Woodside Petroleum Ltd| Remuneration Report 81
Calculation of award
An executive’s award will be based upon two equally weighted components; individual performance against challenging KPIs and
the company’s performance against the corporate scorecard. This results in an individual performance factor (IPF) which ranges
from 0 to 1.6 for executive KMP. These targets are designed to promote short- and long-term shareholder value. Performance
against individual KPIs is assessed by the Board in the case of the CEO, and by the CEO and the Human Resources & Compensation
Committee in the case of other executive KMP. Meeting these targets means the CEO and executive KMP are eligible for their target
EIS allocation, subject to individual performance. Exceeding targets may result in an increase to award, whereas under performance
will result in a reduction in award. The minimum award that an executive can receive is zero if the initial performance conditions are
not achieved. The decision to pay or allocate any EIS award is subject to the overriding discretion of the Board, which may adjust
outcomes in order to better reﬂect shareholder expectations, and company or management performance.
See page 83 for details of the CEO’s individual KPIs and page 85 for other executive KMP.
The Restricted Shares are divided into two tranches. The ﬁrst tranche is 27.5% of the award and subject to a three-year deferral
period. The second tranche is 30% of the award and subject to a ﬁve-year deferral period. There are no further performance
conditions attached to these awards. This element creates a strong retention proposition for executives as vesting is subject
to employment not being terminated with cause or by resignation during the deferral period. The deferral ensures that awards
remain subject to ﬂuctuations in share price across the three and ﬁve-year periods, which is intended to reﬂect the sustainability of
performance over the medium- and long-term and support increased alignment between executives and shareholders.
The Performance Rights are divided into two portions with each portion subject to a separate RTSR performance hurdle tested over a ﬁve-
year period. Performance is tested after ﬁve years as Woodside operates in a capital intensive industry with long investment timelines. It is
imperative that executives take decisions in the long-term interest of shareholders, focused on value creation across the commodity price
cycles of the oil and gas industry. Our view is that RTSR is the best measure of long-term value creation across the commodity price cycle
of our industry.
One-third of the Performance Rights will be tested against a comparator group that comprises the entities within the ASX 50 index at
1 December 2018. The remaining two-thirds will be tested against an international group of oil and gas companies, set out in Table 12 on
RTSR outcomes are calculated by an external adviser on or after the ﬁfth anniversary of the allocation of the Performance Rights.
The outcome of the test is measured against the schedule below. For EIS awards, any Performance Rights that do not vest will lapse
and are not retested.
Woodside RTSR percentile position within peer group
Vesting of Performance Rights
Less than 50th percentile no vesting
Equal to 50th percentile 50% vest
Equal to or greater than 75th percentile 100% vest
Vesting between the 50th and 75th percentile points is on a pro rata basis.
Target variable opportunity for 2018
Each executive is given a target VAR opportunity and a maximum VAR opportunity which is a percentage of the executive's FAR. The
opportunities for 2018 are outlined below.
Position Minimum opportunity
Target opportunity (% of FAR) Maximum opportunity (% of FAR)
CEO Zero 200 300
Executive KMP 160 256
CEO target remuneration Executive KMP target remuneration
VARIABLE REWARD FIXED REWARD