Earnings Call Transcript - WDS Q2 2025

Operator, Operator

Thank you for joining us, and welcome to the Woodside Energy Group Limited Half Year Results 2025 Conference Call. I will now turn the call over to Ms. Meg O’Neill, CEO and Managing Director. Please proceed.

Marguerite Eileen O’Neill, CEO and Managing Director

Good morning, everyone, and welcome to Woodside's 2025 half year results presentation. We are broadcasting from Sydney, and I want to start by recognizing the traditional custodians of this land, the Gadigal People of the Eora Nation, and honoring their elders, past and present. I'm joined on the call by our Chief Financial Officer, Graham Tiver. Together, we will give you a summary of our half year 2025 performance and then open the floor for questions. Please review the disclaimers and important information on Slides 2 and 3. I want to remind you that all dollar amounts in today's presentation are in U.S. dollars unless stated otherwise. Turning to Slide 4, I'm pleased to share a robust set of half year results. They reflect exceptional performance across our portfolio of top-tier assets, effective execution of our key growth projects, and sustained strong returns for our shareholders. In the first half of the year, we concentrated on executing all elements of our strategy and investment case, focusing on providing energy, creating and returning value, and running our business in a sustainable way. We achieved strong sales and consistent operations while lowering unit production costs, maximizing value from our key assets. Our project delivery excellence has been evident across multiple major projects, including Scarborough and Trion. In April, we made the final investment decision on Louisiana LNG, positioning Woodside as a global leader in LNG. This project capitalizes on our strengths in project execution, operational best practices, and LNG marketing to satisfy increasing global demand and generate long-term shareholder value. Our robust financial performance and prudent capital management allow us to invest in future growth while also rewarding our shareholders with a fully franked interim dividend of $0.53 per share, at the upper end of our payout range. We also maintain a commitment to sustainable operations, having recorded no high consequence injuries or significant environmental impacts during this period, and we are on track to achieve our net equity Scope 1 and 2 greenhouse gas emissions reduction goals. Slide 5 outlines our key operational and financial results, highlighting our base business performance. Exceptional results at Sangomar contributed to impressive half year production of 548,000 barrels of oil equivalent per day, and total production reached 99.2 million barrels of oil equivalent. Increased production has been matched by greater efficiency, reducing unit production costs by another 7%. We also generated value through our marketing and trading business, with half year activities contributing $144 million, which is about 8% of total events. We reported a net profit after tax exceeding $1.3 billion. Our balance sheet remains strong during this phase of increased capital investment, and we continue to hold a solid liquidity position with gearing within our target range. Consequently, we are well prepared to advance our growth projects while ensuring strong returns for shareholders. Safety remains a top priority at Woodside, and as shown on Slide 6, it is gratifying that during this period of increased activity, we did not record any high consequence injuries. We also reached significant safety milestones throughout our global portfolio, including 100,000 hours worked across two major turnarounds at our Northwest Shelf project in Western Australia without lost time injuries. Safety was also a key focus during our outstanding performance at Sangomar, with no recordable injuries in the project's first year. These accomplishments illustrate our ongoing dedication to safety and set the standards expected at Woodside. We continue to emphasize proactive measures and continuous improvement, including using AI-driven analytics to enhance our investigation and learning processes. Moving to Slide 8, the first half of the year demonstrated Woodside’s exemplary operational capabilities with consistent reliability and stringent cost control across our global portfolio. Our strong production has allowed us to narrow full-year guidance to the higher end of our range, despite the effects of the Greater Angostura asset divestment. The graph highlights that our operated assets' reliability and relentless cost control have lowered unit production costs to $7.70 per barrel of oil equivalent. Our teams consistently focus on cost efficiencies, including leveraging technology such as AI to enhance safety and operational efficiency. In terms of corporate expenses, we are exploring new avenues to cut down on costs, including the planned establishment of a digital solutions center in India. Since the minister announced the proposed approval for the Northwest Shelf extension in May, we have been collaborating with the government to secure final approvals that will support ongoing, long-term operations consistent with the government's future gas strategy. The WA government's approval, after extensive assessment over six years, includes conditions based on the best available science that are also technically feasible. We aim for similar objectives in our discussions with the federal government. It is frustrating that we have not yet received final federal approval, as approval timelines must be considered when contemplating productivity enhancements in Australia. The federal government recognizes the Northwest Shelf extension's significance for our communities, customers, and workforce, and thus for the entire nation. We anticipate a positive outcome soon. A significant highlight during this period has been the remarkable performance of Sangomar, which you can see on Slide 9. In just the first half, Sangomar generated nearly $1 billion in revenue. Fourteen months after first oil, the project has maintained production at its expected capacity of 100,000 barrels per day with nearly 99% reliability. Future development decisions will be guided by the first 12 to 24 months of production data, and the performance of Sangomar's subsurface and wells looks promising. The potential Sangomar Phase 2 development aims to utilize existing FPSO infrastructure, facilitating a more efficient and cost-effective brownfield expansion. On Slide 10, we discuss our recent agreement with ExxonMobil. This agreement, announced in July, will see us assume operatorship of the Bass Strait assets, further enhancing our operations in Australia and enabling the potential development of additional gas resources. We expect this transaction to finalize next year. This strategic move combines Woodside's global operational strengths with Exxon's highly skilled Bass Strait workforce, bolstering our overall operational expertise. By gaining operatorship over a more extensive asset group in Australia, we can create economies of scale expected to drive cost efficiencies and synergies throughout our operations. This agreement will also provide flexibility for future development through existing infrastructure, with four potential development wells that could deliver up to 200 petajoules of sales gas into the domestic