7

Financial &Corporate Information

Message from the Senior Vice President,
Finance & Accounting Division

I would like to take this opportunity to provide an overview of
the Group’s business results, highlights and financial position for the year ended
March 31, 2014, as well as details of its investment plans and funding.
losses with respect to its statement of income. As a result,
INPEX has been successful in taking more advantage of thebenefits to accrue from the weak yen from both the balance
sheet and income statement perspectives while at the sametime securing high levels of profits.

Financial Position

Masahiro Murayama
Director, Senior Vice President, Finance & Accounting Division

Business Results for
the Year Ended March 31, 2014
Consolidated net sales for the year ended March 31, 2014,
amounted to ¥1,334.6 billion, an increase of 9.7% comparedwith the previous period. From a profit perspective, consolidated net income edged up 0.4% year on year to ¥183.7 billion. Although the absence of the one-off gain on transfer ofmining rights totaling around ¥50.0 billion recorded in the previous period and the 2.4% year-on-year downturn in crude oil
prices (ICE Brent) had an unfavorable effect on performance,these negative factors were more than offset by the positiveflow-on effect of ¥212.0 billion attributable to the downturnin the value of the Japanese yen and other factors including
production volume stability. As a result, INPEX reported anincrease in both revenue and earnings for the period underreview. As the year ended March 31, 2013, came to a close, thevalue of the yen declined substantially. Taking this fluctuation
in foreign currency exchange rates into account, the Company
reported a loss on its foreign currency denominated loans andforeign exchange loss as other expenses. In principle, INPEX
strives to maintain a basic balance between its foreign currency denominated assets and liabilities. Although the Company benefitted from an unrealized gain on foreign currency
denominated bonds, this item is not reflected in the statementof income thereby eliminating any offset with the aforementioned foreign exchange loss. However, this unrealized gain isrecorded as an unrealized holding gain on securities in the net
assets section of the balance sheet. The value of the yen continued to fall throughout the year ended March 31, 2014. As
the Company realizes the unrealized gains attributable to theweak yen through the redemption of foreign currency denominated bonds, the Company has steadily balanced its foreign
currency denominated assets and liabilities related profits and

080

INPEX CORPORATION Annual Report 2014

Consolidated total assets as of March 31, 2014, stood at¥4,038.1 billion, up ¥422.0 billion compared with the previous
period-end. This largely reflected the increase in tangible fixed
assets of ¥367.2 billion mainly due to development-related
investments in the Ichthys LNG Project. Total off-balance-sheet
assets on a 100% basis of the Ichthys downstream operating company, in which INPEX holds a 66.07% equity share,amounted to ¥1,309.8 billion as of March 31, 2014. The balance of net assets as of the end of the period under review
came in at ¥2,996.0 billion, up ¥325.1 billion compared withthe balance as of March 31, 2013. This included net income
for the period of ¥183.7 billion and an increase in translation
adjustments of ¥175.9 billion. The available cash on hand asof March 31, 2014, was ¥1,466.1 billion and mainly earmarked
for investment through to the year ending March 31, 2017,as prescribed under the Company’s Medium- to Long-Term
Vision. For the most part, investments are generally madein U.S. dollars. Accordingly, INPEX has entered into various
financial instruments including forward currency contracts withapproximately ¥1,200 billion of cash available on hand held inthis major currency.
Turning to the Company’s overall financial position, theequity ratio stood at 69.1% as of March 31, 2014, with net debt
Analysis of Factors Contributing to an Increase/
Decrease in Net Income(¥ billion)

Major factors:• Absence of the gain on transfer ofIchthys mining rights (minus factor)• Foreign exchange gain (plus factor)• Gain on sales of marketablesecurities (plus factor)+118.1

+10.3
-64.1

-26.6
-37.0

183.0

Major factors:• Decrease in sales volume (-¥60.5 billion)• Decrease in unit prices (-¥23.3 billion)• Exchange rate fluctuation(depreciation of the yen) (+¥212.0 billion)

Net income Increase in Increase in Decrease in
OtherYear ended
net sales
the cost
incomeexploration
March 31, 2013of sales expenses andandthe allowance expenses
for exploration

Other

183.7

Net income
Year ended
March 31, 2014

Notesto net total capital employed coming in at negative 31.9%.
These levels are well in excess of the Company’s long-term
financial targets of an equity ratio of 50% or more and a net
debt to net total capital employed ratio of 20% or less. Looking
ahead, INPEX will take all necessary steps to prepare for future
investments while maintaining a robust financial position.

Investment Plans and Funding
INPEX will continue to undertake exploration and development investments aimed at future growth in line with theinvestment target of ¥3.5 trillion, covering the five-year period
from the year ended March 31, 2013, to the year ending March
31, 2017, outlined under the Medium- to Long-Term Vision formulated in May 2012. Recently, the Company has witnessed a
prolonged decline in the value of the yen. Against this backdrop, INPEX has revised its medium- to long-term assumptionof the yen/U.S. dollar exchange rate from ¥80 in May 2012to ¥100. As a result, the amount of investment has fluctuatedupward on a yen basis. On a U.S. dollar basis, the total amountof investment remains essentially unchanged. To meet these
U.S. dollar–based investment requirements, the Company will
look to procure U.S. dollar funds through external loans including project finance, operating cash flows and available cashon hand. As stated above, the vast majority of available cashon hand is currently denominated in U.S. dollars, and this isconsidered sufficient to meet the Company’s exploration anddevelopment investment needs for the next three years. Taking
this factor into account, INPEX is not expected to incur additional funding as a result of the yen’s depreciation.

Three-Year Period Investment and Funding Plans(¥ billion)* EBIDAX = Net income + Minority interests + Deferred tax + (1– Tax rate)(Interest expense – Interest income) + Exchange
profit and loss + Depreciation and amortization + Amortizationof goodwill + Recovery of recoverable accounts under production
sharing (capital expenditures) + Exploration expenses + Provision
for exploration projects + Provision for allowance for recoverable
accounts under production sharing* Net assets excluding minority interests = Net assets – Minority
interests* Equity ratio = Net assets excluding minority interests / Total assets* Net debt = Interest-bearing debt – Cash and cash equivalents– Time deposits – Certificate of deposits – Public bonds and corporate bonds and other debt securities with determinable value– Long-term time deposits* Net debt / Net total capital employed = Net debt / (Net assets +Net debt)* D/E ratio = Interest-bearing debt / (Net assets – Minority interests)* ROE = Net income / Average of net assets excluding minority
interests at the beginning and end of the year
* Net ROACE = (Net income + Minority interests + (Interest
expense – Interest income) (1 – Tax rate)) / Average of sum of
net assets and net debt at the beginning and end of the year
* The reserves cover most of INPEX group projects including theequity-method affiliates. The reserves from March 31, 2007 to
March 31 2010 were evaluated by DeGolyer & MacNaughton, andfrom March 31, 2011, the reserves of projects which are expected
to be invested a large amount and affect the Group’s future resultmaterially are evaluated by DeGolyer & MacNaughton, and theothers are done internally.
The proved reserves are evaluated in accordance with SEC
regulations.
The probable reserves are sum of proved reserves and probablereserves evaluated in accordance with SPE/WPC/AAPG/SPEE
guideline Petroleum Resources Management System 2007(PRMS)
approved in March 2007 after deduction of proved reserves evaluated in accordance with SEC regulations. The probable reserves
include reserves of bitumen. Probable reserves as of March 31,
2007 are evaluated in accordance with the guideline establishedby SPE and WPC (1997 SPE/WPC).
Possible reserves are evaluated in accordance with PRMS. Possible reserves also include reserves of bitumen.
* Production volumes are calculated in accordance with SEC regulations and include the equity-method affiliates. The production
volume of crude oil and natural gas under the production sharing
contracts entered into by the Group corresponds to the net economic take of the Group.
Calculation of the conversion factor from gas to oil equivalent wasaltered from the year ended March 31, 2012.

■Development* ■Exploration ■Other Capital Expenditures**1,125.0

794.0
650.0
990.0

• Cash available on hand(¥1,466.1 billion)• Yearly operating cash flow
(Pre-exploration investment)

682.0
576.0

91.0

30.0

21.0

55.0
19.0

2015

2016

2017

(Project finance, etc.,
signed in December 2012 for
the Ichthys LNG Project)*Ichthys downstream business included in development expenditures**Investments mainly in the Naoetsu LNG Terminal and pipeline-related facilities in JapanINPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

105.0• External loans

Notes: 1 INPEX Holdings Inc. was established on April 3, 2006
through a stock transfer between INPEX CORPORATION
and Teikoku Oil Co., Ltd. and merged with these subsidiaries and changed the corporate name to INPEX CORPORATION on October 1, 2008.
2 INPEX Corporation settles accounts in March; Teikoku OilCo., Ltd. settled accounts in December up to the period
ended December 31, 2005.
3 Due to a change of the accounting period, amounts ofconsolidated financial statement of Teikoku Oil Co., Ltd.
of the period ended March 31, 2006 reflect the threemonth period from January 1, 2006 to March 31, 2006.
Per share data and Financial indicators for the period are
not listed here.
4 In consolidated financial statements of INPEX Corporation and Teikoku Oil Co., Ltd. announced for the periods
ended on or before March 31, 2006, amounts of less than
1 million yen are rounded down, while amounts are basically rounded to the nearest million.

081

12-Year Financial Information
Fig ure s give n for t he year s e n d e d o n or b efore Marc h 31, 20 0 6 re p re s e nt INPE X C or p or atio n an d it s
subsidiaries/Teikoku Oil Co., Ltd. and its subsidiaries; figures given for the years ended on or after March 31,
2007 represent INPEX Corporation (post integration) and its subsidiaries.
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a mat ter ofarithmetic computation only, at ¥102.92=US$1.00, the approximate exchange rate in effect as of March 31, 2014.

