of contact they wish to be maintained while
on parental leave. This has meant women set contact levels they were comfortable with, which
may have been greater or less than quarterly dependent upon their wishes. A specific survey will
be sent to women who have returned from parental leave in 2011 or 2012 to obtain feedback on
opportunities for improvements in Woodside’s processes.
The career development plans of all female middle management employees were assessed
during 2011 to ensure their appropriateness in developing and retaining Woodside’s female
talent. The review highlighted that additional work is required to ensure that all female middle
management employees have suitable career development plans in place. A program to assist
managers in their development conversations was completed by managers identified as requiring
training in this area. The implementation of a learning management system by Woodside in early
2012 will provide improved transparency around the quality of development plans in place and
progress against them.
Formal annual review of all
part-time work arrangements to
ensure roles are appropriate to
maintain career development
No formal review of part-time work arrangements took place in 2011. Tools will be developed
in 2012 to allow Woodside to undertake a wholesale review of part-time work arrangements to
ensure Woodside has sufficient sustainable part-time roles available. The review will be finalised
and any recommendations implemented in 2013.
Further information regarding Woodside’s commitment to diversity is available on pages 42 and 43 of Woodside’s 2011 Sustainable
Development Report which is available in the sustainable development section of Woodside’s website.
Table 3 - Woodside workforce gender profile
Female
Female %
Male
Male %
Administration
Technical
Supervisory / Professional
Middle Management
Senior Management
Total
Board Members
254
347
368
63
2
1,034
1
67.0
25.2
26.2
9.7
4.5
26.8
12.5
125
1,031
1,037
587
42
2,822
7
33.0
74.8
73.8
90.3
95.5
73.2
87.5
Woodside Petroleum Ltd | 2011 Annual Report
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9 ASX Corporate Governance Council Recommendations Checklist
This table cross-references the ASXCGC Recommendations to the relevant sections of the Corporate Governance Statement and the
Remuneration Report.
ASX Corporate Governance Council Recommendations
Reference
Comply
Principle 1: Lay solid foundations for management and oversight
1.1
1.2
1.3
Companies should establish the functions reserved to the board and those delegated to senior executives
and disclose those functions.
2.1
Companies should disclose the process for evaluating the performance of senior executives.
Companies should provide the information indicated in Guide to Reporting on Principle 1.
Remuneration Report
2.1, 2.9, Remuneration
Report
2.2, 2.4
2.2, 2.3
2.2, 2.3
3.1, 3.3
2.9
2.2, 2.4, 2.6, 2.7, 2.9, 2.10,
3.1, 3.3
Principle 2: Structure the board to add value
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the board should be independent directors.
The chair should be an independent director.
The roles of chair and chief executive officer should not be exercised by the same individual.
The board should establish a nomination committee.
Companies should disclose the process for evaluating the performance of the board, its committees and
individual directors.
Companies should provide the information indicated in Guide to Reporting on Principle 2.
Principle 3: Promote ethical and responsible decision-making
3.1
3.2
3.3
3.4
3.5
Companies should establish a code of conduct and disclose the code or summary of the code as to:
the practices necessary to maintain confidence in the company’s integrity
the practices necessary to take into account their legal obligations and the reasonable expectations of their
5.1
stakeholders
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.
Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy.
The policy should include requirements for the board to establish measurable objectives for achieving gender
diversity for the board to assess annually both the objectives and progress in achieving them.
Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the
board in accordance with the diversity policy and progress towards achieving them.
Companies should disclose in each annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women on the board.
Companies should provide the information indicated in the Guide to reporting on Principle 3.
8
8
8
8
Principle 4: Safeguard integrity in financial reporting
4.1
4.2
4.3
4.4
The board should establish an audit committee.
The audit committee should be structured so that it:
consists only of non-executive directors
consists of a majority of independent directors
is chaired by an independent chair, who is not chair of the board
has at least three members.
The audit committee should have a formal charter.
Companies should provide the information indicated in Guide to Reporting on Principle 4.
Principle 5: Make timely and balanced disclosure
5.1
5.2
Companies should establish written policies designed to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior executive level for that compliance and disclose those
policies or a summary of those policies.
Companies should provide the information indicated in Guide to Reporting on Principle 5.
Principle 6: Respect the rights of shareholders
3.1, 3.2
3.1, 3.2
3.1, 3.2
3.1, 3.2, 7
4.2
4.2
6.1
6.2
Companies should design a communications policy for promoting effective communication with shareholders
and encouraging their participation at general meetings and disclose their policy or a summary of that policy.
Companies should provide the information indicated in Guide to Reporting on Principle 6.
4.1
4.1
Principle 7: Recognise and manage risk
7.1
7.2
7.3
7.4
Companies should establish policies for the oversight and management of material business risks and
disclose a summary of those policies.
6.1
The board should require management to design and implement the risk management and internal control system to
manage the company’s material business risks and report to it on whether those risks are being managed effectively.
The board should disclose that management has reported to it as to the effectiveness of the company’s management
of its material business risks.
The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the
chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations
Act is founded on a sound system of risk management and internal control and that the system is operating effectively in
all material respects in relation to financial reporting risks.
6.2
6.4
Companies should provide the information indicated in Guide to Reporting on Principle 7.
6.1, 6.2, 6.4
Principle 8: Remunerate fairly and responsibly
8.1
8.2
8.3
8.4
The board should establish a remuneration committee.
The remuneration committee should be structured so that it:
consists of a majority of independent directors
is chaired by an independent chair
has at least three members.
Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of
executive directors and senior executives.
Companies should provide the information indicated in Guide to Reporting on Principle 8.
3.1, 3.4
3.1, 3.4
Remuneration Report
3.1, 3.4, 5.2
54
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Directors’ report (including remuneration report)
The directors of Woodside Petroleum
Ltd present their report (including the
Remuneration Report) together with the
Financial Report of the consolidated entity,
being Woodside Petroleum Ltd and its
controlled entities, for the year ended
31 December 2011.
Directors
The directors of Woodside Petroleum Ltd
in office at any time during or since the
end of the 2011 financial year are set out in
Table 1 on page 46. Additional information
on the directors (including qualifications
and experience and directorships of listed
companies held by the directors at anytime
in the last three years) is set out on pages
38 to 39.
The number of directors’ meetings held
(including meetings of committees of
the Board) and the number of meetings
attended by each of the directors of
Woodside Petroleum Ltd during the
financial year are shown in Table 1 on
page 46.
Details of director and senior executive
remuneration is set out in the
Remuneration Report on pages 55 to 69.
The particulars of directors’ interests in
shares of the company as at the date of
this report are set out on page 70.
Principal activities
The principal activities and operations of
the Group during the financial year were
hydrocarbon exploration, evaluation,
development, production and marketing.
Other than as previously referred to in
the Annual Report, there were no other
significant changes in the nature of the
activities of the consolidated entity during
the year.
Consolidated results
The consolidated operating profit
attributable to the company’s shareholders
after provision for income tax and non-
recurring items was $1,507 million
($1,575 million in 2010).
Review of operations
A review of the operations of the
Woodside Group during the financial year
and the results of those operations are set
out on pages 1 to 37.
Significant changes in state of affairs
The review of operations (pages 1 to
37) sets out a number of matters which
have had a significant effect on the state
of affairs of the consolidated entity.
Other than those matters, there were no
significant changes in the state of affairs
of the consolidated entity during the
financial year.
Events subsequent to end
of financial year
Dividends
Since the reporting date, the directors
have declared a fully franked dividend
of US55 cents (2010: US55 cents),
payable on 4 April 2012. The amount of
this dividend will be US$443 million (2010:
US$431 million). No provision has been
made for this dividend in the Financial
Report as the dividend was not declared or
determined by the directors on or before
the end of the financial year.
Likely developments and expected
results
In general terms, the review of operations
of the Group gives an indication of likely
developments and the expected results
of the operations. In the opinion of
the directors, disclosure of any further
information would be likely to result in
unreasonable prejudice to the Group.
Environmental compliance
Woodside is subject to a range of
environmental legislation in Australia
and other countries in which it operates.
Details of Woodside’s environmental
performance is provided on page 23.
Through its Environment Policy, Woodside
plans and performs activities so that
adverse effects on the environment are
avoided or kept as low as reasonably
practicable.
Woodside did not incur any environmental
fines or penalties during 2011.
Dividends
The directors have declared a final dividend
out of profits of the company in respect
of the year ended 31 December 2011
of US55 cents per ordinary share (fully
franked) payable on 4 April 2012.
A fully franked final dividend of
US55 cents per ordinary share was paid
to shareholders on 6 April 2011 in respect
of the year ended 31 December 2010.
Together with the fully franked interim
dividend of US55 cents per share paid to
shareholders on 30 September 2011, the
total dividend paid during the 2011 year
was US110 cents per share fully franked.
Woodside’s dividend reinvestment plan
operated during the year.
Company secretaries
The following individuals have acted as
company secretary during 2011:
Robert J Cole
BSc, LLB (Hons) (ANU)
Executive Vice President Commercial,
General Counsel and Joint Company
Secretary
Mr Cole joined Woodside in 2006 after
14 years as a partner of international law
firm, Mallesons Stephen Jaques, the last
three years as partner in charge of the
Perth office. Mr Cole holds Bachelor of
Science and Bachelor of Laws degrees.
Frances M Kernot
BCom (Hons) (UWA), Grad. Dip. CSP,
CA, ACIS
Company Secretary
Ms Kernot joined Woodside in 2003.
She has 20 years experience in company
secretarial, compliance and financial
accounting roles. Ms Kernot holds a
Bachelor of Commerce degree and is
a Chartered Accountant and Chartered
Secretary. She is a member of the
Chartered Secretaries’ Legislation Review
Committee.
Ms Kernot has resigned as Company
Secretary effective 29 February 2012 to
take a governance and planning role in the
company’s Corporate division. Warren
Baillie was appointed Company Secretary
effective 1 February 2012. Mr Baillie holds
a Bachelor of Laws and a Bachelor of
Commerce and is a Solicitor and Chartered
Secretary. He is a member of the National
Board and WA State Council of Chartered
Secretaries Australia. He has previously
held Assistant Company Secretary and
Senior Legal Counsel roles at Woodside.
Woodside Petroleum Ltd | 2011 Annual Report
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Remuneration report
Contents
Overview
Remuneration Policy and company performance
CEO remuneration
Executive remuneration
Former CEO Mr D Voelte
United States executive
Retention and General Employee Share Plans
Contracts for executives
Non-executive directors
Human Resources & Compensation Committee
Securities Dealing Policy
Use of remuneration consultants
Reporting in United States Dollars
Summary Index of Tables
Table
Description
General
1
2
3
Allocation of executive remuneration between fixed and variable annual reward
Woodside five year performance
Summary of contractual provisions for executives
CEO and Senior Executive Remuneration
4
Compensation of CEO and senior executives for the year ended
31 December 2010 and 31 December 2011
Variable Annual Rewards – Executive Incentive Plan
5
6
7
8
9
10
11
Vesting schedule for Relative Total Shareholder Return-tested Variable Pay Rights
Short-term incentive and long-term incentive peer group
Summary of terms and conditions of Variable Pay Rights awarded under the
Executive Incentive Plan
Summary of terms and conditions of Relative Total Shareholder Return-tested
Variable Pay Rights awarded to the former CEO Mr D Voelte
Summary of executives’ interests in time-tested Variable Pay Rights
Summary of executives’ interests in Relative Total Shareholder Return-tested
Variable Pay Rights
Summary of terms and conditions for WEUSA long-term incentive plans
Retention and General Employee Share Plans
12
13
14
15
16
Summary of senior executives’ interests in shares under the Woodside Share
Purchase Plan
Summary of senior executives’ interests in Equity Rights under the Woodside
Employee Equity Plan
Summary of senior executives’ interest in Equity Rights under the Woodside Equity Plan
Summary of terms and conditions for pay rights awarded under the equity based
retention plan
Time-tested Pay Rights awarded under the equity based retention plan
Non-executive directors
17
18
Annual base Board and committee fees for non-executive directors
Total remuneration paid to non-executive directors in 2011 and 2010
Page
56
57
58
58
59
59
60
61
61
62
62
62
62
57
57
61
63
64
64
64
64
65
66
67
67
68
68
68
68
69
69
56
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Remuneration report (audited)
Overview
Summary of the remuneration structure for the Key Management Personnel
Woodside’s remuneration philosophy is
based on providing competitive rewards
that attract, retain and motivate the
highest calibre people to deliver superior
performance that is aligned with the
creation of value for shareholders. To
achieve this Woodside ensures that the
level and composition of remuneration
is sufficient and reasonable; there is a
clear relationship between Woodside and
individual performance and remuneration;
and the remuneration policy is openly
communicated.
The following table contains a broad
summary of the remuneration structure for
Woodside’s Key Management Personnel.
This structure and its elements are
described in more detail elsewhere in this
Remuneration Report:
Element of remuneration
Fixed Annual Reward (FAR) (including
superannuation)
Salary
Fees
Variable Annual Reward (VAR)
Short-term incentive (STI)
Cash
Variable Pay Rights (VPR)
Long-term incentive (LTI)
Variable Pay Rights (VPR)
Retention and General Employee Share
Plans
Woodside Share Purchase Plan
Woodside Employee Equity Plan
Woodside Equity Plan
Other Equity Based Retention
Category of Key Management Personnel
Non-
executive
directors
CEO
Senior
executives
See page 58
See page 58
See page 61
See page 58
See page 58
See page 58
See page 58
See page 58
See page 59
See page 60
See page 60
See page 60
See page 61
Executive remuneration outcomes
for 2011
Performance outcomes for 2011 for
the Chief Executive Officer and Senior
Executives were as follows:
The value of the short-term incentive
(STI) scorecard for 2011 was 1.00 out of
a maximum possible result of 2.
The total potential amount of the STI
pool for 2011 ranged from a minimum
of A$0 to a maximum of A$28,557,650.
The actual STI pool for 2011 was
A$14,322,637 for 88 participants
including the Chief Executive Officers.
One third of STI for the 2011
performance year for current executives
(A$4,383,699) was deferred as Time-
tested VPRs restricted for three years in
accordance with the terms of the plan.
Time-tested VPRs allocated in 2008
as deferred STI in respect of the 2007
performance year vested during the
year.
Employees derived no value from long-
term incentive (LTI) during 2011 as the
Relative Total Shareholder Return-tested
VPRs failed to reach the performance
hurdle.
In 2011, Woodside implemented a new
general employee equity plan.
Non-executive director fees
The total fees paid to the Chairman and
the non-executive directors on the board
(including fees paid for their involvement
on board committees) are kept within the
total approved by shareholders. Fees for
the Chairman and non-executive directors
increased with effect from July 2011.
Non-executive directors do not receive
performance payments.
Woodside’s Key Management Personnel at any time during or since the end of the 2011 financial year are:
Executives
Executive director
P Coleman - (Managing Director and Chief Executive Officer) (CEO)(1)
D Voelte - (Managing Director and Chief Executive Officer) (CEO)(2)
Senior executives
F Ahmed - (Executive Vice President Development)
R Cole - (Executive Vice President Commercial and General Counsel and Joint Company Secretary)
L Della Martina - (Executive Vice President Australia Business)
K Gallagher - (Executive Vice President North West Shelf)(3)
E Howell - (Executive Vice President Health, Safety and Security)(4)
P Moore - (Executive Vice President Exploration)
G Roder - (Executive Vice President Corporate Strategy and Planning)(5)
V Santostefano - (Executive Vice President Production)
J Soine - (Executive Vice President International Oil and Gas)(6)
L Tremaine - (Executive Vice President and Chief Financial Officer)
Non-executive directors
M A Chaney - (Chairman)
M A Cilento
E Fraunschiel
C M Haynes(7)
A Jamieson
P J M H Jungels
D I McEvoy
D Megat(8)
I Robertson(9)
(1) On 30 May 2011 Mr Coleman was appointed to the position of Managing Director and
Chief Executive Officer.
(2) Mr Voelte ceased to be Managing Director and Chief Executive Office with effect from
30 May 2011. On 30 June 2011 Mr Voelte departed from Woodside.
(3) On 31 October 2011 Mr Gallagher departed from Woodside.
(4) On 31 December 2011 Ms Howell departed from Woodside.
(5) On 27 October 2011 Mr Roder became key management personnel.
(6) On 30 September 2011 Mr Soine departed from Woodside.
(7) On 1 June 2011 Dr Haynes was appointed a non-executive director of Woodside.
(8) On 20 April 2011 Mr Megat retired as a non-executive director of Woodside.
(9) On 20 April 2011 Mr Robertson retired as a non-executive director of Woodside.
Woodside Petroleum Ltd | 2011 Annual Report
57
Remuneration Policy and
company performance
Executive Remuneration Policy
Woodside’s Remuneration Policy aims to
reward executives fairly and responsibly in
accordance with the regional (and in some
instances, international) market and ensure
that Woodside:
provides competitive rewards that
attract, retain and motivate executives of
the highest calibre;
sets demanding levels of performance
which are clearly linked to an executive’s
remuneration;
structures remuneration at a level that
reflects the executive’s duties and
accountabilities;
benchmarks remuneration against
appropriate comparator groups;
aligns executive incentive rewards with
the creation of value for shareholders;
and
complies with applicable legal
requirements and appropriate standards
of governance.
Executive remuneration is reviewed
annually having regard to individual and
business performance and relevant
comparative information.
Executive remuneration structure
Woodside’s remuneration structure for
executives has several components:
Fixed Annual Reward (FAR) - the
‘not at risk’ component (unrelated to
performance) which includes base
salary, superannuation contribution and
other allowances such as motor vehicle
and health insurance. Fixed Annual
Reward is determined on the basis of
the scope of the executive’s role and the
individual level of knowledge, skill and
experience.
Variable Annual Reward (VAR) - the ‘at
risk’ component (related to performance)
which is awarded under the Executive
Incentive Plan (EIP) and comprises:
a short-term incentive; and
a long-term incentive.
Participation in Retention Plans - Equity
Based Pay Rights and Woodside
employee equity plans.
Participation in General Employee Share
Plans - Woodside Share Purchase Plan
and Woodside Equity Plan.
The target allocation of remuneration
between Fixed Annual Reward and
Variable Annual Reward for Woodside’s
executives is shown in Table 1.
Participation in Retention Plans and
participation in General Employee Share
Plans is not taken into account for the
calculation of the percentages shown in
the table.
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Table 1 - Allocation of executive
remuneration between fixed and
variable annual reward
Position
Not at
risk
Fixed
Annual
Reward
CEO
30%
At risk
Variable Annual
Reward
STI
30%
LTI
40%
Executives 45%-50% 30%-33% 20%-22%
Executive remuneration and
company performance
Whilst there are a number of internal
and external factors relevant to
Woodside’s performance, the Board
believes Woodside’s performance is
also attributable to the ability to motivate
and retain its executives and, thus, the
effectiveness of the remuneration policies.
Table 2 below, shows the key financial
measures of company performance over
the past five years.
The Human Resources and Compensation
Committee assists the Board in
creating a strong linkage between
executive remuneration and Woodside’s
performance and the details of these
linkages are provided in the following
sections.
Table 2 - Woodside five year performance
Year Ended 31 December
Net Profit After Tax (US$ million)
Earnings Per Share (US cents)(1)
Dividends Per Share (US cents)
Production (MMboe)
Share closing price (A$)
(last trading day of the year)
5 Year rolling TSR (%)(2)
Relative TSR(3) (1 year)
2011
1,507
190
110
64.6
30.62
3.77
2010
1,575
204
105
72.7
42.56
13.94
2009(4)
1,474
210
95
80.9
47.20
42.03
2008(4)
1,546
225
100
81.3
36.70
33.26
2007(5)
864
128
91
70.6
50.39
109.94
4th Quartile
4th Quartile
1st Quartile
2nd Quartile
2nd Quartile
(1) Basic and diluted earnings per share from total operations.
(2) This calculation is annualised and measured in Australian dollars. The significant change in the three year rolling TSR percentage for 2008 is due to the impact of the economic downturn.
(3) As discussed under the STI component of EIP on page 58.
(4) Amounts were translated to US dollars using monthly average exchange rates.
(5) Amounts were translated to US dollars using annual average exchange rates.
58
Woodside Petroleum Ltd | 2011 Annual Report
Governance
CEO remuneration
Mr P Coleman was appointed Chief
Executive Officer and Managing Director
effective 30 May 2011. Independent
remuneration consultant, Mercer
(Australia) Pty Ltd was engaged to
undertake a review of the CEO’s
remuneration in accordance with
Woodside’s Remuneration Policy and
the CEO’s remuneration was determined
using this review and taking into account
the regional and international market
conditions.
Mr Coleman’s remuneration is governed
by his contract of employment which, in
summary for 2011 is comprised of:
30% Fixed Annual Reward (FAR); and
Variable Annual Reward
30% short-term incentive component
(STI); and
40% long-term incentive component
(LTI).
Short-term incentive
STI is allocated as two-thirds cash and
one-third Time-tested Variable Pay Rights
(VPRs). Time-tested VPRs have the same
terms and conditions as those awarded
to other executives under the Executive
Incentive Plan (EIP) as described on pages
58 and 59.
The grant of an STI award to the CEO
is determined by the STI Scorecard and
individual performance as determined by
the Board.
The individual performance of the CEO
is reviewed by the Board against the
following factors which were chosen
because of their impact on shareholder
value:
setting and pursuing the growth agenda;
achieving effective execution;
building enterprise and organisational
capacity;
enhancing culture and reputation; and
ensuring shareholder focus.
Long-term incentive
The LTI entitlement for the 2011
performance year will be allocated in
March 2012 and will be subject to Relative
Total Shareholder Return (RTSR) testing
in March 2015. The vesting conditions for
the LTI allocation reflect those contained
in the EIP as outlined on page 59 and
summarised in Table 7 on page 64 in
respect of the 2011 EIP allocation.
The LTI performance measure was chosen
because it aligns remuneration with the
company’s long-term performance relative
to a peer group of local and international oil
and gas companies.
A summary of the CEO’s VPRs is provided
in Tables 9 and 10 on pages 65 to 66.
Sign on bonus
Mr Coleman was awarded a one off
sign on incentive with a grant date of
30 May 2011 to recognise certain rights
he was giving up with his former employer.
Accordingly Woodside acquired 66,004
Woodside Petroleum Ltd shares which are
held in trust for Mr Coleman. One third of
these shares will vest on each anniversary
after the date of his appointment. The fair
value of each of the shares awarded is
$49.19. Any unvested entitlements will be
forfeited if Mr Coleman’s employment is
terminated for cause or by his resignation.
Accordingly there are no performance
conditions attached to this award.
Executive remuneration
Fixed Annual Reward
Executives receive a Fixed Annual Reward
(FAR) which is determined by both the
scope and responsibilities of the particular
role, as well as the level of knowledge,
skill and experience of the individual
executive. On an annual basis, Woodside
benchmarks the FAR paid to executives
against comparator organisations using
survey data sourced from external advisors
and data providers.
Woodside uses standardised methodology
to evaluate the relative magnitude of
executive positions and compare executive
remuneration against peer comparators.
Variable Annual Reward - Executive
Incentive Plan
The Variable Annual Reward (VAR)
component of executive remuneration is
based on a percentage of an executive’s
Fixed Annual Reward. This percentage is
determined by the Board with reference to
market comparator data and the scope of
the executive’s role. For most executives
VAR is delivered through the Executive
Incentive Plan (EIP) (refer below). The
delivery of awards of VAR for the former
CEO and the United States based
executive are discussed separately on
page 59.
The EIP aims to reward executives for
meeting or exceeding their individual
performance targets, while at the same
time linking their reward to the creation
of long-term sustainable wealth for
shareholders.
VAR has two elements:
1. the short-term incentive (STI) award
(which links remuneration to short-
term performance) which is paid two
thirds in cash and one third in an award
of variable pay rights, the vesting of
which is dependent on three years
continuing service (Time-tested VPRs);
and
2. the long-term incentive (LTI) award
(which links remuneration to long-term
performance) which is paid by a grant
of variable pay rights, the vesting of
which is dependent on service and
total shareholder return on Woodside
shares relative to an identified peer
group (RTSR-tested VPRs).
A variable pay right represents a right,
if all vesting conditions have been met,
to receive either shares or cash with a
value determined by reference to the
market value of a Woodside share at the
time of vesting. The number of variable
pay rights awarded under the EIP for the
2011 performance year is calculated by
dividing the value of the award (which is
determined after the completion of the
performance year) by the volume weighted
average price (VWAP) of Woodside shares
for the month of December 2011.
The Board determines whether variable
pay rights are to be satisfied in cash or
shares at the time of vesting. If satisfied
in shares, the shares will be purchased on
market. If satisfied in cash, the amount
paid is based on the market value of
a Woodside share at the vesting date
calculated by reference to the VWAP of
Woodside shares in the five trading days
prior to the vesting date. No amount is
payable by the recipient executive on the
grant or vesting of a variable pay right.
The Board has power under the rules of
the EIP to terminate, suspend or amend
the EIP, and to alter the management or
administration of the EIP. Board decisions
about the operation of the EIP are made on
the recommendation of the Committee.
Short-term incentive award
The award of the STI component is
determined by the combination of
individual performance and a company
scorecard which is set and approved
annually by the Board (Scorecard).
Woodside Petroleum Ltd | 2011 Annual Report
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The Scorecard for 2011 was based on four
equally weighted measures:
safety and environmental factors;
production;
operating expenditure; and
Woodside’s one year total return
to shareholders, ranked within an
international peer group (STI Peer Group,
see Table 6 on page 64). Total return
to shareholders is the growth in the
value of shares over the performance
year, plus the value of dividends, other
distributions paid out over that year
(assuming that dividends and other
distributions are reinvested in shares
on the payment date) and pro rata
buybacks.
The measures for the Scorecard were
chosen because of the impact they have
on shareholder value.
The Board has the discretion to aggregate
executives into pool groups to ensure
a fair allocation of total STI between
executives. The total STI award available
for all participating executives is pooled in
each pool group by adding the target STI
value for each individual within the pool(s).
The Scorecard result (with a possible value
of between zero and two) is used as a
multiple to adjust the value of the pool(s).
The adjusted pool(s) are allocated among
the executives in that pool group based
on their individual performance relative to
other executives.
An executive’s performance during the
year is assessed against their individual
performance agreement, which is set at
the start of each year and includes key
performance indicators (KPIs) relevant to
the executive’s areas of responsibility. KPIs
may include the following:
health and safety (e.g. total recordable
case frequency, high potential incident
frequency);
environment (e.g. greenhouse gas
emissions, flared gas);
human resources (e.g. voluntary
turnover);
financial (e.g. revenue, operating costs,
earnings before interest and tax, return
on average capital employed, lifting
costs, drilling costs); and
operational (e.g. production volumes,
project progress).
These KPIs are chosen because they
align individual performance with the
achievement of Woodside’s business plan
and objectives.
The executive receives a performance
rating based upon an assessment of
their performance against their individual
performance agreement. This assessment
is conducted by the CEO and approved by
the Committee. This rating is then used to
determine the STI award (if any).
The STI award for a performance year is
paid two thirds in cash and one third in
an award of Time-tested VPRs. Time-
tested VPRs require that the executive’s
employment not be terminated with
cause, or by resignation for three years
after allocation. Time-tested VPRs may
vest prior to the expiry of the three years
upon a change of control event, or on the
death or total and permanent disablement
of the executive. Time-tested VPRs
granted will also vest upon redundancy,
retirement or the cessation of a fixed term
employment contract.
There are no further performance
conditions for vesting of Time-tested
VPRs.
Long-term incentive award
The LTI award for the 2011 performance
year is granted in the form of variable pay
rights, the vesting of which is linked to
service and total shareholder return (RTSR-
tested VPRs).
The vesting of RTSR-tested VPRs is
conditional on a satisfactory ranking of
Woodside’s relative total shareholder
return (RTSR), as calculated under the
EIP rules, over a three or four year period
in comparison with an international peer
group (LTI Peer Group). The LTI Peer Group
for the grant of RTSR-tested VPRs for the
2011 performance year are set out in Table
6 on page 64.
The LTI performance measure was chosen
because it aligns remuneration with
the company’s long-term performance
relative to a peer group of local and
international oil and gas companies. The
RTSR is calculated by an external advisor
in accordance with the EIP rules on the
third anniversary of the allocation of these
RTSR-tested VPRs. The outcome of the
test is measured against the schedule
shown in Table 5 on page 64. If no RTSR-
tested VPRs vest at this time (because
Woodside has not performed at or above
the 50th percentile of the LTI Peer Group),
the RTSR test is re-applied on the fourth
anniversary of the allocation date. If no
RTSR-tested VPRs vest on the fourth
anniversary, all VPRs for that performance
year lapse.
RTSR-tested VPRs require that the
executive’s employment not be terminated
with cause, or by resignation, prior to
vesting.
RTSR-tested VPRs may vest prior to the
satisfaction of the vesting conditions upon
a change of control event, or on the death
or total and permanent disablement of
the executive. In the event of retirement,
redundancy or the cessation of a fixed
term employment contract of a participant
RTSR-tested VPRs continue in the plan
and are subject to the normal vesting.
A summary of the terms and conditions
of VPRs under each award made to
executives under the EIP is provided
in Table 7 on page 64. Summaries of
executives’ interests in Time-tested VPRs
and RTSR-tested VPRs are in Tables 9 and
10 on pages 65 to 66.