market, reaffirming our commitment to supplying reliable and affordable energy to Australian customers. Now, let's review the global energy landscape and the critical role LNG will play in addressing future demand. As global populations grow and living standards rise, energy consumption also increases. As indicated on Slide 11, since 2020, primary energy consumption per capita in non-OECD Asia has increased by 14%. During this growth, there remains a substantial demand gap between these nations and OECD APAC and the USA, showing that additional demand growth is likely as these countries experience economic development and improvements in quality of life. These nations face the challenge of securing reliable and affordable energy while simultaneously reducing emissions and improving air quality. Natural gas and LNG serve as adaptable energy sources, supporting a base load, industrial use, and grid reliability. LNG contributes to energy security by providing diversification and is a tradable energy source. With the Scarborough and Louisiana LNG projects underway, Woodside is well-equipped to meet the expected 60% rise in LNG demand by 2040, delivering competitively priced, reliable energy to key markets. Turning to Slide 12, fueled by this strong long-term demand for our products, we are positioning Woodside to optimize value through our global marketing and trading efforts. We are capitalizing on our diverse portfolio of high-quality assets and established marketing and trading capabilities. Our portfolio allows for volume and contractual flexibility, enabling us to meet customer needs and adapt to market shifts. Our gas hub exposure on produced LNG stands at 24.2%, which yielded a premium of about 3% per MMBtu compared to oil-linked sales, showcasing the benefits of price diversity in volatile markets. We have entered into sale and purchase agreements during the half with Uniper and China Resources for Woodside LNG deliveries to customers in Europe and Asia extending into the 2040s, confirming solid long-term demand. Regarding our major projects, excellent progress has been made on the Scarborough Energy project, which is currently 86% complete, targeting its first LNG cargo in the latter half of 2026. Slide 13 depicts milestones achieved in May, with successful connections made between the floating production unit hull and topsides. Integration activities are ongoing as we prepare for the FPU's journey from China to Australia. To prep for the arrival of the FPU, subsea installation testing and pre-commissioning efforts were completed after the period. Our development drilling campaign is also on schedule, with four out of eight wells having drilled the reservoir section, confirming excellent reservoir properties. On Slide 14, we are progressing on Trion toward our target of first oil in 2028. During the half, we made strides in constructing the floating production unit, completing significant activities including equipment fabrication and the construction of three modules and living quarters. Preparations are advancing for the floating storage and offloading vessels to be constructed in the latter half of 2025, and we are ready for major subsea work to commence next year. As previously mentioned, Louisiana LNG is transformative for Woodside, positioning us as a global LNG powerhouse and promising lasting shareholder value for years ahead. Slide 15 shows that since finalizing the acquisition last October, we have achieved competitive EPC pricing for all three trains, selected a top-tier infrastructure partner to share capital expenses, secured long-term offtake agreements with Uniper, and signed a long-term gas supply agreement for feed gas. Following the FID in April, we have sustained strong project momentum and target first LNG production in 2029. As shown on Slide 15, construction of Train 1 is currently 22% complete, with expectations to have the first structural steel on site by year-end. In June, we executed a 40% sell-down of Louisiana LNG infrastructure to Stonepeak, resulting in a contribution of $5.7 billion towards expected capital expenditures and covering 75% of the capital expenditures over 2025 and 2026. This enhances our balance sheet and capacity to fund growth projects while providing shareholder returns. We are seeing strong interest from high-quality potential partners as we explore further sell-downs. Slide 16 highlights several advantages of traditional U.S. LNG models, such as ample low-cost feed gas and access to both Asian and European markets. Louisiana LNG builds upon these advantages, being a highly competitive project with a fully permitted site and an LNG project cost of around $960 per tonne, while the sell-down to Stonepeak mitigates our capital exposure. Woodside's robust balance sheet and investment-grade credit rating eliminate the need for project financing, allowing us to capitalize on international LNG market prices without depending on low-margin, long-term offtake agreements. We will continue to secure LNG sales agreements as we approach the first LNG. Additionally, volumes from Louisiana LNG will enhance Woodside's global LNG marketing portfolio, adding value through shipping, trading, and portfolio optimization. As we assess strong market interest in Louisiana LNG HoldCo equity, we are prioritizing long-term strategic partnerships with those who can offer complementary capabilities to enhance the project's value. Our approach is deliberate and disciplined in partner selection, similar to our equity sell-down in growth to JERA and LNG Japan, which facilitates shared investment, secured offtake, and opens further avenues to explore lower carbon solutions. Moving on to Beaumont New ammonia on Slide 17, by the end of the first half, Train 1 was 95% complete, with initial ammonia production expected in late 2025. We successfully completed key activities during the period and have started pre-commissioning activities in preparation for startup. Our marketing efforts are aimed at supporting demand for our early ammonia production in the U.S. and Europe, utilizing existing spot markets for flexibility in placing initial production volumes. Aligned with market predictions, we anticipate opportunities beyond 2026 to supply lower carbon ammonia to Europe as customer demand escalates, particularly due to new policies in key energy markets like the carbon border adjustment mechanism. On Slide 18, during the first half, we continued executing various complex decommissioning campaigns, including the successful completion of a multiyear decommissioning program at Enfield. This asset has been taken from exploration through development and operations to decommissioning under Woodside's management. We faced unexpected challenges in removing equipment at the legacy Griffin, Minerva, and Stybarrow fields, which will impact costs in 2025 and the following years. We are committed to minimizing risks in our decommissioning operations and integrating lessons learned to enhance safety, environmental stewardship, and efficiency. With ongoing safe decommissioning operations at the Gippsland Basin joint venture, including the permanent plugging and abandonment of over 200 wells, we anticipate no similar challenges with future decommissioning of Bass Strait assets. I'll now hand over the discussion to Graham, who will summarize our financial strategy and performance.