Millions of yen

As of or years ended March 31,(Results of operations)
Net sales
Cost of sales
Gross profit
Operating income
Income before income taxes andminority interests
Net income

2003/3
2002/12

2004/3
2003/12

2005/3
2004/12

2006/3
2005/12
2006/3

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥ 201,533
73,63095,99744,931
105,536
28,69997,2707,296
70,0507,491
27,911¥
5,233¥ 218,831
78,498105,758
47,062
113,072
31,436
93,876
8,739
94,773
11,04434,781¥
6,796¥ 478,586
84,032
197,094
48,455
281,492
35,576
268,662
13,533
258,631
16,67676,493¥9,276¥ 704,234
100,716
27,718257,903
55,47312,807446,330
45,243
14,910426,650
21,077
9,470
403,539
26,122
10,216
103,476¥ 15,485¥ 6,484

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥ 119,076
47,58529,869110,416
3,885
796
185,91445,188
338,747
203,986
27,27523,88257,007
41,342
254,463¥ 138,760¥ 106,952
50,16635,141
103,668
137,908754
245,295
71,691
525,298
226,280
28,894
20,661
185,410
46,101
310,991¥ 159,516¥ 238,419
45,65868,260114,220
138,631776
333,915
79,858779,227
240,513
122,91027,439209,738
44,986446,578¥ 168,086¥ 257,573
58,58665,86465,219125,418
126,497
136,757
811
1,028
512,887
108,949
115,268
972,437
293,767
308,659
179,600
28,99828,156250,236
65,23072,927542,600¥199,536¥207,574(Financial position)
Current assets
Tangible fixed assets
Intangible assets
Investments and other assets
Total assets
Current liabilities
Long-term liabilities
Net assets** The amount of Net assets as of the years ended on or before March 31, 2006 is retroactively adjusted in accordance with "Accounting Standard for Presentation of Net Assets in
Balance Sheet" (ASBJ Statement No.5).

(Cash flows)
Cash flows from operating
activities
Cash flows from investing
activities
Cash flows from financing
activities
Cash and cash equivalents at endof the year

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil¥¥

51,282
15,004(40,533)(27,166)
21,237(407)
78,41423,020¥44,464
19,955(218,121)(8,284)
151,120(5,914)54,582¥ 28,789¥ 131,206
19,225(119,956)(20,018)
9,791(5,824)
128,375¥ 22,234¥ 218,239
15,1189,872(252,399)(20,287)(4,705)
14,3507,845
5,480
114,967¥ 25,545¥ 36,175¥157,275.33*1
512.183,333*1
6.00
19,612.92*1¥
22.09¥214,163.98
543.624,000
7.50
40,255.92¥
30.22¥ 262,966.53—
646.905,500—
9.00
53,814.47¥—¥ 50.61(Per share data)
Net assets per share (Yen)
Cash dividends per share (Yen)
Earnings per share (EPS) (Yen)INPEX ¥143,389.73*1
Teikoku Oil
444.90
INPEX
3,333*1
Teikoku Oil
6.00
INPEX
15,726.17*1
Teikoku Oil ¥17.11*1 Retroactively adjusted for a three-for-one stock split in May 2004.
*2 Retroactively adjusted for a stock split at a ratio of 1:400 of common stock on October 1, 2013.

(Financial indicators)
Net debt / Net total capital
employed (%)
Equity ratio (%)
D/E ratio (%)

082

INPEX CORPORATION Annual Report 2014

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil(75.8)%
(2.3)
74.9
66.6
18.5
18.8%

12.0%
(9.1)
52.9
69.1
60.9
13.9%

(13.3)%
(5.5)
52.8
69.0
43.2
10.8%

(19.6)%
(1.0)

—

51.9
67.1
14.7%

—

43.6

—%

Thousands of
U.S. dollars

Millions of yen

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2014/3

943,080¥ 1,186,732¥ 1,216,533¥ 1,334,626$12,967,606

INPEX

¥

¥

969,713 ¥ 1,202,965¥ 1,076,165 ¥840,427¥

343,795

390,554

319,038

298,168

334,833

395,443426,326

490,417

4,765,031

625,918

812,411757,127542,259

608,247

791,289

790,207844,2098,202,575

559,077

714,211663,267

461,668

529,743

709,358

693,448

733,610

7,127,963

586,263

685,800

616,167

442,027

508,587

767,039

718,146

750,078

7,287,971

183,691$ 1,784,794

165,092¥

173,246¥

145,063¥

107,210¥

182,962¥

128,699¥

194,001¥

492,932¥

908,702¥ 1,106,504¥ 1,140,204$11,078,546

INPEX

¥

474,124¥565,111¥411,110¥492,855¥

219,227

254,481

297,636

358,094

379,862

383,698584,541

951,779

9,247,756

265,822265,481

253,681239,205

249,111233,318

380,156

439,179

4,267,188

648,934

722,828805,618

923,624

1,558,475

1,540,680

1,544,958

1,506,977

14,642,217

1,608,107

1,807,901

1,768,045

2,013,778

2,680,380

3,066,398

3,616,159

4,038,139

39,235,707

266,248

325,286

206,059

227,905

254,729

367,844414,977375,670

3,650,116

261,843

243,802

199,925

295,270

328,268

384,361

530,198

666,432

6,475,243¥ 1,080,016¥ 1,238,813¥ 1,362,061¥ 1,490,603¥ 2,097,383¥ 2,314,193¥ 2,670,984¥ 2,996,037$29,110,348

¥

¥

¥

213,514$ 2,074,563

INPEX

¥

¥

231,982¥363,995¥

230,352¥

241,373¥274,094

320,692

252,347(209,243)(261,767)(240,168)(251,812)(844,511)(280,864)(489,870)(395,555)(3,843,325)

13,794(45,228)(46,090)

68,937548,057

29,294137,069

48,961

475,719

189,417 ¥

222,270 ¥

162,845 ¥

216,395 ¥

182,025

117,531$ 1,141,965¥

249,233¥

199,859

¥

INPEX
2

¥1,091.17*

2¥1,227.92*

2¥1,350.25*

2¥1,473.87*¥1,367.40*2¥1,492.27*2¥1,699.10*2¥1,911.25*2

17.50*2

18.75*2

20.00*2

13.75*2

15.00*2

17.50*2

17.50*2

18.00*2¥ 176.06*2¥ 183.78*2¥ 154.00*2¥ 113.88*2¥ 102.08*2¥ 132.84*2¥ 125.29*2¥ 125.78*2$

18.57*2
0.17*2$

1.22*2(18.6)%(36.1)%(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%(31.9)%(31.9)%

64.0

64.0

71.9

68.9

74.5

71.1

68.6

69.1

69.1

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

20.9%

20.9%

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

INPEX

7

083

Background Information
Oil and Gas Accounting Policies and Treatment
ACCOUNTING METHODS FOR TYPES OF AGREEMENTS
The oil and gas business generates the bulk of consolidated net

on the above PSC-related considerations is as follows:sales revenues for INPEX CORPORATION and its consolidated
subsidiaries (the “Group”). Two types of agreements govern• The Group records as net sales its share of total sales

the Group’s oil and gas operations. One is production sharing

relating to the oil and gas production that is allocated tocontracts (the “PSCs”) and the other is concession agreements.
The latter category also includes domestic mining rights, as well
as overseas permits, licenses and lease agreements.

contractors under the PSCs.
• The Group books as cost of sales the portion of “Recoverable
accounts under produc tion sharing” that is recovered
through the allocation of its share of the “cost recovery

1. Production sharing contracts
Production sharing contract is an agreement by which one
or sever al oil and gas development companies ser ve ascontractors that undertake at their own expense exploration anddevelopment work on behalf of the governments of oil-producing
countries or national oil companies and receive production fromthe projects as cost recovery and compensation.

Cost recovery and production sharing
The PSCs determine the allocation of oil and gas production
among the host country’s government (or related entity) and thecontractors such as the Group. The allocation formula generally
dif fers according to the terms of the individual PSC. The
overview below is specific to one type of PSC typical of many oil
and gas projects in Indonesia, a country with which the Grouphas concluded numerous PSCs.
Under this type of arrangement, the total production in any
given year or other accounting period is allocated at the end of
the period between three portions.

(1) “First tranche petroleum”: This is a prescribed portionof total production allocated between the host country’s
g ove r n m e nt a n d t he co nt r ac to r s i n li ne w i t h ag re e dpercentages.
(2) “Cost recovery portion”: This is the oil and gas equivalentof a) non-capital production-related expenditures incurred inthat period, plus b) the scheduled depreciation expenses inthat period for capital expenditures, as calculated under the
PSC. The equivalents are determined based on the current
unit prices of crude oil and natural gas and allocated between
the contractors alone. The quantity of oil and gas in the “costrecovery portion” decreases as unit prices increase, whereasthat of the “equity portion” (explained below) rises.
If the actual production for the period is insufficient tocover the quantity of oil and gas equivalent calculated forthe cost recover y por tion, the latter is capped at actual
production and any surplus amount is carried forward to thefollowing period, as stipulated in the PSC.
(3) “Equity portion”: This is any residual production that is left
after the first two portions have been allocated. It is allocatedbetween the host country’s government and the contractors
based on agreed percentages.
The calculation of items in the income statement based

084

INPEX CORPORATION Annual Report 2014

portion.”Recoverable costs under the PSCs
Exploration costs
The share of recoverable exploration costs incurred by theGroup under the terms of the relevant PSC is capitalized within”Recoverable accounts under production sharing.”
Development costs
The share of all development costs incurred by the Group thatis recoverable under the terms of the relevant PSC is recorded
within “Recoverable accounts under production sharing.”
Production costs
Any operating costs incurred during the production phase thatare recoverable under the relevant PSC are initially recorded
within “Recoverable accounts under production sharing.”
Administrative expenses
Any administrative expenses that are recoverable under the
relevant PSC are recorded within “Recoverable accounts under
production sharing.”
Interest on loans
Any interest expense that is recoverable under the relevant PSC
is recorded within “Recoverable accounts under production
sharing.”
As discussed above, in “Cost recover y and produc tion
sharing,” these costs are recovered either as capital or operating
expenditures.

Non-recoverable costs under the PSCs
Acquisition costs
Costs relating to the acquisition of rights (recorded as intangible
assets under “Exploration and development rights”) for any
projects governed by the PSCs that are entirely in the exploration
phase are expensed as incurred and amortized. Expenditures
or costs relating to the acquisition of rights to projects alreadyin the development or production phase are capitalized within“Exploration and development rights” and amortized based on
the unit-of-production method. These amortization costs arerecorded within “Depreciation and amortization.” Cost recovery
provisions in the PSCs do not generally cover these expenditures.