Former CEO Mr D Voelte
The former CEO, Mr D Voelte, ceased to
be CEO on 30 May 2011 and retired from
Woodside effective 30 June 2011.
In accordance with his employment
contract, Mr Voelte will receive a pro
rata STI allocation in respect of the 2011
performance year (which will be paid
entirely as cash in March 2012) and a pro
rata LTI allocation in March 2012 that will
be subject to RTSR testing in March 2015.
Upon Mr Voelte’s retirement all unvested
Time-tested VPR’s vested. Unvested
RTSR-tested VPRs continue to be subject
to the vesting conditions associated with
each allocation. Mr Voelte was paid out
accrued statutory entitlements and did not
receive any other retirement benefits from
Woodside.
United States executive
For part of the year Woodside had one
executive, Mr Soine based in the United
States. The executive was rewarded
for meeting or exceeding performance
targets, while at the same time linking
the reward to the creation of long-term
sustainable wealth for shareholders.
Mr Soine participated in 2009, 2010 and
2011 in two variable incentive plans:
1. the short-term incentive plan which
is called Performance Based Pay
and links remuneration to short-term
performance; and
2. the long-term incentive (LTI) plan
which links remuneration to long-term
performance.
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Governance
Mr Soine departed Woodside in
September 2011 and forfeited all
entitlements arising under the short and
long-term incentive plans.
A summary of the terms and conditions for
the LTI plans awarded in the United States
is provided in Table 11 on page 67.
Retention and General
Employee Share Plans
Woodside has a history of providing
employees with the opportunity to
participate in ownership of shares in
the Company. This has supported staff
retention and alignment of employees
with shareholder interests. In early 2009
Woodside suspended the share purchase
plan in operation at the time following
legislative taxation changes impacting
employee share plans. In July 2009
Woodside implemented the Woodside
Employee Equity Plan (EEP) to support
retention of employees from 2009 to
2012. Since the introduction of the EEP
Woodside has maintained a voluntary
turnover level of around 6%.
As part of our strategy to attract, retain
and motivate our employees, the Board
approved the introduction from November
2011 of a broad-based, long-term equity
plan called the Woodside Equity Plan to
recognise and reward the commitment of
eligible employees.
Woodside Equity Plan
In November 2011, Woodside introduced
the Woodside Petroleum Ltd; Woodside
Equity Plan (WEP) which is available to all
Australian based permanent employees
including executives, other than the CEO.
Woodside’s intention is to enable eligible
employees to build up a holding of equity
in the Company as they progress through
their career at Woodside. The number of
equity rights (ERs) offered to each eligible
employee is calculated with reference
to salary and performance as assessed
under the performance review process as
described on page 58 under the heading
short-term incentive. There are no further
ongoing performance conditions upon
allocation of each individuals ERs. The
linking of performance to an allocation
allows Woodside to recognise and reward
eligible employees for high performance.
The WEP is intended to provide an
opportunity to share in the growth of the
Company as well as provide a retention
mechanism for participating employees.
Participants do not make any payment in
respect of the ERs at grant nor at vesting.
Eligible participants receive an allocation
of ERs. Each ER entitles the participant to
receive a Woodside share on the vesting
date three years after the effective date.
ERs may vest prior to the vesting date on
a change of control or on a pro rata basis,
at the discretion of the CEO, limited to
the following circumstances; redundancy,
retirement (after six months participation),
death, termination due to medical illness
or incapacity or total and permanent
disablement of a participating employee.
An employee whose employment is
terminated by resignation or for cause prior
to the vesting date will forfeit all of their
ERs.
Shares will either be issued by Woodside
to the Trustee or acquired on market
by the Trustee to satisfy vesting ER
entitlements. The number of ERs that vest
may be adjusted for any interruptions to an
employee’s service. Eligible participants
who are on an international assignment
may receive a cash amount subject to
Board discretion.
Participants in the WEP cannot dispose of
or otherwise deal with an ER and do not
receive any dividends or have voting rights
in respect of an ER. Allocations of ERs to
participants will be adjusted in the event of
Woodside making a bonus issue of shares
or upon reconstruction of the Company’s
share capital.
Table 14 on page 68 provides a summary
of executives’ interests in ERs under the
WEP.
Woodside Employee Equity Plan
2009 - 2012
In July 2009 Woodside introduced the
Woodside Petroleum Ltd 2009 – 2012
Employee Equity Plan (EEP) which was
available to all Australian based employees
including executives, other than the CEO.
The EEP is intended to provide a retention
mechanism for participating employees
as well as provide an opportunity to
share in the growth of the Company,
consequently no performance conditions
are attached. As the objective of the EEP
is primarily retention, the ERs are a form
of remuneration that is not dependent
on individual performance or Woodside’s
performance. Participants do not make any
payment in respect of the ERs at grant nor
at vesting.
Eligible participants received a one-off
allocation of ERs. Each ER entitles the
participant to receive a Woodside share
on the vesting date. ERs may vest prior
to the vesting date on a change of control
or, at the discretion of the CEO, limited to
the following circumstances; redundancy,
death, termination due to medical illness
or capacity or total and permanent
disablement of a participating employee.
An employee whose employment is
terminated by resignation, retirement,
cessation of a fixed term employment
contract or for cause prior to 31 July 2012
will forfeit all of their ERs.
Shares will either be issued by Woodside
to the Trustee or acquired on market
by the Trustee to satisfy vesting ER
entitlements. The number of ERs that vest
may be adjusted for any interruptions to an
employee’s service. Eligible participants
who are on an international assignment
may receive a cash amount subject to
Board discretion.
Participants in the EEP cannot dispose of
or otherwise deal with an ER and do not
receive any dividends or have voting rights
in respect of an ER.
Table 13 on page 68 provides a summary of
executives’ interests in ERs under the EEP.
Woodside Share Purchase Plan
In April 2007 Woodside introduced the
Woodside Share Purchase Plan (WSPP)
which was available to all Australian based
employees, including executives, up to
March 2009. The plan was suspended
in May 2009 due to changes in tax
legislation and has since been closed.
The WSPP provided eligible employees
with an opportunity to acquire Woodside
shares and to share in the growth of the
Company. The WSPP year was based on a
1 July to 30 June period (WSPP Year).
Participants in the WSPP elected to
sacrifice an amount of salary, and this
amount was applied by the WSPP Trustee
to purchase Woodside shares on market.
The maximum amount that could be salary
sacrificed in the 2008/09 WSPP Year was
A$12,000 and the minimum was A$3,000.
Woodside provided funds to the WSPP
Trustee to buy additional Woodside shares
(matching shares) on market at a fixed ratio
to the shares purchased with sacrificed
funds (in the 2008/09 WSPP Year the ratio
was one and a half matching shares for
one purchased with sacrificed funds; in the
2007/08 WSPP Year the ratio was one for
one).
All shares purchased under the WSPP are
held in trust. To become finally entitled to
the matching shares funded by Woodside,
a participant must remain a Woodside
employee for a three year qualification
period. Participants cannot dispose of
shares purchased with sacrificed funds
within this three year qualification period
unless they cease employment with
Woodside (in which case they become
entitled to deal with the shares purchased
with sacrificed funds, but lose their
entitlement to matching shares). After the
three year qualification period participants
may elect to have their WSPP shares
retained in the trust for up to a further
seven years, provided they remain in the
employment of Woodside.
Participants receive any dividends paid on
shares held in the trust, have voting rights,
may participate in any rights issues and
receive any bonus issues.
The matching shares were a form of
remuneration that was not dependent on
the employees’ individual performance
or Woodside’s performance as it was
intended to align eligible employees to
shareholder value.
Table 12 on page 67 provides a summary
of executives’ interests in shares under
the WSPP. Executives were entitled to
participate in the 1 for 12 renounceable
rights issue announced in December 2009
in respect of their shareholdings under
the WSPP. Table 12 does not include any
shares which were acquired by executives
in 2010 pursuant to the rights issue.
Woodside Petroleum Ltd | 2011 Annual Report
61
Other equity based retention
As part of a retention strategy for senior
executives, some executives participate in
equity based retention plans (Pay Rights
Plan) under which eligible executives are
granted pay rights (PRs). A PR entitles the
participant to an award of cash or shares
on vesting.
PRs awarded under the retention plan
in November 2007 require Woodside’s
relative total shareholder return for the
performance year immediately preceding
the specific vesting date to be at or above
the 50th percentile of the STI Peer Group
(refer to short-term incentives above)
before vesting can occur.
Table 15 on page 68 provides a summary
of the terms and conditions for PRs under
the Pay Rights Plan and Table 16 on page
68 provides a summary of executives’
interests in PRs.
Contracts for executives
Each senior executive has a contract
of employment with the exception of
Mr G Roder who is a third party contractor
engaged through Energy Resourcing
Australia. Table 3 below contains a
summary of the key contractual provisions
of the contracts of employment for the
executives.
Termination provisions
Under each executive contract of
employment Woodside may choose to
terminate the contract immediately by
making a payment equal to the ‘Company
Notice Period’ of Fixed Annual Reward in
lieu of notice as shown in Table 3 below.
In 2009 the Board determined to amend
new executive contracts to ensure that any
payments made in the event of a company
initiated termination of an executive
contract would be consistent with the
Corporations Amendment (Improving
Accountability on Termination Payments)
Act 2009.
Non-executive directors
Remuneration Policy
Woodside’s Remuneration Policy for non-
executive directors aims to attract, retain,
motivate and to remunerate fairly and
responsibly having regard to:
the level of fees paid to non-executive
directors relative to other major
Australian companies;
the size and complexity of Woodside’s
operations; and
the responsibilities and work
requirements of Board members.
Fees paid to non-executive directors are
recommended by the Committee based
on advice from external remuneration
consultants, Mercer Australia Pty Ltd and
determined by the Board, subject to an
aggregate limit of A$3 million per financial
year, approved by shareholders at the 2007
Annual General Meeting (AGM).
The annual base Board fees and
Committee fees were increased with
effect from 1 July 2011.
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Table 3 - Summary of contractual provisions for executives
Employing company
Contract duration
Termination notice
period company(1)(2)
Termination notice
period executive(1)
Name
P Coleman
D Voelte(3)
F Ahmed
R Cole
L Della Martina
K Gallagher(5)
E Howell(6)
P Moore
G Roder
Woodside Petroleum Ltd
Woodside Petroleum Ltd
Unlimited
Unlimited
Woodside Energy Ltd
Fixed term contract until
Woodside Energy Ltd
Woodside Energy Ltd
Woodside Energy Ltd
Woodside Energy Ltd
Woodside Energy Ltd
13 February 2012(4)
Unlimited
Unlimited
Unlimited
Unlimited
Unlimited
Energy Resourcing Australia
Fixed term until
V Santostefano
Woodside Energy Ltd
J Soine(7)
L Tremaine
Woodside Energy (USA) Inc
Woodside Energy Ltd
10 August 2012
Unlimited
Unlimited
Unlimited
12 months
12 months
12 months
12 months
12 months
12 months
12 months
12 months
3 months
12 months
12 months
12 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
6 months
3 months
6 months
2 Weeks
6 months
(1) Termination provisions – Woodside may choose to terminate the contract immediately by making a payment equal to the ‘Company Notice Period’ of FAR (or in the case of Mr Roder a
payment equal to his agreed day rate for the company notice period) in lieu of notice. In the event of termination for serious misconduct or other nominated circumstances, executives are
not entitled to this termination payment.
(2) On termination of employment, executives will be entitled to the payment of any FAR calculated up to the termination date, any leave entitlement accrued at the termination date and
any payment or award permitted under the EIP Rules. Executives are restrained from certain activities for specified periods after termination of their employment in order to protect
Woodside’s interests.
(3) Mr Voelte departed Woodside on 30 June 2011.
(4) At the time of reporting, Woodside is progressing the extension of Mr Ahmed’s fixed term contract.
(5) Mr Gallagher departed Woodside on 31 October 2011.
(6) Ms Howell departed Woodside on 31 December 2011.
(7) Mr Soine departed Woodside on 30 September 2011.
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Woodside Petroleum Ltd | 2011 Annual Report
Governance
The Woodside Petroleum Ltd shareholding
guideline for non-executive directors
requires non-executive directors to hold
a minimum holding of 2,000 Woodside
Petroleum Ltd shares and non-executive
directors who have less than the minimum
holding will be required to direct 25%
of net (after tax) fees to the purchase
of Woodside shares until the minimum
holding requirement is satisfied. The non-
executive directors may utilise the Non-
Executive Directors’ Share Plan (NEDSP)
to acquire the shares on market at market
value. As the shares are acquired with
net fees the shares in the NEDSP are not
subject to any performance conditions.
Remuneration structure
Non-executive director remuneration
consists of base fees, committee fees,
other payments for additional services
outside the scope of Board and committee
duties, and statutory superannuation
contributions or payments in lieu
(currently 9%). Non-executive directors
do not earn retirement benefits other than
superannuation and are not entitled to any
form of performance-linked remuneration.
Table 17 on page 69 shows the annual
base Board and Committee fees for non-
executive directors.
In addition to these fees, non-executive
directors are entitled to reimbursement
of reasonable travel, accommodation
and other expenses incurred attending
meetings of the Board, committees
or shareholders, or while engaged on
Woodside business. Non-executive
directors are not entitled to compensation
on termination of their directorships.
Board fees are not paid to the CEO, as
the time spent on Board work and the
responsibilities of Board membership
are considered in determining the
remuneration package provided as part of
his normal employment conditions.
The total remuneration paid to, or in
respect of, each non-executive director in
2011 is set out in Table 18 on page 69.
Human Resources &
Compensation Committee
The Human Resources & Compensation
Committee (Committee) assists the Board
to determine appropriate remuneration
policies and structures for non-executive
directors and executives. The role of the
Committee is described in the Corporate
Governance Statement set out in this
Annual Report.
Securities Dealing Policy
Woodside’s Securities Dealing Policy
prohibits executives who participate in
an equity-based executive incentive plan,
from entering into any transaction which
would have the effect of hedging or
otherwise transferring to any other person
the risk of any fluctuation in the value of
any unvested entitlement in Woodside
securities. Directors proposing to enter into
arrangements to limit the economic risk of
a vested holding in Woodside securities
must obtain the approval of the Chairman
(or, where the notifying executive is the
Chairman, the CEO) prior to entering into
the arrangement and immediately provide
details of the arrangements entered into.
Executives who report directly to the CEO
and the Company Secretary/Secretaries
must submit a completed compliance
certificate in respect of arrangements
to limit the economic risk of a vested
holding in Woodside securities to their
direct manager and then to the General
Counsel for acknowledgement. Adherence
to this policy by executives is monitored
by six monthly directors’ questionnaires
to management. Further information on
Woodside’s Securities Dealing Policy is
provided in section 5.2 of the Corporate
Governance Statement on page 49.
In addition to the restrictions imposed
under the Securities Dealing Policy, key
management personnel are prohibited by
law from hedging any of their unvested
entitlements or any of their vested
entitlements that remain subject to a
holding lock.
Use of remuneration
consultants
The Committee directly engages external
advisors to provide input to the process
of reviewing director, executive director
and executive remuneration. In June 2011
the Committee established a process for
obtaining external advice in respect of key
management personnel (KMP).
In 2011 Mercer and Hay Group were
engaged at the direction of the Committee
to provide market remuneration data to the
Committee.
Mercer provided market data and a
recommendation in regard to non-
executive director fees in May 2011.
Mercer also provided market data to the
Committee in November 2011 in relation to
the remuneration of the CEO. The market
data report was provided directly to the
Committee through the Committee’s
Chairman. The fee for the provision
of the report was A$26,930. Mercer
provided a statement to the Committee
that the report had been prepared free of
undue influence from KMP. Woodside’s
superannuation arrangements for all
participating employees are provided
through Woodside’s participation in the
Mercer Master Trust.
Hay Group provided executive
remuneration market data to the Chairman
of the Committee in November 2011. The
fee for the provision of the report was
A$19,300. Although it was not required
because no recommendations were
made Hay Group provided a statement to
the Committee that the report had been
prepared free of undue influence from
KMP. Hay Group also provide a market
data report to Woodside in regard to non
KMP employees as well as providing
Woodside access to the Hay Group data
base for ad hoc enquiries, other than for
KMP employees. Hay Group also provided
leadership development training and
conducted a staff survey for Woodside
during 2011.
Reporting in United States
Dollars
In this report the remuneration and
benefits reported have been presented
in US dollars. This is consistent with
the change in functional currency from
Australian dollars to US dollars from
1 January 2010. Compensation for
Australian-based employees is paid
in Australian dollars and, for reporting
purposes, converted to US dollars based
on the average exchange rate for the
payment period. Valuation of equity
awards is converted at the spot rate
applying when the equity award is granted.
The Australian dollar compensation paid
during the year ended 31 December 2010
was converted to US dollars at the average
exchange rate of US$1:A$1.090, and the
valuation of equity awards at 1 January
2010 was converted to US dollars at the
spot rate of US$1:A$1.110. The Australian
dollar compensation paid during the year
ended 31 December 2011 was converted
to US dollars at the average exchange
rate of US$1:A$0.968, and the valuation
of equity awards at 1 January 2011 was
converted to US dollars at the spot rate of
US$1:A$0.976.
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Table 4 - Compensation of CEO and senior executives for the year ended 31 December 2010 and 2011(1)
Short–term
Post employment
Share-
based
payments
Long-term
Cash salary
and fees
Cash
bonuses
Non-
monetary
Pension super
Cash bonus
Executives
Year
Salaries,
fees and
allowances
Short-term
incentive
bonus(2)
Benefits and
allowances(3)
Company
contributions to
superannuation(4)
Share plan(5)
Long-term
incentive
plan (6)
Termination
benefits
Total
remuneration
Performance
related %
P Coleman,
Managing Director
and Chief Executive
Officer(7)
F Ahmed, Executive(8)
Vice President
Development
R Cole, Executive
Vice President
Commercial and
General Counsel
and Joint Company
Secretary
L Della Martina,
Executive Vice
President Australia
Business
P Moore, Executive
Vice President
Exploration(9)
V Santostefano,
Executive Vice
President Production
L Tremaine, Executive
Vice President and
Chief Financial
Officer(10)
G Roder, Executive
Vice President
Corporate Strategy
and Planning(11)
M Chatterji,
Executive Vice
President & Chief
Financial Officer(12)
K Gallagher, Executive
Vice President North
West Shelf(13)
E Howell, Executive
Vice President Health,
Safety & Security(14)
A Kantsler, Executive
Vice President
Health, Safety &
Security(15)
2011
1,375,146
978,550
38,730
9,569
1,460,264
3,862,259
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2011
2010
473,808
285,544
363,684
576,606
189,609
371,382
643,782
340,174
2011
726,382
415,541
12,516
23,065
453,332
2010
568,201
337,725
8,652
79,640
454,976
2011
455,952
248,483
51,148
100,309
329,496
2010
369,382
216,143
42,160
81,264
450,773
2011
2010
2011
2010
380,764
183,111
41,352
83,643
243,545
62,875
30,899
6,319
13,794
34,977
544,433
362,194
13,003
110,784
362,994
429,199
179,477
10,939
86,888
299,222
1,766,818
1,477,771
1,630,836
1,449,194
1,185,388
1,159,722
932,415
148,864
1,393,408
1,005,725
53
36
53
55
49
57
46
44
52
48
2011
503,712
294,809
12,516
27,584
243,060
1,081,681
50
2011
114,680
25,281
10,301
150,262
2010
931,332
646,418
212,713
1,349,336
3,139,799
63
2011
2010
2011
2010
429,907
13,184
52,841
(539,830)
186,579
142,681
387,727
252,009
15,524
70,585
277,131
1,002,976
549,013
374,872
14,050
77,778
529,720
23,310
1,568,743
435,419
225,052
9,754
113,824
324,882
1,108,931
2010
349,771
173,869
9,218
60,469
821,728
86,583
1,501,638
J Soine, Executive Vice
President International
Oil and Gas(16)
2011
2010
336,975
314,514
308,448
696
D Voelte, Managing
Director and Chief
Executive Officer(17)
2011
1,366,014
1,210,942
150,583
2010
2,563,341
1,704,861
123,347
136,873
23,927
47
(533,441)
14,977
(44,569)
162
236,644
884,391
2,334,256
3,374,812
761,909
5,823,704
7,766,361
(1) The Australian dollar compensation paid during the year ended 31 December 2011
was converted to US dollars at the average exchange rate of US$1:A$0.96834, and
valuation of equity awards at 1 January 2011 was converted to US dollars at the spot
rate of US$1:A$0.97585.The Australian dollar compensation paid during the year
ended 31 December 2010 was converted to US dollars at the average exchange rate of
US$1:A$1.090, and valuation of equity awards at 1 January 2010 was converted to
US dollars at the spot rate of US$1:A$1.110.
(2) The amount represents the short-term incentive earned in the respective year, which is
actually paid in the following year.
(3) Reflects the value of allowances and benefits including but not limited to travel, motor
vehicle and health insurance.
(5)
(4) As a non-resident for Australian tax purposes Mr Ahmed, Mr Voelte and Mr Chatterji
have elected to receive a cash payment in lieu of all superannuation contributions, in
accordance with the Superannuation Guarantee (Administration) Act 1992. The cash
payment is subject to (PAYG) income tax and paid as part of their normal monthly salary.
The amount is included in salaries, fees and allowances.
‘Share plan’ incorporates all equity based plans. In accordance with the requirements
of AASB 2 Share-based Payment, the fair value of rights as at their date of grant has
been determined by applying the Black-Scholes option pricing technique or binomial
valuation method combined with a Monte Carlo simulation with the exception of
Mr Ahmed’s 2007 and 2008 VPR’s which are to be settled in cash as a result of his
international secondment. The fair value of rights is amortised over the vesting period,
such that ‘Total remuneration’ includes a portion of the fair value of unvested equity
compensation during the year. The amount included as remuneration is not related to or
indicative of the benefit (if any) that individual executives may ultimately realise should
these equity instruments vest.
(6) The cash based long-term incentive plan is only applicable to the US based executive.
In accordance with the requirements of AASB 119 Employee Benefits, the value of the
benefit has been determined using the projected unit credit method.
(7) Mr Coleman commenced with Woodside on 30 May 2011. The Australian dollar
compensation paid for the period from 30 May 2011 to 31 December 2011 was
converted to US dollars at the average rate of US$1:A$0.96518.
(8) As Mr Ahmed’s contract was due to expire on 13 February 2012 and details of an
extension had not been finalised at the time of reporting, his share base payment
amortisation expense has been accelerated accordingly.
(9) On 27 October 2010 Mr Moore was appointed to KMP. The Australian dollar
compensation paid from 27 October 2010 to 31 December 2010 was converted to
US dollars at the average exchange rate of US$1:A$1.01057.
(10) On 1 January 2011 Mr Tremaine was appointed to KMP.
(11) On 27 October 2011 Mr Roder was appointed to KMP. The Australian dollar
compensation paid from 27 October 2011 to 31 December 2011 was converted to
US dollars at the average exchange rate of US$1:A$0.98399. Mr Roder is engaged as a
third party contractor through Energy Resourcing Australia, he receives a fixed daily rate
and is not eligible to participate in the EIP.
(12) On 31 December 2010 Mr Chatterji departed Woodside.
(13) On 31 October 2011 Mr Gallagher departed Woodside. On 13 January 2010
Mr Gallagher was appointed to KMP. The Australian dollar compensation paid for the
period from 13 January 2010 to 31 December 2010 was converted to US dollars at the
average exchange rate of US$1:A$1.08993. The Australian dollar compensation paid for
the period from 1 January 2011 to 31 October 2011 was converted to US dollars at the
average rate of US$1:A$0.96451.
(14) On 31 December 2011 Ms Howell departed Woodside.
(15) On 2 July 2010 Dr Kantsler departed Woodside. The Australian dollar compensation
paid from 1 January 2010 to 2 July 2010 was converted to US dollars at the average
exchange rate of US$1:A$1.12199 and the termination payment was converted to
US dollars at the exchange rate of US$1:A$1.1940.
(16) On 19 April 2010 Mr Soine was appointed to KMP and on 30 September 2011 Mr Soine
departed Woodside.
(17) On 30 June 2011 Mr Voelte departed Woodside. The Australian dollar compensation
paid for the period from 1 January 2011 to 30 June 2011 was converted to US dollars at
the average exchange rate of US$1:A$0.96746.
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Governance
Executive Incentive Plan
Table 5 - Vesting schedule for RTSR-tested VPRs
Woodside RTSR percentile position within Peer Group
Less than 50th percentile
Equal to 50th percentile
Equal to 75th percentile
Equal to 100th percentile
Vesting between these percentile points is on a pro rata basis. While a VPR generally only confers an entitlement to a single share on vesting (or its cash value), when greater than 100%
vesting is achieved additional shares are allocated in respect of each RTSR-tested VPR to achieve the necessary uplift.
Vesting of RTSR-tested VPRs
no vesting
50% vest
100% vest
150% vest (i.e. 50% uplift for topping LTI Peer Group)
Table 6 - STI and LTI peer group(1)
Apache Corporation
Anadarko Petroleum Corporation
BG Group PLC
CNOOC Limited
Inpex Corporation
Marathon Oil Company
Murphy Oil Corporation
Pioneer Natural Resources Company
Repsol YPF, S.A.
Santos Ltd
Talisman Energy Inc
(1) As a consequence of the merger between Petro-Canada and Suncor Energy Inc. in
August 2009, Petro-Canada was deleted from the Peer Group for the purposes of LTI
awards made in March 2008 and February 2009, leaving 10 comparator companies. For
the 2009, 2010 and 2011 Performance Year Inpex Corporation has been added to the LTI
Peer Group.
Table 7 - Summary of terms and conditions of VPRs awarded under the EIP
The following table summarises the terms and conditions of the VPRs awarded to the executives under the EIP for 2011, 2010, 2009, 2008 and 2007.
Terms and conditions
2011 VPR Allocation
2010 VPR Allocation
2009 VPR Allocation
2008 VPR Allocation
2007 VPR Allocation
Allocation Date
1 March 2012
25 February 2011
5 March 2010
27 February 2009
14 March 2008
Pricing Date
Grant Date
Volume Weighted
Average Price
31 December 2011
31 December 2010
31 December 2009
31 December 2008
31 December 2007
1 January 2011
1 January 2010
1 January 2009
1 January 2008
1 January 2007
A$31.93
A$42.78
A$47.86
A$33.50
A$48.25
Vesting Date(1)
1 March 2015
25 February 2014
5 March 2013
27 February 2012
14 March 2011(3)
Retesting Date(2)
1 March 2016
25 February 2015
5 March 2014
27 February 2013
14 March 2012
(1) Provision is made for accelerated vesting in certain events such as total and permanent disability, death or a change in control of Woodside.
(2) Retesting is applied to the RTSR-tested VPRs if the RTSR threshold is not achieved at the vesting date. Retesting is not applicable in respect of Time-tested VPRs.
(3) At the initial vesting test on 14 March 2011 the RTSR threshold was not achieved for the 2007 allocation which will be subject to retest on 14 March 2012. If the threshold RTSR is not
achieved on retest, the RTSR-tested VPRs will lapse.
Table 8 - Summary of terms and conditions of RTSR-tested VPRs awarded to the former CEO Mr D Voelte(1)
The following table summarises the terms and conditions of the VPRs awarded to the former CEO Mr D Voelte under the terms of his employment
contract for 2011, 2010, 2009 and 2008.
Terms and conditions 2011 VPR Allocation
2010 VPR Allocation
2009 VPR Allocation
2008 VPR Allocation
2008 Accelerated LTI(1)
Allocation Date
1 March 2012
25 February 2011
5 March 2010
27 February 2009
14 March 2008
Pricing Date
Grant Date
Volume Weighted
Average Price
31 December 2011
31 December 2010
31 December 2009
31 December 2008
31 December 2007
1 January 2011
1 January 2010
1 January 2009
1 January 2008
19 February 2008
A$31.93
A$42.78
A$47.86
A$33.50
A$48.25
Vesting Date(2)
1 March 2015
25 February 2014
5 March 2013
27 February 2012
31 March 2011(4)
Retesting Date(3)
1 March 2016
25 February 2015
5 March 2014
27 February 2013
14 March 2012
(1) Time-tested VPRs awarded to Mr Voelte in respect of 2008, 2009 and 2010 vested upon his retirement. For 2011 the STI was paid fully in cash and no Time-tested VPRs
were allocated to Mr Voelte.
(2) Provision is made for accelerated vesting in certain events such as total and permanent disability, death or a change in control of Woodside.
(3) Retesting is applied to the RTSR-tested VPRs if the RTSR threshold is not achieved at the vesting date.
(4) At the initial vesting test on 14 March 2011 the RTSR threshold was not achieved for the 2008 Accelerated LTI which will be subject to retest on 14 March 2012.
If the threshold RTSR is not achieved on retest, the RTSR-tested VPRs will lapse.