Graham Clifford Tiver, CFO

Thanks, Meg and hello, everyone. I'm pleased to present a strong set of financial results. It's worth calling out Sangomar's cash contribution of approximately $800 million. Our EBITDA margin of 70% remains peer-leading, an outstanding result given lower realized prices and ongoing inflationary pressures. Its reliable and cost-competitive performance has translated into half year earnings of $0.69 per share, coupled with our consistent approach to capital management. This provides our balance sheet, with the resilience and flexibility to continue delivering strong returns for shareholders while funding value-accretive growth. Moving to Slide 21. We continue to deliver our business in line with our capital management framework, which remains unchanged. We operate with discipline and focus. We continue to exercise strong cost control across our business, once again achieving a measurable reduction in unit production costs. The same discipline is applied when making investment decisions, adhering strictly to our capital allocation framework and ensuring alignment to our strategic goals. We are disciplined in how we position the balance sheet to achieve these goals. Levers such as the sell-down of 40% interest in Louisiana LNG infrastructure to Stonepeak assist in strengthening our balance sheet metrics while also bringing a quality partner into the project.

Operator, Operator

And ladies and gentlemen, it seems that we may have a technical issue with the main speaker line. Please stay on the line while we try to reconnect. Thank you. And everyone, we're reconnecting the speaker line. Please proceed.

Graham Clifford Tiver, CFO

It's Graham Tiver joining again. I do apologize for the technical difficulties. What I'll do is I'll start from Slide 21, the capital management framework slide. We continue to deliver our business in line with our capital management framework, which remains unchanged. We operate with discipline and focus. We continue to exercise strong cost control across our business, once again achieving a measurable reduction in unit production costs. The same discipline is applied when making investment decisions, adhering strictly to our capital allocation framework and ensuring alignment to our strategic goals, and we are disciplined in how we position the balance sheet to achieve these goals. Levers such as the sell-down of a 40% interest in Louisiana LNG infrastructure to Stonepeak assist in strengthening our balance sheet metrics while also bringing a quality partner into the project. As Meg mentioned, Stonepeak will provide $5.7 billion towards the expected capital expenditure of Louisiana LNG and importantly, on an accelerated basis, will contribute 75% of expected project capital expenditure in both 2025 and 2026. This innovative approach has improved our liquidity and keeps our gearing within the target range. The capital management framework underpins a healthy balance sheet, allowing us to invest in our future while providing strong returns to our shareholders. When referring to returns, our dividend policy is to pay a minimum of 50% of underlying NPAT. We target paying between 50% and 80% and for more than a decade, we have consistently paid at the top end of this range. As highlighted on Slide 22, we have achieved this once again with a healthy interim dividend of $0.53 per share fully franked, representing a half year annualized yield of 6.9%. We have taken important steps to maintain the balance sheet strength and pay a dividend at the top of the range. This starts with strong underlying performance of our assets, supported by Sangomar coming online, exceeding our expectations. Secondly, strong financial discipline and investment-grade credit rating. And finally, portfolio optimization from the Stonepeak transaction and Greater Angostura divestment as well as a focus on OpEx and CapEx, including minimizing discretionary spend. Our balance sheet remains well positioned with a portfolio of high-quality producing assets and transformative growth projects. We are actively managing our debt portfolio. We have minimal debt maturities over the next 12 months, and as you can see on Slide 23, our liquidity remains strong. The strong cash-generating capacity of our assets, combined with the issuance of $3.5 billion in senior unsecured bonds in the U.S. market, which attracted significant oversubscription has led to a liquidity position of $8.4 billion. We remain committed to maintaining an investment-grade credit rating, which enables efficient access to global debt markets on competitive terms and represents an independent assessment of the financial strength of our business. Strong operating cash flow and disciplined capital allocation results in a strong balance sheet. At the half year, our gearing remains within our range of 10% to 20%, and we have $8.4 billion in liquidity. I'll now hand back to Meg.

