Consolidated Financial Results for the Six Months Ended September 30, 2023

November 10, 2023

Note: The following report is a summary of the Japanese-language original.

Company name: Japan Petroleum Exploration Co., Ltd.

Listing:

Prime Market, Tokyo Stock Exchange

Securities code:

1662

URL:

https://www.japex.co.jp/en/

Representative:

FUJITA Masahiro, Representative Director and President

Inquiries:

MATSUMOTO Akinori, General Manager, Corporate Communication Office

Telephone:

+81-3-6268-7111 (from overseas)

Scheduled date to commence dividend payments:

December 12, 2023

Scheduled date to file Quarterly Report:

November 13, 2023

Presentation of supplementary material on quarterly financial results: Yes

Holding of quarterly financial results presentation meeting (for institutional investors and analysts): Yes

(Millions of yen with fractional amounts discarded, unless otherwise noted)

1. Consolidated financial results for the six months ended September 30, 2023 (April 1, 2023 - September 30, 2023)

(1) Consolidated operating results (cumulative)

(Percentages indicate year-on-year changes.)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Six months ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

September 30, 2023

150,708

24.9

28,501

47.6

39,135

(9.2)

27,770

(11.6)

September 30, 2022

120,708

1.9

19,304

102.3

43,084

122.7

31,430

-

Note: Comprehensive income:

Six months ended September

30, 2023:

70,817 million yen

(102.6%)

Six months ended September 30, 2022:

34,953 million yen

(-%)

Basic earnings per share

Diluted earnings per share

Six months ended

Yen

Yen

September 30, 2023

512.09

-

September 30, 2022

573.89

-

  1. Consolidated financial position

Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen

%

As of September 30,

619,769

515,803

77.8

2023

As of March 31, 2023

568,180

457,169

74.9

Reference: Equity As of September 30, 2023: 482,190 million yen

As of March 31, 2023: 425,632 million yen

2. Cash dividends

Annual dividends

First quarter

Second quarter

Third quarter

Fiscal year-end

Annual

Fiscal year ended

Yen

Yen

Yen

Yen

Yen

-

150.00

-

220.00

370.00

March 31, 2023

Fiscal year ending

-

125.00

March 31, 2024

Fiscal year ending

March 31, 2024

-

125.00

250.00

(Forecasts)

Note: Revisions to the latest forecasts of cash dividends: Yes

- 1 -

3. Consolidated financial forecasts for the fiscal year ending March 31, 2024 (April 1, 2023 - March 31, 2024)

(Percentages indicate year-on-year changes.)

Net sales

Operating profit

Ordinary profit

Profit attributable

Basic earnings per

to owners of parent

share

Millions

%

Millions

%

Millions

%

Millions

%

Yen

of yen

of yen

of yen

of yen

Fiscal year ending

325,400

(3.3)

48,800

(21.4)

57,000

(31.4)

45,000

(33.2)

833.06

March 31, 2024

Note: Revisions to the consolidated financial forecasts most recently announced: Yes

  • Notes
  1. Changes in significant subsidiaries during the six months under review (changes in specified subsidiaries resulting in the change in scope of consolidation): None
  2. Application of specific accounting for preparing quarterly consolidated financial statements: Yes

Note: For details, please refer to "(3) Notes to quarterly consolidated financial statements (Application of specific accounting for preparing quarterly consolidated financial statements)" of "2. Consolidated financial statements and significant notes thereto" on page 9 of the attached material.

  1. Changes in accounting policies, changes in accounting estimates, and restatement
    1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
    2. Changes in accounting policies due to other reasons: None
    3. Changes in accounting estimates: None
    4. Restatement: None
  3. Number of issued shares (common shares)
    1. Total number of issued shares at the end of the period (including treasury shares)