Table 9 - Summary of executives’ interests in time-tested VPRs(1)
Name
Allocation date
Vesting
date(2)
Awarded but
not vested
Vested in
2011
% of total
vested
Woodside Petroleum Ltd | 2011 Annual Report
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Fair value(3) of VPRs by performance year
2010
2009
2008
2007
2011
38.87
42.86
42.86
30.07
40.87
30.07
40.87
30.07
40.87
30.07
40.87
30.07
40.87
30.07
40.87
30.07
40.87
30.07
40.87
31.26
31.26
39.81
39.92
39.81
39.92
39.81
39.92
39.81
39.92
39.81
39.92
29.57
38.32
38.87
38.87
38.87
38.87
38.87
38.87
29.57
38.32
29.57
38.32
38.32
29.57
38.32
38.32
29.57
38.32
29.57
38.32
995
8
1,756
15
1,677
14
748
6
1,669
14
863
7
1,677
14
1,905
3,110
16
26
4,192
2,867
16,513
28,209
137
234
31,445
21,719
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
amount included as remuneration is not related to or
indicative of the benefit (if any) that individual executives
may ultimately realise should these equity instruments
vest.
(4) Additional allocation of VPRs to each tranche of granted
VPRs, following renounceable equity rights issue by the
company.
(5) Mr Ahmed was not within the definition of KMP
(8) Mr Tremaine did not meet the definition of KMP under
AASB 124 for years prior to 2011. Previous years
comparative figures are not shown.
(9) Mr Gallagher did not meet the definition of KMP under
AASB 124 for years prior to 2010. Previous years
comparative figures are not shown. A total of 9,148
Time-tested VPRs were forfeited on Mr Gallagher’s
departure on 31 October 2011.
under AASB 124 for the 2007 year. Previous years
comparative figures are not shown.
(10) A total of 10,195 Time-tested VPRs vested when
Ms Howell departed Woodside on 31 December 2011.
(6) Mr Della Martina did not meet the definition of KMP
(11) A total of 81,607 Time-tested VPRs vested when
under AASB 124 for 2007. Previous year’s comparative
figures are not shown.
(7) Mr Moore did not meet the definition of KMP under
AASB 124 for years prior to 2010. Previous years
comparative figures are not shown.
Mr Voelte departed Woodside on 30 June 2011.
P Coleman
F Ahmed(5)
March 2012
March 2008
March 2015
14,791
March 2011
February 2009
February 2012
3,245
December 2009(4)
March 2011
December 2009(4)
February 2012
March 2010
March 2013
February 2011
February 2014
March 2012
March 2008
March 2015
March 2011
27
3,692
2,415
4,330
February 2009
February 2012
4,543
R Cole
December 2009(4)
March 2011
December 2009(4)
February 2012
March 2010
March 2013
February 2011
February 2014
March 2012
L Della Martina(6)
March 2008
March 2015
March 2011
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4,599
4,302
6,301
February 2009
February 2012
2,916
December 2009(4)
March 2011
December 2009(4)
February 2012
March 2010
March 2013
February 2011
February 2014
March 2012
March 2008
March 2015
March 2011
December 2009(4)
March 2011
February 2011
February 2014
P Moore(7)
March 2012
V Santostefano
March 2008
March 2015
March 2011
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2,950
2,753
3,768
2,018
2,776
February 2009
February 2012
2,910
December 2009(4)
March 2011
December 2009(4)
February 2012
March 2010
March 2013
February 2011
February 2014
March 2012
March 2008
March 2015
March 2011
December 2009(4)
March 2011
24
3,786
2,286
5,492
L Tremaine(8)
K Gallagher(9)
March 2012
March 2008
March 2015
4,470
March 2011
December 2009(4)
March 2011
February 2011
February 2014
3,319
E Howell(10)
March 2008
March 2011
February 2009
December 2011
December 2009(4)
March 2011
December 2009(4) December 2011
March 2010
December 2011
February 2011
December 2011
D Voelte(11)
March 2008
March 2011
February 2009
June 2011
December 2009(4)
March 2011
December 2009(4)
June 2011
March 2010
February 2011
June 2011
June 2011
(1) For valuation purposes all VPRs are treated as if they
will be equity settled, with the exception of Mr Ahmed’s
2007 and 2008 VPRs which are to be settled in cash as
a result of his international secondment. This fair value
is recalculated at the end of every reporting period. In
2010 the fair value of the 2008 cash settled VPRs was
$41.86.
(2) Vesting date and exercise date are the same. Vesting is
(3)
subject to satisfaction of vesting conditions.
In accordance with the requirements of AASB 2 Share
- based Payment, the fair value of rights as at their date
of grant has been determined by applying the Binomial
or Black Scholes option pricing technique with the
exception of Mr Ahmed as noted in (1). The fair value
of rights is amortised over the vesting period, such that
‘Total remuneration’ includes a portion of the fair value
of unvested equity compensation during the year. The
Fair value(4) of VPR post peer group
modification
Performance year
2010
2009
2008
2007
2011
24.98
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Governance
Table 10 - Summary of executives’ interests in RTSR-tested VPRs(1)
Name
Allocation
date
Vesting
date(2)(3)
Awarded but
not vested
Vested in
2011
% of total
vested
P Coleman
F Ahmed(5)
March 2012
March 2016
February 2009
February 2013
December 2009 March 2012
December 2009
February 2013
March 2010
March 2014
February 2011
February 2015
March 2012
March 2016
R Cole
March 2008
March 2012
February 2009
February 2013
December 2009 March 2012
December 2009
February 2013
March 2010
March 2014
February 2011
February 2015
March 2012
March 2016
L Della Martina(6)
February 2009
February 2013
December 2009 March 2012
December 2009
February 2013
March 2010
March 2014
February 2011
February 2015
March 2012
March 2016
P Moore(7)
February 2011
February 2015
March 2012
March 2016
V Santostefano
March 2008
March 2012
L Tremaine(8)
K Gallagher(9)
E Howell(14)
February 2009
February 2013
December 2009 March 2012
December 2009
February 2013
March 2010
March 2014
February 2011
February 2015
March 2012
March 2016
March 2012
March 2016
February 2011
February 2015
March 2008
March 2012
February 2009
February 2013
December 2009 March 2012
December 2009
February 2013
March 2010
March 2014
February 2011
February 2015
March 2012
March 2016
D Voelte(15)
March 2008
March 2012
March 2008(10)
March 2012
February 2009(11)
February 2013
December 2009 March 2012
December 2009 March 2012
December 2009
February 2013
March 2010(12)
March 2014
February 2011(13)
February 2015
March 2012
March 2016
51,769
8,238
17
68
6,017
7,042
9,768
4,862
8,650
40
72
6,305
7,526
10,661
5,552
29
46
4,045
6,020
8,500
4,412
6,264
3,465
5,540
29
46
5,190
6,665
9,293
7,564
5,805
3,954
7,895
33
66
5,747
6,268
8,549
33,160
81,606
39,179
275
678
325
27,425
30,676
40,771
24.98
24.98
24.98
24.98
24.98
24.98
25.48
24.98
25.48
24.98
26.21
26.21
26.21
26.21
25.48
25.48
25.48
25.48
26.21
25.48
26.21
25.48
2.75
2.75
26.61
23.56
26.61
23.56
26.61
23.56
26.61
23.56
29.19
26.61
27.93
23.56
0.40
29.19
27.93
27.93
29.19
27.93
29.19
27.93
29.19
27.93
(1) For valuation purposes all VPRs are treated as if they will be equity settled, with the
exception of Mr Ahmed’s 2007 and 2008 VPRs which are to be settled in cash as a
result of his international secondment. The fair value is recalculated at the end of every
reporting period. In 2010 the fair value of the 2007 and 2008 cash settled VPR’s was
$4.75 and $9.90 respectively.
(2) Vesting date and exercise date are the same. Vesting is subject to satisfaction of
vesting conditions.
(3) Vesting date is 14 March 2012 in respect of March 2008 allocations, on 27 February
(4)
2012 or 27 February 2013 in respect of February 2009 allocations, on 5 March 2013 or
5 March 2014 in respect of March 2010 allocations, 25 February 2014 or 25 February
2015 in respect of February 2011 allocations and 1 March 2015 or 1 March 2016 in
respect of March 2012 allocations.
In accordance with the requirements of AASB 2 Share - based Payment, the fair value
of rights as at their date of grant has been determined by applying the Binomial or Black
Scholes option pricing technique with the exception of Mr Ahmed as noted in (1). The
fair value of rights is amortised over the vesting period, such that ‘Total remuneration’
includes a portion of the fair value of unvested equity compensation during the year. The
amount included as remuneration is not related to or indicative of the benefit (if any) that
individual executives may ultimately realise should these equity instruments vest.
(5) Mr Ahmed did not meet the definition of KMP under AASB 124 for the 2006 and 2007
years. Previous years comparative figures are not shown.
(6) Mr Della Martina did not meet the definition of KMP under AASB 124 for the 2006 and
2007 years. Previous year’s comparative figures are not shown.
(7) Mr Moore did not meet the definition of KMP under the AASB 124 for the years prior
to 2010. Comparative figures are not shown.
(8) Mr Tremaine did not meet the definition of KMP under the AASB 124 for the years
prior to 2011. Comparative figures are not shown.
(9) Mr Gallagher did not meet the definition of KMP under the AASB 124 for the years
prior to 2010. Comparative figures are not shown. A total of 18,856 RTSR-tested VPRs
were forfeited on Mr Gallagher’s departure on 31 October 2011.
(10) Mr Voelte’s Accelerated LTIs.
(11) This allocation represents the remaining 50% of Mr Voelte’s 2008 LTI VAR allocation
(excludes the Accelerated LTI VARs).
(12) This allocation represents the remaining 50% of Mr Voelte’s 2009 LTI VAR allocation
(excludes the Accelerated LTI VARs).
(13) This allocation represents the remaining 50% of Mr Voelte’s 2010 LTI VAR allocation
(excludes the Accelerated LTI VARs).
(14) Ms Howell departed Woodside on 31 December 2011. The fair value of the rights have
been expensed in full however, they will only vest subject to satisfaction of vesting
conditions.
(15) Mr Voelte departed Woodside on 30 June 2011. The fair value of the rights have
been expensed in full however, they will only vest subject to satisfaction of vesting
conditions.
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Table 11 - Summary of terms and conditions for WEUSA LTI plans
Terms and conditions
2011 LTI allocation
2010 LTI allocation
2009 LTI allocation
Grant Date
Vesting Date(1)
Percentage Vested
Percentage Forfeited
1 January 2011
1 January 2010
1 January 2009
31 December 2013
31 December 2012
31 December 2011
0%
100%
0%
100%
0%
100%
(1) Under the WEUSA LTI Plan all unvested LTI lapsed upon the resignation of Mr Soine on 30 September 2011.
Table 12 - Summary of senior executives’ interests in shares under the WSPP(1)
Name
WSPP year
Opening
balance
F Ahmed(5)
R Cole
L Della Martina(6)
P Moore(7)
V Santostefano
K Gallagher(8)
E Howell
J Soine(9)
D Voelte
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2007 WSPP(4)
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2011
2010
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2007 WSPP(4)
2011
2010
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2007 WSPP(4)
2011
2010
2011
2010
2009 WSPP(2)
2008 WSPP(3)
2007 WSPP(4)
-
-
-
-
769
893
498
124
-
769
893
498
124
234
358
769
893
498
124
-
769
893
-
-
-
-
-
-
-
769
893
498
124
-
Shares
purchased
under WSPP
-
-
-
-
-
-
158
173
62
-
-
158
173
-
-
-
-
158
173
62
-
-
-
-
-
-
-
-
-
-
-
158
173
62
Matching shares Vested shares
Lapsed /
forfeited
Closing balance
-
-
-
-
-
-
237
201
62
-
-
237
201
-
-
-
-
237
201
62
-
-
-
-
-
-
-
-
-
-
-
237
201
62
-
-
-
-
374
124
-
-
-
374
124
-
-
234
124
374
124
-
-
-
532
124
-
-
-
-
-
-
-
769
124
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
237
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
395
769
893
498
124
395
769
893
498
-
234
395
769
893
498
124
-
769
-
-
-
-
-
-
-
-
769
893
498
124
(1) For a full summary of executives interests in shares see note 28 (b) to the financial report at page 129.
(2) 2009 WSPP refers to the purchases made in 2009 for the 2008/09 Plan. The matching shares for the 2009 WSPP had a fair value of $31.46 and $34.49 per share respectively.
(3) 2008 WSPP refers to the plan for the 2008/09 Plan Year as well as the purchases made in 2008 for the 2007/08 Plan. The matching shares for the 2008 WSPP had a fair value of
$49.97, $56.16, $56.85 and $47.19 per share respectively.
(4) 2007 WSPP refers to the plan for the 2007/08 Plan Year granted in 2007. The matching shares for the 2007 WSPP had a fair value of $43.11 per share.
(5) Mr Ahmed did not meet the definition of KMP under AASB 124 for the 2007 year. Previous years comparative figures are not shown
(6) Mr Della Martina did not meet the definition of KMP under AASB 124 for the 2007 year. Previous years comparative figures are not shown.
(7) Mr Moore did not meet the definition of KMP under AASB 124 for any years prior to 2010. Previous years comparative figures are not shown.
(8) Mr Gallagher did not meet the definition of KMP under AASB 124 for any years prior to 2010. Previous years comparative figures are not shown.
(9) Mr Soine was not eligible to participate in the WSPP as he is not located in Australia.
68
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Table 13 - Summary of senior executives’ interests in Equity Rights under EEP
Name
Grant Date
F Ahmed
R Cole
31 October 2009
30 April 2010
31 October 2009
30 April 2010
L Della Martina
31 October 2009
P Moore
V Santostefano
L Tremaine
K Gallagher(2)
E Howell(3)
31 October 2009
30 April 2010
31 October 2009
30 April 2010
31 October 2009
31 October 2009
30 April 2010
31 October 2009
30 April 2010
Number of Equity
Rights granted
Number of Equity
Rights which have
lapsed/forfeited
Number of Equity
Rights which have
vested during 2011
Fair Value of Equity
Rights(1)
4,350
36
4,350
36
4,350
4,350
36
4,350
36
4,350
4,350
36
4,350
36
-
-
-
-
-
-
-
-
-
-
4,350
36
4,350
36
-
-
-
-
-
-
-
-
-
-
-
-
-
-
39.81
39.83
39.81
39.83
39.81
39.81
39.83
39.81
39.83
39.81
39.81
39.83
39.81
39.83
(1) The fair value of Equity Rights as at their date of grant has been determined by reference to the share price at acquisition. The fair value of Equity Rights is amortised over the vesting
period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or
indicative of the benefit (if any) that individual executives may ultimately realise should these equity instruments vest.
(2) Mr Gallagher departed from Woodside on 31 October 2011.
(3) Ms Howell departed from Woodside on 31 December 2011.
Table 14 - Summary of senior executives’ interests in Equity Rights under the WEP
Name
Grant Date
Number of Equity
Rights granted
Number of Equity
Rights which have
lapsed/forfeited
Number of Equity
Rights which have
vested during 2011
Fair Value of Equity
Rights(1)
R Cole
30 November 2011
L Della Martina
30 November 2011
P Moore
30 November 2011
V Santostefano
30 November 2011
L Tremaine
30 November 2011
1,830
1,830
1,830
1,830
1,830
-
-
-
-
-
-
-
-
-
-
30.49
30.49
30.49
30.49
30.49
(1) The fair value of Equity Rights as at their date of grant has been determined by reference to the share price at acquisition. The fair value of Equity Rights is amortised over the vesting
period, such that ‘Total remuneration’ includes a portion of the fair value of unvested equity compensation during the year. The amount included as remuneration is not related to or
indicative of the benefit (if any) that individual executives may ultimately realise should these equity instruments vest.
Table 15 - Summary of terms and conditions for PRs awarded under the equity-based retention plan
Terms and conditions
Allocation Date
Pricing Date
Grant Date
Volume Weighted Average Price
Performance condition for vesting
Vesting Date
Pay Rights Plan 2
1 November 2007
1 November 2007
1 November 2007
A$49.25
Maintenance of acceptable individual performance over the period
from allocation date to vesting date.
Minimum level of company RTSR performance at or above 50th
percentile of the Peer Group over the preceding year.
15 March 2009; 15 March 2010; 15 March 2011
Table 16 - Time-tested PRs awarded under the equity based retention plan
Name
F Ahmed
J Soine
Allocation Date
Vesting Date
Vested in 2011
Lapsed in 2011
Fair Value of Pay Rights
November 2007
December 2009
November 2007
December 2009
March 2011
March 2011
March 2011
March 2011
-
-
-
-
2,030
17
1,015
8
0.75
0.75
0.75
0.75
Woodside Petroleum Ltd | 2011 Annual Report
69
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Table 17 - Annual base Board and committee fees for non-executive directors
Position
Board
Audit & Risk
Committee
Human Resources
& Compensation
Committee
Sustainability
Committee
Nominations
Committee
Chairman of the Board(1)
Non-executive directors(2)
Committee Chairman
Committee Member
A$
653,100(3)
198,600(3)
-
-
A$
-
-
52,300(3)
26,100(3)
A$
-
-
41,800(3)
20,900(3)
A$
-
-
41,800(3)
20,900(3)
A$
-
-
Nil
Nil
(1) Inclusive of committee work.
(2) Board fees paid to non-executive directors, other than the Chairman.
(3) Annual fee from 1 July 2011.
Table 18 - Total remuneration paid to non-executive directors in 2011 and 2010(1)
Cash salary & fees
Pension super
Salaries, fees and
allowances
Company contributions
to superannuation
M A Chaney
M A Cilento
E Fraunschiel
C Haynes(2)(3)
A Jamieson
P J M H Jungels
D I McEvoy
D Megat(4)
I Robertson(3)(5)
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
2011
2010
$
659,941
551,928
242,889
201,813
274,592
234,390
155,712
-
278,700
213,477
332,451
270,842
264,111
221,902
80,776
229,975
72,362
204,978
$
59,395
49,674
21,860
18,163
24,713
15,583
-
-
-
-
-
-
23,770
13,072
-
-
-
-
Total
$
719,336
601,602
264,749
219,976
299,305
249,973
155,712
-
278,700
213,477
332,451
270,842
287,881
234,974
80,776
229,975
72,362
204,978
(1) The total remuneration for 2010 was converted at the average exchange rate of US$1:A$1.090 and the 2011 total remuneration was converted at the average exchange rate of
US$1:A$0.96834.
(2) Dr Haynes was nominated by Shell Group and appointed on 1 June 2011. Dr Haynes retired from the Shell Group on 31 August 2011. He continues to serve on the Woodside Board.
(3) Board fees for directors who are both nominated and employed by the Shell Group are paid directly to their employing company, not the individual.
(4) Mr Megat retired on 20 April 2011. The Australian dollar compensation paid for the period from 1 January 2011 to 20 April 2011 was converted to US dollars at the average exchange
rate of US$:A$0.98712.
(5) Mr Robertson retired on 20 April 2011. The Australian dollar compensation paid for the period from 1 January 2011 to 20 April 2011 was converted to US dollars at the average
exchange rate of US$:A$0.98712.
70
Woodside Petroleum Ltd | 2011 Annual Report
Governance
Directors' report (continued)
Indemnification and insurance of
directors and officers
The company’s constitution requires the
company to indemnify each director,
secretary, executive officer or employee
of the company or its wholly-owned
subsidiaries against liabilities (to the
extent the company is not precluded by
law from doing so) incurred in or arising
out of the conduct of the business of the
company or the discharge of the duties
of any such person. The company has
entered into deeds of indemnity with each
of its directors, secretaries, certain senior
executives, and employees serving as
officers on wholly-owned or partly-owned
companies of Woodside in terms of the
indemnity provided under the company’s
constitution.
From time to time, Woodside engages its
external auditor, Ernst & Young, to conduct
non-statutory audit work and provide other
services in accordance with Woodside's
External Auditor Guidelines. The terms
of engagement include an indemnity in
favour of Ernst & Young:
against all losses, claims, costs,
expenses, actions, demands, damages,
liabilities or any proceedings (liabilities)
incurred by Ernst & Young in respect of
third party claims arising from a breach
by the Group under the engagement
terms; and
for all liabilities Ernst & Young has to
the Group or any third party as a result
of reliance on information provided by
the Group that is false, misleading or
incomplete.
The company has paid a premium under
a contract insuring each director, officer,
secretary and employee who is concerned
with the management of the company or
its subsidiaries against liability incurred in
that capacity. Disclosure of the nature of
the liability covered by and the amount of
the premium payable for such insurance
is subject to a confidentiality clause under
the contract of insurance. The company
has not provided any insurance for the
external auditor of the company or a body
corporate related to the external auditor.
Non-audit services and auditor
independence declaration
Details of the amounts paid or payable to
the external auditor of the company, Ernst
& Young, for audit and non-audit services
provided during the year are disclosed in
note 32 to the Financial Report.
Based on advice provided by the Audit &
Risk Committee, the directors are satisfied
that the provision of non-audit services
by the external auditor during the financial
year is compatible with the general
standard of independence for auditors
imposed by the Corporations Act for the
following reasons:
all non-audit services were provided in
accordance with Woodside’s External
Auditor Policy and External Auditor
Guidelines; and
all non-audit services were subject to
the corporate governance processes
adopted by the company and have
been reviewed by the Audit & Risk
Committee to ensure that they do not
affect the integrity or objectivity of the
auditor.
Further information on Woodside’s policy
in relation to the provision of non-audit
services by the auditor is set out in section
7 of the Corporate Governance Statement
on pages 50 to 51.
The auditor independence declaration,
as required under section 307C of the
Corporations Act, is set out on this page
and forms part of this report.
Proceedings on behalf of the
company
No proceedings have been brought
on behalf of the company, nor has any
application been made in respect of
the company under section 237 of the
Corporations Act.
Rounding of amounts
The amounts contained in this report
have been rounded to the nearest million
dollars under the option available to the
company under Australian Securities and
Investments Commission Class Order
98/0100 dated 10 July 1998.
Directors’ relevant interests in
Woodside shares as at date of report
Director
MA Chaney
PJ Coleman
MA Cilento
E Fraunschiel
CM Haynes
A Jamieson
PJMH Jungels
DI McEvoy
Relevant interest
in shares
20,000
66,004
1,382
81,930
186
3,000
9,205
7,924
Signed in accordance with a resolution of
the directors.
M A Chaney, AO
Chairman
Perth, Western Australia
22 February 2012
P J Coleman
Chief Executive Officer
Perth, Western Australia
22 February 2012
Auditor’s Independence
Declaration to the Directors of
Woodside Petroleum Ltd
In relation to our audit of the financial
report of Woodside Petroleum Ltd for
the year ended 31 December 2011, to
the best of my knowledge and belief,
there have been no contraventions of the
auditor independence requirements of the
Corporations Act 2001 or any applicable
code of professional conduct.
Ernst & Young
R J Curtin
Partner
Perth, Western Australia
22 February 2012
Liability limited by a scheme approved under
Professional Standards Legislation.
Woodside Petroleum Ltd | 2011 annual Report
71
2011 FinanCiaL REPORT
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Contents
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
1.
Summary of significant accounting policies
2. Operating segments
3.
4.
5.
Revenue and expenses
Taxes
Earnings per share
6. Dividends paid and proposed
7.
8.
9.
Cash and cash equivalents
Receivables
inventories
10. Other financial assets
11. Other assets
12. Exploration and evaluation assets
13. Oil and gas properties
14. Other plant and equipment
15. Payables
16.
interest-bearing liabilities
17. Tax payable
18. Other financial liabilities
19. Other liabilities
20. Provisions
21. Contributed equity
22. Other reserves
23. Retained earnings
24. Parent entity information
25. Financial and capital risk management
26. Expenditure commitments
27. Employee benefits
28. Key management personnel compensation
29. Events after the end of the reporting period
30. Related party disclosures
31. Contingent liabilities and contingent assets
32. auditor remuneration
33. Joint ventures
34. associated entities
35. Subsidiaries
36. Corporate information
Directors’ declaration
independent audit report
72
73
74
75
76
77
90
93
95
98
98
99
99
99
100
100
101
102
103
103
104
104
104
105
105
106
107
108
108
108
117
118
128
132
132
133
133
134
135
136
138
139
140
72
Woodside Petroleum Ltd | 2011 annual Report
Consolidated income statement
For the year ended 31 December 2011
Revenue from sale of goods
Cost of sales
Gross profit
Other income
Other expenses
Profit before tax and net finance income/(costs)
Finance income
Finance costs
Profit before tax
Taxes
income tax expense
Petroleum Resource Rent Tax expense
Total taxes
Profit after tax
Profit attributable to
Equity holders of the parent
non-controlling interest
Profit for the year
Notes
3(a)
3(b)
3(c)
3(d)
3(e)
3(f)
4(a)
Basic and diluted earnings per share attributable to the equity holders of the parent (US cents)
5
The accompanying notes form part of the Financial Report.
2011
US$m
4,802
(1,657)
3,145
109
(1,042)
2,212
10
(36)
2010
US$m
4,193
(1,669)
2,524
225
(493)
2,256
39
(21)
2,186
2,274
(660)
(17)
(677)
(532)
(165)
(697)
1,509
1,577
1,507
2
1,509
190
1,575
2
1,577
204
Consolidated statement of comprehensive income
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
73
Profit for the year
Other comprehensive income
income tax benefit on net gain on hedge of net investment
Cash flow hedges
Transferred to income statement
income tax (expense)/benefit
net change in fair value of available-for-sale financial assets
Companies voluntarily liquidated
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to
Equity holders of the parent
non-controlling interest
Total comprehensive income for the year
The accompanying notes form part of the Financial Report.
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2011
US$m
2010
US$m
1,509
1,577
-
-
-
-
(3)
(16)
(19)
14
20
(6)
14
(4)
-
24
1,490
1,601
1,488
2
1,490
1,599
2
1,601
74
Woodside Petroleum Ltd | 2011 annual Report
Consolidated statement of financial position
as at 31 December 2011
Current assets
Cash and cash equivalents
Receivables
inventories
Other financial assets
Other assets
Total current assets
Non-current assets
inventories
Other financial assets
Other assets
Exploration and evaluation assets
Oil and gas properties
Other plant and equipment
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Payables
interest-bearing liabilities
Tax payable
Other financial liabilities
Other liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
interest-bearing liabilities
Deferred tax liabilities
Other financial liabilities
Other liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
issued and fully paid shares
Shares reserved for employee share plans
Other reserves
Retained earnings
Equity attributable to equity holders of the parent
Non-controlling interest
Total equity
The accompanying notes form part of the Financial Report.
Notes
2011
US$m
2010
US$m
7(a)
8
9(a)
10(a)
11(a)
9(b)
10(b)
11(b)
12
13
14
4(d)
15(a)
16(a)
17
18(a)
19(a)
20
15(b)
16(b)
4(d)
18(b)
19(b)
20
21(a)
21(b)
22
23
41
669
195
16
93
1,014
18
86
3
2,235
19,289
62
33
21,726
22,740
1,214
770
74
-
27
327
2,412
215
4,332
1,334
6
181
991
7,059
9,471
13,269
5,880
(67)
1,063
5,782
12,658
611
13,269
963
439
118
11
48
1,579
39
111
36
1,801
16,517
72
41
18,617
20,196
1,234
403
35
18
13
137
1,840
35
4,512
1,333
5
174
611
6,670
8,510
11,686
5,036
(57)
971
5,141
11,091
595
11,686
Consolidated statement of cash flows
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
75
Cash flows from/(used in) operating activities
Profit after tax for the year
adjustments for:
non-cash items
Depreciation and amortisation
impairment of exploration and evaluation assets
(Reversal)/impairment of oil and gas properties and other assets
Unrealised foreign exchange (gain)/loss
Gain on sale of exploration and evaluation assets
Gain on sale of assets of disposal group held for sale
Gain on sale of oil and gas properties
Change in fair value of derivative financial instruments
Change in fair value of other financial instruments
net finance costs/(income)
Tax expense
Exploration and evaluation written off
Other
Changes in assets and liabilities
(increase)/decrease in trade and other receivables
increase in inventories
increase in provisions
(Decrease)/increase in other assets and liabilities
increase/(decrease) in trade and other payables
Cash generated from operations
amounts received from employees relating to employee share plans
Purchases of shares and payments relating to employee share plans
interest received
Dividends received
interest paid
income tax paid
Petroleum Resource Rent Tax paid
Payments for restorations
Net cash from operating activities
Cash flows from/(used in) investing activities
Payments for capital and exploration expenditure
Proceeds from sale of exploration and evaluation assets
Proceeds from sale of oil and gas properties
Net cash used in investing activities
Cash flows from/(used in) financing activities
Proceeds from/(repayments of) borrowings
Contributions from non-controlling interests
Proceeds from rights issues
Transaction costs on issue of shares
Proceeds from underwriters of Dividend Reinvestment Plan (DRP)
Dividends paid (net of DRP)
Dividends paid outside of DRP
Net cash from financing activities
Net decrease in cash held
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on the balances of cash held in foreign currencies
Cash and cash equivalents at the end of the year
The accompanying notes form part of the Financial Report.