Marguerite Eileen O’Neill, CEO and Managing Director

Thanks, Graham. Conducting our business sustainably is one of the goals underpinning our strategy to thrive through the energy transition. As shown on Slide 25, our company-wide sustainability strategy sets clear objectives and focus areas to track our performance across four material areas: health, safety and well-being, climate, First Nations cultural heritage and engagements and environment and biodiversity. Beyond our safety performance, which I outlined earlier, we have made positive progress across all these areas. We progressed to the implementation of our asset decarbonization plans and remain on track to achieve our net equity Scope 1 and 2 greenhouse gas emissions reduction targets. Engagement with traditional owner representatives remains central to our Australian activities. This included the completion of a planned annual cultural heritage audits of the North West Shelf project leases in collaboration with traditional owners. And we continue to invest in major environmental scientific research partnerships, including a five-year extension to our long-standing marine research collaboration with the University of Western Australia announced earlier this month. Moving to Slide 26. Woodside continues to make significant economic and social contributions to the communities where we operate. We remain one of Australia's top tax contributors. Our total taxes, royalties and levies paid during the half to Australian governments was AUD 1.3 billion demonstrating an ongoing and significant contribution to the nation's economic prosperity. We continue to make major investments that drive local content and capability. Our Scarborough Energy project is estimated to spend more than AUD 5.4 billion across Western Australia through its development phase, while our Louisiana LNG project is expected to generate approximately 40,000 nationwide jobs during construction. On to Slide 28. I'd like to close by recapping on our achievements to date for 2025 and the compelling investment case before our shareholders. Above all, the first half of 2025 for Woodside has been about delivery, delivering strong and consistent returns to our shareholders, delivering outstanding production from our world-class assets matched by increased efficiency and cost control, delivering our major growth projects including a final investment decision on Louisiana LNG that positions Woodside to meet growing global demand and unlock long-term shareholder value. We remain on track to deliver our net equity Scope 1 and 2 greenhouse gas emissions reduction targets and above all, we are committed to safety. Our achievements in the first half demonstrate delivery of our strategic goals and give us great confidence that Woodside will thrive through the energy transition as we continue to play a critical role in delivering reliable, affordable and lower carbon energy that the world needs today and into the future. Thank you. I'll now open the call to questions. I know we've had some technical issues. So I'd like you to please limit your questions to two each to ensure everybody has an opportunity to ask their questions.

Operator, Operator

Your first question comes from Gordon Ramsay from RBC Capital Markets.

Gordon Alexander Ramsay, Analyst

Congratulations, Meg and team on a great result. I'm really encouraged with what we're seeing. I just want to pick up on Sangomar. Obviously, you've delivered exceptional operating performance with that field and reservoirs performed very, very well. The Phase 1 production is based largely on the S500 sand development. You made a comment today that Phase 2 could leverage off existing infrastructure. Are you able to provide an update on the performance of the injector producer pair in the S400 sand units? And when Woodside might possibly be in a position to advance what appears to be encouraging initial results from those wells.

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. Thanks, Gordon, and we appreciate your ongoing interest in Sangomar. As you would have seen in the announcements, we made a reserve add based on the S400 performance early in the period, that was about 7.1 million barrels approved and 16 million barrels to T+P. So some initial positive signs in the S400s. And the second reserve add that we made subsequent to the period that's noted in the report of 18.4 million barrels is associated with the S500. So that main portion of the development continues to perform very well. We continue to gather data. So we believe that we'll need, call it, 12 to 24 months of production data to inform decisions around Phase 2. But conceptually, as I mentioned in the call, the intention would be to leverage the existing FPSO and to continue to tie back subsea wells to the infrastructure. As you can well appreciate, that's a very capital-efficient way of continuing to develop the asset. So we'll keep you posted as we start moving those opportunities through the gate process.

