Woodside Petroleum Ltd| Remuneration Report 79
Scorecard measures and outcomes
The Board assesses executive management performance on an annual basis against a balanced scorecard of measures in conjunction with
individual key performance indicators (KPIs) that aim to drive business performance and the creation of shareholder value.
The 2018 scorecard for executive KMP is based on four equally weighted measures that have been chosen because they impact
short- and long-term shareholder value, with a score of 5 for an outcome at target and a maximum score of 10 on each measure.
The Board sets challenging targets for each measure with significant stretch to achieve maximum performance and robustly
assesses performance against expectation.
In 2018, Woodside delivered positive performance across all operational assets, with total 2018 production at the high end of market
guidance and strong safety performance particularly in the second half of the year. Combined with the higher realised price outcome,
this enabled Woodside to deliver a NPAT outcome at the upper end of our target range. Woodside re-positioned its portfolio with
the acquisition of an additional 50% equity in the Scarborough gas field and further progressed a number of projects and growth
opportunities. The majority of business plan priorities were met and we are well positioned to deliver across all three growth horizons.
In considering overall corporate performance, the Board chose to exercise its discretion to reflect appropriately first half safety performance
and business priorities that were not achieved. The Board elected to adjust the initially recommended scorecard outcome from 8.25 to 7.75
(out of a maximum of ten) for the 2018 performance year.
DELIVERY AGAINST BUSINESS PLAN
Woodside’s annual business plan commitments aim
to deliver long-term shareholder value. In 2018, we
focused on five key business priorities - base business
excellence, Wheatstone delivery and optimisation,
unlocking the Burrup Hub, SNE FEED entry and
progressing our opportunities in Myanmar.
+Continued to deliver high reliability and strong unit production
performance from our operating assets; commenced production
from Greater Western Flank Phase 2, six months ahead of schedule
and $630 million under budget (100% project); Wheatstone
commenced LNG production from Train 2; successful A$2.5
billion equity raising underpinned funding for the acquisition of an
additional 50% interest in Scarborough gas field, and will support
the progression of Scarborough and the SNE Phase 1 developments
and the development of Browse to FID; Woodside entered FEED
for Pluto Train 2 underpinning Woodside’s preferred concept for
the development of the Scarborough gas resource; NWS Project
signed non-binding preliminary agreements with the Browse Joint
Venture (BJV) and Chevron for the processing of their respective
oshore gas resources through NWS Project facilities; Browse
commenced concept definition with unanimous approval by the
BJV participants; Woodside assumed operatorship for the proposed
SNE Field Development Phase 1, and FEED activities commenced;
successful appraisal of the 2016 Shwe Yee Htun-1 discovery in
Block A-6, located in oshore Myanmar; start-up of both the
Wheatstone Domestic Gas and Pluto Truck Loading facilities was
not achieved as planned in 2018 with delivery now expected in early
2019; disappointing exploration outcomes resulting in higher than
expected non-commercial discoveries.
NPAT
Profit after tax performance is closely aligned with short-term
shareholder value creation. NPAT is underpinned by operational
performance, oil price and foreign exchange rates. This measure
focuses management on driving exceptional operational performance,
with the Board ensuring that short-term results are not achieved at the
expense of longer term performance. NPAT outcomes are exposed to
the upside and downside of oil price and foreign exchange fluctuations,
as are returns to shareholders.
+Strong operational performance due to high reliability and low cost
assets underpinned a NPAT result of $1,364 million, a 28% increase on
2017. This was supported by higher realised prices and lower exploration
operational expense, partially oset by lower petroleum resource rent
tax benefit, higher income tax expense and higher depreciation.
Scorecard outcome: 8
Scorecard outcome: 10
SAFETY AND ENVIRONMENT
The Board considers company performance across
a range of elements including personal and process
safety, environment (including emissions reductions),
sustainability and our social licence to operate. Strong
performance in this area creates and protects value four
ways; it reduces the likelihood of major accident events and
catastrophic losses; it maintains Woodside’s licence to operate
which enables the development and sanction of its growth portfolio;
it reflects ecient, optimised and controlled business processes that
generate value; and it supports the company’s position as a partner of
choice providing us access to the best capabilities and talent.
+During the first half of 2018, Woodside’s safety performance declined
compared to 2017. However, in response to a concerted campaign
of engagement with sta and contractors, performance improved to
deliver a total recordable injury rate of 1.32 per million hours worked.
Woodside had one Tier 1 and one Tier 2 loss of primary containment
process safety event in 2018. Woodside delivered a total of 138kt
CO
2
-e in emissions reductions against baseline. This exceeded our
annual target of 115 kt CO
2
-e. We remain on track to deliver our
target of a 5% reduction against baseline by 2020. The Dow Jones
Sustainability Index included Woodside in the World, Asia-Pacific and
Australian lead groups and ranked Woodside fifth within our industry.
Scorecard outcome: 6
PRODUCTION
Woodside maximises revenue and generates value from its assets
when they are fully utilised in production. Production is carefully
managed throughout the year to optimise the production value from
the reservoir. The production target is set relative to the company’s
annual budget and is not revised through the year.
+Full year production was 91.4 MMboe and was at the high end
of market guidance. This result was underpinned by our strong
operational and project delivery performance including successful
optimisation of the North West Shelf turnaround, strong Pluto
reliability, early delivery of Greater Western Flank 2 start-up and
better than expected production performance
from Wheatstone.
Scorecard outcome: 7
Total
scorecard
7.75
outcome