7(b)
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Notes
2011
US$m
2010
US$m
1,509
1,577
664
14
(17)
(3)
(7)
-
(5)
5
(12)
26
677
176
59
(175)
(63)
250
(45)
13
3,066
-
(10)
10
4
(200)
(496)
(132)
-
2,242
(3,584)
16
35
(3,533)
172
194
-
-
648
(652)
-
362
(929)
963
7
41
782
-
98
13
(99)
(143)
-
(22)
-
(18)
697
11
26
67
(4)
49
21
(16)
3,039
21
-
40
6
(195)
(654)
(149)
(4)
2,104
(3,649)
65
643
(2,941)
(42)
137
1,078
(18)
-
-
(547)
608
(229)
1,203
(11)
963
76
Woodside Petroleum Ltd | 2011 annual Report
Consolidated statement of changes in equity
For the year ended 31 December 2011
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notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
77
77
1. Summary of significant accounting policies
(a) Basis of preparation
The Financial Report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001, australian accounting Standards and other authoritative pronouncements of
the australian accounting Standards Board.
The Financial Report has been prepared on a historical cost basis, except for derivative financial instruments and certain
other financial assets, which have been measured at fair value.
The Financial Report is presented in US dollars. The amounts contained in this report have been rounded to the nearest
million dollars under the option available to the Group under australian Securities and investments Commission Class
Order 98/0100 dated 10 July 1998, unless otherwise stated.
The Financial Report was authorised for issue in accordance with a resolution of the directors on 22 February 2012.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
Except as disclosed below, the accounting policies adopted are consistent with those disclosed in the annual Financial
Report for the year ended 31 December 2010. Certain comparative information has been reclassified to be presented on
a consistent basis with the current year’s presentation.
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Changes in accounting policy and disclosures
The Group has adopted all new and amended australian accounting Standards and interpretations effective from 1
January 2011 including:
• aaSB 2009-12 Amendments to Australian Accounting Standards [Editorial amendments to aaSBs 5, 8, 108, 110, 112,
119, 133, 137, 139, 1023 & 1031 and interpretations 2, 4, 16, 1039 & 1052]
• aaSB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project [aaSB 3,
aaSB 7, aaSB 121, aaSB 128, aaSB 131, aaSB 132 & aaSB 139]
• aaSB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project
[aaSB 1, aaSB 7, aaSB 101 & aaSB 134 and interpretation 13]
• aaSB 2010-5 Amendments to Australian Accounting Standards [Editorial amendments to aaSB 1, 3, 4, 5, 101, 107, 112,
118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and interpretations 112, 115, 127, 132 & 1042]
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• aaSB 124 (Revised) Related Party Disclosures
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new and amended Standards and interpretations did not result in any significant changes to accounting policies.
The Group has not elected to early adopt any other new or amended Standards or interpretations that are issued but
not yet effective.
(b) Statement of compliance
The Financial Report complies with australian accounting Standards and international Financial Reporting Standards,
as issued by the international accounting Standards Board.
(c) Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group as at 31 December each year.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be
consolidated from the date at which control is transferred out of the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. at acquisition, the assets,
liabilities and contingent liabilities of a subsidiary are measured at their fair values. any excess of the cost of acquisition
over the fair values of the identifiable net assets acquired is recognised as goodwill.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using
consistent accounting policies. all intercompany balances and transactions, including unrealised profits and losses
arising from intra-group transactions, have been eliminated in full.
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78
78
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(c) Basis of consolidation (continued)
a change in ownership of a subsidiary that does not result in a loss of control is accounted for as an equity transaction.
On loss of control of a subsidiary, all carrying amounts of assets, liabilities and non-controlling interests are
derecognised. any retained interest in the subsidiary is remeasured to its fair value and a gain or loss is recognised in
the income statement.
investments in subsidiaries are carried at cost less impairment charges in the separate financial statements of the
parent company. Dividends received from subsidiaries are recorded as other income in the separate income statement
of the parent company and do not impact the recorded cost of investment. The parent company will assess whether
any indicators of impairment of the carrying amount of the investment in the subsidiary exist. Where such indicators
exist, to the extent that the carrying amount of the investment exceeds its recoverable amount, an impairment loss
is recognised.
non-controlling interests are allocated their share of the net profit after tax in the consolidated income statement, their
share of other comprehensive income, net of tax in the consolidated statement of comprehensive income and are
presented within equity in the consolidated statement of financial position, separately from parent shareholders’ equity.
(d) Revenue
Revenue is recognised and measured at the fair value of consideration received or receivable to the extent that it is
probable that the economic benefits will flow to the Group and the revenue can be reliably measured.
Product revenue
Revenue earned from the sale of oil, gas and condensate produced is recognised when the risks and rewards of
ownership of the products are transferred to the customer. This policy is applied to the Group’s different operating
arrangements as follows:
•
•
•
•
revenue earned under a lease or licence conferring ownership rights to production, in which the Group has
a working interest with other producers, is recognised in earnings on the basis of the Group’s interest in the
relevant lease or licence (entitlements method). Revenue is not reduced for royalties and other taxes payable from
production, except where royalties are payable in kind;
revenue from take or pay contracts is recognised in earnings when the product has been drawn by the customer or
recorded as unearned revenue when not drawn by the customer;
revenue earned under a risk service contract is recognised when the Group has a legally enforceable entitlement to
the proceeds; and
revenue earned under a production service contract is recognised on the basis of the Group’s share of oil, gas or
condensate allocated to the contractor party or parties under the contract.
Interest revenue
interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Dividend revenue
Dividend revenue is recognised when the Group’s right to receive payment is established.
(e) Exploration and evaluation
Expenditure on exploration and evaluation is accounted for in accordance with the area of interest method. The Group’s
application of the accounting policy for the cost of exploring and of evaluating discoveries is closely aligned to the US
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
79
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1. Summary of significant accounting policies (continued)
(e) Exploration and evaluation (continued)
GaaP-based successful efforts method.
Exploration licence acquisition costs are capitalised and subject to half-yearly impairment testing.
all exploration and evaluation expenditure, including general permit activity, geological and geophysical costs and new
venture activity costs, is expensed as incurred except where:
•
the expenditure relates to an exploration discovery that, at the reporting date, has not been recognised as an area of
interest, as an assessment of the existence or otherwise of economically recoverable reserves is not yet complete;
or
• an area of interest is recognised and it is expected that the expenditure will be recouped through successful
exploitation of the area of interest, or alternatively, by its sale.
The costs of drilling exploration wells are initially capitalised pending the results of the well. Costs are expensed where
the well does not result in the successful discovery of economically recoverable hydrocarbons and the recognition of an
area of interest. areas of interest are recognised at the field level. Subsequent to the recognition of an area of interest,
all further evaluation costs relating to that area of interest are capitalised.
Each potential or recognised area of interest is reviewed half-yearly to determine whether economic quantities of
reserves have been found, or whether further exploration and evaluation work is underway or planned to support the
continued carry forward of capitalised costs.
Upon approval for the commercial development of an area of interest, accumulated expenditure for the area of interest
is transferred to oil and gas properties.
The recoverability of the carrying amount of the exploration and evaluation assets is dependent on successful
development and commercial exploitation, or alternatively, sale of the respective areas of interest.
Where a potential impairment is indicated, assessment is performed for each area of interest to which the exploration
and evaluation expenditure is attributed. To the extent that capitalised expenditure is not expected to be recovered it is
charged to the income statement.
in the statement of cash flows, those cash flows associated with capitalised exploration and evaluation expenditure
are classified as cash flows used in investing activities. Exploration and evaluation expenditure expensed is classified as
cash flows used in operating activities.
(f) Oil and gas properties
Oil and gas properties are stated at cost less accumulated depreciation and impairment charges. Oil and gas properties
include construction, installation or completion of production and infrastructure facilities such as pipelines and
platforms, capitalised borrowing costs, transferred exploration and evaluation assets, development wells and the cost of
dismantling and restoration.
Subsequent capital costs, including major maintenance, are included in the asset’s carrying amount only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can
be measured reliably. Otherwise costs are charged to the income statement during the financial year in which they
are incurred.
80
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Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(g) Other plant and equipment
Other plant and equipment is stated at cost less accumulated depreciation and any impairment charges.
(h) Depreciation and amortisation
Oil and gas properties and other plant and equipment are depreciated to their estimated residual values at rates based
on their expected useful lives. The major categories of assets are depreciated as follows:
Category
Method
Estimated useful
lives (years)
Oil and gas properties
Land
Buildings
not depreciated
Straight-line over useful life
Transferred exploration and evaluation assets
and offshore plant and equipment
Units of production basis over Proved plus
Probable reserves
Onshore plant and equipment
Straight-line over the lesser of useful life and the
life of Proved plus Probable reserves
Marine vessels and carriers
Other plant and equipment
Straight-line over useful life
Straight-line over useful life
-
40
5-50
5-50
10-40
5-15
(i)
Impairment of assets
The carrying amounts of all assets, other than inventory, financial assets and deferred tax assets, are reviewed
half-yearly to determine whether there is an indication of an impairment loss. if any such indication exists, the asset’s
recoverable amount is estimated.
The recoverable amount of an asset is determined as the higher of its value in use and fair value less costs to sell. Value in
use is determined by estimating future cash flows after taking into account the risks specific to the asset and discounting
them to its present value using a pre-tax discount rate that reflects current market assessment of the time value of money.
For any asset that does not generate largely independent cash flows, the recoverable amount is determined for the
cash generating unit to which the asset belongs. if the carrying amount of an asset (or cash generating unit) exceeds its
recoverable amount, the asset (or cash generating unit) is written down. Generally, the Group evaluates its oil and gas
properties on a field-by-field basis.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased
to the revised estimate of its recoverable amount, but only to the extent that the asset’s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
(j) Non-current assets and disposal groups held for sale and discontinued operations
non-current assets and disposal groups that are expected to be recovered primarily through a sale transaction rather
than through continuing use are classified as held for sale and measured at the lower of their carrying amounts and fair
values less cost to sell. They are not depreciated or amortised. To be classified as held for sale, an asset or a disposal
group must be available for immediate sale in its present condition and its sale must be highly probable.
an impairment loss is recognised for any initial or subsequent write-down of the asset to its fair value less cost to
sell. impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are
recognised in the income statement. Gains are not recognised in excess of any cumulative impairment loss.
(k) Derivative financial instruments and hedge accounting
From time to time, the Group uses derivative financial instruments such as swaps, options, futures and forward
contracts to hedge its risks associated with commodity price, interest rate and foreign currency fluctuations.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair values in line with market fluctuations. The unrealised gain or loss on remeasurement is
immediately recognised in the income statement, except where hedge accounting applies.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
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1. Summary of significant accounting policies (continued)
(k) Derivative financial instruments and hedge accounting (continued)
The fair values of derivative financial instruments that are traded on an active market are based on quoted market prices
at the reporting date. The fair values of financial instruments not traded on an active market are determined using a
valuation technique based on cash flows discounted to present value using current market interest rates.
Hedge accounting
When a derivative is designated as a hedge for accounting purposes, the relationship between the derivative and the
hedged item is documented, as is its risk management objective and strategy for undertaking the hedge transaction.
also documented is the assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that
are used in hedging transactions have been, and will continue to be, highly effective in offsetting changes in fair values
or cash flows of hedged items.
For the purposes of hedge accounting, hedges are classified and accounted for as follows:
Hedge type and risk
Accounting treatment
Fair value hedge
Exposure to changes in the fair value of
a recognised asset, liability or committed
transaction
Cash flow hedge
Changes in fair value of derivatives that are designated and qualified as fair
value hedges are recorded in the income statement, together with any
changes in the fair value of the hedged risk that are attributable to the asset,
liability or committed transaction.
Exposure to variability in cash flows
associated with a highly probable
forecasted transaction or a committed
foreign currency transaction
The effective portion of changes in the fair value of derivatives is recognised
in other comprehensive income and in the hedging reserve in equity. The
gain or loss relating to any ineffective portion is recognised in the income
statement immediately.
Hedge of net investment
Exposure to changes in the net assets of
foreign operations from foreign exchange
movements
amounts accumulated in equity are taken to the income statement in the
periods when the hedged item affects income, for instance, when the
forecast sale that is hedged takes place.
The accounting treatment is substantially similar to a cash flow hedge.
Gains or losses accumulated in the hedge of net investment reserve
in equity are taken to the income statement on disposal of the foreign
operation.
Hedge accounting is discontinued when the hedging instrument expires, is sold or terminated, or when a hedge
no longer meets the criteria for hedge accounting. at that point in time, any cumulative gain or loss on the hedging
instrument recognised in equity remains in equity until the forecasted transaction occurs.
if the forecast transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is
transferred to the income statement.
Embedded derivatives
Derivatives embedded in the Group’s contracts, that change the nature of a host contract’s risk and are not clearly
and closely related to the host contract, are initially recognised at fair value on the date the contract is entered into.
Subsequent fair value movements of the derivative are recognised in the income statement.
(l)
Provision for restoration
The Group records the present value of the estimated cost of legal and constructive obligations to restore operating
locations in the period in which the obligation arises. The nature of restoration activities includes the removal of facilities,
abandonment of wells and restoration of affected areas.
a restoration provision is recognised and updated at different stages of the development and construction of a facility
and then reviewed on an annual basis. When the liability is initially recorded, the estimated cost is capitalised by
increasing the carrying amount of the related exploration and evaluation assets or oil and gas properties.
82
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Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(l)
Provision for restoration (continued)
Over time, the liability is increased for the change in the present value based on a pre-tax discount rate appropriate to
the risks inherent in the liability. The unwinding of the discount is recorded as an accretion charge within finance costs.
The carrying amount capitalised in oil and gas properties is depreciated over the useful life of the related asset (refer to
note 1(h)).
Costs incurred that relate to an existing condition caused by past operations and do not have a future economic benefit
are expensed.
(m) Joint ventures
The Group’s interests in jointly controlled assets are accounted for by recognising its proportionate share in assets and
liabilities from joint ventures, except where as operator, Woodside takes on the role as independent contractor. in these
instances, receivables and payables relating to jointly controlled operations are brought to account on a gross basis.
Joint venture expenses and the Group’s entitlement to production are recognised on a pro-rata basis according to the
Group’s joint venture interest.
investments in jointly controlled entities, where the Group has significant influence, but not control, are accounted for
using the equity method of accounting. Under the equity method, the cost of the investment is adjusted by the post-
acquisition changes in the Group’s share of the net assets of the venture.
On loss of joint control in a jointly controlled entity, any retained interest in the former entity is recognised at its fair
value at the date that joint control is lost. a gain or loss, on loss of joint control, is recognised in the income statement.
(n) Borrowing costs
Borrowing costs incurred for the acquisition or construction of qualifying assets are capitalised during the period of time
that is required to complete and prepare the asset for its intended use or sale. assets are considered to be qualifying
assets when this period of time is substantial (greater than 12 months).
The interest rate used to determine the amount of borrowing costs to be capitalised is the weighted average effective
interest rate applicable to the Group’s outstanding borrowings during the year.
(o)
Foreign currency
The functional and presentation currency of Woodside Petroleum Ltd and all its subsidiaries is US dollars.
Translation of foreign currency transactions
Transactions in foreign currencies are initially recorded in the functional currency of the transacting entity at the
exchange rates ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies at
the reporting date are translated at the rates of exchange ruling at that date. Exchange differences in the consolidated
financial statements are taken to the income statement, with the exception of differences on foreign currency
borrowings that provide an effective hedge against a net investment in subsidiaries which are taken directly to the
hedge of net investment reserve until the disposal of the net investment, at which time they are recognised in the
income statement.
Translation of the financial results of foreign operations prior to 2010
Prior to 1 January 2010, certain entities within the Group had a functional currency of australian dollars as a result of the
economic environment in which they were operating. For the period prior to the date of change in functional currency
assets and liabilities of these entities were translated into the presentation currency of the Group (US dollars) at the rate
of exchange ruling at the respective reporting dates. The income statements were translated at the average exchange
rates for the reporting period, or at the exchange rates ruling at the date of transactions. Exchange differences arising on
translation were taken to the foreign currency translation reserve in equity.
On disposal of a foreign operation, the proportionate share of exchange differences recognised in the foreign currency
translation reserve relating to that particular foreign operation is recognised in the income statement.
Hedge transactions
Derivatives and other financial instruments are used to hedge foreign exchange risk relating to certain transactions
(refer to note 1(k)).
Disposal of foreign operations
On disposal of a foreign operation, the proportionate share of exchange differences recognised in the foreign currency
translation reserve relating to the particular foreign operation is recognised in the income statement.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
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1. Summary of significant accounting policies (continued)
(p)
Leases
The determination of whether an arrangement is or contains a lease, is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
assets held under leases that transfer to the Group substantially all the risks and rewards of ownership of the leased
asset are classified as finance leases. Finance leases are capitalised at the inception of the lease, at the lower of the fair
value of the leased asset and the present value of the minimum lease payments.
Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve
a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income
statement over the lease term.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease assets are not capitalised and payments are recognised in the income statement as an expense
over the lease term. Lease incentives received are recognised in the income statement as an integral part of the
total lease expense.
(q) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position comprise cash at bank and short-term deposits with
an original maturity of three months or less. Cash and cash equivalents are stated at face value in the statement of
financial position.
For the purposes of the statement of cash flows, cash and cash equivalents are reported net of outstanding
bank overdrafts.
(r)
Trade and other receivables
Trade and other receivables, including receivables from related parties, are initially recognised at fair value and
subsequently measured at amortised cost less an allowance for uncollectible amounts. Collectability and impairment
are assessed on a regular basis. Subsequent recoveries of amounts previously written off are credited against other
expenses in the income statement.
(s)
Inventories
inventories include hydrocarbon stocks, consumable supplies and maintenance spares. inventories are valued at the
lower of cost and net realisable value. Cost is determined on a weighted average basis and includes direct costs and an
appropriate portion of fixed and variable production overheads where applicable. inventories determined to be obsolete
or damaged are written down to net realisable value.
(t)
Investments
investments are classified as either available-for-sale or held for trading and are initially recognised at fair value plus, in
the case of investments not held for trading, any directly attributable transaction costs.
after initial recognition investments are carried at fair value. Changes in the fair value of available-for-sale investments
are recognised as a separate component of equity until the investment is sold, collected or otherwise disposed of, or
until the investment is determined to be impaired, at which time the cumulative change in fair value previously reported
in equity is included in the income statement. Changes in the fair value of held for trading investments are recognised in
the income statement.
For investments that are actively traded in organised financial markets, fair value is determined by reference to stock
exchange quoted market bid prices at the close of business on the reporting date. Where investments are not actively
traded, fair value is established by using other market accepted valuation techniques.
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notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(u)
Investments in associates
The Group’s investments in its associates are accounted for using the equity method of accounting in the consolidated
financial statements. an associate is an entity in which the Group has significant influence and is neither a subsidiary
nor a joint venture.
The financial statements of associates, prepared for the same reporting period as the Group and applying consistent
accounting policies, are used by the Group to apply the equity method. The investment in the associate is carried in the
consolidated statement of financial position at cost plus post-acquisition changes in the Group’s share of net assets of
the associate less any impairment. The income statement reflects the Group’s share of the associate’s after tax profit or
loss from operations.
Where there has been a change recognised directly in the associate’s equity, the Group recognises its share of any
changes and discloses this, where applicable, in the consolidated statement of changes in equity.
On loss of significant influence of an associate, any retained investment in the former associate is recognised at its fair
value. a gain or loss, on loss of significant influence, is recognised in the income statement.
(v) Employee provisions
Provision is made for employee benefits accumulated as a result of employees rendering services up to the end of the
reporting period. These benefits include wages, salaries, annual leave and long service leave.
Liabilities in respect of employees’ services rendered that are not due to be settled within one year after the end of the
period in which the employees render the related services are recognised in the statement of financial position. These
liabilities are measured at the present value of the estimated future cash outflow to be made to the employees using
the projected unit credit method. in determining the present value of the estimated future cash outflow, consideration is
given to expected future wage and salary levels, experience of employee departures and periods of service. Estimated
future payments are discounted using appropriate discount rates. Liabilities due to be settled within one year after the
end of the period in which the employees render the related services are measured at the amount due to be paid.
(w) Share-based payments
Equity-settled transactions
The Group provides benefits to its employees (including key management personnel) in the form of share-based
payments whereby employees render services for shares (equity-settled transactions). The cost of equity-settled
transactions with employees is measured by reference to the fair values of the equity instruments at the date at which
they are granted. The fair value is determined by using a Binomial or Black-Scholes option pricing technique combined
with a Monte Carlo simulation methodology, where relevant. The cost of equity-settled transactions is recognised,
together with a corresponding increase in equity, over the period in which the vesting conditions are fulfilled (the vesting
period), ending on the date on which the relevant employees become fully entitled to the awards (the vesting date).
at each subsequent reporting date until vesting, the cumulative charge to the income statement is the result of:
•
•
the grant date fair value of the award;
the current best estimate of the number of awards that will vest, taking into account the likelihood of
employee turnover; and
•
the expired portion of the vesting period.
The charge to the income statement for the year is the cumulative amount, as calculated above, less the amounts
charged in the previous years. There is a corresponding entry to equity.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than
were originally anticipated.
an additional expense is recognised for any modification that increases the total fair value of the share-based payment
arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
if an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation and any expense not
yet recognised for the award is recognised immediately.
Shares in the Group reacquired on-market are classified and disclosed as reserved shares and deducted from equity
(refer to note 1(ac)). no gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation
of the Group’s own equity instruments.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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1. Summary of significant accounting policies (continued)
(w) Share-based payments (continued)
Cash-settled transactions
The Group provides benefits to employees who have been on international assignment or secondment at any time
during the vesting period in the form of cash-settled share-based payments. Employees render services in exchange
for cash, the amounts of which are determined by reference to the price of the shares of Woodside Petroleum Ltd.
The ultimate cost of these cash-settled share-based payments will be equal to the actual cash paid to the employees
which will be the fair value at settlement date. The cumulative cost recognised until settlement is held as a liability. all
changes in the liability are recognised in the income statement for the year.
The fair value of the liability is determined, initially and at each reporting date until it is settled, by using a Binomial or
Black-Scholes option pricing technique combined with a Monte Carlo simulation methodology, where relevant.
(x) Retirement benefits
all employees of the Group’s australian entities are entitled to benefits under the Group’s superannuation plan due to
retirement, disability or death. The Group has a defined benefit component and a defined contribution component within
the plan. The defined benefit section of the plan is closed to new members.
The defined benefit component provides defined lump sum benefits based on years of service and final average salary.
The cost of providing benefits under the defined benefit plan is determined using the projected unit credit actuarial
valuation method. a liability or asset in respect of the defined benefit component of the superannuation plan is
recognised in the statement of financial position and is measured at the present value of the defined benefit obligation
at the reporting date less the fair value of the superannuation fund’s assets at that date. The defined benefit obligation
includes actuarial estimates of future variables such as employee turnover and the plan’s rate of return.
The cost of the defined benefit component is charged to the income statement systematically over the employee’s
service life.
Gains and losses arising from changes in actuarial estimates are recognised immediately as income or expense in the
income statement.
The defined contribution component receives fixed contributions from Group companies and the Group’s legal or
constructive obligation is limited to these contributions. Contributions to the defined contribution fund are recognised
as an expense as incurred.
(y) Financial liabilities
Borrowings are initially recognised at fair value less transaction costs. Borrowings are subsequently carried at amortised
cost, except for those designated in a fair value hedge relationship as described previously. any difference between
the proceeds received and the redemption amount is recognised in the income statement over the period of the
borrowings using the effective interest method.
Trade and other payables are carried at amortised cost when goods and services are received, whether or not billed to
the Group, prior to the end of the financial year.
Dividends payable are recognised when declared by the Group.
(z)
Tax
Income tax
income tax expense on the profit or loss for the year comprises current and deferred tax expense.
Current tax expense is the expected tax payable on the taxable income for the year and any adjustment to tax payable
in respect of previous years.
Temporary differences arise between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax expense is determined based on changes in temporary differences.
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notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(z)
Tax (continued)
Deferred tax liabilities are recognised for taxable temporary differences. Deferred tax assets are recognised for
deductible temporary differences, unused tax losses and unused tax credits only if it is probable that sufficient future
taxable income will be available to utilise those temporary differences and losses. Such deferred tax liabilities and
assets are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than
in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit or loss nor
the accounting profit or from investments in subsidiaries, associates and interests in joint ventures, to the extent that
the Group is able to control the reversal of the temporary difference and the temporary difference is not expected to
reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the
liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantially
enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Current and deferred tax expenses are recognised in the income statement, except to the extent that they relate to
items recognised directly in equity, in which case they are recognised in equity.
Petroleum Resource Rent Tax (PRRT)
PRRT is considered, for accounting purposes, to be a tax based on income. accordingly, current and deferred PRRT
expense is measured and disclosed on the same basis as income tax.
Tax consolidation
The parent and its wholly owned australian controlled entities have elected to enter into tax consolidation, with
Woodside Petroleum Ltd as the head entity of the tax consolidated group.
The tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the
members of the tax consolidated group are recognised in the separate financial statements of the members of the tax
consolidated group, using the stand alone approach.
(aa) Goods and Services Tax (GST)
Revenue, expenses and assets are recognised net of GST except where the GST incurred on a purchase of goods
and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising
from investing and financing activities that is recoverable from, or payable to, the taxation authority is classified as an
operating cash flow.
(ab) Royalties and excise duty
Royalties and excise duty under existing regimes are considered to be production based taxes and are therefore
accrued on the basis of the Group’s entitlement to physical production.
(ac)
Issued capital
Ordinary shares are classified as equity and recorded at the value of consideration received. The cost of issuing shares
is shown in share capital as a deduction, net of tax, from the proceeds.
Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment
arrangements (reserved shares), are deducted from equity. no gain or loss is recognised in the income statement on
the purchase, sale, issue or cancellation of the Group’s own equity instruments.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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1. Summary of significant accounting policies (continued)
(ad) Critical accounting estimates, assumptions and judgements
in applying the Group’s accounting policies, management continually evaluates judgements, estimates and assumptions
based on experience and other factors including expectations of future events that may have an impact on the Group.
all judgements, estimates and assumptions made are believed to be reasonable based on the most current set of
circumstances available to management. actual results may differ from those judgements, estimates and assumptions.
Significant judgements, estimates and assumptions made by management in the preparation of these financial
statements are outlined below.
Critical accounting estimates and assumptions
Impairment of assets
in determining the recoverable amount of assets, in the absence of quoted market prices, estimates are made
regarding the present value of future cash flows. For oil and gas properties, expected future cash flow estimation is
based on reserves, future production profiles, commodity prices and costs.
Restoration obligations
The Group estimates the future removal costs of offshore oil and gas platforms, production facilities, wells and pipelines
at different stages of the development and construction of assets or facilities. in most instances, removal of assets
occurs many years into the future. This requires judgemental assumptions regarding removal date, future environmental
legislation, the extent of reclamation activities required, the engineering methodology for estimating cost, future
removal technologies in determining the removal cost, and liability specific discount rates to determine the present
value of these cash flows. For more detail regarding the policy in respect of provision for restoration refer to note 1(l).
Reserve estimates
Estimation of reported recoverable quantities of Proven and Probable reserves include judgemental assumptions
regarding commodity prices, exchange rates, discount rates, and production and transportation costs for future cash
flows. it also requires interpretation of complex geological and geophysical models in order to make an assessment of
the size, shape, depth and quality of reservoirs, and their anticipated recoveries. The economic, geological and technical
factors used to estimate reserves may change from period to period.
Changes in reported reserves can impact assets’ carrying amounts, provision for restoration and recognition of
deferred tax assets due to changes in expected future cash flows. Reserves are integral to the amount of depreciation,
amortisation and impairment charged to the income statement. Reserve estimates are prepared in accordance
with Woodside’s Hydrocarbon Resource inventory Management Process and guidelines prepared by the Society of
Petroleum Engineers.
Critical judgements in applying the Group’s accounting policies
Exploration and evaluation
The Group’s accounting policy for exploration and evaluation assets is set out in note 1(e). The application of this policy
requires management to make certain estimates and assumptions as to future events and circumstances, in particular,
the assessment of whether economic quantities of reserves have been found. any such estimates and assumptions
may change as new information becomes available. if, after having capitalised expenditure under the policy, the Group
concludes that it is unlikely to recover the expenditure by future exploitation or sale, then the relevant capitalised
amount will be written off to the income statement.
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
1. Summary of significant accounting policies (continued)
(ae) New and amended Accounting Standards and Interpretations issued but not yet effective
The following Standards and interpretations have recently been issued or amended but are not yet effective and have
not been adopted by the Group as at the financial reporting date.
Title
aaSB 9 Financial Instruments
aaSB 2009-11 Amendments to Australian
Accounting Standards - arising from
AASB 9
[AASBs 1, 3, 4, 5, 7, 101, 102, 108, 112, 118,
121, 127, 128, 131, 132, 136, 139, 1023 &
1038 and Interpretations 10 & 12]
aaSB 2010-7 Amendments to Australian
Accounting Standards arising from AASB 9
(December 2010)
[AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118,
120, 121, 127, 128, 131, 132, 136, 137, 139,
1023 & 1038 and Interpretations 2, 5, 10,
12, 19 &127]
aaSB 10 Consolidated Financial
Statements
aaSB 11 Joint Arrangements
aaSB 2011-7 Amendments to Australian
Accounting Standards arising from the
Consolidation and Joint Arrangements
Standards
[AASB 1, 2, 3, 5, 7, 9, 2009-11, 101, 107,
112, 118, 121, 124, 132, 133, 136, 138, 139,
1023 & 1038 and Interpretations 5, 9, 16
& 17]
aaSB 12 Disclosures of Interests in Other
Entities
aaSB 13 Fair Value Measurement
Application date
of the Standard
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Periods
beginning on or
after 1 January
2013
Summary
aaSB 9 includes requirements for the classification and
measurement for financial assets and financial liabilities
and the recognition and derecognition requirements for
financial instruments. This standard is a result of the first
part of Phase i of the iaSB's project to replace iaS 39
Financial Instruments: Recognition and Measurement
(aaSB 139 Financial Instruments: Recognition and
Measurement).