Gordon Alexander Ramsay, Analyst

And just one other question for me, just on unit production costs. You brought that guidance down to $8 to $8.5 a barrel of oil equivalent. Again, can you just kind of just run through how you've been able to do that? Obviously, Sangomar has performed very well, but also, are there other aspects to the cost reduction that we should be aware of?

Marguerite Eileen O’Neill, CEO and Managing Director

Sure. So Sangomar has been really a star with really strong production. And if you look at the unit production cost for Sangomar itself, it's very competitive and has helped bring down our average. We also have been working across the business to bring costs down. In the first half, there were some one-off cost reductions in the U.S., and then there's an activity set that will take our full year UPC into that guidance range of $800 million to $850 million above where we are for the first half, which is the $770 million.

Operator, Operator

And your next question comes from Tom Allen from UBS.

Tom Allen, Analyst

Maybe just starting with Louisiana LNG. So just knowing that we've been through a few updates where negotiations on equity sell-down have been ongoing. Wondering, Meg, if you could please provide some color on what or if anything has changed relative to Woodside's expectations on sell-downs that we discussed at the February results. Is Woodside and prospective partners seeing stronger-than-anticipated competition from competing projects or is it the subtle differences in the EPC arrangements across projects? Obviously, Woodside obviously have a fully wrapped EPC with Bechtel. Or is it the political environment adding complexity and timing risk to the negotiations for project equity?

Marguerite Eileen O’Neill, CEO and Managing Director

Thank you for the question, Tom. Regarding Louisiana LNG, we believe this is a favorable project. If you look at our construction costs, the cost per tonne is very competitive. Other companies in this area have reported inflationary pressures affecting their costs after the Louisiana LNG project. We're remaining disciplined. Our main priority is to find the right partner and ensure fair value for Woodside shareholders. This approach is similar to what we did with Scarborough and Pluto Train 2, where we engaged an infrastructure investor early in the project when the investment and returns aligned with their expectations. We are being selective about who we bring into the HoldCo. As I mentioned previously, once we reached FID, it opened the door for companies to re-enter the process. We've been moving quickly, but some companies indicated they were interested but couldn't meet our timeline. Now that we are past FID and progressing into the execution phase, it has allowed some players who need additional time to join the conversation. We will continue to be disciplined and aim to bring in quality partners at a value that benefits our shareholders.

Tom Allen, Analyst

Okay. Second question, just over at Beaumont ammonia, please. There's just a little slip in the schedule for first production out of Beaumont to later in the year. Are you able to share just some color on what happened there? I think we've sort of previously guided plans to sell-down the project and enter into offtake is obviously still ahead. Can we assume that's well advanced with partners and offtake and that will probably come through over the quarter, ahead of first production?

Marguerite Eileen O’Neill, CEO and Managing Director

I don't remember us indicating plans to sell down. We currently have no ongoing process to sell down Beaumont. Our primary focus is on collaborating with OCI to complete construction. It's important to note that the obligation to finish construction and deliver an operational plant that meets clear performance standards rests with OCI. The scheduling delays are a result of some construction setbacks, which are not being managed by Woodside, and there is no financial impact on us besides the delay in the second payment, the completion payments. As we mentioned in the second quarter, we expect that completion payment to be made in 2026 instead of this year. We are working on marketing, which is a critical priority for us to ensure we have buyers ready to purchase the ammonia when we begin operations later this year. The second phase involves starting the low-carbon ammonia production, set for the second half of 2026, at which point we will be able to market the products. We are already marketing the product to attract premium pricing related to the lower carbon intensity of the blue ammonia we will be producing then.

Operator, Operator

And your next question comes from Adam Martin from E&P.

Adam Martin, Analyst

I suppose, firstly, just on the Bass Strait, could you walk through those sort of potential for development opportunities sort of what needs to happen to get those into FID, please?

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. Thanks, Adam. And I really appreciate the interest in the Bass Strait operatorship transition. We were very excited to be able to conclude that negotiation with ExxonMobil, particularly with the ability for us to solely develop some of these opportunities. These are gas discoveries that have been made many, many years ago. They've been in the contingent resource for a period. Our teams have been doing scoping work for well, a number of months to understand what the potential is. So we need to work through our normal technical due diligence. But we do have the ability to take a final investment decision, but that would not happen until the operatorship transition has completed.

Adam Martin, Analyst

Okay. And just a second question. Obviously, you got the $443 million restoration movements. I think that relates to sort of CapEx going up a little bit from previous expectations. Can you just talk through the timing of that future spend and I suppose why that's not a risk for other programs like the Bass Strait moving forward, please?