2. Concession agreements

Exploration costs
The Group’s share of exploration costs is expensed as incurred.

Conces sion agreement is an agreement or authorization

disposition of the oil and gas it extracts. Revenues are returned

Development costs
T he Group’s s hare of any develop ment cos t s related tomining facilities is capitalized within tangible fixed assets. The
depreciation of tangible fixed assets that are governed byconcession agreements is computed primarily using the unitof-production method for mining assets located outside Japanand the straight-line method for domestic facilities. Theseto the host country in the form of royalties, taxes, etc., on sales.

depreciation expenses are recorded within the cost of sales.

(including mining rights awarded in Japan, as well as overseas
permits, licenses and lease agreements) by which a government
entity or a national oil company of the country directly awards
mining rights to an oil company. The oil company makes its own
investment in exploration and development and has the right ofAcquisition costs
Costs relating to the acquisition of rights (recorded as intangible
as s et s under “Mining r ight s”) for projec t s gover ne d byconcession agreements are treated in the same way as projects
governed by the PSCs, as described above.

Production sharing contracts
Costs

Exploration
costs

Development
costsStatement of
IncomeProject under
exploration phase

Provision for allowance
for recoverable
accounts under
production sharing

Production costs(Operating costs)

Project underdevelopment andproduction phase
Recoverable
accounts under
production sharing
Project underdevelopment andproduction phase

Acquisition
costs

Exploration anddevelopment
rightsAdministrative expenses
The Group’s share of administrative expenses is expensed as
incurred.

Concession agreements

Assets on
Balance Sheet

Recoverable
accounts under
production sharing

Production costs
The Group’s share of operating costs that are incurred during the
production phase is recorded within the cost of sales.

Costs

Assets on
Balance Sheet

Statement of
IncomeExplorationcosts

All exploration costs
are expensed
as incurred

Exploration
expenses

Cost of sales(Recovery of recoverable
accounts under
production sharing(capital expenditures))

Cost of sales(Recovery of recoverable
accounts under
production sharing(operating expenditures))

Selling, general andadministrative expenses(Depreciation andamortization)
Other expenses(Amortization of
exploration anddevelopment rights)

Cost of sales(Depreciation andamortization)

Development
costs

Tangible fixed

Production costs(Operating costs)

All production costs
are expensed
as incurred

Cost of sales(Operating expenses)

Acquisition
costs

Mining rights

Cost of sales(Depreciation andamortization)assetsCRITICAL ACCOUNTING POLICIES AND ESTIMATESThe Group’s consolidated financial statements are preparedrational changes to such estimates could exert a material impact

in conformity with Japanese GAAP. The preparation of theseon the financial condition or operating results. Critical accounting

financial statements requires the application of estimates,

policies and estimates relating to the financial presentation are

judgments and assumptions that affect the reported values ofoutlined below.

reporting period. Actual results may differ from the previously— Allowance for recoverable accounts under
production sharing

estimated or assumed values.

Any expenditures made during the exploration, development

well as the reported amounts of revenues and expenses for the

Accounting estimates pursuant to the preparation of theand production phases of projects governed by the PSCs areconsolidated financial statements are deemed critical if thecapitalized within “Recoverable accounts under production

degree of uncertainty associated with such estimates is high, or if

sharing” if they are recoverable under the relevant PSC. A

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

assets and liabilities at the date of the financial statements, as

7085

reserve equal to exploration costs is recorded within “Allowancestage based on a schedule of investments in exploration.

for recoverable accounts under production sharing“ to provide

Although the Group believes that assessments relating to thefor potential losses from unsuccessful exploration. This reserve

schedule of investments are reasonable, changes to the schedule

typically remains unchanged on the balance sheet until it exceeds

could significantly affect future operating results.

the residual balance of exploration costs that previously had
been capitalized within “Recoverable accounts under production
sharing“ during the exploration phase. Reflecting the uncertainty
associated with oil and gas projects, a reserve is recorded within— Provision for loss on businessA provision for loss on business is provided for future potential
loss on crude oil and natural gas development, production and“Allowance for recoverable accounts under production sharing“

sales business individually estimated for each project. Although

to provide for probable losses on development activities, asassessments and accounting estimates are made on a reasonable

individually estimated for each project. Although assessments

basis, actual operating results can change depending on theand accounting estimates are made on a reasonable basis, actual

business status.

operating results can change depending on the project status.

— Unit-of-production method
Overseas mining facilities, mining rights and exploration anddevelopment rights that are acquired during the development
and production phase are mainly depreciated or amortizedbased on the unit-of-production method. This approach requires
the estimation of reserves. Although the Group believes thatthe assessment of reserves is done in an appropriate manner,
any changes in these estimates could significantly affect future
operating results.

— Asset retirement obligations
Asset retirement obligations are recorded by a reasonableestimate of retirement costs incurred upon termination of theoperation with respect to oil and gas production facilities in casethat the Group is obliged to retire such facilities by oil and gas
contracts or laws and regulations within the countries in which
the Group operates or has working interests. Although the Group
believes that such estimates of the present value of retirement
costs are reasonable, changes to estimates of the present valueof retirement costs could significantly affect future operating
results.

— Allowance for investments in exploration companies
A reser ve is recorded to provide for probable los ses oninvestments made by the Group in entities engaged in oil andgas activities, as estimated based on the net assets of such
entities. Although the Group believes that the assessments andestimates relating to such investments are reasonable, changes
in actual production volumes, prices or foreign exchange rates
could significantly affect future operating results.

— Provision for exploration projects
A provision for exploration projec ts is provided for future
expenditures of consolidated subsidiaries at the exploration

086

INPEX CORPORATION Annual Report 2014

— Deferred tax assets
Deferred tax assets reflect temporary differences (including net
operating loss carry-forwards) arising mainly from the writedown of exploration expenditures, foreign taxes payable andexcess of tax allowable depreciation. Valuation allowances areprovided once it is judged that the non-realization of deferred
tax assets has become the more probable outcome. The effectof foreign tax credits is taken into account in the calculation ofsuch valuation allowances. The realization of deferred tax assets
is principally dependent on the generation of sufficient taxable
income, based on the available information. Adjustments todeferred tax assets could be required if future taxable income
was lower than expected due to market conditions, foreignexchange rate fluctuations or poor operating performance.

— Retirement benefits to employees
Retirement benefit obligation to employees are recognized at
the net present value of future obligations as of the end of theaccounting period, taking into account any periodic benefit costs
that have arisen during the period. The calculation of retirement
benefit obligations and retirement benefit expenses is basedon various actuarial assumptions, including the discount rate,
employee turnover and retirement rates, remuneration growth
rates, and the long-term expected return on plan assets. Future
operating results could be significantly affected by deviation
between the base assumptions and actual results or the revisionof such assumptions which were to generate actuarial gains orlosses.

— Goodwill
The excess cost over underlying net assets excluding minority
interests as fair value as of their dates of acquisition is accounted
for as goodwill and amortized over 20 years on a straight-line
method.

Managementʼs Discussion and Analysis of Financial
Condition and Results of Operations
BUSINESS ENVIRONMENT
During the year ended March 31, 2014, the Japanese economy
followed a gradual recovery trend, such as a pickup in consumer
spending and productive activity and improvement of low
employment, owing to the Government’s economic policy andBank of Japan’s monetary easing.
Under such business environment, Brent crude oil price,a t ypical indicator of international crude oil prices whichsignificantly affect the Group’s business, started the year ended
March 31, 2014, at US$111.08 per barrel. Although Brent crude oil
price fell to US$97.69 per barrel at one point due to stagnationin economic indicators in the U.S., the upward trend began
and rose to US$116.61 per barrel in late August, following thegrowing tension in Syria.
After mid-September, however, when military intervention
in Syria was avoided, Brent crude oil price grew weaker anddropped to US$103.46 per barrel in early November. Afterward,
against a background of the expectation of crude demand due tosuspension of crude oil production in some oilfields in Libya andimprovement in economic indicators in countries, the upward
trend began again and remained at US$110 per barrel level in
December.
Since the beginning of the year 2014, Brent crude oil pricesomewhat moved and finished at US$107.76 per barrel at the endof the year ended March 31, 2014.
Meanwhile, crude oil and petroleum product prices in thedomestic market changed correlating with the international
crude oil prices. Reflecting these circumstances, the averagesales price for crude oil for the year ended March 31, 2014 for
the Group was US$107.78 per barrel, which is US$2.33 lower thanthat for the year ended March 31, 2013.
The foreign exchange market, another important factor
that affects the business of the Group, began the year ended
March 31, 2014, with the yen trading at around ¥94 to the U.S.
dollar. The depreciation of the yen against the U.S. dollar steadily
continued to the ¥103 level in mid-May while the Policy Boardof the Bank of Japan decided to introduce the “quantitative andqualitative monetary easing” above market expectations at theMonetary Policy Meeting held in April.
When Chairman Bernanke of Federal Reserve Board implied
FRB would downscale its quantitative monetary easing, the yen
recovered to the ¥93 level due to the movement to avoid risky
assets. However, yen selling turned out dominant again after
interest rate of the U.S. rose and sideways movement continued
for a while after that.
In the face of U.S. economic recovery after November aswell as FOMC (Federal Open Market Committee) decision to
downscale the quantitative monetary easing in December, theyen depreciated against the U.S. dollar gradually to the ¥105.40
level.
Although the yen once appreciated to the ¥100 level as
investors avoided risky assets with concern over emerging
economies from the beginning of 2014, TTM closed at ¥102.92
to the U.S. dollar which turned out to be ¥8.93 lower than that on
March 31, 2013.
Reflecting these situations, the average sales exchange rate
for the Group for the year ended March 31, 2014, was ¥100.20 to
the U.S. dollar, which is ¥17.52 lower than that for the year ended
March 31, 2013.