This Standard makes amendments to several australian
accounting Standards and interpretations. These
amendments arise from the issuance of aaSB 9
Financial Instruments that sets out requirements for the
classification and measurement of financial assets. This
Standard is applied when aaSB 9 is applied.
This Standard adds the requirements for classifying and
measuring financial liabilities to aaSB 9. The Standard
also makes amendments to several australian accounting
Standards and interpretations. These amendments arise
from the issuance of aaSB 9 Financial Instruments as
issued in December 2010.
aaSB 10 introduces a revised definition of control and
establishes a single control model that applies to all
entities. This Standard replaces aaSB 127 Consolidated
and Separate Financial Statements and interpretation 112
Consolidation - Special Purpose Entities and is required to
be applied retrospectively.
This Standard supersedes aaSB 131 Interests in Joint
Ventures and interpretation 113 Jointly Controlled Entities -
Non-Monetary Contributions by Venturers and establishes
principles for the financial reporting by parties to a joint
arrangement. Changes will be required to be applied
retrospectively.
This Standard makes amendments to several australian
accounting Standards and interpretations arising from
the issuance of the consolidation and joint arrangements
Standards.
This standard provides a single source of guidance for all
disclosures relating to an entitiy’s interests in subsidiaries,
joint arrangements, associates and unconsolidated
structured entities.
This standard defines fair value and provides a single
framework for measuring fair value when required by
individual Standards.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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1. Summary of significant accounting policies (continued)
(ae) New and amended Accounting Standards and Interpretations issued but not yet effective (continued)
aaSB 2011-8 Amendments to Australian
Accounting Standards arising from AASB
13
[AASB 1,2,3,4,5,7,9, 2009-11, 2010-7, 101,
102, 108, 110, 116, 117, 118, 119, 120, 121,
128, 131, 132, 133, 134, 136, 138, 139, 140,
141, 1004, 38 and Interpretations 2, 4,
12, 13, 14, 17, 19, 131 & 132]
aaSB 119 Employee Benefits (revised)
Periods
beginning on or
after 1 January
2013
This Standard makes amendments to several australian
accounting Standards and interpretations. These
amendments principally arise from the issuance of aaSB
13.
Periods
beginning on or
after 1 January
2013
The revised Standard requires the immediate recognition
of defined benefit costs, improves the presentation and
disclosure requirements for defined benefit plans and
requires the recognition of short-term and other long-term
employee benefits to be based on the expected timing
of settlement rather than employee entitlement. These
revisions will require retrospective application.
This Standard makes amendments to several australian
accounting Standards and interpretations. These
amendments principally arise from amendments to the
revised employee benefits Standard.
This Standard removes the requirements to include
individual key management personnel disclosures in the
notes to and forming part of the Financial Report.
aaSB 2011-10 Amendments to Australian
Accounting Standards arising from AASB
119 (September 2011)
[AASB 1, 8, 101, 124, 134, 1049 & 2011-8
and Interpretation 14]
Periods
beginning on or
after 1 January
2013
aaSB 2011-4 Amendments to Australian
Accounting Standards to Remove Individual
Key Management Personnel Disclosure
Requirements [AASB 124]
Periods
beginning on or
after 1 July 2013
aaSB 2011-9 Amendments to Australian
Accounting Standards - Presentation of
Items of Other Comprehensive Income
[AASB 1, 5, 7, 101, 112, 120, 121, 132, 133,
134, 1039 & 1049]
aaSB 1054 Australian Additional
Disclosures
aaSB 2011-1 Amendments to Australian
Accounting Standards arising from the
Trans-Tasman Convergence Project
aaSB 2011-2 Amendments to Australian
Accounting Standards arising from the
Trans-Tasman Convergence Project -
Reduced Disclosure Requirements
Periods
beginning on or
after 1 July 2012
Periods
beginning on or
after 1 July 2011
This Standard amends the presentation of components
of other comprehensive income including presenting
separately those items that will be reclassified to profit or
loss in the future and those that would not. amendments
will be applied retrospectively.
The aaSB has deleted many, but not all, australian specific
disclosure requirements from individual Standards and
moved to this new Standard to align with the equivalent
new Zealand Standard. This Standard simplifies disclosures
for audit remuneration, franked dividends, capital and
expenditure commitments.
The potential effect of these Standards is yet to be fully determined. However, it is not expected that the new or
amended Standards will significantly affect the Group’s financial position.
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
2. Operating segments
The Group has identified its operating segments based on the internal reports that are reviewed and used by the executive
management team (the chief operating decision makers) in assessing performance and in determining the allocation of
resources. The following operating segments are identified by management based on the nature and geographical location of
the business or venture.
North West Shelf Business Unit
Exploration, evaluation, development, production and sale of liquefied natural gas, pipeline natural gas, condensate, liquefied
petroleum gas and crude oil from the north West Shelf ventures.
Australia Oil Business Unit
Exploration, evaluation, development, production and sale of crude oil, condensate, liquefied petroleum gas and pipeline
natural gas in assigned permit areas including Laminaria, Mutineer–Exeter, Enfield, Vincent, Otway and Stybarrow ventures.
Pluto Business Unit
Exploration, evaluation and development of liquefied natural gas in assigned permit areas.
Browse Business Unit
Exploration, evaluation and development of liquefied natural gas in assigned permit areas.
United States Business Unit
Exploration, evaluation, development, production and sale of pipeline natural gas, condensate and crude oil in assigned
permit areas.
Other
This segment comprises the activities undertaken by Exploration, international and Sunrise Business Units.
no operating segments have been aggregated to form the above reportable operating segments.
Performance monitoring and evaluation
Management monitors the operating results of the Business Units separately for the purpose of making decisions about
resource allocation and performance assessment. The performance of operating segments is evaluated based on profit before
tax and net finance costs (profit before tax and interest) and is measured in accordance with the Group’s accounting policies.
Financing requirements, finance income, finance costs and taxes are managed at a Group level. Unallocated items comprise
non-segmental items of revenue and expenses and associated assets and liabilities not allocated to operating segments as
they are not considered part of the core operations of any segment.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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2. Operating segments (continued)
3
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92
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
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notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
93
93
3. Revenue and expenses
(a) Revenue from sale of goods
Liquefied natural gas
north West Shelf
Pipeline natural gas
north West Shelf
Otway(1)
United States of america
Condensate
north West Shelf
Otway(1)
Ohanet(2)
United States of america
Oil
north West Shelf
Laminaria
Mutineer–Exeter
Enfield(3)
Vincent(3)
Stybarrow(3)
United States of america
Liquefied petroleum gas
north West Shelf
Otway(1)
Ohanet(2)
Total revenue from sale of goods
(b) Cost of sales
Cost of production
Production costs
Royalties and excise
insurance
inventory movement
Shipping and direct sales costs
Oil and gas properties depreciation and amortisation
Land and buildings
Transferred exploration and evaluation
Plant and equipment
Marine vessels and carriers
Total cost of sales
Gross profit
(1) Woodside’s interest in the Otway Gas Project was sold in March 2010.
(2) Woodside’s interest in the Ohanet risk sharing contract expired in October 2011.
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2011
US$m
2010
US$m
1,509
1,310
375
-
8
383
860
-
26
1
887
118
152
11
475
589
450
84
1,879
127
-
17
144
4,802
(505)
(466)
(31)
21
(981)
(61)
(7)
(21)
(581)
(6)
(615)
(1,657)
3,145
292
17
31
340
704
4
33
3
744
333
205
8
496
372
165
83
1,662
110
5
22
137
4,193
(430)
(419)
(36)
7
(878)
(53)
(7)
(29)
(696)
(6)
(738)
(1,669)
2,524
(3) 2010 figures include a crude oil hedging loss of US$14 million resulting from settlement of Greater Exmouth area Zero Cost Collars. no other commodity hedging
programs were placed or in place during 2011.
94
94
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
3. Revenue and expenses (continued)
(c) Other income
Other fees and recoveries
Share of associates’ net profit
Exchange gain/(loss) on cash balances
Other exchange gain/(loss)
Gain on sale of assets of disposal group held for sale
Gain on sale of oil and gas properties
Gain on sale of exploration and evaluation assets
Change in fair value of other financial instruments
Total other income
(d) Other expenses
Exploration and evaluation
Exploration expensed in current year
Exploration expensed previously capitalised
amortisation of licence acquisition costs
Evaluation
Total exploration and evaluation
Other costs
net defined benefit plan (loss)/gain
Change in fair value of derivative financial instruments
Depreciation of other plant and equipment
General, administrative and other costs
Pluto mitigation and pre-start up costs
impairment of exploration and evaluation assets
Reversal/(impairment) of oil and gas properties
impairment of other assets
Total other costs
Total other expenses
Profit before tax and net finance income/(costs)
(e)
Finance income
interest
Total finance income
(f)
Finance costs
Unwinding of present value discount (accretion)
Other finance costs
Total finance costs
Profit before tax
2011
US$m
2010
US$m
29
3
7
46
-
5
7
12
109
(381)
(147)
(28)
(31)
(587)
(7)
(5)
(12)
(130)
(304)
(14)
17
-
(455)
(1,042)
2,212
10
10
(27)
(9)
(36)
2,186
37
4
(21)
(37)
143
-
99
-
225
(291)
(8)
(24)
(6)
(329)
2
22
(11)
(79)
-
-
(97)(1)
(1)
(164)
(493)
2,256
39
39
(18)
(3)
(21)
2,274
(1) as part of the Group’s regular review of assets whose values may be impaired, a charge of US$92 million was recognised in relation to the neptune oil field in
the Gulf of Mexico (which is part of the United States Business Unit segment) following an assessment of the expected ultimate reserve recovery. as a result
of the impairment, deferred tax assets of US$40 million are no longer expected to be realised by the Group and were recognised as a charge to income tax
expense, refer to note 4(a). The recoverable amount for the cash-generating unit was determined based on a value in use calculation. The real pre-tax discount
rate applied to the cash-generating unit was 11%.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
95
95
4.
Taxes
(a)
Tax expense comprises
income tax
Current tax expense
Over provided in prior years
Deferred tax expense related to the movements in deferred tax balances
Write-downs of deferred tax assets
impact of conversion to US dollar functional currency
PRRT
Current tax expense
Under provided in prior years
Deferred tax expense related to the movements in deferred tax balances
impact of conversion to US dollar functional currency
Total tax expense reported in the income statement
(b) Reconciliation of tax expense to prima facie tax payable
Profit before tax
PRRT expense
Profit after PRRT expense
Tax expense calculated at 30%
Tax effect of items which are non-deductible/(assessable)
Sale of assets
Research and development
Other
Foreign expenditure not brought to account
Tax rate differential on non-australian income
Over provided in prior years
Write-downs of deferred tax assets
impact of conversion to US dollar functional currency
Foreign exchange impact on tax expense
PRRT expense
Tax expense
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US$m
2010
US$m
579
(5)
86
-
-
660
88
4
(75)
-
17
677
2,186
(17)
2,169
651
-
(9)
(4)
21
2
(5)
-
-
4
17
677
545
(4)
80
40
(129)
532
96
1
(25)
93
165
697
2,274
(165)
2,109
633
(65)
(10)
9
53
3
(4)
40
(129)
2
165
697
The tax rate used in the above reconciliation is that applied to resident companies pursuant to the income tax statutes in
force in australia as at the reporting date. There has been no change in the corporate tax rate when compared with the
previous reporting year.
(c) Tax recognised directly in equity
Deferred tax
-
(9)
96
96
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
4. Taxes (continued)
(d) Deferred tax
2011
Deferred tax assets
arising from temporary
differences and tax losses
Foreign jurisdiction
Domestic jurisdiction
Deferred tax liabilities
arising from temporary differences
Exploration and evaluation assets
Oil and gas properties
Financial instruments
Other liabilities
Provisions
Other
assets classified as held for sale
arising from PRRT
2010
Deferred tax assets
arising from temporary
differences and tax losses
Foreign jurisdiction
Domestic jurisdiction
Deferred tax liabilities
arising from temporary differences
Exploration and evaluation assets
Oil and gas properties
Financial instruments
Other liabilities
Provisions
Other
assets classified as held for sale
arising from PRRT
At
1 January
Charged/
(credited)
to income
statement
Charged/
(credited)
to equity
Acquisition/
(disposal)
Other
movements
At
31 December
US$m
US$m
US$m
US$m
US$m
US$m
11
30
41
410
548
114
(238)
(203)
(49)
-
751
1,333
51
24
75
263
487
216
(234)
(158)
23
56
677
1,330
-
(8)
(8)
153
138
(75)
35
(171)
(4)
-
(75)
1
(40)
(5)
(45)
148
76
3
(4)
(45)
(66)
-
57
169
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
-
-
(1)
-
-
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(56)
17
(39)
-
-
-
-
-
-
-
-
-
-
-
-
-
11
11
(1)
(15)
(111)
-
-
(5)
-
-
(132)
11
22
33
563
686
39
(203)
(374)
(53)
-
676
1,334
11
30
41
410
548
114
(238)
(203)
(49)
-
751
1,333
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
97
97
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4. Taxes (continued)
(e) Unrecognised deferred tax assets
Tax losses not recognised
Revenue
Capital
Temporary differences associated with investments
Deductible temporary differences not recognised
(f)
Tax losses
2011
US$m
2010
US$m
205
100
4
144
453
195
100
3
160
458
at the reporting date the Group has unused (recognised and not recognised) tax losses of US$981 million
(2010: US$969 million) that are available for offset against future taxable profits.
a deferred tax asset in respect of tax losses of US$16 million (2010: US$22 million) has been recognised because it is
probable that sufficient future taxable profit will be available for use against such losses.
no deferred tax asset has been recognised in respect of the remaining tax losses and credits due to the uncertainty of
future profit streams.
There are no carried forward tax credits available in 2011 (2010: nil).
(g) Tax consolidation
The parent and its wholly-owned australian controlled entities have elected to enter tax consolidation, with
Woodside Petroleum Ltd as the head entity of the tax consolidated group. The members of the tax consolidated
group are identified at note 35(a).
Entities within the tax consolidated group have entered into a tax funding arrangement and a tax sharing agreement
with the head entity. Under the terms of the tax funding arrangement, Woodside Petroleum Ltd and each of the entities
in the tax consolidated group have agreed to make a tax equivalent payment to or from the head entity calculated on
a stand alone basis based on the current tax liability or current tax asset of the entity. Such amounts are reflected in
amounts receivable from, or payable to, other entities in the tax consolidated group.
The tax sharing agreement entered into between members of the tax consolidated group provides for the
determination of the allocation of income tax liabilities between the entities, should the head entity default on its tax
payment obligations. no amounts have been recognised in the financial statements in respect of this agreement as
payment of any amounts under the tax sharing agreement is considered remote.
98
98
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
5. Earnings per share
Profit attributable to equity holders of the parent (US$m)
Weighted average number of shares on issue
Basic and diluted earnings per share (US cents)(1)
2011
2010
1,507
791,668,973
190
1,575
773,388,154
204
(1) Earnings per share is calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares
outstanding during the year. The weighted average number of shares makes allowance for shares reserved for employee share plans. Diluted earnings per share is not
significantly different from basic earnings per share.
There have been no transactions involving ordinary shares between the reporting date and the date of completion of this
Financial Report.
6. Dividends paid and proposed
(a) Dividends paid during the financial year(1)
Prior year fully franked final dividend US$0.55, paid on 6 april 2011
(2010: US$0.49, paid on 31 March 2010)
Current year fully franked interim dividend US$0.55, paid 30 September 2011
(2010: US$0.50 paid on 23 September 2010)
(b) Dividend declared (not recorded as a liability)(1)
Fully franked final dividend US$0.55,to be paid on 4 april 2012
(2010: US$0.55, paid on 6 april 2011)
Dividend per share in respect of financial year (US cents)
(1) Fully franked at 30.0% (2010: 30.0%).
(c) Franking credit balance
Franking credits available for the subsequent financial year arising from
Franking account balance at 31 December
Current year income tax payable
Dividends declared
Franking account balance after payment of tax and dividends
2011
US$m
2010
US$m
430
436
866
443
110
383
390
773
431
105
2,893
82
(190)
2,785
2,752
6
(185)
2,573
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
99
99
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7.
Cash and cash equivalents
(a)
Components of cash and cash equivalents
Cash at bank(1)
Money market deposits(2)
Total cash and cash equivalents
(1) Cash at bank earns on average 0.6% (2010: 1.1%).
2011
US$m
2010
US$m
20
21
41
57
906
963
(2) Money market deposits are denominated in australian dollars and US dollars with an average maturity of 8.1 days (2010: 20.2 days) and effective interest rates
of 0.1% to 5.6% (2010: 0.2% to 5.2%).
(b) Reconciliation to statement of cash flows
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:
Cash at bank
Money market deposits
8. Receivables
Trade receivables(1)
Other receivables (2)
Dividends receivable(3)
(1) Denominated in a mixture of australian dollars and US dollars, interest free and settlement terms between 7 and 30 days.
(2) Other receivables are interest-free with various maturities.
(3) Dividends and interest receivable are receivable within 30 days of period end.
9.
Inventories
(a)
Inventories (current)
Petroleum products (at cost)
Work in progress
Goods in transit
Finished stocks
Warehouse stores and materials (at cost)
(b)
Inventories (non-current)
Warehouse stores and materials (at cost)
2011
US$m
2010
US$m
20
21
41
57
906
963
2011
US$m
2010
US$m
339
328
2
669
285
152
2
439
2011
US$m
2010
US$m
1
3
119
72
195
1
4
61
52
118
18
39
100
100
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
10. Other financial assets
(a) Other financial assets (current)
Derivative instruments (at fair value)(1)
Embedded derivatives (at fair value)(2)
Cash held in reserve
(b) Other financial assets (non-current)
Other investments (available-for-sale)
Listed (at fair value)
Unlisted (at cost)
Cash held in reserve(3)
Derivative instruments (at fair value)(1)
Embedded derivatives (at fair value)(2)
(1) Details regarding derivative instruments are contained in note 25(f).
(2) Embedded derivatives relate to sales contracts.
(3) Represents restricted cash associated with JBiC facility, refer to note 25(e).
11. Other assets
(a) Other assets (current)
Prepayments
Other
(b) Other assets (non-current)
Other
investment in associates
2011
US$m
2010
US$m
9
7
-
16
3
5
30
10
38
86
9
-
2
11
6
6
30
15
54
111
2011
US$m
2010
US$m
41
52
93
1
2
3
46
2
48
34
2
36
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
101
101
12. Exploration and evaluation assets
(a) Reconciliations of the carrying amounts of exploration
and evaluation assets
Carrying amount at 1 January
additions
Disposals at written down value
amortisation of licence acquisition costs
Expensed (previously capitalised):
Exploration
Evaluation
impairment loss
Transferred exploration and evaluation
Carrying amount at 31 December
(b) Carrying amounts of exploration and evaluation assets
Regions
australia
Browse Basin
Carnarvon Basin
Bonaparte Basin
The americas
Gulf of Mexico
Brazil
asia
Korea
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t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
2011
US$m
2010
US$m
1,801
1,158
816
(10)
(28)
(147)
(29)
(14)
(154)
2,235
701
-
(24)
(8)
(2)
-
(24)
1,801
2011
US$m
2010
US$m
1,200
712
136
155
26
740
699
127
207
26
6
2
2,235
1,801
102
102
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
13. Oil and gas properties
Land
and
buildings
Transferred
exploration
and
evaluation
Plant
and
equipment
Marine
vessels and
carriers
Projects
in
development
Total
US$m
US$m
US$m
US$m
US$m
US$m
Year ended 31 December 2011
Carrying amount at 1 January 2011
338
141
3,827
132
additions
Disposals at written down value
Depreciation and amortisation
impairment reversal
Completions and transfers
Carrying amount at 31 December 2011
At 31 December 2011
Historical cost
accumulated depreciation and impairment
Net carrying amount
Year ended 31 December 2010
-
-
(7)
-
(27)
304
574
(270)
304
-
-
(21)
-
-
332
(61)
(581)
17
780
-
-
(6)
-
-
120
4,314
126
402
(282)
120
9,384
(5,070)
4,314
373
(247)
126
Carrying amount at 1 January 2010
376
155
4,188
138
additions
Disposals at written down value
Depreciation and amortisation
impairment loss
Completions and transfers
Carrying amount at 31 December 2010
at 31 December 2010
Historical cost
accumulated depreciation and impairment
net carrying amount
-
-
(7)
-
(31)
338
573
(235)
338
-
-
(29)
(9)
24
141
409
(268)
141
67
-
(696)
(88)
356
-
-
(6)
-
-
3,827
132
12,079
2,955
(10)
-
-
(599)
14,425
14,425
-
14,425
9,000
3,404
-
-
-
(325)
12,079
16,517
3,287
(71)
(615)
17
154
19,289
25,158
(5,869)
19,289
13,857
3,471
-
(738)
(97)
24
16,517
8,931
(5,104)
3,827
373
(241)
132
12,079
-
12,079
22,365
(5,848)
16,517
Borrowing costs capitalised in oil and gas properties during the year were US$200 million (2010: US$217 million) at a weighted
average interest rate of 3.3% (2010: 3.7%).
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
103
103
14. Other plant and equipment
(a) Other plant and equipment
Plant and equipment
Less: accumulated depreciation
(b) Reconciliation of the carrying amounts of other plant and equipment at the beginning and
end of the financial year
Carrying amount at 1 January
additions
Depreciation
Carrying amount at 31 December
15. Payables
(a) Payables (current)
Trade payables(1)
Other payables(1)
interest payable(2)
(b) Payables (non-current)
Loan payables(3)
(1) Trade and other payables are interest-free and normally settled on 30 day terms.
(2) Details regarding interest-bearing liabilities are contained in note 25(e).
(3) Loan payables are unsecured, interest-free and have a repayment period of 10 years.
O
v
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r
v
i
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B
u
s
i
n
e
s
s
r
e
v
i
e
w
s
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
r
e
p
o
r
t
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
2011
US$m
2010
US$m
161
(99)
62
72
2
(12)
62
160
(88)
72
82
1
(11)
72
2011
US$m
2010
US$m
343
827
44
245
934
55
1,214
1,234
215
35
104
104
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
16.
Interest-bearing liabilities
(a)
Interest-bearing liabilities (current)(1)
Bonds
Debt facilities
(b)
Interest-bearing liabilities (non-current)(1)
Bonds
Debt facilities
(1) Details regarding interest-bearing liabilities are contained in note 25(e).
17. Tax payable
income tax payable
PRRT payable
18. Other financial liabilities
(a) Other financial liabilities (current)
Other financial liability
(b) Other financial liabilities (non-current)
Other financial liability
2011
US$m
2010
US$m
-
770
770
300
103
403
2,626
1,706
4,332
1,927
2,585
4,512
2011
US$m
2010
US$m
84
(10)
74
6
29
35
2011
US$m
2010
US$m
-
-
6
6
18
18
5
5
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
105
105
19. Other liabilities
(a) Other liabilities (current)
Unearned revenue
Gas purchase commitments
(b) Other liabilities (non-current)
Unearned revenue
Gas purchase commitments
Defined benefit superannuation plan
20. Provisions
Year ended 31 December 2011
at 1 January 2011
Change in provision
Unwinding of present value discount
At 31 December 2011
At 31 December 2011
Current
non-current
Year ended 31 December 2010
at 1 January 2010
Change in provision
Unwinding of present value discount
at 31 December 2010
at 31 December 2010
Current
non-current
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s
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s
G
o
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e
r
n
a
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c
e
F
i
n
a
n
c
i
a
l
r
e
p
o
r
t
i
n
f
o
r
m
a
t
i
o
n
S
h
a
r
e
h
o
d
e
r
l
2011
US$m
2010
US$m
24
3
27
134
17
30
181
12
1
13
143
17
14
174
Restoration
of operating
locations(1)
Employee
benefits(2)
Other
Total
US$m
US$m
US$m
US$m
581
295
23
899
26
873
899
434
129
18
581
7
574
581
156
19
-
175
134
41
175
121
35
-
156
119
37
156
11
233
-
244
167
77
244
9
2
-
11
11
-
11
748
547
23
1,318
327
991
1,318
564
166
18
748
137
611
748
(1) Details regarding restoration of operating locations are contained in note 1(l) and 1(ad).
(2) Details regarding employee benefits are contained in note 1(v) and 27.
106
106
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
21. Contributed equity
(a)
Issued and fully paid shares
805,671,604 (2010: 783,401,631) ordinary shares(1)
(b) Shares reserved for employee share plans
1,298,284 (2010: 1,578,948) ordinary shares(2)
2011
US$m
2010
US$m
5,880
5,036
(67)
(57)
(1) all shares are a single class with equal rights to dividends, capital distributions and voting. The company does not have authorised capital nor par value in
respect of its issued shares.
(2) information relating to the number of Woodside Petroleum Ltd shares reserved for employee share plans can be found in note 27(a) and (b).
2011
Shares
2010
Shares
2011
US$m
2010
US$m
(c) Movements in issued and fully paid shares
at 1 January
783,401,631
748,598,989
5,036
3,705
DRP underwriting agreement
Ordinary shares issued at a$43.80 (2010 final dividend)
Ordinary shares issued at a$33.43 (2011 interim dividend)
7,397,386
9,507,762
-
-
DRP
Ordinary shares issued at a$45.42 (2009 final dividend)
Ordinary shares issued at a$42.49 (2010 interim dividend)
Ordinary shares issued at a$42.32 (2010 final dividend)
Ordinary shares issued at a$33.49 (2011 interim dividend)
-
-
2,430,803
2,934,022
2,891,112
3,264,722
-
-
Rights issue
Ordinary shares issued at a$42.10
-
28,646,808
334
310
-
-
106
94
-
Share issue costs (net of tax)
At 31 December
805,671,604
783,401,631
5,880
-
-
121
133
-
-
1,078
(1)
5,036
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
107
107
Employee
benefits
reserve
Foreign
currency
translation
reserve
Hedge of net
investment
reserve
Hedging
reserve
Investment
fair value
reserve
Total
US$m
US$m
US$m
US$m
US$m
US$m
192
111
-
-
-
-
303
91
101
-
-
-
-
192
679
-
-
-
-
(16)
663
679
-
-
-
-
-
679
110
-
-
-
-
-
110
96
-
-
-
14
-
110
-
-
-
-
-
-
-
(14)
-
14
-
-
-
-
(10)
-
-
(3)
-
-
(13)
(6)
-
-
(4)
-
-
(10)
971
111
-
(3)
-
(16)
1,063
846
101
14
(4)
14
-
971
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B
u
s
i
n
e
s
s
r
e
v
i
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w
s
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
r
e
p
o
r
t
i
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f
o
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a
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i
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22. Other reserves
Year ended 31 December 2011
at 1 January 2011
Share-based payments
Cash flow hedges
Gain recognised in revenue
available-for-sale financial assets
net gain on hedge of net investment
Companies voluntarily liquidated
At 31 December 2011
Year ended 31 December 2010
at 1 January 2010
Share-based payments
Cash flow hedges
Gain recognised in revenue
available-for-sale financial assets
net gain on hedge of net investment
Companies voluntarily liquidated
at 31 December 2010
Nature and purpose of reserves
Employee benefits reserve
Used to record share-based payments associated with the employee share plans.
Foreign currency translation reserve
Used to record foreign exchange differences arising from the translation of the financial statements of foreign entities from
their functional currency to the Group’s presentation currency.
Hedge of net investment reserve
Used to record gains and losses on hedges of net investments in foreign operations.
Hedging reserve
Used to record the effective portion of changes in the fair value of cash flow hedges.
Investment fair value reserve
Used to record changes in the fair value of the Group’s available-for-sale financial assets.
108
108
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
23. Retained earnings
at 1 January
net profit for the year
Dividends
At 31 December
24. Parent entity information
Information relating to Woodside Petroleum Ltd
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
issued and fully paid shares
Share reserved for employee share plans
Employee benefits reserve
Foreign currency translation reserve
Retained earnings
Total shareholders’ equity
Profit of the parent entity
Total comprehensive income of the parent entity
Guarantees
2011
US$m
5,141
1,507
(866)
5,782
2010
US$m
4,339
1,575
(773)
5,141
2011
US$m
2010
US$m
-
6,800
(131)
(426)
6,374
5,880
(67)
264
303
(6)
6,374
885
885
-
5,786
(176)
(373)
5,413
5,036
(57)
154
303
(23)
5,413
756
756
Woodside Petroleum Ltd and Woodside Energy Ltd (a subsidiary company) are parties to a Deed of Cross Guarantee as
disclosed in note 35(b). The effect of the Deed is that Woodside Petroleum Ltd has guaranteed to pay any deficiency in the
event of winding up of the subsidiary company under certain provisions of the Corporations Act 2001. The subsidiary company
has also given a similar guarantee in the event that Woodside Petroleum Ltd is wound up.