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. One of the challenges we've encountered with the decommissioning work this year has been the condition of some of the closed sites. Fields like Stybarrow, Minerva, and Griffin have not produced oil and gas for many years, and the condition of the equipment was not as documented when we got into the field. This has led to several challenges in recovery. I am pleased to report that we have plugged all of the wells, which is where the environmental risk is at its highest. Completing that work is a significant achievement. However, we have needed to reassess our approach due to the challenges faced. We're returning to engineering work to better manage the safety and environmental risks identified. The additional spending will occur over the coming years, and we will provide more information to the market as it becomes available. We plan to proceed carefully, especially since NOPSEMA has revised the general directions for these legacy assets, allowing us more time to ensure we have sound engineering plans and are properly managing construction along with safety and environmental risks. Regarding Bass Straits, we've noted advantages when decommissioning shortly after production ends, as this allows for much more efficient execution. As mentioned in the report, Bass Strait has plugged and abandoned over 200 wells, and the platform removal campaign is deep in the engineering phase. We are following all normal engineering and project gating processes to ensure we have a solid understanding of costs. The bulk of this work is scheduled for 2027, and we are working closely with ExxonMobil. Everything remains on track from a cost perspective as we progress through the project.

Operator, Operator

And your next question comes from Saul Kavonic from MST.

Saul Kavonic, Analyst

Can you provide an update on the MOU with Aramco? Are those discussions going as you expected? Also, could you explain what is meant by collaboration on ammonia and how that relates to Beaumont?

Marguerite Eileen O’Neill, CEO and Managing Director

Sure. So not a lot to update on Saul. So we were very pleased to be invited by Aramco to participate in the U.S. Saudi Investment Forum back in May. And very pleased to execute the MOU with them, looking at U.S. investment opportunities in both LNG and low-carbon ammonia. Look, we continue to build a very strong and constructive relationship with Aramco. And when we have something announceable, we will announce.

Operator, Operator

And your next question comes from Nik Burns from Jarden Australia.

Nik Burns, Analyst

Meg and Tim, just first question, maybe just on the dividend, paying out again at the top end of your payout range. The gearing at 30 June is at the top end of a gearing target range as well and the dividend probably could push you over the top end of that. Maybe can you talk about the factors that led you to be comfortable with retaining an 80% payout ratio for the interim result? And whether being at the upper end places any risk of having to pay out below the upper end over the next few periods.

Marguerite Eileen O’Neill, CEO and Managing Director

I'll let Graham take that.

Graham Clifford Tiver, CFO

Thanks, Nik. Yes, as you know, through our capital management framework, we're not just looking at a point in time, we're looking through into the future as well. We're really comfortable and happy where the business is today. It's performing well and the balance sheet is in a strong position. I guess I'd call out that the strong underlying performance of the business continues to shine through, generating very strong operational cash flows. The strong financial discipline around our cost and CapEx control, we've got the investment-grade credit rating, and I guess we've been able to optimize our portfolio during the period as well. So with Stonepeak coming in, as I said in my speech, quite an innovative approach with the funding in that 75% upfront in the 2025 and '26 and then the Angostura sell-down as well. So you bring all that together and the business is in good shape, and we're confident with our forward view on being able to continue to generate strong cash flows, invest in our growth projects, our immediate future and also provide strong returns to our shareholders.

Nik Burns, Analyst

Got it. And just a question on marketing. Meg, you called out the strong returns being driven by the marketing team, circa 8% of group EBIT in the first half. I was interested in the fact that you've retained your gas hub exposure guidance of 28% to 35% for the full year. I think on my numbers, the average around 24% in the first half. Can you talk a bit about the current state of the global spot LNG market? And looking ahead, what's going to drive a material increase in your sales into the spot market in the second half of the year?

Marguerite Eileen O’Neill, CEO and Managing Director

Thanks, Nik. It's a great question. And I think the results really validate our strategy to preserve a certain amount of our LNG to sell at gas hub exposure. So when we look at the difference in pricing between oil-indexed LNG sales versus gas hub indexed LNG sales, it's a $3 premium. So a very significant uplift associated with the way we have our pricing exposure managed. And as you'll note, and as you've caught on, our guidance for the full year is higher than what we've delivered in the first half. So obviously, our performance in the second half will be above where we are today. And when you look at what's happening in the market with softening in Brent, but continued strength in the LNG pricing that bodes well, and that continues to reinforce the value of our strategy. Now when we look further down the road, I think we've been pretty clear that our target in the next couple of years is to retain that exposure of, call it, circa 30% gas hub indexation. As we start up Louisiana LNG, we'll continue to be refining our intentions around price indexation and exposures. One of the things that's very clear, the fundamentals for the 2030s are very robust. When you look at things like Asian demand underpinned by economic growth, declining domestic supply in many Asian nations that have historically been strong gas producers. So if you referenced WoodMac, for example, they're expecting more than 100 million tons of new pre-FID LNG supply will be required by 2040. And so we're very bullish in the long term. But we'll continue to be refining our price index exposure over time. We've got a fair amount of opportunity and flexibility with the Louisiana LNG offtake, and we'll be looking to balance that in a way that best works for our shareholders.