As of September 30, 2023

54,300,076 shares

As of March 31, 2023

54,300,076 shares

  1. Number of treasury shares at the end of the period

As of September 30, 2023

65,253 shares

As of March 31, 2023

73,730 shares

  1. Average number of shares during the period (cumulative from the beginning of the fiscal year)

Six months ended September 30, 2023

54,229,503 shares

Six months ended September 30, 2022

54,766,817 shares

  • Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
  • Proper use of financial forecasts, and other special matters
    The forward-looking statements, including the financial forecasts shown in this document are based on information currently available to our company and on certain assumptions deemed to be reasonable. As such, they do not constitute guarantees by our company of future performance. Actual performance and other results may differ materially from these forecasts due to various factors.
    For the suppositions that form the assumptions for financial forecasts and cautions concerning the use thereof, please refer to "(3) Explanation of consolidated financial forecasts and other forward-looking statements" of "1. Qualitative information regarding settlement of accounts for the six months ended September 30, 2023" on page 4 of the attached material to the quarterly financial results report.

- 2 -

(Attached Material)

1. Qualitative information regarding settlement of accounts for the six months ended September 30, 2023

  1. Explanation of operating results
    During the six months ended September 30, 2023, net sales was ¥150,708 million, an increase of ¥30,000 million (+24.9%) year on year. Gross profit was ¥43,304 million, an increase of ¥9,323 million (+27.4%) year on year. Main factors behind the year-on-year increase for net sales and increase for gross profit include a rise in the selling price of natural gas in Japan as a result of the increase in LNG price, etc., and the growth of sales volume for crude oil in North America.
    Exploration expenses was ¥982 million, a decrease of ¥158 million (-13.9%) year on year. Selling, general and administrative expenses was ¥13,820 million, an increase of ¥285 million (+2.1%) year on year. As a result, operating profit was ¥28,501 million, an increase of ¥9,196 million (+47.6%) year on year.
    Ordinary profit was ¥39,135 million, a decrease of ¥3,948 million (-9.2%) year on year, due mainly to decreases in share of profit of entities accounted for using equity method and foreign exchange gains.
    Profit before income taxes decreased by ¥3,946 million year on year to ¥39,121 million. Profit attributable to owners of parent decreased by ¥3,659 million year on year to ¥27,770 million.
    Below is a breakdown of net sales.
    1. E&P Business
      Net sales from the E&P Business came to ¥47,536 million, an increase of ¥33,393 million (+236.1%) year on year, mainly due to the growth of sales volume for crude oil in North America.
    2. Infrastructure/Utility Business
      Net sales from the Infrastructure/Utility Business came to ¥74,686 million, a decrease of ¥2,093 million (-2.7%) year on year. This was mainly the result of the decreased sales volume for LNG, despite factors for increased net sales such as a rise in the selling price of natural gas in Japan due to the increase in LNG price, etc., and the growth of sales volume for electricity.
    3. Other Businesses
      Net sales from other businesses, such as the contract services (drilling and geological surveys, etc.), sale of oil products, including liquefied petroleum gas (LPG), fuel oil and the like, as well as other subcontracted tasks, came to ¥28,486 million, a decrease of ¥1,300 million (-4.4%) year on year.
  3. Explanation of financial position
    Total assets at the end of the second quarter increased by ¥51,589 million from the previous fiscal year-end to ¥619,769 million.
    Current assets decreased by ¥20,716 million from the previous fiscal year-end. This was mainly due to decreases in notes and accounts receivable - trade, and contract assets and raw materials and supplies. Non- current assets increased by ¥72,305 million from the previous fiscal year-end. This was mainly due to increases in the recording of wells, etc. under property, plant and equipment, and a rise in market values of investment securities.
    Liabilities decreased by ¥7,044 million from the previous fiscal year-end to ¥103,966 million.
    Current liabilities decreased by ¥21,990 million from the previous fiscal year-end. This was due mainly to a decrease in notes and accounts payable - trade. Non-current liabilities increased by ¥14,946 million from the previous fiscal year-end. This was mainly due to an increase in deferred tax liabilities resulting from the rise in market values of investment securities and other factors.
    Net assets increased by ¥58,633 million from the previous fiscal year-end to ¥515,803 million. The main factor was an increase in valuation difference on available-for-sale securities.
    • 3 -
  1. Explanation of consolidated financial forecasts and other forward-looking statements
    The consolidated financial forecasts for the fiscal year ending March 31, 2024 have been revised from the forecasts announced on August 9, 2023.
    Please refer to the "Notice of Financial Forecasts Revision, Interim Dividend Payout, and Year-end Dividend Forecast Revision" disclosed on November 10, 2023, the same day of this report.