PERFORMANCE OVERVIEW
Net sales

Net sales■Crude oil sales ■Natural gas sales ■Other sales(¥billion)
1,500

1,334.6
1,200

1,186.7

1,216.5

2012

2013

7

1,076.2
943.1

900

840.4

600

300

0

2009

2010

2011

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

Consolidated net sales for the year ended March 31, 2014,
increased by ¥118.1 billion, or 9.7%, to ¥1,334.6 billion from
¥1,216.5 billion for the year ended March 31, 2013, due to thepositive effect of the depreciation of the yen against the U.S.
dollar, despite decreases in the sales price and sales volume ofcrude oil.
Compared with the year ended March 31, 2013, net salesof crude oil increased by ¥70.6 billion, or 9.0%, to ¥858.8 billion
from ¥788.1 billion, and net sales of natural gas increased by¥57.6 billion, or 14.5%, to ¥455.4 billion from ¥397.8 billion.
Crude oil sales volume decreased by 7,018 thousandbarrels, or 8.1%, to 79,171 thousand barrels compared with theyear ended March 31, 2013. This was mainly due to the decline
in production in the Van Gogh Oil Field and the Kitan Oil Field.
The sales volume of natural gas increased by 8 billion cubicfeet (Bcf), or 2.6%, to 327 Bcf compared with the year ended
March 31, 2013. Of this, the sales volume of overseas natural gas
increased by 7 Bcf, or 2.6%, to 260 Bcf compared with the year
ended March 31, 2013, mainly due to an increase in sales volume
in Americas region. The sales volume of domestic natural gas
increased by 45 million m3, or 2.6%, to 1,798 million m3 (equivalent
to 67 Bcf) compared with the year ended March 31, 2013. The
average sales price of overseas crude oil was US$107.78 per barrel,a decrease of US$2.33, or 2.1%, compared with the year ended
March 31, 2013. The average sales price of overseas natural
gas was US$13.09 per thousand cubic feet (Mcf), a decrease of
US$0.34, or 2.5%, compared with the year ended March 31, 2013.
The average sales price of domestic natural gas was ¥50.31 per
m3, an increase of ¥3.29 per m3, or 7.0%, compared with the year
ended March 31, 2013.
The increase of ¥118.1 billion in net sales was mainly derived
from the following factors: regarding net sales of crude oil andnatural gas, a decrease in sales volume pushing sales down of087

(Millions of yen, %)Years ended March 31,

Net sales
Crude oil
Natural gas
Other
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Other
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests
Net income¥60.5 billion, a decrease in unit sales price pushing sales down of¥23.3 billion, and the depreciation of the yen against the U.S. dollar
contributing ¥212.0 billion to the increase, in addition, a decreasein net sales excluding crude oil and natural gas of ¥10.2 billion.

Cost of sales
Cost of sales for the year ended March 31, 2014, increased by¥64.1 billion, or 15.0%, to ¥490.4 billion from ¥426.3 billion
for the year ended March 31, 2013. This was mainly due to thedepreciation of the yen against the U.S. dollar.

2013

2014

ChangeRatio¥1,216,533
788,135
397,766
30,632426,326
790,207
20,12553,73422,900693,448
98,666
8,735
7,832
40
82,05973,968
1,518
1,042
15,131
12,45230,056
13,769718,146529,275
188,871
5,909¥ 182,962¥1,334,626
858,754455,414
20,458490,417844,20928,20657,34525,048733,61050,735
17,462
9,228
10,32013,72534,267
2,335
5,054
8,028
1,165
4,280
13,405750,078
563,137
186,941
3,250¥ 183,691¥118,093
70,61957,648(10,174)
64,09154,002
8,081
3,611
2,148
40,162(47,931)
8,727
1,396
10,280(68,334)(39,701)817
4,012(7,103)(11,287)(25,776)(364)
31,93233,862(1,930)(2,659)
¥
729

9.7%
9.0
14.5
(33.2)
15.0
6.8
40.2
6.7
9.4
5.8
(48.6)
99.9
17.8—(83.3)(53.7)
53.8
385.0(46.9)(90.6)(85.8)
(2.6)
4.4
6.4
(1.0)
(45.0)
0.4%

increased exploration activities in Japan and the Middle East &Africa region.

Selling, general and administrative expenses
Selling, general and administrative expenses for the year ended
March 31, 2014, increased by ¥3.6 billion, or 6.7%, to ¥57.3
billion from ¥53.7 billion for the year ended March 31, 2013. Thiswas mainly due to increases in transport costs and personnel
expenses.

Depreciation and amortization
Exploration expenses
Exploration expenses for the year ended March 31, 2014,
increased by ¥8.1 billion, or 40.2%, to ¥28.2 billion from ¥20.1
billion for the year ended March 31, 2013. This was mainly due toDepreciation and amortization for the year ended March 31,
2014, increased by ¥2.1 billion, or 9.4%, to ¥25.0 billion from
¥22.9 billion for the year ended March 31, 2013. This was mainly
due to an increase in the depreciation of exploration andCost of sales

Operating income(¥billion)(¥billion)

490.4

500

800

426.3

663.3

395.4

400

319.0
300

600

709.4

693.4

2012

2013

733.6

529.7

334.8
298.2

461.7
400

200
200

100

0

0

2009

088

2010

2011

INPEX CORPORATION Annual Report 2014

2012

2013

2014

2009

2010

2011

2014

development rights for the ACG Oil Fields. The Group records
depreciation costs for production facilities that are covered byconcession agreements as cost of sales. In addition, under its
accounting treatment of the PSCs, the Group records capital
expenditures as “Recoverable accounts under produc tion
sharing” instead of capitalizing these costs within tangible fixed
assets and depreciating them. Costs that are recovered in any
given year based on the terms of the PSCs are included in thecost of sales.

year ended March 31, 2013. This was mainly due to decreases inprovision for exploration projects and in foreign exchange loss.

Income taxes

As a result of the above, operating income for the year ended
March 31, 2014, increased by ¥40.2 billion, or 5.8%, to ¥733.6
billion from ¥693.4 billion for the year ended March 31, 2013.

Total current income taxes and deferred income taxes for theyear ended March 31, 2014, increased by ¥33.9 billion, or 6.4%,
to ¥563.1 billion from ¥529.3 billion for the year ended March 31,
2013. The Group pays the majority of its taxes outside Japan. In
addition to the high corporate tax rates imposed in a numberof regions, the Group is generally unable to deduct expenses
incurred in Japan for such taxes. Despite the positive effects
attributable to the application of the foreign tax credit system,
this situation resulted in a high effective income tax rate of 75.1%
in the year under review.

Other income

Minority interests

Other income for the year ended March 31, 2014, decreased by¥47.9 billion, or 48.6%, to ¥50.7 billion from ¥98.7 billion for theyear ended March 31, 2013. This was mainly due to a decrease ingain on transfer of mining, despite an increase in gain on sales ofmarketable securities.

Minority interests for the year ended March 31, 2014, decreasedby ¥2.7 billion, or 45.0%, to ¥3.3 billion from ¥5.9 billion for theyear ended March 31, 2013.

Operating income

Other expenses
Other expenses for the year ended March 31, 2014, decreased by¥39.7 billion, or 53.7%, to ¥34.3 billion from ¥74.0 billion for the

Net income
As a result of the above, net income for the year ended March
31, 2014, increased by ¥0.7 billion, or 0.4%, to ¥183.7 billion from
¥183.0 billion for the year ended March 31, 2013.

FINANCIAL POSITION
Total assets as of March 31, 2014, increased by ¥422.0 billion,or 11.7%, to ¥4,038.1 billion from ¥3,616.2 billion as of March
31, 2013. Current assets increased by ¥33.7 billion, or 3.0%, to¥1,140.2 billion from ¥1,106.5 billion due to an increase in time
deposits and others. Fixed assets increased by ¥388.3 billion,or 15.5%, to ¥2,897.9 billion from ¥2,509.7 billion as of March 31,
2013, due to increases in construction in progress, recoverable
accounts under production sharing, long-term time deposits andothers.
Meanwhile, total liabilities increased by ¥96.9 billion, or
10.3%, to ¥1,042.1 billion from ¥945.2 billion as of March 31,
2013. Current liabilities decreased by ¥39.3 billion, or 9.5%,
to ¥375.7 billion from ¥415.0 billion as of March 31, 2013, due
to a decrease in income taxes payable and others. Long-term

liabilities increased by ¥136.2 billion, or 25.7%, to ¥666.4 billion
from ¥530.2 billion as of March 31, 2013, due to an increase inlong-term debt and others.
Net as set s increased by ¥325.1 billion, or 12.2%, to¥2,996.0 billion from ¥2,671.0 billion as of March 31, 2013. Total
shareholders’ equity increased by ¥157.8 billion, or 6.7%, to¥2,497.7 billion from ¥2,340.0 billion as of March 31, 2013. Total
accumulated other comprehensive income increased by ¥152.0
billion to ¥293.4 billion from ¥141.3 billion as of March 31, 2013,and minority interests increased by ¥15.2 billion, or 8.0%, to¥204.9 billion from ¥189.7 billion as of March 31, 2013.

Net income

Total assets(¥billion)(¥billion)

200

150

194.0

183.0

183.7

4,500

4,038.1

4,000
3,500

145.1

3,066.4

3,000

107.2

2,680.4

2,500

100

2,000

1,768.0

2,013.8

1,500
50

1,000
500

0

0

2009

2010

2011

2012

2013

2014

2009

2010

2011

2012

2013

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

128.7

7

3,616.2089

INVESTMENT AND FUNDING— Investments in upstream oil and gas projects
Continuous exploration for new reserves of crude oil and natural
gas is essential for stable earnings of the Group. The informationin this section on upstream oil and gas investments is based on
the data reported by project operators relating to exploration
ex penditures, development ex penditures and oper ating
expenses. The Group’s expenditure categories are defined asfollows:• Exploration expenditures include the costs of exploratory
drilling and any geological or geophysical studies. The
costs of local personnel and office operations and related
administrative expenses are also included in this category if
a project (or contract area) is in the exploration phase.
• Development expenditures include the costs of development
drilling and any production facilities.
• Operating expenses include the costs of well operations,maintenance and the supervision of production activities.
This category also includes the administrative expenses forthe project (or contract area) if it contains a field in active
production and/or development.