Operator, Operator

And your next question comes from Dale Koenders from Barrenjoey.

Dale Johannes Koenders, Analyst

And this question might be more for Graham. In the second quarter report, you reported CapEx and exploration of $2.5 billion year-to-date, including net contributions in Louisiana, which benefited from the $1.8 billion Stonepeak contribution. It just $4.3 billion, on your cash flow statement, you reported $4.9 billion spent on CapEx and exploration. I'm just wondering what the $600 million difference is.

Graham Clifford Tiver, CFO

Sorry. What you have here is the cash flow view, which will also include capitalized borrowing costs. In contrast, what we report to the market reflects a pure view of CapEx expenditure. This is a significant component and differentiating factor between our market report and the actual underlying cash flow perspective.

Dale Johannes Koenders, Analyst

So the $330 million line item in your cash flow statement, what is that? Is that borrowing costs as well? Or sorry, go ahead.

Graham Clifford Tiver, CFO

What I suggest is maybe the team can take it offline and have a conversation with you, but that's the major difference.

Dale Johannes Koenders, Analyst

Okay. And then just secondly, in terms of cash tax payments, they're a little bit higher than expense. I'm just wondering sort of on a go-forward basis, how you think that delta will play out.

Graham Clifford Tiver, CFO

Yes. So as you know, cash tax payments, there's many different factors that play into the cash tax. And obviously, this year, we have had lower prices across the Australian business that's also flowing in. You've got the PRRT. I guess all we can do is continue to provide as much guidance as possible on that but it's very difficult to sit here and say exactly what that tax number will be because there's many factors that play into it, Dale.

Operator, Operator

And your next question comes from Henry Meyer from Goldman Sachs.

Henry Meyer, Analyst

Just on the LNG carrier position, could you give any update on plans to lease or own carriers to support the Louisiana delivery cargoes? And in light of gearing the balance sheet, just what lease liabilities do you expect to carry when they're delivered perhaps related to the Scarborough carriers on order.

Marguerite Eileen O’Neill, CEO and Managing Director

Sure. So philosophically, Henry, we think there are other companies that are well equipped and well suited to own LNG carriers. When we started up Northwest Shelf, there were some projects owned vessels, but we've moved away from that, and that's probably the industry standard to use leased vessels. The number of vessels, the balance sheet exposure is something that we're working through as we speak. So too early to advise. But as we progress that work and progress those contracts, we will certainly keep the market updated.

Henry Meyer, Analyst

Okay. And following up on the decommissioning costs for Griffin, Minerva and Stybarrow. I just wanted to double-check one of the comments before. Have some of those challenges encountered been reflected in the estimates for other fields? Or is there work underway to revise those costs as well?

Marguerite Eileen O’Neill, CEO and Managing Director

As we update our decommissioning estimates, which is typically done annually, we incorporate insights gained throughout the process. One positive takeaway from managing closed sites is that we are using that knowledge to enhance our decommissioning plans for currently operational sites. For instance, in our Australia operations, some of the FPSOs are scheduled to go offline in the 2030s. We are applying lessons learned from closed sites to these future decommissioning efforts to be more proactive and mitigate challenges we have faced. A notable success is the Enfield field, which Woodside operated until it ceased operations in 2018. We encountered none of the issues during the decommissioning of the Enfield subsea equipment that were present with Griffin, Minerva, and Stybarrow.

Operator, Operator

And your next question comes from Mark Wiseman from Macquarie.

Mark Andrew Wiseman, Analyst

I wanted to ask firstly on the Bass Strait operatorship decision. Could we talk about what the alternative would have been to this. It sounds like Esso was waiting for policy stability from the government and perhaps has come to the conclusion that they wouldn't invest in those four development opportunities, the 200 PJs, and so the alternative would have been to remain non-operator and not see any of that contingent resource come to fruition. Is that right? And I wonder, you made a comment there, Meg, around the workforce. It sounded like you see some benefit in bringing those Esso experienced staff into your team. Could you perhaps elaborate on that as well, please?

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. Certainly, the alternative mark would have been for ExxonMobil to continue operating. As I said, those four fields that we've identified and have the rights to exclusively develop are discoveries that have been on the books and the joint venture has known about for a very long time. So again, I suspect, although I can't guarantee that those likely would not have matured had we stayed with the existing operations. And on the people side, yes, we're super excited. There's a lot of talent and capability within the ExxonMobil workforce in Australia. Our Head of Operations in Australia came out of that workforce. So we know the people and I've been really pleased with the positive response we've seen from the ExxonMobil folks who, I think, see potentially a little bit longer horizon to be able to live and work in Australia with Woodside as operator, again, recognizing we've got a little bit bigger footprint and recognizing our desire to continue to be a significant player in the East Coast gas market.