- 4 -

2. Consolidated financial statements and significant notes thereto

  1. Consolidated quarterly balance sheet

(Millions of yen)

As of March 31, 2023

As of September 30, 2023

Assets

Current assets

Cash and deposits

191,956

187,239

Notes and accounts receivable - trade, and contract

48,474

43,517

assets

Securities

3,000

3,000

Merchandise and finished goods

2,216

2,744

Work in process

11

183

Raw materials and supplies

21,613

15,742

Other

14,574

8,701

Allowance for doubtful accounts

(54)

(54)

Total current assets

281,791

261,075

Non-current assets

Property, plant and equipment

118,411

143,032

Intangible assets

5,569

5,569

Investments and other assets

Investment securities

115,940

167,981

Other

46,855

42,514

Allowance for doubtful accounts

(47)

(47)

Allowance for overseas investment loss

(341)

(357)

Total investments and other assets

162,407

210,091

Total non-current assets

286,388

358,694

Total assets

568,180

619,769

- 5 -

(Millions of yen)

As of March 31, 2023

As of September 30, 2023

Liabilities

Current liabilities

Notes and accounts payable - trade

26,489

10,466

Income taxes payable

9,333

9,211

Provisions

2,331

2,178

Other

26,096

20,403

Total current liabilities

64,250

42,259

Non-current liabilities

Deferred tax liabilities

20,461

34,009

Retirement benefit liability

3,428

3,437

Provisions

620

273

Asset retirement obligations

20,043

20,586

Other

2,206

3,399

Total non-current liabilities

46,759

61,706

Total liabilities

111,010

103,966

Net assets

Shareholders' equity

Share capital

14,288

14,288

Retained earnings

362,989

378,742

Treasury shares

(136)

(121)

Total shareholders' equity

377,141

392,909

Accumulated other comprehensive income

Valuation difference on available-for-sale securities

46,324

80,147

Deferred gains or losses on hedges

(699)

84

Foreign currency translation adjustment

2,275

8,572

Remeasurements of defined benefit plans

590

476

Total accumulated other comprehensive income

48,491

89,280

Non-controlling interests

31,536

33,612

Total net assets

457,169

515,803

Total liabilities and net assets

568,180

619,769

- 6 -

  1. Consolidated quarterly statement of income and Consolidated quarterly statement of comprehensive income
    Consolidated quarterly statement of income

(Millions of yen)

Six months ended

Six months ended

September 30, 2022

September 30, 2023

Net sales

120,708

150,708

Cost of sales

86,727

107,404

Gross profit

33,980

43,304

Exploration expenses

1,140

982

Selling, general and administrative expenses

13,535

13,820

Operating profit

19,304

28,501

Non-operating income

Interest income

406

985

Dividend income

1,651

2,035

Share of profit of entities accounted for using equity

6,684

1,270

method

Foreign exchange gains

9,176

6,352

Gain on valuation of derivatives

6,446

-

Other

173

524

Total non-operating income

24,540

11,167

Non-operating expenses

Interest expenses

2

58

Commitment fees

155

159

Provision for loss on disaster

250

141

Other

352

174

Total non-operating expenses

760

533

Ordinary profit

43,084

39,135

Extraordinary income

Gain on sale of non-current assets

-

0

Total extraordinary income

-

0

Extraordinary losses

Loss on retirement of non-current assets

15

13

Total extraordinary losses

15

13

Profit before income taxes

43,068

39,121

Income taxes

8,970

9,092

Profit

34,097

30,029

Profit attributable to non-controlling interests

2,667

2,258

Profit attributable to owners of parent

31,430

27,770

- 7 -

Consolidated quarterly statement of comprehensive income

(Millions of yen)

Six months ended

Six months ended

September 30, 2022

September 30, 2023

Profit

34,097

30,029

Other comprehensive income

Valuation difference on available-for-sale securities

(3,378)

33,818

Deferred gains or losses on hedges

(64)

492

Foreign currency translation adjustment

4,036

6,155

Remeasurements of defined benefit plans, net of tax

(117)