• Discrepancies exist between the standards stipulated in
U.S. FASB Accounting Standards Codification Topic 932,
“Extractive Industries—Oil and Gas (Topic 932),” and boththe Group’s definitions of exploration and development
expenditures and the standards used in preparing thefollowing tables. The following is a par tial list of thediscrepancies between the Group’s accounting policies andTopic 932.
- Group expenditures relating to the PSC-governed joint
ventures where the Group is not the operator are disclosed
on a cash basis rather than an accrual basis as required by
Topic 932.
- The tables below have been prepared based on the costdefinitions used by operators in their reporting, which may
not be consistent with Topic 932.
- Topic 932 requires that administrative costs not directly
related to exploration and development ac tivities be
excluded from exploration and development expenditures,
whereas such administrative costs are not necessarily
excluded from those expenditures under the Group’s
accounting policies.

The table below shows the Group’s exploration and development costs and other expenditures (excluding capitalized interest costs
and asset retirement costs corresponding to asset retirement obligations capitalized under fixed assets) by segment for the years
ended March 31, 2013 and 2014.
(Millions of yen)

Year ended March 31, 2013

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥
62
Development
2,145
2,207
Subtotal* 1
Equity-method Affiliates
Exploration—
Development—
Subtotal—
22,324
Other capital expenditures* 2
Total* 3¥24,531

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 32,599
198,700
231,299¥ 231
52,16352,394¥12,515
29,51542,030¥ 8,577
11,964
20,541¥ 53,984
294,487
348,471—397
397
282,374¥514,070————¥52,394

8
298
306
79
¥42,415

—
878
878
13
¥21,432

8
1,573
1,581
304,790¥654,842*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic pipelines for sales of natural gas and the Naoetsu LNG Terminal, and the Group’s shareof investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method affiliate).
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2013, was ¥2,708 million.

(Millions of yen)

Year ended March 31, 2014

Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥ 3,384
Development
1,071
4,455
Subtotal* 1
Equity-method Affiliates
Exploration—
Development—
Subtotal—
37,036
Other capital expenditures* 2
Total* 3¥41,491

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 36,689
338,123
374,812¥107
58,80458,911¥16,590
50,041
66,631¥14,232
18,601
32,833¥ 71,002
466,640
537,642

—
1,517
1,517
388,271¥764,600

194
—
194
—
¥59,105

105
11,791
11,896—¥78,527

—
1,198
1,198
—
¥34,031299
14,506
14,805425,307¥977,754*1 Figures include an equity-method affiliate of Japan Oil Development Co., Ltd. (JODCO).
*2 Other capital expenditures include the construction costs of domestic pipelines for sales of natural gas and the Naoetsu LNG Terminal, and the Group’s shareof investment in the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method affiliate).
*3 The amount capitalized for the asset retirement costs corresponding to asset retirement obligations for the year ended March 31, 2014, was ¥10,651 million.

090

INPEX CORPORATION Annual Report 2014

Total investments for the year ended March 31, 2014, increased by ¥322.9 billion, or 49.3%, to ¥977.8 billion (including ¥14.8 billion for
exploration and development by equity-method affiliates) from ¥654.8 billion for the year ended March 31, 2013. This was mainly due to anincrease in development expenditures for the Ichthys Project (including the downstream business) and WA-44-L (the Prelude FLNG Project) in
the Asia & Oceania region.
The table below shows the Group’s operating expenses by segment for the years ended March 31, 2013 and 2014.
(Millions of yen, %)Years ended March 31,

2014

2013

INPEX CORPORATION and Consolidated SubsidiariesJapan¥ 9,491
Asia & Oceania
63,851
Eurasia (Europe & NIS)
7,152
Middle East & Africa
23,055
Americas868
Subtotal
104,417Equity-method Affiliates
Asia & Oceania
525
Eurasia (Europe & NIS)—
Middle East & Africa
1,724
Americas
1,746
Subtotal
3,995
Total
¥108,412

9.1%
61.2
6.8
22.1
0.8
100.0

¥ 10,286
82,7199,521
31,921
1,916
136,363

7.5%
60.7
7.0
23.4
1.4
100.0

13.1
—
43.2
43.7
100.0
—%

1,224
—
7,156
2,199
10,579¥146,942

11.6
—
67.6
20.8
100.0
—%

— Expenditures for acquisitions of upstream oil and gas projects
The table below shows the Group’s expenditures for acquisitions of upstream oil and gas projects by segment for the years ended
March 31, 2013 and 2014. Expenditures in this category include the costs of acquiring mining rights, exploration and development
rights, signing bonuses and any tangible fixed assets or recoverable accounts under production sharing gained through the acquisitionof interest in upstream oil and gas projects.

(Millions of yen, %)Years ended March 31,

INPEX CORPORATION and Consolidated Subsidiaries
Asia & Oceania¥ 82,219
Eurasia (Europe & NIS)
1,024
Middle East & Africa—
Americas94,088Subtotal
177,331
Equity-method Affiliates
Asia & Oceania—
Eurasia (Europe & NIS)—
Middle East & Africa
42,228Americas—
Subtotal
42,228
Total¥219,559

2014

2013
46.4%
0.6
—
53.0
100.0

¥16,091913—
26,64343,647

36.9%
2.1
—
61.0
100.0

—
—
100.0
—
100.0
—%

—
—
—
—
—
¥43,647

—
—
—
—
—
—%

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Total expenditures on acquisitions of upstream oil and gas projects for the year ended March 31, 2014, decreased by ¥175.9 billion to¥43.6 billion from ¥219.6 billion for the year ended March 31, 2013, due to decreases in the Asia & Oceania, Middle East & Africa, andAmericas regions.

091

— Analysis of recoverable accounts under production sharing
For upstream projects governed by the PSCs, the Group’s share of costs arising during the exploration, development and production
phases is capitalized under “Recoverable accounts under production sharing.” The following table shows the changes in the balance of“Recoverable accounts under production sharing” during the years ended March 31, 2013 and 2014.
(Millions of yen)

Years ended March 31,

Balance at beginning of the year
Add: Exploration costs
Development costs
Operating expenses
Other
Less: Cost recovery—capital expenditures
Cost recovery—operating expenditures
Other
Balance at end of the year
Allowance for recoverable accounts under production sharing at end of the year2013
¥ 568,318
22,044130,998
53,9195,102
54,087
107,938
27,790590,566¥(112,871)

2014¥ 590,566
42,086172,234
73,1799,386
67,073
129,6714,717
685,990¥(123,484)

The amount posted as “Cost recovery—operating expenditures”

increased compared with the year ended March 31, 2013. Thisin recoverable accounts under production sharing is greater

was mainly due to an increase in operating expenses in thethan that posted as operating expenses. Along with operating

Offshore Mahakam Block and the South Natuna Sea Block B.

expenses, this is because a por tion of the exploration andCost recovery for the year ended March 31, 2014, increased

development cos t s, which are incur red and recover ablecompared with the year ended March 31, 2013. This was mainly

within the year, is included in the “Cost recovery—operating

due to an increase in cost recovery in the Offshore Mahakam

expenditures” account.

Block, the South Natuna Sea Block B and the ACG Oil Fields.

E xploration cos t s for the year ended March 31, 2014,

In addition, other deduction was mainly due to the decrease

increased compared with the year ended March 31, 2013. Thisin recoverable accounts under production sharing related to thewas mainly due to an increase in exploration expenditures in thebusiness withdrawal.

Asia & Oceania region such as the Masela Block.

The allowance for recoverable accounts under production

Development costs for the year ended March 31, 2014,

sharing as of March 31, 2014, increased compared with March

increased compared with the year ended March 31, 2013. This31, 2013. This was mainly due to additional allowance provisions

was mainly due to an increase in development expenditures inin connection with an increase in recoverable accounts under

the Offshore Mahakam Block, the South Natuna Sea Block B andproduction sharing with respect to exploration expenditures in

the Masela Block.

the Asia & Oceania region.

Operating expenses for the year ended March 31, 2014,— Funding sources and liquidity
Oil and gas exploration and development projects, as well as the

The Ichthys downstream entity (Ichthys LNG Pty Ltd, anconstruction of gas infrastructure, require significant funding.

equity-method affiliate), as the borrower, has utilized external

The Group relies on cash flow derived from internal reserves,loans from export credit agencies and commercial banks for

together with external sources, to procure funds. The Group’s

project financing since the year ended March 31, 2013.

basic policy is to utilize internal cash flow and external equity

The Group’s basic liquidity policy is to maintain sufficientfinancing to fund exploration projects and to utilize internal cash

cash on hand at all times to fund expenditures for existing andflow and external loans to fund development projects and thenew oil and gas projects in a timely manner, while also keeping a

construction of gas infrastructure. The Group currently receives

cushion of liquidity to provide for steep falls in oil and gas prices.

loans from the Japan Bank for International Cooperation,

In line with this policy, excess cash reserves are invested in low-

Japanese commercial banks and others. The Japan Oil, Gas

risk, highly liquid financial instruments. The Group’s strategy is toand Metals National Corporation (JOGMEC) guarantee system

improve capital efficiency over the long term through businesscovers these loans. In addition, the Development Bank of Japan

expansion while continuing to maintain a sound financial positionand various Japanese commercial banks provide loans for thewith sufficient liquidity.

construction of domestic gas infrastructure.

092

INPEX CORPORATION Annual Report 2014

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2014, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total$ 116.2
154.6
258.6
258.6
458.6
3,408.7$4,655.3

Yen

Total yen equivalent

5,672
7,831
34,102
9,149
8,730
34,697¥100,181¥ 17,627
23,74460,71935,76555,931
385,515¥579,301¥— Cash flows
Cash flows for the years ended March 31, 2013 and 2014, are summarized as follows:(Millions of yen)

Years ended March 31,

Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Cash and cash equivalents at end of the year

Net cash provided by operating activities
Net cash provided by operating activities for the year ended
March 31, 2014, was ¥213.5 billion, a decrease of ¥38.8 billion
from ¥252.3 billion for the year ended March 31, 2013. This was
mainly due to increases in income taxes paid and recoverable
accounts under production sharing (operating expenditures),despite an increase in income before income taxes and minority
interests.