Mark Andrew Wiseman, Analyst

Okay. Finally, regarding Santos, it’s clear that there were previous discussions between Woodside and Santos. Those discussions have now concluded, and there has been a non-binding offer for Santos. Did that offer prompt you to reconsider the potential advantages of a merger with Santos? Could you also share your thoughts on what attracted you to it at that time, and do you still perceive those benefits if you were to engage with Santos again?

Marguerite Eileen O’Neill, CEO and Managing Director

No, we are not considering that. The reason we initially explored opportunities with Santos was because of their LNG portfolio. However, we have moved on by acquiring Tellurian and investing in Louisiana LNG. With our significant positions in both the Atlantic and Pacific Basins, we believe this creates a stronger portfolio than merging two Pacific-focused businesses. We wish them the best but are committed to our own plans.

Operator, Operator

And your next question comes from Rob Koh from MS.

Robert Koh, Analyst

So I guess my first question is just on balance sheet management. And I guess you've got sell-down possibilities for Louisiana HoldCo. You've got your Chevron asset swap coming. And lots of other things in train, I'm sure. I wonder, could you comment on the possibility of doing any further executory contract type deals like the Stonepeak be on any of the other assets? Is that something we could contemplate?

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. Look, Rob, that kind of model was something that we've looked at a few times. And we looked at it actually before we took FID on Pluto Train 2 and Scarborough because it is one way to unlock capital, but given the joint venture structures of some of our existing assets, it's more complicated. So we're very much focused on the HoldCo sell-down at Louisiana LNG. And again, it's about getting the right partner at the right price and then executing the transactions that we've announced. So the Chevron asset swap as well as the operatorship transition in Bass Strait.

Robert Koh, Analyst

Yes. And then my second question relates to the restoration rehabilitation provisions. I guess, part A of the question is, can you give us a steer on any contingency should the pipelines need to be taken out? Because I think the provision is made on a pipeline in situ basis. And then secondly, I saw that Chevron has a very old legacy deal for Barrow Island, where there's decommissioning is offset against royalty refund. Just wondering, does Woodside have anything similar like that on the books and within the provision?

Marguerite Eileen O’Neill, CEO and Managing Director

Yes. When it comes to the provisions, we take a risk-based approach regarding certain pieces of equipment that we believe should remain in place for environmental reasons, such as jacket structures and pipelines. The restoration provision includes a risk that estimates the likelihood of needing to remove these items. We are conducting extensive research in the Bass Strait with ExxonMobil, as well as in our own operations, to gain a better understanding of the marine habitat that has developed around these assets over the years. Our goal is to determine the best environmental outcomes, and we have accounted for this risk in our provisions. Regarding royalty refunds, we do not have access to the same structure that Chevron utilizes in Bass Strait. It is important to mention that abandonment expenses are creditable on PRRT and income tax, which are considered expenses for oilfield developments, and that is the structure available to us.

Operator, Operator

And your next question comes from Nicholas Morgan from JPMorgan.

Nicholas Morgan, Analyst

Two questions from me. Firstly, on Louisiana LNG. Could you give some further detail on what the targeted split is for Woodside's equity share of LNG just on a contracted vs spot basis?

Marguerite Eileen O’Neill, CEO and Managing Director

We aim to include about 8 million tons in our portfolio. The final investment decision we made for the first three trains is for 16.5 million tons. We plan to retain approximately 8 million tons of that, but we will sell a significant part of it. The amount we sell and the contracting arrangements offer us considerable flexibility. As you may have noted from our announcements this half, we have secured LNG offtake agreements with China Resources and Uniper. One of the Uniper agreements was directly associated with Louisiana LNG, so I would categorize that within the 8 million tons we are not keeping for our own accounts. We do have a lot of flexibility in our LNG marketing, allowing us to collaborate closely with customers to understand their needs and negotiate mutually beneficial outcomes. Our intention is to incorporate 8 million tons into our portfolio.

Nicholas Morgan, Analyst

All right. Thank you all for listening in and participating today. I look forward to speaking to many more of you in the coming days. in the U.S. and just how those costs are kind of tracking towards expectations taken at FID?

Marguerite Eileen O’Neill, CEO and Managing Director

Look, the pipeline costs are still tracking within what was announced at FID.

Operator, Operator

And there are no further phone questions at this time. I will now turn the call back over to Ms. O’Neill for closing remarks.

Marguerite Eileen O’Neill, CEO and Managing Director

But I would also like to highlight that we have a Capital Markets Day planned for the 5th of November, and we look forward to talking more about the Woodside business at that occasion. Thank you all.

Operator, Operator

That does conclude our conference for today. We thank you for participating. You may now disconnect your lines.