Woodside Petroleum Ltd has guaranteed the discharge by a subsidiary company of its financial obligations under debt facilities
disclosed in note 25(e).
25. Financial and capital risk management
(a) Financial risk management objectives and policies
The Group’s principal financial instruments, other than derivatives, comprise interest-bearing debt, cash and short-term
deposits. Other financial instruments include trade receivables and trade payables, which arise directly from operations.
Market (including foreign exchange, commodity price and interest rate risk), liquidity and credit risks arise in the normal
course of the Group’s business. Primary responsibility for identification and control of financial risk rests with a central
treasury department (Treasury) under directives approved by the Board.
The Group’s management of financial risk is aimed at ensuring net cash flows are sufficient to:
• meet all its financial commitments as and when they fall due;
• maintain the capacity to fund its committed project developments;
• pay a reasonable dividend; and
• maintain a long-term credit rating of not less than ‘investment grade’.
The Group monitors and tests its forecast financial position against these criteria and, in general, will undertake hedging
activity only when necessary to ensure that these objectives are achieved. Other circumstances that may lead to
hedging activities include the purchase of reserves and the underpinning of the economics of a new project.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
109
109
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s
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a
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c
e
F
i
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a
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c
i
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e
p
o
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25. Financial and capital risk management (continued)
(a) Financial risk management objectives and policies (continued)
it is, and has been throughout the period, the Group Treasury policy that no speculative trading in financial instruments
shall be undertaken. The Group’s forecast financial risk position with respect to key financial objectives and compliance
with Treasury policy is regularly reported to the Board. The audit & Risk Committee oversees the internal auditor review
of the treasury function.
(b) Market risk
(i)
Foreign exchange risk
Foreign exchange risk arises from future commitments, assets and liabilities that are denominated in a currency
that is not a functional currency of an entity. The functional currency of all entities within the Group is US dollars.
Currency exposure relates to transactions and balances in currencies other than US dollars. The majority of the
operations’ revenue is denominated in US dollars whereas the majority of operating expenditure and capital
expenditure is incurred in currencies other than US dollars (including australian dollars). as a result most
operations within the Group are exposed to foreign currency risk arising from australian dollars. Monetary items
denominated in currencies other than the functional currency are translated into US dollar equivalents and any
associated gain or loss is taken to the income statement.
Measuring the exposure to foreign exchange risk is achieved by regularly monitoring and performing sensitivity
analysis on the Group’s financial position. Currently there are no foreign exchange hedge programs in place.
Group Treasury manages the purchase of foreign currency to meet operational requirements.
The following table shows financial instruments by currency. The Group is principally exposed to foreign exchange
risk on those financial instruments denominated in australian dollars.
2011
2010
USD
AUD
Other
Total
USD
aUD
US$m
US$m
US$m
US$m
US$m
US$m
Other
US$m
Total
US$m
16
555
92
663
475
5,136
6
5,617
22
114
10
146
915
-
-
915
3
-
-
3
39
-
-
39
41
669
102
812
1,429
5,136
6
6,571
910
329
108
1,347
361
4,849
23
5,233
44
110
14
168
866
-
-
866
9
-
-
9
42
104
-
146
963
439
122
1,524
1,269
4,953
23
6,245
Financial assets
Cash
Receivables
Other financial assets
Financial liabilities
Payables
interest-bearing liabilities(1)
Other financial liabilities
(1) Excludes deferred transaction costs.
110
110
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
25. Financial and capital risk management (continued)
(b) Market risk (continued)
(i)
Foreign exchange risk (continued)
The following table summarises the sensitivity of the balance of financial instruments held at the reporting date to
movement in the exchange rate of the US dollar to the australian dollar, with all other variables held constant. The
15% sensitivity is based on reasonably possible changes, over a financial year, using the observed range of actual
historical rates for the preceding five-year period, which has increased in volatility during the year.
Judgements of reasonably possible movements
US$:a$ +15% (2010:+15%)
US$:a$ -15% (2010:-15%)
(ii) Commodity price risk
Post tax profits
(decrease)/increase
Other comprehensive income
(decrease)/increase
2011
US$m
(80)
80
2010
US$m
(74)
74
2011
US$m
2010
US$m
-
-
-
-
The Group’s revenue is exposed to commodity price fluctuations, in particular oil and gas prices.
Group Treasury measures exposure to commodity price risk by monitoring and stress testing the Group’s forecast
financial position to sustained periods of low oil and gas prices. This analysis is regularly performed on the Group’s
portfolio and, as required, for discrete projects and acquisitions.
(iii)
Interest rate risk
interest rate risk is the risk that the Group’s financial position will be adversely affected by movements in interest
rates that will increase the cost of floating rate debt or opportunity losses that may arise on fixed rate debt in
a falling interest rate environment. Cash and short-term deposits are short term in nature and are therefore
monitored by Group Treasury to achieve the optimal outcome.
The Group’s main interest rate risk arises from long-term debt. Debt issued at floating rates expose the Group
to cash flow interest rate risk. The Group aims to manage its interest rate risk by maintaining an appropriate mix
of fixed and floating rate debt. To manage the ratio of fixed rate debt to floating rate debt, the Group may enter
into interest rate swaps. Derivatives are entered into against specific rate exposures only, as disclosed in note
25(f). no hedging programs were placed during 2011 (2010: nil).
at reporting date, the Group had the following mix of financial assets and liabilities exposed to various benchmark
interest rates that were not designated in cash flow hedges:
Financial assets
Other financial assets
Financial liabilities
interest-bearing liabilities(1)
Derivative instruments
(1) Excludes deferred transaction costs.
(2) 2010 amount has been changed to include floating rate bi-lateral facilities.
2011
US$m
2010
US$m
19
24
(2,487)
(250)
(2,737)
(2,704)(2)
(250)
(2,954)
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
111
111
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s
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o
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e
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a
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c
e
F
i
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a
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c
i
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p
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25. Financial and capital risk management (continued)
(b) Market risk (continued)
(iii)
Interest rate risk (continued)
The following table summarises the sensitivity of the balance of financial instruments held at the reporting date,
following a movement to London interbank Offered Rate (LiBOR), with all other variables held constant. The
LiBOR +/- 1.5% sensitivity is based on reasonably possible changes, over a financial year, using the observed
range of actual historical rates for the preceding five-year period.
Judgements of reasonably possible movements
LiBOR +1.5% (2010: +1.5%)
LiBOR -1.5% (2010: -1.5%)
Post tax profits
(decrease)/increase
Other comprehensive income
(decrease)/increase
2011(3)
US$m
2010(3)
US$m
2011
US$m
2010
US$m
(5)
5
(8)
8
-
-
-
-
(3) Excludes impact of sensitivities on interest-bearing liabilities where borrowing costs are capitalised to qualifying assets. For 2011 and 2010 no interest bearing
liabilities were considered as all borrowing costs were capitalised.
The sensitivity is lower in 2011 than in 2010 due to the interest rate swap being one year closer to maturity
at the reporting date.
(c) Liquidity risk
Liquidity risk arises from financial liabilities of the Group and the Group’s subsequent ability to meet their obligations to
repay financial liabilities as and when they fall due.
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet its financial
commitments in a timely and cost-effective manner.
Group Treasury continually reviews the Group’s liquidity position including cash flow forecasts to determine
the forecast liquidity position and maintain appropriate liquidity levels. at 31 December 2011, the Group has a total
of US$2,179 million available undrawn facilities and cash at its disposal. Financial liabilities available to the Group are
disclosed in note 25(e). Refer to note 25(g) for details of the repayment obligations in respect of the amount of
facilities drawndown.
2011
Payables maturity analysis
2010
Payables maturity analysis
< 30 days 30-60 days > 60 days
Total
< 30 days 30-60 days > 60 days
Total
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
Trade payables
Other payables
interest payable
Total payables
337
827
44
1,208
6
-
-
6
-
215
-
215
343
1,042
44
1,429
240
934
55
1,229
5
-
-
5
-
35
-
35
245
969
55
1,269
112
112
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
25. Financial and capital risk management (continued)
(d) Credit risk
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument, resulting in
a financial loss to the Group. Credit risk arises from the financial assets of the Group, which comprise trade and other
receivables.
The Group manages its credit risk on trade receivables and financial instruments by predominantly dealing with
counterparties with an investment grade credit rating. Customers who wish to trade on unsecured credit terms are
subject to credit verification procedures. Receivable balances are monitored on an ongoing basis. as a result the
Group’s exposure to bad debts is not significant. The Group’s maximum credit risk is limited to the carrying amount of
its financial assets. at the reporting date there were no significant concentrations of credit risk within the Group.
2011
2010
Receivables maturity analysis
Receivables maturity analysis
< 30 days 30-60 days > 60 days
Total
< 30 days 30-60 days > 60 days
Total
US$m
US$m
US$m
US$m
US$m
US$m
US$m
US$m
Trade receivables
Other receivables
Dividends receivable
interest receivable
Total receivables
339
323
2
-
664
-
1
-
-
1
-
4
-
-
4
339
328
2
-
669
285
151
2
-
438
-
1
-
-
1
-
-
-
-
-
285
152
2
-
439
(e)
Financing facilities
364-day revolving credit facilities
The Group has three dual currency (US and australian dollars) 364-day revolving credit facilities totalling US$200 million.
interest rates are based on LiBOR and are fixed at the commencement of the drawdown period. interest is paid at
the end of the drawdown period. The 364-day revolving credit facilities are subject to various covenants and a negative
pledge restricting future secured borrowings, subject to a number of permitted lien exceptions. neither the covenants
nor the negative pledges have been breached at any time during the reporting year.
Bi-lateral loan facilities
The Group has 14 bi-lateral loan facilities totalling US$1,425 million. Details of bi-lateral loan facilities at the reporting
date are as follows:
Number of facilities
Term (years)
8
2
1
1
1
1
5
5
5
4
3
3
Currency
aUD, USD
Multiple
USD
aUD, USD
aUD, USD
USD
Extension option
Evergreen
Evergreen
not evergreen
Evergreen
Evergreen
Evergreen
interest rates are based on LiBOR and are fixed at the commencement of the drawdown period. interest is paid at
the end of the drawdown period. Evergreen facilities may be extended continually by a year subject to the bank’s
agreement. The bi-lateral loan facilities are subject to various covenants and a negative pledge restricting future secured
borrowings, subject to a number of permitted lien exceptions. neither the covenants nor the negative pledges have
been breached at any time during the reporting year.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
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25. Financial and capital risk management (continued)
(e)
Financing facilities (continued)
Bridging facilities
The Group entered into two 10-month bridging facilities in December 2011 totalling US$400 million. interest rates
are based on LiBOR and are fixed at the commencement of the drawdown period. interest is paid at the end of
the drawdown period. One of the bridging facilities has an option to extend for 10 months subject to the bank’s
agreement and the other facility has an option to extend for two months. The bridging facilities are subject to various
covenants and a negative pledge restricting future secured borrowings, subject to a number of permitted lien exceptions.
neither the covenants nor the negative pledges have been breached at any time during the reporting year.
Bonds
The Group has five unsecured bonds issued to ‘qualified institutional buyers’ in the United States of america as
defined in Rule 144a of the US Securities act 1933. These bonds include:
• The 2013 US$250 million bond has a fixed rate coupon of 5.00% p.a. and matures on 15 november 2013;
• The 2014 US$400 million bond has a fixed rate coupon of 8.125% p.a. and matures on 1 March 2014;
• The 2014 US$700 million bond has a fixed rate coupon of 4.50% p.a. and matures on 10 november 2014;
• The 2019 US$600 million bond has a fixed rate coupon of 8.75% p.a. and matures on 1 March 2019; and
• The 2021 US$700 million bond has a fixed rate coupon of 4.60% p.a. and matures on 10 May 2021.
interest on the bonds is payable semi-annually in arrears. The bonds are subject to various covenants and a negative
pledge restricting future secured borrowings, subject to a number of permitted lien exceptions. neither the
covenants nor the negative pledges have been breached at any time during the reporting year.
Japan Bank for International Cooperation (JBIC) Facility
On 24 June 2008, the Group entered into a committed loan facility totalling US$1,500 million (JBiC Facility). The
JBiC Facility comprises a 15-year, US$1,000 million tranche with JBiC (JBiC Tranche), and a five-year, US$500 million
commercial tranche with a syndicate of eight australian and international banks arranged by The Bank of Tokyo-
Mitsubishi UFJ, Ltd (Commercial Tranche). There is a prepayment option for both the Commercial Tranche and the JBiC
Tranche. interest rates are based on LiBOR. interest is payable semi-annually in arrears on the JBiC Tranche and with a
choice of one, two, three, six, nine or twelve months in arrears on the Commercial Tranche. Both tranches amortise on
a straight-line basis, with equal instalments of principal due on each interest payment date (every six months) starting
on the earlier of 7 January 2012 or the first 7 January or 7 July to occur no less than 180 days after the commercial start
date of the Pluto Liquefied natural Gas (LnG) Project. Under the JBiC Facility, 90% of the receivables from designated
Pluto LnG Project Sale and Purchase agreements, are secured in favour of the lenders through a trust structure, with a
required reserve amount of US$30 million. To the extent that this reserve amount remains fully funded and no default
notice or acceleration notice has been given, the revenue from the Pluto LnG Project continues to flow directly to the
Group from the trust account. The JBiC Facility is subject to various covenants and a negative pledge restricting future
secured borrowings, subject to a number of permitted lien exceptions. neither the covenants nor the negative pledge
has been breached at any time during the reporting year.
Asian syndicated facility
On 8 December 2010, the Group executed a five-year US$1,100 million syndicated loan facility with 34 banks. Funds
from the loan were used to repay the US$1,100 million syndicated loan facility executed in May 2009. australia and
new Zealand Banking Group Limited and The Bank of Tokyo-Mitsubishi UFJ, Ltd were joint-mandated lead arrangers
of the syndicated loan. The loan is composed of a US$550 million term facility (Facility a) and a US$550 million
revolving facility (Facility B). interest rates are based on LiBOR for both facilities and are fixed at the commencement
of the drawdown period. interest is paid at the end of the drawdown period. The syndicated loan is subject to various
covenants, including a negative pledge restricting future secured borrowings, subject to a number of permitted lien
exceptions. neither the covenants nor the negative pledge has been breached at any time during the reporting year.
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
25. Financial and capital risk management (continued)
(f) Hedging and derivatives
Interest rates
The Group manages its exposure to interest rate risk by maintaining a mix of fixed rate and floating rate debt. in
general, the fixed rate debt and floating rate debt ratio is managed through an appropriate choice of debt instrument.
The Group may enter into interest rate swaps to manage the ratio of fixed rate debt to floating rate debt.
Instrument
Notional
amount
interest
rate swaps
US$250
million
Rate
Expiry
Hedge type
Receive 5% fixed
2013
Pay LiBOR
less 0.10%
Fair value hedge in 2006 -
designated to swap the 2013
US$250 million bond from a fixed
rate to floating rate exposure.
De-designated as a fair value
hedge on 1 January 2007.
(g) Maturity profile of interest-bearing liabilities
The maturity profile of the Group’s interest-bearing liabilities are as follows:
Fair value
2011
US$m
2010
US$m
19
24
Due for payment in
1 year
or less
1-2 years
2-3 years
3-4 years
4-5 years More than
Total
5 years
US$m
US$m
US$m
US$m
US$m
US$m
US$m
2011
interest-bearing liabilities(1)
2010
interest-bearing liabilities(1)
(1) Excludes deferred transaction costs.
(952)
(952)
(580)
(580)
(761)
(761)
(488)
(488)
(1,339)
(1,339)
(740)
(740)
(174)
(174)
(2,167)
(2,167)
(6,133)
(6,133)
(735)
(735)
(1,315)
(1,315)
(1,266)
(1,266)
(1,469)
(1,469)
(5,853)
(5,853)
The amounts disclosed in the tables above are the contractual undiscounted cash flows and hence will not necessarily
reconcile with the amounts disclosed in the consolidated statement of financial position.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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25. Financial and capital risk management (continued)
(h)
Fair values
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
• Level 1 - the fair value is calculated using quoted prices in active markets;
• Level 2 - the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable
for the asset or liability; and
• Level 3 - the fair value is estimated using inputs for the asset or liability that are not based on observable
market data.
The fair values of financial instruments and the methods used to estimate their fair values are as follows:
2011
2010
Total
Quoted
market
price
(Level 1)
Valuation
technique -
market
observable
inputs
(Level 2)
Valuation
technique -
non-market
observable
inputs
(Level 3)
Quoted
market
price
(Level 1)
Valuation
technique -
market
observable
inputs
(Level 2)
Valuation
technique -
non-market
observable
inputs
(Level 3)
Total
US$m US$m
US$m US$m US$m
US$m
US$m US$m
Financial assets
Derivative instruments
Current
non-current
Other investments (available-for-sale):
Listed entity investments
Embedded derivatives:
Current
non-current
-
-
3
-
-
9
10
-
-
-
-
-
-
7
38
9
10
3
7
38
-
-
6
-
-
9
15
-
-
-
-
-
-
-
54
9
15
6
-
54
Quoted market price represents the fair value determined based on quoted prices on active markets as at the
reporting date.
The fair value of the listed equity instruments are based on quoted market prices and these financial instruments are
included in Level 1.
For financial instruments not quoted in active markets, the Group uses valuation techniques comparable to similar
instruments such as present value techniques for which market observable prices exist. Financial instruments that use
valuation techniques with only observable market inputs, that are not significant to the overall valuation, include interest
rate swaps and forward commodity contracts. These instruments are included in Level 2. in circumstances where a
valuation technique is based on significant unobservable inputs, such as embedded derivatives they are included in
Level 3.
The fair values of receivables, payables, interest-bearing liabilities and other financial assets and liabilities which are not
measured at fair value approximate their carrying amounts.
116
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
25. Financial and capital risk management (continued)
(h)
Fair values (continued)
Transfer between categories
There were no transfers between Level 1 and Level 2 during the year.
Reconciliation of Level 3 fair value movements
at 1 January
amortisation recognised in the income statement
at 31 December
Total amortisation stated in the above table for assets held at the end of the financial year
(i)
Capital management
2011
US$m
2010
US$m
54
(9)
45
(9)
54
-
54
-
Group Treasury is responsible for the Group’s capital management including cash, debt and equity. Capital management
is undertaken to ensure that a secure, cost-effective and flexible supply of funds is available to meet the Group’s
operating and capital expenditure requirements. This involves the use of corporate forecasting models, which facilitates
analysis of the Group’s financial position including cash flow forecasts to determine the future capital management
requirements.
Group Treasury maintains a stable capital base from which the Group can pursue its growth aspirations, whilst
maintaining a flexible capital structure that allows access to a range of debt and equity markets to both draw upon and
repay capital. an example of the Group’s capital management is the activation of the Dividend Reinvestment Plan (DRP)
during a period of high capital expenditure.
The DRP was approved by shareholders at the annual General Meeting in 2003 for activation as required to fund future
growth. The Group announced the activation of the DRP in December 2006 to manage capital requirements. The DRP
was activated with the 2006 final dividend and deactivated for the 2007 final dividend. The DRP was reactivated in 2008,
and remains active for the 2011 final dividend.
Group Treasury monitors a range of financial metrics, including gearing, and treasury policy breaches and exceptions.
The gearing ratio at the reporting date is 29% (2010: 26%).
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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26. Expenditure commitments
(a) Operating lease commitments
Rentals payable on non-cancellable operating leases, due
Within one year
after one year but not more than five years
Later than five years
2011
US$m
2010
US$m
411
482
337
511
908
423
1,230
1,842
The Group leases assets for operations including floating production, storage and off-take vessels, helicopters, supply
vessels, cranes, land, mobile offshore drilling units, office premises and computers.
There are no restrictions placed upon the lessee by entering into these leases. Renewals are at the option of the
specific entity that holds the lease. Certain leases contain a clause enabling upward revision of the rental charge on an
annual basis based on the consumer price index. The Group made payments under operating leases of US$540 million
during the year (2010: US$595 million). a portion of this amount relates to arrangements containing non-lease elements,
which are not practicable to separate.
(b) Capital expenditure commitments
Expenditure contracted for but not provided for in the Financial Report, due
Within one year
after one year but not more than five years
Later than five years
(c) Other expenditure commitments
Other expenditure commitments predominantly for the future supply of services contracted
for but not provided for in the Financial Report, due
Within one year
after one year but not more than five years
Later than five years
(d)
Exploration commitments
Exploration expenditure obligations contracted for but not provided for in the Financial
Report, due
Within one year
after one year but not more than five years
Later than five years
By region
australia
Browse Basin
Canning Offshore Basin
Carnarvon Basin
The americas
Gulf of Mexico
Peru
asia
Korea
525
42
1
568
83
88
97
268
198
243
2
443
18
187
153
11
2
72
443
743
23
3
769
102
169
3
274
178
199
1
378
47
-
276
9
-
46
378
These obligations may be varied from time to time and are expected to be fulfilled in the normal course of operations
of the Group.
118
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
27. Employee benefits
(a) Woodside employee share plans
(i) Woodside share purchase plan
The Woodside Share Purchase Plan (WSPP) was introduced in april 2007 and was available to all employees,
including executives up to March 2009. The plan was suspended in May 2009 due to uncertainty regarding the
future operation of the plan created by proposed taxation legislation changes announced in the 2009 Federal
budget. The WSPP provided eligible employees with an opportunity to acquire Woodside shares and to share in
the growth of the company. The WSPP year was based on a 1 July to 30 June period (WSPP Year).
Participants in the WSPP elected to salary sacrifice an amount of base salary and this amount was applied by the
WSPP Trustee to purchase shares in Woodside Petroleum Ltd. additional shares were granted (matching shares)
at a fixed annual ratio of the shares awarded for the salary sacrifice amount. in the 2008/09 WSPP Year, the ratio
was one for one and a half; the ratio for the 2007/08 WSPP Year was one for one. Conditions applied in order for
employees to become entitled to the matching shares.
Share acquisitions under the WSPP for the employee sacrificed amounts were made quarterly in arrears. The
shares were purchased by the Trustee on market by dividing the sacrificed amount by the volume weighted
average price paid for all the shares purchased for participating employees. The sacrificed amount is rounded
down to the nearest whole share. any amount not used was carried forward and applied to the sacrificed amount
for the next quarter. any balance at the end of the specified sacrifice period (normally 12 months) was paid to
the participant or carried over to the next sacrifice period if the employee elected to participate. if employment
ceased (for whatever reason) during a quarter or after the end of a quarter, but before any shares had been
purchased in respect of the quarter, no shares were transferred to the participant in relation to that quarter.
in order for the matching shares to beneficially vest to the participating employees in the WSPP, the employee
was required to hold shares purchased through the sacrificed amount for three years and remain employed at the
end of that qualification period.
Matching shares were purchased on a quarterly basis at the same time as the shares were purchased using the
employee’s sacrificed amount.
if employment ceased because of resignation or termination before the end of the three-year qualification period,
the participants forfeited their interests in any matching shares. Shares acquired using any sacrificed amount
were released to the participant.
The WSPP had 1,318 employees participating at 31 December 2011.
Matching shares acquired under the WSPP were accounted for as share-based payments to employees for
services provided and were measured at fair value, being the share price on acquisition date.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
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27. Employee benefits (continued)
(a) Woodside employee share plans (continued)
(ii) Woodside employee equity plan
in July 2009 Woodside introduced the Woodside Petroleum Ltd 2009 - 2012 Employee Equity Plan (EEP) which
is available to all employees including executives, other than the CEO. The EEP is intended to provide a retention
mechanism for participating employees as well as provide an opportunity to share in the growth of the company.
The Equity Rights (ERs) are a form of remuneration that is not dependent on employee's individual performance
or Woodside's performance. The EEP has 3,412 employees participating at 31 December 2011.
Eligible participants are entitled to receive an allocation of ERs. Each ER entitles the participants to receive a
Woodside share on vesting. The ERs will vest on 1 august 2012 (in the absence of any accelerating event,
including a change of control) if the employee is still employed by Woodside on 31 July 2012. an employee whose
employment is terminated by resignation, retirement or for cause prior to 31 July 2012 will forfeit all of their ERs.
Shares will either be issued by the company or acquired on market to satisfy vesting ER entitlements. The
number of ERs that vest may be adjusted for any interruptions to an employee's service. Participants in the EEP
cannot dispose of or otherwise deal with an ER and do not receive any dividends or have voting rights in respect
of an ER. allocations of ERs to participants will be adjusted in the event of the company making a bonus issue of
shares or upon reconstruction of the company's share capital.
as a consequence of the renounceable rights issue by Woodside in December 2009, the Board resolved to issue
additional ERs under the EEP to maintain the value of the ERs held by participating employees. an additional
allocation of ERs was granted to each participant in early 2010. The same terms and conditions which apply to
existing ERs apply to these additional ERs.
The EEP is accounted for as a share-based payment to employees for services provided. The fair value of the
benefit provided is estimated using the Black-Scholes option pricing technique.
The number of ERs and movements in each EEP offer are as follows:
2011
Grant date
On issue at
beginning of year
Granted during
the year
Vested during
the year
Forfeited/lapsed
during the year
On issue at
end of year
16 December 2011
16 September 2011
10 June 2011
18 March 2011
17 December 2010
24 September 2010
25 June 2010
30 april 2010
19 March 2010
30 December 2009
31 October 2009
-
-
-
-
192,851
227,999
323,173
41,677
257,654
202,176
5,568,584
6,814,114
82,602
83,605
104,048
125,477
-
-
-
-
-
-
-
395,732
-
-
-
-
-
-
-
-
-
(241)
(2,975)
(3,216)
-
-
(5,661)
(10,379)
(6,302)
(20,436)
(26,759)
(2,325)
(25,087)
(7,922)
(330,232)
(435,103)
82,602
83,605
98,387
115,098
186,549
207,563
296,414
39,352
232,567
194,013
5,235,377
6,771,527
2010
Grant date
On issue at
beginning of year
Granted during
the year
Vested during
the year
Forfeited/lapsed
during the year
On issue at
end of year
17 December 2010
24 September 2010
25 June 2010
30 april 2010
19 March 2010
30 December 2009
31 October 2009
-
-
-
-
-
219,143
5,928,896
6,148,039
192,851
237,995
329,274
43,113
264,930
-
13
1,068,176
-
-
-
(22)
-
(431)
(5,390)
(5,843)
-
(9,996)
(6,101)
(1,414)
(7,276)
(16,536)
(354,935)
(396,258)
192,851
227,999
323,173
41,677
257,654
202,176
5,568,584
6,814,114
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Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
27. Employee benefits (continued)
(a) Woodside employee share plans (continued)
(ii) Woodside employee equity plan (continued)
The following table lists the inputs to the Black-Scholes option pricing technique used for the years ended
31 December 2011, 31 December 2010 and 31 December 2009:
Grant date
Vesting date
Share price at
grant date
(A$/share)
Employee benefit
fair value
(US$/ER)
Expected
dividend return
(%)
Expected life
(years)
Valuation assumptions
16 December 2011
16 September 2011
10 June 2011
18 March 2011
17 December 2010
24 September 2010
25 June 2010
30 april 2010
19 March 2010
30 December 2009
31 October 2009
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
1 august 2012
31.30
34.25
43.55
44.41
43.17
44.48
43.28
45.40
46.73
47.35
47.70
30.59
32.50
39.79
42.17
40.81
40.51
35.71
39.83
40.53
39.68
39.81
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
2.5
0.63
0.88
1.15
1.38
1.62
1.85
2.10
2.26
2.37
2.59
2.75
(iii) Woodside equity plan
in november 2011 Woodside introduced the Woodside Petroleum Ltd - Woodside Equity Plan (WEP) which is available
to all australian based permanent employees including executives, other than the CEO. Woodside’s intention is to
enable eligible employees to build up a holding of equity in the company as they progress through their career at
Woodside. The number of Equity Rights (ERs) offered to each eligible employee is calculated with reference to salary
and performance. The linking of performance to an allocation allows Woodside to recognise and reward eligible
employees for high performance. The WEP is intended to provide an opportunity to share in the growth of the company
as well as provide a retention mechanism for participating employees. Participants do not make any payment in respect
of the ERs at grant nor at vesting.
Eligible participants receive an allocation of ERs. Each ER entitles the participant to receive a Woodside share on the
vesting date three years after the effective date. ERs may vest prior to the vesting date on a change of control or on a
pro rata basis, at the discretion of the CEO, limited to the following circumstances; redundancy, retirement (after six
months participation), death, termination due to medical illness or incapacity or total and permanent disablement of a
participating employee. an employee whose employment is terminated by resignation or for cause prior to the vesting
date will forfeit all of their ERs.
Shares will either be issued by Woodside or acquired on market to satisfy vesting ER entitlements. The number of
ERs that vest may be adjusted for any interruptions to an employee’s service. Eligible participants who are on an
international assignment may receive a cash amount subject to Board discretion.
Participants in the WEP cannot dispose of or otherwise deal with an ER and do not receive any dividends or have voting
rights in respect of an ER. allocations of ERs to participants will be adjusted in the event of Woodside making a bonus
issue of shares or upon reconstruction of the company’s share capital.
The WEP is accounted for as a share-based payment to employees for services provided. The fair value of the benefit
provided will be estimated using the Black-Scholes option pricing technique.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
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27. Employee benefits (continued)
(a) Woodside employee share plans (continued)
(iii) Woodside equity plan (continued)
The WEP had 3,478 employees participating at 31 December 2011.