Net cash used in investing activities

2013¥252,347(489,870)
137,069¥199,859

2014¥213,514(395,555)
48,961¥117,531

decreases in payments for purchase of mining rights and longterm loans made, despite an increase in payments for purchasesof tangible fixed assets.

Net cash provided by financing activities
Net cash provided by financing activities for the year ended
March 31, 2014, was ¥49.0 billion, a decrease of ¥88.1 billion from¥137.1 billion for the year ended March 31, 2013. This was mainly
due to decreases in proceeds from long-term debt and proceedsfrom minority interests for additional shares.

Net cash used in investing activities for the year ended March 31,
2014, was ¥395.6 billion, a decrease of ¥94.3 billion from ¥489.9
billion for the year ended March 31, 2013. This was mainly due to

CONSOLIDATED FINANCIAL FORECAST FOR THE YEAR ENDING
MARCH 31, 2015 (Announced on August 6, 2014)
Net sales for the year ending March 31, 2015, are expected
to decrease due to the forecasted decline in the crude oil pricecompared with the year ended March 31, 2014 and others.
Operating income, income before income taxes and minority
interests and net income for the year ending March 31, 2015,
are also expected to decrease due to an increase in exploration
expenses and others.
The aforementioned forecasts are based on an average oil
price of US$106.2 per barrel for Brent crude oil and an averageexchange rate of ¥100.5 to the U.S. dollar for the year ending
March 31, 2015.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Consolidated net sales for the year ending March 31, 2015,
are expected to decrease by ¥18.6 billion, or 1.4%, to ¥1,316.0
billion compared with the year ended March 31, 2014. Operating
income for the year ending March 31, 2015, is expected todecrease by ¥98.6 billion, or 13.4%, to ¥635.0 billion comparedwith the year ended March 31, 2014. Income before income taxes
and minority interests are expected to decrease by ¥49.1 billion,
or 6.5%, to ¥701.0 billion compared with the year ended March
31, 2014. Net income is expected to decrease by ¥5.7 billion, or
3.1%, to ¥178.0 billion compared with the year ended March 31,
2014.

093

Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

ASSETS
Current assets
Cash and cash equivalents
Time deposits (Note 12)
Accounts receivable—trade (Note 4)
Marketable securities (Notes 4 and 5)
Inventories
Deferred tax assets (Note 7)
Accounts receivable—other (Note 4)
OtherLess allowance for doubtful accounts
Total current assets
Tangible fixed assets
Buildings and structures (Note 6)
Wells (Note 6)
Machinery, equipment and vehicles (Note 6)Land
Construction in progress
Other
Less accumulated depreciation and amortization
Total tangible fixed assets
Intangible assets
Goodwill (Note 16)
Exploration and development rights
Mining rights
Other
Total intangible assets
Investments and other assets
Recoverable accounts under production sharing
Less allowance for recoverable accounts
under production sharing
Investment securities (Notes 4, 5 and 6)
Long-term loans receivable
Long-term time deposits (Note 12)
Deferred tax assets (Note 7)
Other investments (Note 6)
Less allowance for doubtful accounts
Less allowance for investments in exploration
Total investments and other assets
Total fixed assets
Total assets
See accompanying notes to consolidated financial statements.

094

INPEX CORPORATION Annual Report 2014

2013

2014

2014

¥ 199,859¥ 117,531$ 1,141,965

284,469

555,948

5,401,749

117,412110,396

1,072,639

281,129

177,709

1,726,671

15,40925,485

247,619

10,111

7,745

75,252

94,333

121,121

1,176,846

118,701

41,913

407,239(14,919)(17,644)(171,434)

1,106,504

1,140,204

11,078,546

240,218

294,6212,862,621

247,173

264,4392,569,365

305,836

356,157

3,460,523

19,56019,737

191,770

359,430

626,520

6,087,447

19,067

29,050282,258

1,191,284

1,590,524

15,453,984(606,743)(638,745)(6,206,228)

584,541

951,779

9,247,756

87,841

81,080787,796

118,869

125,622

1,220,579

167,179

221,4112,151,292

6,267

11,066

107,521

380,156

439,179

4,267,188

590,566

685,990

6,665,274(112,871)(123,484)(1,199,806)

477,695

562,506

5,465,468

673,129

476,4074,628,906

7,264

33,092

321,531287,273

364,1033,537,728

40,076

13,822

134,299

65,434

61,159594,238

(794)

(885)

(8,599)(5,119)(3,227)(31,354)1,544,958

1,506,977

14,642,217

2,509,655

2,897,935

28,157,161¥3,616,159¥4,038,139$39,235,707

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2013

2014

¥

¥

2014

Current liabilities
Accounts payable—trade
Short-term borrowings and current portion of
long-term debt (Notes 4, 6 and 12)
Income taxes payable (Note 7)

41,4028,561

46,811
21,954$454,829
213,311

152,681

91,198886,106

Accounts payable—other (Note 6)

133,233

131,905

1,281,626

Provision for exploration projects

26,857

9,817

95,385

127

111

1,079

Accrued bonuses to officers
Asset retirement obligations (Note 15)

3,813

2,353

22,862Other (Note 7)

48,30371,521

694,918

414,977375,670

3,650,116

Total current liabilities
Long-term liabilities
Long-term debt (Notes 4, 6, 11 and 12)

466,909561,674

5,457,384

Deferred tax liabilities (Note 7)

34,98854,960534,007

Accrued retirement benefits to employees (Note 14)

8,580

—

—

Provision for loss on business

3,705

6,978

67,800Accrued special repair and maintenance

278

234

2,274

Liability for retirement benefits (Note 14)

—

7,793

75,719Asset retirement obligations (Note 15)

13,582

25,954

252,177

Other (Note 6)

2,156

8,839

85,882

Total long-term liabilities

530,198

666,432

6,475,243

Total liabilities

945,175

1,042,102

10,125,359

Common stock
Authorized: 2013 —
9,000,001 shares2014 — 3,600,000,001 shares
Issued:2013 —
3,655,810 shares2014 — 1,462,323,601 shares
Capital surplus

290,810

290,8102,825,593

679,288679,288

6,600,155

Retained earnings
Less: Treasury stock: 2013 —
4,916 shares2014 — 1,966,400 shares
Total shareholders’ equity

1,375,107

1,532,876

14,893,859(5,248)(5,248)(50,991)

2,339,957

2,497,726

24,268,616

34,742

44,737434,677

Net assets (Note 9)

Unrealized holding gain on securities

16,244(17,579)(170,802)

Translation adjustments

90,350266,225

2,586,718

Total accumulated other comprehensive income

141,336

293,383

2,850,593

Minority interests

189,691

204,928

1,991,139

2,670,984

2,996,037

29,110,348¥3,616,159¥4,038,139$39,235,707

Total net assets
Contingent liabilities (Note 18)
Total liabilities and net assets

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Unrealized gain (loss) from hedging instruments (Note 11)095

Consolidated Statement of Income and Consolidated Statementof Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

Net sales
Cost of sales
Gross profit
Exploration expenses
Selling, general and administrative expenses (Notes 13, 14 and 16)
Depreciation and amortization
Operating income
Other income
Interest income
Dividend income
Gain on sales of marketable securities
Other
Total other income
Other expenses
Interest expense
Equity in losses of affiliates
Provision for allowance for recoverable
accounts under production sharing
Provision for exploration projects
Foreign exchange loss
Other
Total other expenses
Income before income taxes and minority interests
Income taxes (Note 7)
Current
Deferred
Total income taxes
Income before minority interests
Minority interests
Net income

096

INPEX CORPORATION Annual Report 2014

2013

2014

2014

¥1,216,533
426,326
790,207
20,12553,73422,900693,448¥1,334,626
490,417844,20928,20657,34525,048733,610$12,967,606
4,765,031
8,202,575
274,058
557,180
243,374
7,127,963

8,735
7,832
40
82,05998,666

17,462
9,228
10,32013,72550,735

169,666
89,662100,272
133,356
492,956

1,518
1,042

2,335
5,054

22,68849,10615,131

8,028

78,002

12,45230,056
13,76973,968718,146

1,165
4,280
13,40534,267750,078

11,31941,586130,247
332,948
7,287,971

539,208(9,933)529,275
188,871
5,909¥ 182,962

514,016
49,121
563,137
186,941
3,250¥ 183,691

4,994,326
477,273
5,471,599
1,816,372
31,578$ 1,784,794

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014
Thousands of
U.S. dollars(Note 3)

Millions of yen

Income before minority interests
Other comprehensive income
Unrealized holding gain on securities
Unrealized gain (loss) from hedging instruments
Translation adjustments
Share of other comprehensive income of affiliates accounted
for by the equity-method
Total other comprehensive income (Note 8)
Comprehensive income (Note 8)
Total comprehensive income attributable to:Shareholders of INPEX CORPORATION
Minority interests

2013

2014

2014

¥188,871¥186,941$1,816,372

27,787
16,769105,692

9,982(20,888)
176,31196,988(202,954)
1,713,088(6,674)(64,847)

158,731345,672

1,542,275
3,358,647

329,4228,120¥

335,737
9,935

$

¥

(1,577)
148,671
337,542

3,262,116
96,531

See accompanying notes to consolidated financial statements.