(114)

Share of other comprehensive income of entities

379

436

accounted for using equity method

Total other comprehensive income

Comprehensive income Comprehensive income attributable to

855

40,788

34,953

70,817

Comprehensive income attributable to owners of parent

32,285

68,559

Comprehensive income attributable to non-controlling

2,667

2,257

interests

- 8 -

  1. Notes to quarterly consolidated financial statements (Notes on premise of going concern)
    No item to report.
    (Notes on significant changes in the amount of shareholders' equity)
    No item to report.
    (Changes in the scope of consolidation or the scope of application of the equity method) Significant changes in the scope of application of the equity method
    Effective the first quarter, Abashiri Biomass Power 3 LLC., an affiliate of JAPEX, became an equity method affiliate of JAPEX due to its increased material significance.
    Effective the second quarter, Longboat JAPEX Norge AS became an equity method affiliate of JAPEX because JAPEX acquired its shares.
    (Application of specific accounting for preparing quarterly consolidated financial statements) Deferral accounting of cost variance
    Cost variance arising from seasonal changes in production level is deferred as current assets (other) because such variance is expected to be almost completely eliminated by the end of the cost accounting period.
    Calculation of taxes
    For the taxes, JAPEX and some of its consolidated subsidiaries compute first by reasonably estimating the effective tax rate after applying tax effect accounting against profit before income taxes for the fiscal year including the second quarter, and next by multiplying the quarterly profit before income taxes by such estimated effective tax rate.
    However, in cases where the calculation of taxes using such estimated effective tax rate yields a result that is not reasonable to a significant extent, the effective statutory tax rate is used.
    Note that income taxes - deferred is included in income taxes.
    (Significant subsequent events) Repurchase and cancellation of own shares
    At the Board of Directors meeting held on November 10, 2023, JAPEX resolved to repurchase its own shares in accordance with the provisions of Article 156 of the Companies Act as applied pursuant to Article 165, paragraph (3) of the same Act, and also resolved to cancel a portion of its own shares in accordance with the provisions of Article 178 of the Companies Act.
    1. Reasons for the repurchase and cancellation of own shares
      JAPEX will carry out the acquisition of its own shares in order to improve capital efficiency and enhance shareholder returns. All of the own shares to be repurchased this time will be cancelled in order to increase shareholder profits through a decrease in the total number of issued shares.
    2. Details of resolution of the Board of Directors concerning the repurchase of own shares
      1. Types of shares to be repurchased Common shares
      2. Total number of shares to be repurchased Up to 3 million shares
        (5.53% of the total number of outstanding shares (excluding treasury shares))
      3. Total value of shares to be repurchased Up to ¥20 billion
      4. Repurchase period
        From November 13, 2023 to August 30, 2024
      5. Repurchase method
        Market purchases based on the discretionary dealing contract regarding repurchase of own shares
    4. Details of resolution of the Board of Directors concerning the cancellation of own shares
      1. Types of shares to be cancelled Common shares
      2. Total number of shares to be cancelled
        All of the shares repurchased as stated in (2) above
      3. Scheduled date of cancellation September 30, 2024
        • 9 -

3. Supplemental information

Status of production and sales

(1) Production

Six months ended

Six months ended

(Reference)

Fiscal year ended

September 30, 2022

September 30, 2023

March 31, 2023

(April 1, 2022 -

(April 1, 2023 -

(April 1, 2022 -

September 30, 2022)

September 30, 2023)

March 31, 2023)

Crude oil (kL)

297,110

546,545

751,616

(181,998)

(440,374)

(518,697)

E&P Business

Natural gas

246,826

255,876

523,998

(thousand m3)

(1,922)

(27,541)

(14,136)

Infrastructure/

LNG (t)

1,102

-

1,258

Utility Business Electricity

1,206,213

1,717,047

2,509,471

(thousand kWh)

Notes: 1. The figures in parentheses represent overseas production and are included in the total. 2. Part of the natural gas production volume is used as a feedstock for LNG.

- 10 -

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JAPEX - Japan Petroleum Exploration Co. Ltd. published this content on 10 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 14 November 2023 13:48:56 UTC.