The number of equity rights and movements in each WEP offer are as follows:
2011
Grant date
On issue at
beginning of year
Granted during
the year
Vested during
the year
Forfeited/lapsed
during the year
On issue at end
of year
30 november 2011
-
-
1,669,427
1,669,427
-
-
(4,820)
(4,820)
1,664,607
1,664,607
The following table lists the inputs to the Black-Scholes option pricing technique used for the year ended
31 December 2011.
Grant date
Vesting date
Share price at grant
date (A$/share)
Employee benefit
fair value (US$/ER)
Expected dividend
return (%)
Expected life
(years)
30 november 2011 30 november 2014
32.80
30.49
2.5
3
Valuation assumptions
(b) Executive share plans
The Executive incentive Plan (EiP) and Pay Rights (PR) Plans became effective 1 January 2005 and 15 March 2007
respectively. For further details regarding the EiP, PR Plans and the Group’s remuneration structure for the CEO and
senior executives refer to the Remuneration Report included in the 2011 Directors’ Report.
The following table illustrates the number and weighted average prices of shares reserved and acquired during the year
by the plan.
2011
2010
Number of
shares
Weighted
average price
(A$/share)
Opening balance
Purchases during the year
Vested during the year
Shares reserved for executives
under EiP/PR
503,244
200,000
(140,414)
562,830
46.88
35.50
47.80
42.61
Cost
US$m
18
7
(7)
18
number of
shares
Weighted
average price
(a$/share)
650,650
-
(147,406)
503,244
46.88
-
46.88
46.88
Cost
US$m
24
-
(6)
18
122
122
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
27. Employee benefits (continued)
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For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
123
123
27. Employee benefits (continued)
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124
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
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notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
125
125
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27. Employee benefits (continued)
(c) CEO sign-on incentive shares
Mr Coleman gave up certain rights with his former employer to join Woodside as CEO. To recognise these interests, he
was paid a one off sign-on incentive. Woodside acquired Woodside Shares to the value of $3 million to be held in trust
for Mr Coleman. One third of these shares will vest each anniversary after the date of his appointment (in the absence
of any accelerating event, including a change of control, in which case all shares will vest on the date of the control
event).
any unvested entitlements will be forfeited if Mr Coleman’s employment is terminated for cause or by his resignation.
Mr Coleman cannot dispose of or deal with any restricted shares until such restricted shares vest. in the event bonus
shares are allotted in respect of the sign-on shares, the bonus shares will be allotted to the Trustee and held for
Mr Coleman on the same terms and conditions as the underlying restricted shares.
The number of equity rights and movements in the CEO Sign-On incentive share offer was as follows:
Grant date
On issue at
beginning of year
Granted during
the year
Vested during
the year
Forfeited/lapsed
during the year
On issue at end
of year
30 May 2011
-
66,004
-
-
66,004
2011
The following table lists the inputs to the Black-Scholes option pricing technique used for the year ended
31 December 2011.
Grant date
Vesting date
Share price at grant
date (A$/share)
Employee benefit
fair value (US$/ER)
Expected dividend
return (%)
Expected life
(years)
30 May 2011
30 May 2011
30 May 2011
30 May 2012
30 May 2013
30 May 2014
45.97
45.97
45.97
49.19
49.19
49.19
-
-
-
1
2
3
Valuation assumptions
(d) Superannuation plan
Employees of the Group may be entitled to superannuation benefits on retirement, disability, death or withdrawal
under the Group’s Superannuation Plan. The Group has one funded plan with a defined benefit section and a defined
contribution section.
The defined benefit section of the plan is closed to new members. all new members receive accumulation only
benefits. The defined contribution section receives fixed contributions from Group companies and the Group’s legal or
constructive obligation is limited to these contributions.
Defined benefit superannuation plan
The Group has a legal obligation to settle defined benefit plan deficits, however, these do not need to be settled with an
immediate contribution or additional one-off contribution. any defined benefit plan surplus may only be used to reduce
future contributions from the Group.
The present value of the defined benefit obligation has been determined using the projected unit credit method.
Employer contributions
Employer contributions to the defined benefit section of the plan are based on recommendations by the plan’s actuary.
actuarial assessments are made at no more than yearly intervals and the last such assessment was made as at
31 December 2011.
126
126
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
27. Employee benefits (continued)
(d) Superannuation plan (continued)
Funding method
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded
by the time they become payable. To achieve this objective, the actuary has adopted a method of funding benefits
known as the attained age normal method. This funding method seeks to have benefits funded by means of a total
contribution which is expected to be a constant percentage of members’ salaries over their working lifetimes.
Using the funding method described above, in October 2008 the actuary recommended that the payment of employer
contributions to the fund recommence. The Group recommenced contributions to the defined benefit section of the
plan based on actuary recommended contribution rates for the respective groups of employees from 1 november
2008. Total employer contributions paid by Group companies for the year ending 31 December 2011 were US$20 million
(2010: US$14 million).
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
127
127
27. Employee benefits (continued)
(d) Superannuation plan (continued)
Defined benefit plan asset/(liability) included in the statement of financial position
Present value of the defined benefit obligation
Fair value of defined benefit plan assets
Net benefit liability - non-current
Defined benefit plan categories of plan assets
Cash
australian equity
international equity
Fixed income
Property
Other
Defined benefit plan reconciliations
Reconciliation of the present value of the defined benefit obligation,
which is fully funded
at 1 January
Current service cost
interest on obligation
actuarial (loss)/gain
Plan participants’ contributions
Benefits, administrative expenses, premiums and tax paid
Currency translation differences
At 31 December
Reconciliation of the fair value of plan assets
at 1 January
Expected return on plan assets
actuarial loss
Employer contributions
Plan participants’ contributions
Benefits, administrative expenses, premiums and tax paid
Currency translation differences
At 31 December
Defined benefit plan amounts recognised in the income statement
Current service cost
interest on obligation
Expected return on plan assets
net actuarial loss
Defined benefit plan expense
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US$m
2010
US$m
(184)
154
(30)
2011
%
8
28
29
14
16
5
100
(160)
146
(14)
2010
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(160)
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(9)
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(184)
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(14)
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(12)
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(3)
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(18)
(160)
119
9
(3)
14
3
(12)
16
146
9
15
(16)
3
11
128
128
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
27. Employee benefits (continued)
(d) Superannuation plan (continued)
Defined benefit plan principal actuarial assumptions
The principal actuarial assumptions used as at the reporting date for the purpose of calculating the present value of the
defined benefit obligation are as follows:
Discount rate – active members
Discount rate – pensioners
Expected rate of return on plan assets – active members
Expected rate of return on plan assets – pensioners
Expected salary increase rate
Financial year
2011
2010
3.70% p.a.
3.70% p.a.
7.00% p.a.
8.00% p.a.
5.00% p.a.
5.60% p.a.
5.60% p.a.
7.00% p.a.
8.00% p.a.
5.00% p.a.
The expected rate of return on plan assets is determined by weighting the expected long-term return for each asset
class by the benchmark allocation of assets to each class. The returns for each asset class are net of investment tax
and investment fees.
Defined benefit plan historical information
Present value of defined benefit obligation(1)
Fair value of plan assets
(Deficit)/surplus in plan
Experience adjustments (loss)/gain - plan assets
Experience adjustments gain/(loss) - plan liabilities
(1)
includes any provision for contribution tax on plan surplus or deficit.
(e)
Employee benefits expense
Employee benefits
Defined contribution plan costs
Defined benefit plan expense
28. Key management personnel compensation
(a) Compensation of key management personnel
Key management personnel (KMP) compensation for the financial year is as follows:
Short-term employee benefits
Post employment benefits
Share-based payments
Long-term employee benefits
Termination benefits
Financial year
2011
US$m
2010
US$m
Restated
2009
US$m
Restated
2008
US$m
Restated
2007
US$m
(184)
154
(30)
(13)
3
(160)
146
(14)
(3)
3
(133)
119
(14)
7
4
(115)
83
(32)
(43)
(1)
(132)
152
20
(1)
(8)
2011
US$m
139
14
27
180
2010
US$m
143
14
11
168
2011
US$
2010
US$
12,346,879
12,063,581
632,747
6,060,666
(533,441)
986,775
530,391
7,728,173
236,644
86,583
19,493,626
20,645,372
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
129
129
28. Key management personnel compensation (continued)
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130
130
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
28. Key management personnel compensation (continued)
(c) Executives’ interests in variable pay rights (VPR), pay rights (PR) and equity rights (ER)
VPR, PR and ER holdings of key management personnel
2011
Name
P Coleman(1)
D Voelte(2) (11)
L Tremaine(3)
M Chatterji(4)
R Cole
E Howell(5)(11)
a Kantsler(6)
V Santostefano
L Della Martina
K Gallagher(7)
P Moore
F ahmed(8)
J Soine(9)
G Roder(10)
2010
name
D Voelte
M Chatterji
R Cole
E Howell
a Kantsler
V Santostefano
L Della Martina
K Gallagher
P Moore
F ahmed
J Soine
At 1 January 2011 Allocated in 2011 Vested in 2011 Net change - other At 31 December 2011
-
259,186
14,673
33,660
35,266
31,330
25,931
27,059
25,120
24,957
16,873
30,790
1,023
-
-
52,395
7,961
-
13,658
9,135
-
10,781
10,603
9,124
8,260
9,457
-
-
-
(98,257)
(870)
-
(1,771)
(12,116)
-
(1,683)
(1,691)
(1,691)
(754)
(1,003)
-
-
-
-
(1,364)
(33,660)
-
-
(25,931)
-
-
(32,390)
-
(2,047)
(1,023)
-
-
213,324
20,400
-
47,153
28,349
-
36,157
34,032
-
24,379
37,197
-
-
at 1 January 2010 allocated in 2010 Vested in 2010
net change - other at 31 December 2010
261,184
65,059
32,508
27,827
40,816
25,536
27,043
24,139
15,069
23,092
2,046
58,870
17,901
10,940
9,975
13,700
9,012
7,031
6,959
6,424
9,745
-
(60,868)
(44,914)
(8,182)
(6,472)
(24,199)
(7,489)
(8,954)
(6,141)
(4,620)
(2,047)
(1,023)
-
(4,386)
-
-
(4,386)
-
-
-
-
-
-
259,186
33,660
35,266
31,330
25,931
27,059
25,120
24,957
16,873
30,790
1,023
(1) Mr Coleman was appointed as CEO on 30 May 2011. Prior to this Mr Coleman was not employed by the Group.
(2) Mr Voelte departed Woodside on 30 June 2011.
(3) Mr Tremaine did not meet the definition of KMP under aaSB 124 for previous years but did fall within the definition for 2011.
Prior year comparatives are not shown.
(4) Mr Chatterji departed Woodside on 31 December 2010.
(5) Ms Howell departed Woodside on 31 December 2011.
(6) Mr Kantsler departed Woodside on 2 July 2010.
(7) Mr Gallagher departed Woodside on 31 October 2011.
(8) amount includes 1,003 shares that were settled in cash with a fair value of $42.86.
(9) Mr Soine departed Woodside on 30 September 2011.
(10) Mr Roder became a KMP on 27 October 2011.
(11) Mr Voelte and Ms Howell’s RTSR tested VPRs remain subject to the normal vesting conditions.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
131
131
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28. Key management personnel compensation (continued)
(d) Summary of Executives’ interests in shares under the Woodside Share Purchase Plan (WSPP)
Name
Year
Opening
balance
Shares purchased
under WSPP
Matching
shares
Shares vested Net change
- other
Closing
balance
P Coleman(1)
D Voelte(2)
L Tremaine(3)
M Chatterji(4)
R Cole
E Howell(5)
a Kantsler(6)
V Santostefano
L Della Martina(7)
K Gallagher(8)(9)
P Moore(8)
F ahmed
J Soine(8)(10)
G Roder(11)
2011
2011
2010
2009
2008
2007
2011
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2007
2011
2010
2009
2008
2011
2010
2011
2010
2011
2010
2009
2011
2010
2011
-
769
893
498
124
-
-
-
893
498
124
-
769
893
498
124
-
-
-
-
-
-
-
358
358
124
-
769
893
498
124
-
769
893
498
124
769
893
234
358
-
-
-
-
-
-
-
-
-
158
173
62
-
-
-
158
173
62
-
-
158
173
62
-
-
-
-
-
-
-
-
117
62
-
-
158
173
62
-
-
158
173
-
-
-
-
-
-
-
-
-
-
-
-
-
237
201
62
-
-
-
237
201
62
-
-
237
201
62
-
-
-
-
-
-
-
-
117
62
-
-
237
201
62
-
-
237
201
-
-
-
-
-
-
-
-
-
-
-
(769)
(124)
-
-
-
-
-
(893)
-
-
-
(374)
(124)
-
-
-
-
-
-
-
-
-
-
-
-
-
(374)
(124)
-
-
-
(374)
(124)
-
-
(532)
(124)
(234)
(124)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(358)
-
-
-
-
-
-
-
-
-
-
-
-
(237)
-
-
-
-
-
-
-
-
-
-
-
769
893
498
124
-
-
-
893
498
124
395
769
893
498
124
-
-
-
-
-
-
-
358
358
124
395
769
893
498
124
395
769
893
498
-
769
-
234
-
-
-
-
-
-
(1) Mr Coleman was appointed as CEO on 30 May 2011.
Prior to this Mr Coleman was not employed by the Group.
(2) Mr Voelte departed Woodside on 30 June 2011.
(3) Mr Tremaine did not meet the definition of KMP under aaSB 124
for previous years but did fall within the definition for 2011.
(4) Mr Chatterji departed Woodside on 31 December 2010.
(5) Ms Howell departed Woodside on 31 December 2011.
(6) Mr Kantsler departed Woodside on 2 July 2010.
(7) Mr Della Martina did not meet the definition of KMP under aaSB
124 for years prior to 2008.
(8) Mr Gallagher, Dr Moore, and Mr Soine did not meet the definition
of KMP under aaSB 124 for years prior to 2010.
(9) Mr Gallagher departed Woodside on 31 October 2011.
(10) Mr Soine departed Woodside on 30 September 2011.
(11) Mr Roder became a KMP on 27 October 2011.
132
132
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
29. Events after the end of the reporting period
Dividends
Since the reporting date, the directors have declared a fully franked dividend of US$0.55 (2010: US$0.55), payable on
4 april 2012. The amount of this dividend will be US$443 million (2010: US$431 million). no provision has been made for this
dividend in the Financial Report as the dividend was not declared or determined by the directors on or before the end of the
financial year.
30. Related party disclosures
(a) Transactions with related parties
The following table provides the total amount of transactions that were entered into with related parties for the relevant
financial year:
Sales to
related parties
Purchases from
related parties
US$m
US$m
Outstanding
balances
receivable from/
(payable to)
related parties
US$m
Commitments
US$m
Entities with significant influence
over the Group
Royal Dutch Shell Group (Shell Group)
Shell Company of australia Ltd
- purchases of goods
Other members of Shell Group
- purchases of services
Other members of Shell Group
- sales of goods
2011
2010
2011
2010
2011
2010
-
-
-
-
467
174
108
68
16
20
-
-
-
(3)
1
-
-
-
-
-
14
41
-
-
Shell Energy Holdings australia Ltd is deemed a related party through its 23.6% (2010: 24.3%) interest of
190,119,364 ordinary shares (2010: 190,119,364 ordinary shares) in the shareholding of the Group.
Solen Versicherungen aG (a wholly owned captive insurance company of the Royal Dutch Shell Group) participates
in the Group’s various operational and construction insurance programs. in 2011, the total paid by the Group to
Solen Versicherungen aG for its participation was US$2 million (2010: US$3 million).
The Group and Shell have common interests in joint ventures (refer to note 33(a)).
(b) Terms and conditions of transaction with related parties
Sales to and purchases from related parties are made at arm’s length on normal market prices and on normal commercial
terms. applicable insurance premiums are negotiated at arm’s length with lead insurers via Woodside’s insurance brokers
with Solen Versicherungen aG following the terms set by the lead insurers.
Outstanding balances at year end are unsecured, interest-free and settlement occurs in cash.
no guarantees are provided or received for any related party receivables or payables.
no provision for doubtful debts has been recognised on any outstanding balances and no expense has been recognised
in respect of bad or doubtful debts due from related parties.
(c)
Transactions with directors
no transactions with directors occurred outside of their normal Board and committee duties in 2011 (2010: nil).
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
133
133
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31. Contingent liabilities and contingent assets
(a) Contingent liabilities at the reporting date
not otherwise provided for in the Financial Report
Contingent liabilities(1)
Guarantees(2)
(b) Contingent assets at the reporting date
not otherwise accounted for in the Financial Report
Contingent assets relating to certain claims made or pending(3)
2011
US$m
2010
US$m
15
5
20
-
26
4
30
28
(1) Contingent liabilities relate predominately to actual or potential litigation of the Group for which amounts are reasonably estimated but the liability is not probable
and therefore the Group has not provided for such amounts in this Financial Report. additionally, there are a number of other claims and possible claims that
have arisen in the course of business against entities in the Group, the outcome of which cannot be foreseen at present, and for which no amounts have been
included in the table above.
(2) The Group has issued guarantees relating to workers compensation liabilities.
(3) Contingent assets relate predominantly to claims receivable by the Group for which amounts are reasonably estimated but the receivable is not virtually certain
and therefore the Group has not provided for such amounts in the Financial Report.
32. Auditor remuneration
Amounts received or due and receivable by the auditors
of the company for
audit and review of financial reports
Ernst & Young (australia)
audit
Special projects
Overseas Ernst & Young firms
non-audit services
Ernst & Young (australia)
Other assurance/advisory services
Other services
Overseas Ernst & Young firms
Other assurance/advisory services
2011
US$’000
2010
US$’000
1,150
-
313
1,463
839
27
-
866
1,019
521(1)
390
1,930
519
33
55
607
(1) amount related to services provided in respect of the Group’s election to change the functional and presentation currency to US dollars.
134
134
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
33. Joint ventures
(a)
Joint venture interests
The Group's interests in joint venture assets as at 31 December 2011 is detailed below. Exploration, development
and production of hydrocarbons are the principal activities performed across these assets. Related party interests are
indicated where applicable (refer to note 30).
Joint venture assets
Australasia
Producing and Developing assets
north West Shelf Joint Venture
Enfield and Vincent
Laminaria–Corallina
Mutineer–Exeter
Stybarrow
Pluto
Exploration and Evaluation assets
Browse Basin
Carnarvon Basin
Bonaparte Basin
Canning Offshore Basin
Middle East and Africa
Producing assets
Ohanet
Exploration and Evaluation assets
Canary islands
The Americas
Producing and Developing assets
Gulf of Mexico
Exploration and Evaluation assets
Gulf of Mexico
Brazil
Peru
Asia
Exploration and Evaluation assets
Republic of Korea
Group interest %
Related party interest %
12.5 - 50.0
60.0
59.9 - 66.7
8.2
50.0
90.0
25.0 - 75.0
13.0 - 90.0
26.7 - 35.0
55.0
15.0
30.0
20.0
10.0 - 65.0
12.5
20.0
50.0
8.3 - 16.7
-
-
-
-
-
8.3 - 15.0
15.8
25.0 - 33.3
45.0
-
-
-
-
-
-
-
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
135
135
33. Joint ventures (continued)
(b)
Jointly controlled assets
The aggregate of the Group’s interest in all jointly controlled assets is as follows:
Current assets
Receivables
inventories
Other assets
Non-current assets
inventories
Other assets
Exploration and evaluation assets
Oil and gas properties
(c) Commitments through jointly controlled assets
The aggregate of the Group’s commitments through jointly controlled assets is as follows:
Capital
Exploration and other commitments
(1) 2010 amount has been changed to correctly reflect the Group’s commitments.
(d)
Jointly controlled entities
interests in jointly controlled entities are as follows:
Entity
Principal activity
Country of
incorporation
north West Shelf Gas Pty Ltd
north West Shelf Liaison
Company Pty Ltd
north West Shelf australia LnG Pty Ltd
Marketing services for venturers in the
sale of gas to the domestic market.
Liaison for venturers in the sale of LnG
to the Japanese market.
Marketing services for venturers in the
sale of LnG to international markets.
north West Shelf Shipping Service
Company Pty Ltd
LnG vessel fleet advisor.
australia
australia
australia
australia
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2011
US$m
2010
US$m
30
50
15
95
10
-
1,272
9,437
10,719
10,814
2011
US$m
392
384
776
25
41
11
77
13
2
1,481
8,940
10,436
10,513
2010
US$m
889
262(1)
1,151
Group interest %
2011
16.67
16.67
16.67
16.67
2010
16.67
16.67
16.67
16.67
These entities exist as integrated components of the overall north West Shelf Joint Venture structure and are held
proportionately with the other venturers. There have been no changes to the investment in these entities during
the year.
34. Associated entities
Entity
Pindan College Ltd(1)
Principal activity
Provision of academic and technical training in local
communities.
international Gas Transportation Company Ltd(2) LnG vessel fleet management.
Group interest %
2011
25.00
16.67
2010
25.00
16.67
(1) Pindan College Ltd (formerly known as australian Technical College Pilbara Limited) was incorporated on 6 December 2006 and is limited by guarantee to a maximum
amount of a$1. Woodside is one of four members of the company, of which significant influence is present. The associate is incorporated in australia.
(2) The associate is incorporated in Bermuda.
136
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Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
35. Subsidiaries
(a) Subsidiaries
Name of entity
Parent entity
Woodside Petroleum Ltd
Subsidiaries
Woodside Energy Ltd
Woodside Energy Holdings Pty Ltd
Woodside Energy Holdings (USa), inc
Woodside Energy (USa), inc
Gryphon Exploration Company
Gander, inc (formerly aTS, inc)
Woodside Offshore LLC
Woodside natural Gas, inc
avila 8 LLC
Woodside Energy (Peru) Pty Ltd
Woodside Eastern Energy Pty Ltd
Woodside Energy (algeria) Pty Ltd
Woodside Petroleum (nEDSP) Pty Ltd
Woodside Technical Services Pty Ltd
Metasource Pty Ltd
Woodside West Kimberley Energy Pty Ltd
Woodside Guangdong Shipping (One) Pty Ltd
Woodside Guangdong Shipping (Two) Pty Ltd
Woodside Mauritania investments Pty Ltd
Woodside Energy Holdings (UK) Pty Ltd
Woodside Energy (UK) Ltd
Woodside Energy iberia S.a.
Woodside Energy (n.a.) Ltd
Woodside Energy (Kenya) Pty Ltd
Woodside Energy (Carbon Capture) Pty Ltd
Woodside Energy (SL) Pty Ltd
Woodside West africa Pty Ltd
Woodside Energy Technologies Pty Ltd
Woodside Energy (norway) Pty Ltd
Woodside Energy (M.E.) Pty Ltd
Woodside Energy Middle East and africa Pty Ltd
Woodside Browse Pty Ltd
Woodside Burrup Pty Ltd
Pluto LnG Pty Ltd
Burrup Facilities Company Pty Ltd
Burrup Train 1 Pty Ltd
Woodside Energy australia asia Holdings Pte Ltd
WelCap insurance Pte Ltd
Woodside Energy (Korea) Pte Ltd
Woodside Energy Holdings (South america) Pty Ltd
Woodside Energia (Brasil) investimento em Exploração de Petróleo Ltda.
Woodside Finance Ltd
Woodside Petroleum Holdings Pty Ltd
Woodside Petroleum (Timor Sea 19) Pty Ltd
Woodside Petroleum (Timor Sea 20) Pty Ltd
Mermaid Sound Port and Marine Services Pty Ltd
Woodside Group Staff Superannuation Pty Ltd
Woodside Petroleum (northern Operations) Pty Ltd
Woodside Petroleum (W.a. Oil) Pty Ltd
Notes
Country of
incorporation
(1,2,3)
australia
(2,3,4)
(2,4)
(4)
(4)
(4)
(4)
(4)
(4)
(4)
(2,4)
(7)
(2,4)
(7)
(2,4,6)
(2,4)
(7)
(2,4)
(2,4)
(2,4,6)
(2,4)
(4)
(4)
(4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(5)
(5)
(5)
(4)
(4)
(4)
(2,4)
(4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4)
(2,4,6)
(2,4)
(2,4)
australia
australia
USa
USa
USa
USa
USa
USa
USa
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
UK
Spain
UK
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
australia
Singapore
Singapore
Singapore
australia
Brazil
australia
australia
australia
australia
australia
australia
australia
australia
(1) Woodside Petroleum Ltd is the ultimate holding company and the head entity within the tax consolidated group.
(2) These companies were members of the tax consolidated group at 31 December 2011.
(3) Pursuant to aSiC Class Order 98/1418, relief has been granted to the controlled entity, Woodside Energy Ltd from the Corporations Act 2001 requirements for
preparation, audit and publication of accounts. as a condition of the Class Order, Woodside Petroleum Ltd and Woodside Energy Ltd are parties to a Deed of
Cross Guarantee.
(4) all subsidiaries are wholly owned except for those listed in note 5 below.
(5) Kansai Electric Power australia Pty Ltd and Tokyo Gas Pluto Pty Ltd each have 5% of the shares in these companies.
(6) These companies were placed into voluntary liquidation on 21 December 2011.
(7) These companies were deregistered on 9 March 2011.
notes to and forming part of the Financial Report
For the year ended 31 December 2011
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
137
137
35. Subsidiaries (continued)
(b) Deed of Cross Guarantee and closed group
Woodside Petroleum Ltd and Woodside Energy Ltd are parties to a Deed of Cross Guarantee under which each
company guarantees the debts of the other. By entering into the Deed, the entities have been granted relief from
the Corporations Act 2001 requirements for the preparation, audit and publication of accounts, pursuant to australian
Securities and investment Commission (aSiC) Class Order 98/1418. The two entities represent a Closed Group for the
purposes of the Class Order.
The consolidated income statement and statement of financial position of the members of the Closed Group are set
out below.
Closed Group consolidated income statement
Profit before tax
Taxes
Profit after tax
Retained earnings at the beginning of the financial year
Dividends
Retained earnings at the end of the financial year
2011
US$m
2,723
(1,042)
1,681
4,379
(866)
5,194
2010
US$m
1,964
(729)
1,235
3,917
(773)
4,379
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Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
Woodside Petroleum Ltd | 2011 annual Report
notes to and forming part of the Financial Report
For the year ended 31 December 2011
35. Subsidiaries (continued)
(b) Deed of Cross Guarantee and closed group (continued)
Closed Group consolidated statement of financial position
2011
US$m
2010
US$m
Current assets
Cash and cash equivalents
Receivables
inventories
Other financial assets
Other assets
Total current assets
Non-current assets
inventories
Other financial assets
Other assets
Exploration and evaluation assets
Oil and gas properties
Other plant and equipment
Total non-current assets
Total assets
Current liabilities
Payables
Tax payable
Other financial liabilities
Other liabilities
Provisions
Total current liabilities
Non-current liabilities
Payables
Deferred tax liabilities
Other financial liabilities
Other liabilities
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
issued and fully paid shares
Shares reserved for employee share plans
Other reserves
Retained earnings
Total equity
(61)(1)
665
177
7
43
831
7
14,693
-
697
5,118
61
20,576
21,407
1,373
72
23
27
158
1,653
6,287
758
6
181
682
7,914
9,567
11,840
5,880
(67)
833
5,194
11,840
31
435
116
2
(12)
572
18
11,788
34
577
4,858
71
17,346
17,918
1,253
32
41
13
130
1,469
4,927
813
6
174
447
6,367
7,836
10,082
5,036
(57)
724
4,379
10,082
(1) Excess joint venture funds were put on deposit in interest- bearing accounts in Woodside Finance Ltd.
36. Corporate information
Woodside Petroleum Ltd is a company limited by shares incorporated and domiciled in australia. its shares are publicly traded
on the australian Securities Exchange.
Directors’ declaration
Woodside Petroleum Ltd | 2011 annual Report
139
in accordance with a resolution of directors of Woodside Petroleum Ltd, we state that:
1.
in the opinion of the directors:
(a) the financial statements and notes thereto, and the disclosures included in the audited 2011 Remuneration Report, comply
with australian accounting Standards and the Corporations Act 2001;
(b) the financial statements and notes thereto give a true and fair view of the financial position of the Group as at
31 December 2011 and of the performance of the Group for the financial year ended 31 December 2011;
(c) the financial statements and notes thereto also comply with international Financial Reporting Standards as disclosed in note
1(b);
(d) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and
payable; and
(e) there are reasonable grounds to believe that the members of the Closed Group identified in note 35 will be able to meet any
obligations or liabilities which they are or may become subject to, by virtue of the Deed of Cross Guarantee.
2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section
295a of the Corporations Act 2001 for the year ended 31 December 2011.