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014097

Consolidated Statement of Changes in Net Assets
INPEX CORPORATION and Consolidated Subsidiaries

Millions of yen
Shareholders’ equity

For the year ended March 31, 2013

Balance as of April 1, 2012

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock¥290,810¥679,288¥1,219,527¥(5,248)

Cash dividends paid——

(27,382)—(27,382)

Net income
Net changes in items otherthan those in shareholders’equity——182,962—

182,962

—

—

—

—

—

—

—

155,580—

155,580¥290,810¥679,288¥1,375,107¥(5,248)¥2,339,957

Total changes during theperiodBalance as of March 31, 2013

¥2,184,377

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2013

Unrealized holding Unrealized gain fromgain on securities hedging instruments

Balance as of April 1, 2012098

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets¥ 6,953¥ 4,118¥(16,196)¥ (5,125)¥134,941

Cash dividends paid

—

—

—

—

—

(27,382)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

182,962

27,78912,126

106,546

146,461

54,750201,211

Total changes during theperiod27,78912,126

106,546

146,461

54,750356,791

Balance as of March 31, 2013¥34,742¥16,244¥ 90,350¥141,336¥189,691¥2,670,984

INPEX CORPORATION Annual Report 2014

¥2,314,193

Millions of yen
Shareholders’ equity

For the year ended March 31, 2014

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock¥290,810¥679,288¥1,375,107¥(5,248)

Cash dividends paid——

(25,922)—(25,922)

Net income
Net changes in items otherthan those in shareholders’equity——183,691—

183,691

—

—

—

—

—

—

—

157,769—

157,769¥290,810¥679,288¥1,532,876¥(5,248)¥2,497,726

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

¥2,339,957

Millions of yen
Accumulated other comprehensive income

For the year ended March 31, 2014

Unrealized gain
Unrealized holding(loss) from hedging
gain on securities
instruments

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets¥34,742¥ 16,244¥ 90,350¥141,336¥189,691

Cash dividends paid

—

—

—

—

—

(25,922)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

183,691

9,995(33,823)

175,875

152,047

15,237167,284

9,995(33,823)

175,875

152,047

15,237325,053¥44,737¥(17,579)¥266,225¥293,383¥204,928¥2,996,037

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

¥2,670,984

Thousands of U.S. dollars (Note 3)
Shareholders’ equity

For the year ended March 31, 2014

Common stock

Capital surplus

Retained earnings

Total shareholders’equityTreasury stock$2,825,593$6,600,155$13,360,931$(50,991)

Cash dividends paid——

(251,866)—(251,866)

Net income
Net changes in items otherthan those in shareholders’equity——1,784,794—

1,784,794

—

—

—

—

—

—

—

1,532,928—

1,532,928$2,825,593$6,600,155$14,893,859$(50,991)$24,268,616

Balance as of April 1, 2013

Total changes during theperiodBalance as of March 31, 2014

$22,735,688

Thousands of U.S. dollars (Note 3)
Accumulated other comprehensive income

For the year ended March 31, 2014

Unrealized gain
Unrealized holding(loss) from hedging
gain on securities
instruments

Translation
adjustments

Total accumulated other
Minority interests
comprehensive income

Total net assets$ 157,832$ 877,866$1,373,261$1,843,092

—

—

—

—

—

(251,866)

Net income
Net changes in items otherthan those in shareholders’equity

—

—

—

—

—

1,784,794

97,114(328,634)

1,708,852

1,477,332

148,047

1,625,379

97,114(328,634)

1,708,852

1,477,332

148,047

3,158,307$434,677$(170,802)$2,586,718$2,850,593$1,991,139$29,110,348

Total changes during theperiodBalance as of March 31, 2014

$25,952,041

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information$337,563

Cash dividends paid

Balance as of April 1, 2013099

Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2014

Thousands of
U.S. dollars(Note 3)

Millions of yen

2013

2014

2014

¥718,146¥750,078$7,287,971

Depreciation and amortization

51,91650,917494,724

Amortization of goodwill
Provision for allowance for recoverable accounts under
production sharing
Provision for exploration projects

6,761

6,761

65,692

16,354

14,883

144,608

21,132(17,318)(168,267)

Provision for accrued retirement benefits to employees

2,285

—

—

Other provisions

5,547

5,024

48,815

Cash flows from operating activities
Income before income taxes and minority interests

Liability for retirement benefits
Interest and dividend income(777)(7,550)(26,691)(259,337)

Interest expense

1,518

2,335

22,688Foreign exchange loss

16,33014,105137,048

Equity in losses of affiliates
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade

1,041

5,053

49,09654,087

67,073651,700(21,079)(60,491)(587,748)

2,795

6,277

60,989Inventories(3,232)(10,014)(97,299)

Accounts payable—trade

11,0305,413

52,594

Accounts receivable—other

4,910(35,288)(342,868)

Accounts payable—other(900)(18,142)(176,273)

Advances received(24,636)

2,168

21,065

Other(72,531)(5,247)(50,981)774,907756,119

7,346,667

19,652

26,932

261,679

SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

100—(16,567)

INPEX CORPORATION Annual Report 2014

(1,344)(2,381)(23,134)(540,868)(567,156)(5,510,649)¥252,347¥213,514$2,074,563

Thousands of
U.S. dollars(Note 3)

Millions of yen

2013

2014

2014

Payments for time deposits¥(299,460)¥(211,332)$(2,053,362)

Proceeds from time deposits

134,162276,248

2,684,104

Payments for long-term time deposits(252,082)(484,081)(4,703,469)

Cash flows from investing activities

Proceeds from long-term time deposits
Payments for purchases of tangible fixed assets

5,000

130,757

1,270,472(189,153)(323,651)(3,144,685)

Proceeds from sales of tangible fixed assets

116

677

6,578

Payments for purchases of intangible assets(4,256)(6,171)(59,959)

Payments for purchases of marketable securities(17,710)——Proceeds from sales and redemptions of marketable securities

366,633

285,452

2,773,533

Payments for purchases of investment securities(90,831)(24,637)(239,380)

Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Increase in short-term loans receivable

70,90262,433606,617(82,696)(104,073)(1,011,203)(85)(4,187)(40,682)Long-term loans made(141,222)(37,158)(361,038)

Collection of long-term loans receivable

119,238

75,464

733,230

Payments for purchase of mining rights(176,232)(42,734)(415,216)

67,806

11,438111,135(489,870)(395,555)(3,843,325)

991

2,691

26,146

Proceeds from long-term debt

121,572

74,742726,215

Repayment of long-term debt

(4,682)(7,760)(75,398)

Other
Net cash used in investing activities
Cash flows from financing activities
Increase in short-term loans

Proceeds from minority interests for additional shares

55,852

10,28999,971

Cash dividends paid

(27,385)(25,935)(251,992)

Dividends paid to minority shareholders(4,992)(4,992)(48,504)

Other(4,287)

(74)

(719)

Net cash provided by financing activities

137,069

48,961

475,719

Effect of exchange rate changes on cash and cash equivalents

51,49850,752

493,121

Net decrease in cash and cash equivalents(48,956)(82,328)(799,922)

Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents from newly consolidated
subsidiary
Decrease in cash and cash equivalents resulting from exclusion ofsubsidiaries from consolidation
Cash and cash equivalents at end of the year

249,233

199,859

1,941,887

440

—

—

(858)

—

—

¥ 199,859¥ 117,531$ 1,141,965

See accompanying notes to consolidated financial statements.

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014101

Notes to Consolidated Financial Statements
INPEX CORPORATION and Consolidated Subsidiaries

1. BASIS OF PRESENTATIONINPEX CORPORATION (the “Company”) is primarily engaged in the
research, exploration, development and production of crude oil andnatural gas.
The Company and its domestic subsidiaries maintain theiraccounting records and prepare their financial statements inaccordance with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements have been
prepared by using the accounts of foreign consolidated subsidiaries
prepared in accordance with International Financial ReportingStandards, or IFRS or the accounting principles generally accepted in

the United States, or U.S. GAAP as adjusted for certain items.
The accompanying consolidated financial statements havebeen prepared in accordance with accounting principles generally
accepted in Japan, which may differ in certain material respects fromIFRS or U.S. GAAP, and are compiled from the consolidated financial
statements prepared by the Company as required by the Financial
Instruments and Exchange Act of Japan.
The Company has made certain reclassifications of the previous
years’ consolidated financial statements to conform to thepresentation used for the year ended March 31, 2014.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Principles of consolidation and accounting forinvestments in affiliates
The accompanying consolidated financial statements include theaccounts of the Company and companies controlled directly or
indirectly by the Company. Companies over which the Company
exercises significant influence in terms of their operating and financial
policies are included in the consolidated financial statements on an
equity basis. All significant intercompany balances and transactions
are eliminated in consolidation. Further, certain companies that do
not have significant impact on the consolidated financial statements,
are not consolidated or accounted for by the equity-method.
For the 48 companies for which the closing date differed from theconsolidated closing date, including but not limited to, INPEX Sahul,Ltd. and INPEX Masela, Ltd., the financial statements for the year
ended December 31 were used. However, the necessary adjustments
have been made to the financial statements of those companies toreflect any significant transactions made between the Company’s
closing date and that of the consolidated subsidiaries. For the 12companies, including but not limited to, Japan Oil Development,
Co., Ltd., INPEX Southwest Caspian Sea, Ltd., INPEX North CaspianSea, Ltd., INPEX Holdings Australia Pty Ltd, and INPEX Ichthys Pty
Ltd, the financial statements for the year ended on the consolidated
closing date were used, even though their closing date is December
31.
The excess of cost over underlying net assets excluding minority
interests at fair value as of the date of acquisition is accounted for as
goodwill and amortized over 20 years on a straight-line method.

(b) Cash equivalents
All highly liquid investments with a maturity of three months or lesswhen purchased are considered cash equivalents, including shortterm time deposits with original maturities of three months or less.

(c) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the exchange rates prevailing at the balance
sheet date. All revenues and expenses associated with foreign
currencies are translated at the rates of exchange prevailing whensuch transactions were made. The resulting exchange gain or loss iscredited or charged to income.
The assets and liability accounts of overseas subsidiaries aretranslated into yen at the exchange rates prevailing at the balance
sheet date. The revenue and expense accounts of the overseas
subsidiaries are translated into yen at the average rates of exchange

102

INPEX CORPORATION Annual Report 2014

during the period. The components of net assets excluding minority
interests are translated at their historical exchange rates. The
differences arising from the translation are presented as translation
adjustments and minority interests in the accompanying consolidated
financial statements.

(d) Securities
In general, securities are classified into three categories: trading,held-to-maturity or other securities. Securities held by the Company
and its subsidiaries are all classified as other securities. Other
securities with a determinable market value are mainly stated at fairvalue with any changes in unrealized holding gain or loss, net ofthe applicable income taxes, included directly in net assets. Other
securities without a determinable market value are stated at cost.
Cost of securities sold is determined by the moving average method.

(e) Derivatives
Derivatives are stated at fair value.