For and on behalf of the Board
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M A Chaney, AO
Chairman
Perth, Western australia
22 February 2012
P J Coleman
Chief Executive Officer
Perth, Western australia
22 February 2012
140
Woodside Petroleum Ltd | 2011 annual Report
independent audit report
Independent auditor’s report to the members of Woodside Petroleum Ltd
Report on the financial report
We have audited the accompanying financial report of Woodside Petroleum Ltd, which comprises the consolidated statement of
financial position as at 31 December 2011, and the consolidated income statement, consolidated statement of comprehensive
income, statement of changes in equity and consolidated statement of cash flows for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the Directors’ Declaration of the consolidated entity comprising the
Company and the entities it controlled at the year’s end or from time to time during the financial year.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance
with australian accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are
necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. in
note 1, the directors also state, in accordance with accounting Standard aaSB 101 Presentation of Financial Statements, that the
financial statements comply with international Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance
with australian auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit
engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from
material misstatement.
an audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. in making those risk assessments, the auditor considers internal controls relevant to
the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. an audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Independence
in conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to
the directors of the company a written auditor’s independence Declaration, a copy of which is included in the Directors’ Report.
We confirm that the auditor’s independence Declaration would be in the same terms if given to the directors as at the time of this
auditor’s report.
Opinion
in our opinion:
a. the financial report of Woodside Petroleum Ltd is in accordance with the Corporations Act 2001, including:
i
giving a true and fair view of the consolidated entity’s financial position as at 31 December 2011 and of its performance for
the year ended on that date; and
ii complying with australian accounting Standards and the Corporations Regulations 2001; and
b
the financial report also complies with International Financial Reporting Standards as disclosed in note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 55 to 69 of the Directors’ Report for the year ended 31 December
2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance
with section 300a of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on
our audit conducted in accordance with australian auditing Standards.
Opinion
in our opinion, the Remuneration Report of Woodside Petroleum Ltd for the year ended 31 December 2011, complies with section
300a of the Corporations Act 2001.
Ernst & Young
R J Curtin, Partner
Perth, Western australia
22 February 2012
Liability limited by a scheme approved under Professional Standards Legislation.
Shareholder information
As at 17 February 2012
Number of shareholdings
There were 205,868 shareholders. All issued shares carry voting rights on a one for one basis.
Distribution of shareholdings
Size of shareholding
Number of holders
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
152,106
47,656
4,030
1,976
100
205,868
Unmarketable parcels
There were 3,265 members holding less than a marketable parcel of shares in the company.
Twenty largest shareholders
Shareholder
Shell Energy Holdings Australia Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
AMP Life Limited
Australian Foundation Investment Company Limited
Perpetual Trustee Company Limited
Cogent Nominees Pty Limited
Argo Investments Limited
Australian Reward Investment Alliance
Navigator Australia Ltd
Queensland Investment Corporation
Australian United Investment Company Limited
Diversified Investment Limited
Djerriwarrh Investments Limited
Total
Woodside Petroleum Ltd | 2011 Annual Report
141
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Number of
shares
% of issued
capital
57,430,978
94,043,111
27,629,652
40,902,665
585,665,198
805,671,604
7.13
11.67
3.43
5.08
72.69
100.00
Shares held
190,119,364
130,463,043
82,756,015
81,308,822
23,907,574
10,421,204
10,222,559
7,797,879
5,128,933
4,984,206
3,027,386
2,151,273
1,786,284
1,700,873
1,670,252
1,471,450
1,235,934
1,000,000
1,000,000
921,590
% of issued
capital
23.60
16.19
10.27
10.09
2.97
1.29
1.27
0.97
0.64
0.62
0.38
0.27
0.22
0.21
0.21
0.18
0.15
0.12
0.12
0.11
563,074,641
69.89
Substantial shareholders as disclosed in substantial shareholder notices given to the company are as follows:
Shell Energy Holdings Australia Limited
190,119,364
24.27*
*Since Shell Energy Holdings Australia Ltd’s most recent notice of change of interests of substantial shareholder was given on 11 November 2010, its interest in Woodside Petroleum Ltd’s
issued capital has reduced to 23.60%, as a result of additional shares being issued by Woodside Petroleum Ltd.
142
Woodside Petroleum Ltd | 2011 Annual Report
Shareholder information
Annual General Meeting
The 2012 AGM of Woodside Petroleum Ltd
will be held at 10 am (AWST) on 2 May
2012 in the Riverside Theatre, Level 2,
Perth Convention Exhibition Centre,
21 Mounts Bay Road, Perth, Western
Australia. Details of the business of the
meeting will be provided in the AGM
notice.
The AGM will be webcast live on the
internet. An archive version of the webcast
will be placed on the Woodside website to
enable the proceedings to be viewed at a
later time.
Copies of the Chairman’s and CEO’s
speeches will be available on the company’s
website (www.woodside.com.au).
Share registry: enquiries
Investors seeking information about
their shareholdings should contact the
company’s share registry:
Computershare Investor
Services Pty Limited
Level 2, 45 St Georges Terrace
Perth, Western Australia 6000
Postal address: GPO Box D182
Perth, Western Australia 6840
Telephone: 1300 558 507
(within Australia)
+61 3 9415 4632 (outside Australia)
Facsimile: +61 8 9323 2033
Email: web.queries@computershare.com.au
Website: www.investorcentre.com/wpl
The share registry can assist with queries
on share transfers, dividend payments, the
dividend reinvestment plan, notification
of tax file numbers and changes of name,
address or bank account details.
Details of shareholdings can be checked
conveniently and simply by visiting the
share registry website at
www.investorcentre.com/wpl.
For security reasons you will need your
Security Reference Number (SRN) or
Holder Identification Number (HIN) when
communicating with the share registry.
The share registry website allows
shareholders to make changes to address
and banking details online.
Dividend payments
Woodside declares its dividends in
US dollars as it is our functional and
presentation currency. Woodside pays
its dividends in Australian dollars unless a
shareholder’s registered address is in the
United Kingdom where they are paid in
UK pounds sterling, or in the United States
where they are paid in US dollars.
Shareholders who reside outside of the
United States can elect to receive their
dividend in US dollars. Shareholders must
make an election to alter their dividend
currency by the record date for the
dividend by contacting the share registry
on 1300 558 507 (within Australia) or
+61 3 9415 4632 (outside Australia).
Shareholders may have their Australian
dollar dividends paid directly into any bank
or building society account within Australia.
Payments are electronically credited on the
dividend payment date and confirmed by
payment advice. To request direct crediting
of dividend payments please contact the
share registry or visit the share registry
website (www.investorcentre.com/wpl).
The history of dividends paid by the
company can be found on the company’s
website (www.woodside.com.au).
Dividend reinvestment plan
Shareholders with registered addresses
in Australia and New Zealand can elect
to participate in Woodside’s dividend
reinvestment plan and have the dividends
on some or all of their shares automatically
reinvested in additional shares. Information
on the dividend reinvestment plan is
available on the company’s website.
Election forms are available from the
company's website or from the share
registry.
Change of address or banking
details
Shareholders should immediately notify
the share registry of any change to their
address or banking arrangements for
dividends electronically credited to a
bank account. Changes can be made
online at the share registry website
(www.investorcentre.com/wpl).
Business directory
Registered office Perth
Woodside Petroleum Ltd
240 St Georges Terrace Perth, WA 6000
Telephone: +61 8 9348 4000
Postal address: GPO Box D188
Perth, WA 6840
Broome
29 Coughlan Street
Broome, WA 6725
Telephone: 1800 036 654
Australian Securities Exchange
listing
Woodside Petroleum Ltd securities
are listed on the Australian Securities
Exchange (ASX) under the code WPL.
Share price information can be accessed on
the company’s website (www.woodside.
com.au).
American Depositary Receipts
The Bank of New York Mellon Corporation
sponsors a level one American Depositary
Receipts (ADR) program in the United
States of America. One Woodside share
equals one ADR and trades over the
counter under the symbol ‘WOPEY’.
ADR holders should deal directly with the
Bank of New York Mellon Corporation on
all matters related to their ADRs.
Enquiries should be directed to:
The BNY Mellon Shareowner Services
P.O Box 358516
Pittsburgh, PA 15252-8516
USA Toll Free Number:
1-888-269-2377
Number for international callers:
+1 201-680-6825
Email: shrrelations@bnymellon.com
Website: www.adrbnymellon.com
Investor Relations: enquiries
Requests for specific information on
the company can be directed to Investor
Relations at:
Investor Relations
Woodside Petroleum Ltd
Woodside Plaza
240 St Georges Terrace,
Perth, WA 6000
Postal address: GPO Box D188
Perth, WA 6840
Telephone: +61 8 9348 4000
Facsimile: +61 8 9214 2777
Email: investor@woodside.com.au
Website: www.woodside.com.au
Karratha
Burrup Peninsula, Karratha, WA 6714
Telephone: +61 8 9348 4000
Houston (USA)
Woodside Energy (USA) Inc.
Sage Plaza
5151 San Felipe, Suite 1200
Houston, TX 77056, USA
Telephone: +1 713 401 0000
Woodside Petroleum Ltd | 2011 Annual Report
143
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Key announcements 2011
January
February
March
May
Sale of Pluto Uncommitted Cargoes
Woodside reports Full Year 2010 Net Profit of US$1,575 million
Changes to Board of Directors
Gas Discovery at Martin-1
Woodside to issue US$700 million in corporate bonds
Oil Discovery at Laverda North
Claim Group Approves Proposal for Browse LNG Precinct
Woodside Appoints New CEO
Appointment of Non-Executive Director
Woodside Discovers Gas at Xeres-1
June
Pluto Cost and Schedule Update
Woodside Executes Browse Native Title Agreement
August
Woodside Reports 2011 First-Half Profit of US$828 Million
September
Change of Independent Status of Director
Production Commences from Okha FPSO
November
December
Annual Investor Update (including production outlook)
NWS Project Approves Greater Western Flank Phase 1 Project
Woodside to Seek Variation to Browse Retention Leases
Events calendar 2012
Key calendar dates for Woodside shareholders in 2012.
Please note dates are subject to review.
January
February
March
April
May
June
July
19 Fourth quarter 2011 report
22 2011 Full-Year result and final dividend announcement
27 Ex-Dividend date for final dividend
2 Record date for final dividend
4 Payment date for final dividend
19 First quarter 2012 report
30 AGM proxy returns close at 10.00 am (AWST)
2 Annual General Meeting
30 Woodside Half-Year end
19 Second quarter 2012 report
August
22 2012 Half-Year result and interim dividend announcement
TBA Ex-Dividend date for interim dividend
TBA Record date for interim dividend
October
TBA Payment date for interim dividend
18 Third quarter 2012 report
December
31 Woodside Year end
144
Woodside Petroleum Ltd | 2011 Annual Report
Shareholder information
Units, conversion factors and glossary
Units
bbl
Bcf
boe
kPa
Mcf
barrel
billion cubic feet
barrel of oil equivalent
thousands of Pascals
thousand cubic feet
MMbbl million barrels
MMboe million barrels of oil equivalent
MMBtu million British thermal units
mtpa
million tonnes per annum
psi
t
Tcf
TJ
pounds per square inch
tonnes
trillion cubic feet
terajoules
Conversion factors
Product
Factor
Conversion
Factors*
Domestic Gas
1TJ
163.6 boe
Liquefied Natural
Gas (LNG)
1 tonne
Condensate
Oil
1 bbl
1 bbl
8.9055
boe
1.000 boe
1.000 boe
1 tonne
8.1876 boe
Liquefied
Petroleum Gas
(LPG)
Gulf of Mexico Gas 1 MMBtu 0.1724 boe
* Minor changes to some conversion factors can occur over
time due to gradual changes in the process stream.
Glossary
$, $m
1H, 2H
APPEA
Appraisal well
Basis of design
Brent
Brownfield
Condensate
Crude oil
CWLH
US dollars unless otherwise stated, millions of dollars
Halves of the calendar year (i.e. 1H is 1 January to 30 June, 2H is
1 July to 31 December)
Australian Petroleum Production and Exploration Association
A well drilled to follow up a discovery and evaluate its commercial potential
Specification of owner's requirements
Intercontinental Exchange (ICE) Brent Crude deliverable futures contract
(oil price)
An exploration or development project located within an existing province
which can share infrastructure and management with an existing operation
Hydrocarbons, which are gaseous in a reservoir, but which condense to form
liquids as they rise to the surface
Oil that is produced from a reservoir after any associated gas has
been removed
Cossack Wanaea Lambert Hermes
Development well
A well drilled for the purpose of recovering hydrocarbons
DRP
EEP
EIP
ER
FAR
FDP
Dividend reinvestment plan
Employee equity plan
Executive incentive plan
Equity rights
Fixed annual reward
Field development plan
Front-end engineering
and design (FEED)
Preliminary design and cost and schedule confirmation before a final
investment decision
FID
FPSO
Gearing
Greenfield
GWF
HPIF
Infill well
JV
KGP
KPI
LIBOR
LNG
LPG
Final investment decision
Floating production storage and offloading vessel
Net debt divided by (net debt + equity)
Development or exploration located outside the area of influence of existing
operations/infrastructure
Greater Western Flank
High potential incidents frequency rate (per million hours worked)
Drilled for the purpose of increasing production
Joint Venture
Karratha Gas Plant
Key performance indicator
London Inter-Bank Offer Rate
Liquefied natural gas
Liquefied petroleum gas
Lifting costs
Production costs ($m, excluding FPSO lease costs) divided by production
volume (MMboe)
LTI
Net debt
NRA
NRB
NWS
Long-term incentive
Total debt less cash and cash equivalents
North Rankin A platform
North Rankin B platform
North West Shelf Project
POR negotiation
Price-out-of-range negotiation
PRRT
Q1, Q2, Q3, Q4
Petroleum Resources Rent Tax
Quarters of the calendar year (i.e. Q1 is 1 January to 31 March,
Q2 is 1 April to 30 June,Q3 is 1 July to 30 September, Q4 is 1 October to
31 December)
RAP
RTSR, TSR
Woodside’s Reconciliation Action Plan
Relative total shareholder return, total shareholder return
Return on Capital (ROC) Net operating profit after tax divided by average Oil and Gas Properties and
Exploration and Evaluation Assets
Return on Equity (ROE) Net profit after tax divided by shareholder's equity
STI
TLP
TRCF
TSR
VAR
VPR
VWAP
WSPP
Short-term incentive
Tension leg platform (floating production unit)
Total recordable case frequency (per million hours worked)
Total shareholder return
Variable annual reward
Variable pay rights
Volume weighted average price
Woodside share purchase plan
Woodside Petroleum Ltd | 2011 Annual Report
145
Quick reference guide
Angel
Australia Oil
Brazil
Brent
Browse
Browse LNG Precinct
Canary Islands
Carbon tax, Clean Energy legislation
CEO remuneration
Cimatti
Committees of the Board
Contingent resources
Cossack Pioneer
Cryogenic Heat Exchangers
Darwin LNG
Diversity
Dividend
Dividend Reinvestment Plan
Emissions
Enfield
Environmental report
Environmental incidents
Events calendar 2012
External auditor relationship
Flare gas and intensity
Floating LNG
Foundation Pluto LNG Project
Funding
Gearing
Global LNG demand
Goodwyn A
Graduates
Greater Exmouth
Greater Western Flank
Gulf of Mexico Shelf assets
Health and safety
HPIF (High potential incidents frequency rate)
Income tax
Indigenous
James Price Point
Karratha Gas Plant
Laminaria–Corallina
Liberia
Libya
Libya EPSA III
Lifting costs
LNG Train 5
Long-term incentive award
O
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iii, 21
26, 27
37
3,13
iii, 15, 16, 21, 22, 23,
32, 33
33
iii, 3, 37
5, 13
58
27
45
16, 17, 18
23, 25
25
35
8, 51
3, 54
13, 142
13, 23
27
23
23
143
50
23
35
iii, 28
13
3, 12
14
iii, 25
51,
17, 21
iii, 15, 21, 25
iii, 13, 37
3, 9
3, 9
13
8, 22, 31, 33, 51
33
iii, 13, 25
iii, 27
12
iii, 18
37
12, 13
25
59
Ngujima-Yin
Mission
MODEC Venture II FPSO
Mutineer–Exeter
Neptune
Net profit after tax
Nganhurra FPSO
North Rankin A
North Rankin B
North Rankin Redevelopment Project
North West Shelf Project
NWS Oil Redevelopment Project
Northern Endeavour
Ohanet
Okha FPSO
Otway
Petroleum Resource Rent Tax (PRRT)
Peru
Pluto expansion
Power Play
Price-out-of-range-negotiation
Production
Proved plus Probable reserves
Proved reserves
Reconciliation Action Plan
Remuneration report
Republic of Korea
Retention lease
Retention (of employees)
Sales revenue
Securities Dealing Policy
Share plans
Share registry: enquiries
Shareholders: twenty largest
Shareholdings: distribution
Short-term incentive award
Sierra Leone
Stand together for safety
Strategy
Stybarrow
Stybarrow Venture FPSO
Sunrise
Timor–Leste
Total shareholder return
TRCF (total recordable case frequency)
United States
Values
Vision
WPL
i, iii, 13, 23, 26
ii
iii, 27
18, 27
18, 36, 37
2, 3, 12, 57, 78
i, iii, 26, 27
iii, 25
24, 25
24, 25
ii, 13, 18, 24, 31
25
iii, 27
12, 13, 18, 36, 37
iii, 23, 25, 143
12, 13
12, 13
iii, 21, 37
21
37
15
2
16, 17
16, 17
8, 22, 47, 51
55 - 69
iii, 14, 21, 25, 37
21, 33, 143
8, 60
2, 3, 24, 26, 36
47, 49, 62
60, 67
142
141
141
58
12
9
ii
18, 27
27
i, ii, 18, 22, 34
34, 35
56, 58, 59, 61
3, 9
37, 142
ii, 41
ii, 41
3, 6, 142
146
Woodside Petroleum Ltd | 2011 Annual Report
Shareholder information
2011 Summary chart
Product view
Investment
Gas and condensate*
Oil*
Exploration and other
2011
2010
75% 77%
12% 13%
13% 10%
* Indicative only as some assets produce oil and gas
As in 2010, the majority of Woodside’s 2011 capital
expenditure was directed towards growing our future
LNG production to commercialise the company’s
significant gas resources.
Production
Natural gas*
Oil
Condensate
2010
2011
60% 57%
26% 29%
14% 14%
* Includes LNG, LPG and pipeline gas
The proportion of natural gas in Woodside’s 2011 production
increased in comparison to oil due to the planned shut-in of
the NWS Project oil FPSO for redevelopment and natural oil
field decline.
Regional view
Investment
Australia
United States
Rest of World
2010
2011
99% 98%
<1%
2%
<1% <1%
Woodside’s capital expenditure has been dominated by projects
located in the North-West of Australia in recent years.
Production
Australia
United States
Rest of World
2010
2011
95% 94%
3%
3%
2%
3%
Woodside’s current production is largely from Australian assets.
Revenue
Natural gas*
Oil
Condensate
2010
2011
42% 42%
39% 40%
19% 18%
* Includes LNG, LPG and pipeline gas
Revenue
Australia
United States
Rest of World
2010
2011
97% 96%
3%
1%
2%
1%
With strong commodity prices, liquids (oil, condensate) again
contributed a substantial proportion of Woodside’s revenue in 2011.
As with production, Australian assets contributed the vast
majority of Woodside’s revenue in 2011 and 2010.
Reserves (Proved plus Probable)
Reserves (Proved plus Probable)
Natural gas*
Oil
Condensate
2010
2011
85% 84%
7%
9%
7%
8%
Australia
United States
Rest of World
2010
2011
99% 99%
<1% <1%
<0.1% <0.1%
* Includes LNG, LPG and pipeline gas
With natural gas forming the bulk of Woodside’s current
Proved plus Probable reserves, the company’s focus on LNG
development continues.
Woodside’s existing reserves are located almost entirely in
Australia.
10 year comparative data summary
Year Ended 31 December
2011
2010
2009
2008
2007
2006
2005 2004(10)
(Restated)
2003
2002
Woodside Petroleum Ltd | 2011 Annual Report
147
Profit and Loss ($million)(1)
Sales Revenues
Australia
Pipeline Gas
LNG & LPG
NWS Gas (Pipeline, LNG & LPG)
NWS Oil / Condensate
Australia Other
Gulf of Mexico
Algeria
Continuing Operations
Mauritania
Total
EBITDAX
EBITDA
EBIT(2)
Exploration & Evaluation
Depreciation & Amortisation
Finance Costs
Tax Expense
NPAT excluding non-recurring items
Reported NPAT
EPS (cents) excluding non-recurring items(3)
EPS (cents) including non-recurring items(3)
DPS (cents)(4)
Payout ratio (%) excluding non-recurring items
EBITDA / Op Cash Flow (%)
Balance Sheet ($million)(1)
Total Assets
Debt
Net Debt
Shareholder Equity
Cash Flow and Capital Expenditure ($million)(1)
Cash Flow From
Operations
Investing
Financing
Capital Expenditure
Exploration & Evaluation
Oil and Gas Properties(5)
Ratios (%)
ROACE excluding non-recurring items
ROACE including non-recurring items
Return on Shareholders Funds excluding non-recurring items
Return on Shareholders Funds including non-recurring items
Gearing
Volumes
Sales (million boe)
Australia
Pipeline Gas
LNG & LPG
NWS Gas (Pipeline, LNG & LPG)
NWS Oil / Condensate
Australia Other
Gulf of Mexico
Mauritania
Algeria
Total (million boe)(6)
Production (million boe)
Australia
Pipeline
LNG & LPG
NWS Gas
NWS Oil / Condensate
Australia Other
Gulf of Mexico
Mauritania
Algeria
Total (million boe)(6)
Reserves (Proved plus Probable)
Gas (Tcf)
Condensate (MMbbl)
Oil (MMbbl)
Other
Employees(7)
Shares
High (A$)
Low (A$)
Close (A$)
Number (000's)
No. Shareholders
Market Capitalisation (US$ equivalent at reporting date)
Market Capitalisation (AU$ equivalent at reporting date)
Finding Costs ($/boe) (3 year average)(8)(9)
Effective Income Tax Rate (%)
Net Debt/Total Market Cap (%)
375
1,636
-
978
1,677
93
43
4,802
-
4,802
3,424
2,837
2,210
587
627
26
677
1,655
1,507
209
190
110
53
127
309
1,425
-
1,037
1,250
117
55
4,193
-
4,193
3,332
3,003
2,254
329
749
(18)
697
1,418
1,575
183
204
105
57
143
378
863
-
840
1,227
124
55
3,487
-
3,487
3,314
3,061
2,309
253
752
12
823
1,052
1,474
150
210
95
64
206
320
1,119
-
1,229
2,125
197
55
5,045
-
5,045
3,885
3,584
2,852
301
732
19
1,287
1,823
1,546
266
225
100
38
111
22,740
5,102
5,061
12,658
20,196
4,915
3,952
11,091
17,753
4,939
3,732
8,812
10,317
2,044
1,946
4,633
227
711
-
939
1,159
133
55
3,224
137
3,361
2,541
2,101
1,560
440
541
8
687
948
864
141
128
91
64
101
8,515
903
782
4,458
182
689
-
835
739
119
56
2,620
252
2,872
2,339
2,021
1,684
318
337
20
590
1,030
1,075
157
163
98
63
139
7,072
1,435
1,188
3,313
-
-
803
766
450
21
55
2,095
-
2,095
1,685
1,452
1,238
234
213
7
387
791
844
120
128
70
58
138
5,107
826
656
2,565
-
-
581
568
360
-
56
1,565
-
1,565
1,603
1,417
1,213
186
204
-
367
495
845
75
129
44
58
160
4,250
791
169
2,162
-
-
499
454
360
-
5
1,318
-
1,318
905
712
558
193
154
17
197
344
344
51
51
33
64
91
-
-
394
377
421
-
-
1,192
-
1,192
752
220
62
532
158
25
87
358
(50)
53
(7)
37
69
33
3,596
803
670
1,830
2,814
803
716
1,303
2,242
(3,533)
362
2,104
(2,941)
608
1,483
(4,708)
4,207
3,224
(3,892)
684
2,082
(1,700)
(522)
1,457
(1,432)
41
1,053
(1,152)
(352)
883
(69)
(259)
785
(484)
(273)
657
(397)
(263)
778
2,651
703
2,933
273
3,992
418
4,031
447
1,965
376
1,091
210
993
77
480
74
250
47
187
9.9%
9.0% 10.5% 14.5% 25.9% 17.2% 26.8% 26.8% 30.3% 15.0%
12.9% 13.0% 12.5%
11.9% 14.2% 16.7% 33.4% 19.4% 32.5% 32.9% 39.1% 18.8%
28.6% 26.3% 29.8% 29.6% 14.9% 26.4% 20.4%
9.5% 10.5% 29.6% 18.8% 26.0% 26.8% 18.9% 13.8% 16.3%
-1.5%
37.1% 20.9% 31.5% 31.5% 27.3% 18.8% 20.9%
-3.8%
7.2% 26.8% 35.5%
14.0
23.5
-
9.0
14.5
1.1
-
1.8
63.9
14.0
23.8
-
8.9
15.0
1.1
-
1.8
64.6
14.8
24.0
-
13.2
15.7
2.2
-
2.3
72.2
14.8
24.6
-
13.3
15.5
2.2
-
2.3
72.7
18.4
22.8
-
13.9
20.1
3.2
-
2.3
80.7
18.4
23.0
-
14.0
20.0
3.2
-
2.3
80.9
18.9
18.2
-
13.2
24.5
3.1
-
2.3
80.2
18.9
18.6
-
13.5
24.9
3.1
-
2.3
81.3
16.4
18.2
-
12.6
15.6
2.6
2.0
2.3
69.7
16.4
18.6
-
12.7
15.8
2.6
2.2
2.3
70.6
15.5
18.5
-
12.8
11.7
2.6
4.3
2.3
67.7
15.6
18.6
-
12.8
11.6
2.6
4.4
2.3
67.9
-
-
34.8
14.0
8.0
0.4
-
2.3
59.5
-
-
35.0
13.8
8.2
0.4
-
2.3
59.7
-
-
30.8
14.4
9.1
-
-
2.3
56.6
-
-
31.5
14.3
9.3
-
-
2.3
57.4
-
-
31.0
16.2
13.3
-
-
0.1
60.6
-
-
31.1
16.4
13.1
-
-
0.1
60.7
-
-
27.9
15.7
19.1
-
-
-
62.7
-
-
28.3
16.0
19.9
-
-
-
64.2
7.80
138.70
108.50
8.02
154.74
117.50
7.79
147.80
136.10
7.90
151.40
168.80
7.80
152.10
170.20
6.90
144.60
221.10
4.67
129.70
294.50
5.11
138.00
258.80
4.65
145.70
341.50
4.84
154.90
300.10
3,856
3,650
3,219
3,124
2,981
2,888
2,508
2,528
2,219
2,418
49.28
40.56
42.56
50.85
29.76
30.62
70.51
26.81
36.70
53.87
31.19
47.20
56.66
34.81
50.39
49.80
34.81
38.11
15.05
11.50
12.38
805,672 783,402 748,599 698,553 688,331 666,667 666,667 666,667 666,667 666,667
67,523
205,868
4,635
25,287
8,253
24,670
12.67
0.75
30.5% 25.2% 33.7% 32.6% 35.8% 35.4% 31.4% 30.3% 36.4% 235.9%
9.0% 15.4%
20.0% 11.6% 11.8% 11.0%
131,460
30,353
34,685
3.60
119,003
20,033
25,407
2.47
141,035
17,717
25,637
3.35
175,257
31,567
35,334
5.71
201,134
33,745
33,342
6.12
83,829
19,146
26,127
3.95
69,491
7,420
9,867
1.18
72,267
10,456
13,400
1.43
39.39
19.87
39.19
15.10
10.00
14.80
21.48
14.11
20.10
5.9%
2.6%
3.4%
1.6%
1
2
3
4
5
6
7
8
9
Comparative financial
information prior to 2010
has been converted on
a consistent basis in
accordance with Note 1 (o)
to the Financial Report. Cash
flow and capital expenditure
has been converted using a
consistent approach adopted
on conversion of expenses.
EBIT is calculated as a profit
before income tax, PRRT and
net finance costs.
Earnings per share has
been calculated using the
following weighted average
number of shares
(2011: 791,668,973;
2010: 773,388,154;
2009: 703,310,697;
2008: 685,179,496;
2007: 671,447,950;
2006: 657,178,947;
2005: 655,150,640;
2004: 653,790,795;
Pre 2004: 666,666,667).
DPS for 2002 includes a 41.0
cents (AUD) dividend that
was declared after
31 December 2002.
2005 Oil and Gas Properties
capital expenditure includes
acquisitions through
business combinations of
A$415M, relating to the
acquisition of Gryphon
Exploration Company.
From 2003, Woodside
reports oil and condensate
on a volumetric basis.
From 2005 employee
numbers do not include third
party contractors. Previous
years include third party
contractors.
Finding cost for 2003
includes acquisitions
of additional Scope for
Recovery volumes.
Finding cost methodology
has changed from 2004
to be in accordance with
the FAS69/SEC industry
standard.
10 From 1 January 2005,
Woodside prepares its
financial statements in
accordance with Australian
equivalents to IFRS (AIFRS).
To highlight the impact on
previously reported data
information provided for
2004 has been restated.
Information pre 1 January
2004 has not been adjusted
for the effect of AIFRS.
Annual report 2011
Head Office:
Woodside Petroleum Ltd
240 St Georges Terrace
Perth WA 6000 Australia
Postal Address:
GPO Box D188
Perth WA 6840 Australia
t: +61 8 9348 4000
f: +61 8 9214 2777
e: companyinfo@woodside.com.au
Visit us at
www.woodside.com.au
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