(f) Inventories
Overseas inventories are carried mainly at cost, determined by theaverage cost method (balance sheet value is carried at the lowerof cost or market). Domestic inventories are carried mainly at cost,
determined by the moving-average method (balance sheet value iscarried at the lower of cost or market).

(g) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amountdetermined based on the historical experience of bad debt withrespect to ordinary receivables, plus an estimate of uncollectible
amounts determined by reference to specific doubtful receivablesfrom customers experiencing financial difficulties.

(h) Recoverable accounts under production
sharing and related allowance
Cash investments made by the Company during an exploration,
development and production project under a production sharing
contract are recorded as “Recoverable accounts under production
sharing” so long as they are recoverable under the terms of therelevant contract. When the Company receives crude oil andnatural gas in accordance with the relevant contract, an amountcorresponding to the purchase costs of the products (i.e., a cost
recovery portion of the investments) is released from this account.
Because these investments are recoverable only where commercial

oil or gas is discovered, an allowance for recoverable accounts
under production sharing is provided for probable losses oninvestments made during the exploration stage under production
sharing contracts arising from the failure to discover commercial oil
and gas. In light of this uncertainty, an allowance for recoverable
accounts under production sharing is provided for probable losses ondevelopment investment individually estimated for each project.

(r) Asset retirement obligations(i) Allowance for investments in exploration(s) Hedge accounting

The allowance for investments in exploration is provided for future
potential losses on investments in exploration companies at an
estimated amount based on the net assets of the investees.

The deferred hedge accounting method is used for hedging
transactions. The allocation method is applied to foreign exchange
forwards that meet certain criteria. The special treatment is applied
to the interest rate swaps that meet certain criteria. In addition,
derivative transactions are limited to the scope of actual demand, andthe Company does not engage in speculative derivative transactions.

(j) Tangible fixed assets (except leased assets)
Depreciation of overseas mining facilities is mainly computed by theunit-of-production method.
For other tangible fixed assets, the straight-line method ofdepreciation is applied. The useful lives of fixed assets are based on
the estimated useful lives of the respective assets.

Asset retirement obligations are provided by a reasonable estimateof retirement costs incurred upon termination of the operation withrespect to oil and gas production facilities in case that the Company
is obliged to retire such facilities by oil and gas contracts or laws andregulations with the countries in which the Company operates or has
working interests.

(t) Research and development expenses
Research and development expenses are charged to income as
incurred.

(k) Intangible assets (except leased assets)(u) Income taxes

Exploration and development rights at the exploration stage are
fully amortized in the year such rights are acquired, and those at the
production stage are amortized by the unit-of-production method.
Mining rights are amortized mainly by the unit-of-production
method.
Other intangible assets are amortized by the straight-line method.
Capitalized computer software costs are amortized by the straightline method over a period of five years.

Deferred tax assets and liabilities are determined based on the
differences between financial reporting and the tax bases of theassets and liabilities and are measured using the enacted tax rates
and laws which will be in effect when the differences are expected toreverse.

(l) Leased assets
Leased assets are amortized by the straight-line method over thelease period assuming no residual value.

(m) Provision for exploration projects
Provision for exploration projects is provided for future expendituresof consolidated subsidiaries at the exploration stage based on aschedule of investments in exploration.

(n) Accrued bonuses to officers
Accrued bonuses to officers are provided at the expected payment
amount for the fiscal year.

(o) Provision for loss on business
Provision for loss on business is provided for future potential
losses on oil and gas development, production and sales businessindividually estimated for each project.

(p) Accrued special repair and maintenanceAccrued special repair and maintenance are provided for planned
major repair and maintenance activities on tanks in certain
subsidiaries at amounts accumulated through the next activity.

(q) Accounting for retirement benefits

Effective the year ended March 31, 2014, the Company has appliedthe “Accounting Standard for Retirement Benefits” (AccountingStandards Board of Japan Statement No. 26, issued on May 17, 2012)
and the “Guidance on Accounting Standard for Retirement Benefits”(ASBJ Guidance No. 25, issued on May 17, 2012), except for certain
provisions described in the main clause of Section 35 of the standard
and in the main clause of Section 67 of the guidance.
The Company has changed its treatment to record retirement
benefit obligations less plan assets as “Liability for retirement
benefits”.
As a result of the change, the consolidated balance sheet as ofMarch 31, 2014 shows liability for retirement benefits of ¥7,793
million ($75,719 thousand). The change does not affect accumulated
other comprehensive income because actuarial gains and losses arecharged or credited to income as incurred.

(w) Standards issued but not effective• ”Accounting Standard for Retirement Benefits" (ASBJ Statement
No.26, issued on May 17, 2012)• ”Guidance on Accounting Standard for Retirement Beneﬁts" (ASBJ
Guidance No.25, issued on May 17, 2012)(Overview)
Revisions apply mainly to the accounting treatments of unrecognizedactuarial gains and losses as well as unrecognized prior service costs,
the calculation methods for retirement benefit obligations as well
as service costs, and broaden disclosures taking into consideration
improvements to financial reporting and international trends.
(Scheduled Effective Date)
The revisions to the calculation method for retirement benefit
obligations and current service costs will be applied from the
beginning of the year ending March 31, 2015.
(The impact of the adoption of the revised accounting standard andguidance)
The impact of the adoption of the revised accounting standard andguidance on operating income and income before income taxes andminority interests in the year ending March 31, 2015 will be immaterial.
• ”Revised Accounting Standard for Business Combinations” (ASBJ
Statement No.21, issued on September 13, 2013)• ”Revised Accounting Standard for Consolidated Financial

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information(Method of attributing expected retirement benefits to proper
periods)
When calculating retirement benefit obligations, the straight-line
method is used for attributing expected retirement benefits toperiods through March 31, 2014. Because certain subsidiaries areclassified as small enterprises, a simplified method (the amountwhich would be required to be paid if all active employees voluntarily
terminated their employment as of the balance sheet date) is applied
for the calculation of the retirement benefit obligation for thosesubsidiaries.
(Method of recognizing actuarial differences)
Actuarial gains and losses are charged or credited to income as
incurred.

(v) Adoption of new accounting standard

103

Statements” (ASBJ Statement No.22, issued on September 13,
2013)• ”Revised Accounting Standard for Business Divestitures” (ASBJ
Statement No.7, issued on September 13, 2013)• ”Revised Accounting Standard for Earnings Per Share” (ASBJ
Statement No.2, issued on September 13, 2013)• ”Revised Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures”(ASBJ Guidance No.10, issued on September 13, 2013)• ”Revised Guidance on Accounting Standard for Earnings Per Share”(ASBJ Guidance No.4, issued on September 13, 2013)(Overview)
Revisions of these accounting standards mainly apply to (i) the
accounting treatment of any changes in a parent’s ownership interestin a subsidiary when the parent retains control over the subsidiary, (ii)the accounting for acquisition-related costs, (iii) the presentation of
net income, the change of name from ”minority interests” to ”noncontrolling interests” and (iv) the transitional treatments for theseaccounting standards.
(Scheduled Effective Date)
The revised accounting standards and guidance are scheduled totake effect from the beginning of the year ending March 31, 2016.
The transitional treatment will be applied to business combinations
executed at or after the beginning of the year ending March 31,
2016.
(The impact of the adoption of the revised accounting standards andguidance)
The impact of the adoption of revised accounting standards andguidance on consolidated financial statements are now underevaluation.

3. U.S. DOLLAR AMOUNTS
The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at¥102.92=US$1.00, the approximate exchange rate in effect as of March 31, 2014. This translation should not be construed as a representationthat yen have been, could have been, or could in the future be, converted into U.S. dollars at the above or any other rate.

4. STATUS OF FINANCIAL INSTRUMENTS(a) Policy regarding financial instruments
The Company raises funds for oil and gas development andproduction, construction or expansion of gas infrastructure
primarily from cash flow on hand and from bank loans. Oil and gas
development projects are primarily funded from long-term loansthat the Company has secured from the Japan Bank for International
Cooperation, Japanese commercial banks and others. Japan Oil,Gas and Metals National Corporation has provided guarantees forthe principal on certain outstanding amounts of the Company’s
long-term loans. The Development Bank of Japan and Japanesecommercial banks have provided long-term loans for the construction
or expansion of domestic gas infrastructure. The Company generally
borrows loans with variable interest rates, while some loans are with afixed interest rate depending on the nature of each project.
Regarding the financing policy, the Company manages funds
mainly from deposits and government bonds, which are considered
to be of low-risk and high-liquidity. The Company limits the use ofderivative transactions for managing risks of forecasted transactions
and portfolio assets, and does not engage in speculative derivativetransactions.

(b) Details of financial instruments,
associated risks and risk management(Credit risk related to trade receivables)
Trade receivables such as accounts receivable-trade and accounts
receivable-other are comprised mainly from sales of crude oil andnatural gas. Main trading partners are national oil companies, major
oil companies and others. In line with the criteria for trading andcredit exposure management, the Company properly analyzes thestatus of trading partners for early detection and reduction of default
risks.

(Market price fluctuation risk related to securities)
For marketable securities and investment securities exposed tomarket price fluctuation risk, analysis of market values is regularly
reported to the Executive Committee. For shares of stock, theCompany mainly holds shares of trading partners and others
to establish close and smooth relationships for the purpose ofmaintaining a medium- to long-term stable business. A part of104

INPEX CORPORATION Annual Report 2014

these shares are held for the purpose of investment. As for bonds,
the Company mainly holds bonds with short-term maturities byconsidering medium- to long-term cash outflow forecast and market
price fluctuation risk.

(Interest rate fluctuation risk related to short-term loans andlong-term debt)
Loans are mainly used to fund oil and natural gas development
projects and construction or expansion of domestic gas infrastructure
and others. The borrowing period is determined considering thefinancial prospects of the project and useful lives of the facilities.
Loans with variable interest rates are exposed to interest rate
fluctuation risk, however, the Company analyzes the impact of interest
rate fluctuation at the time of borrowing and on an annual basis, andleverages fixed-rate-loans or interest rate swaps as necessary.

(Exchange rates fluctuation risk related to assets and liabilities
in foreign currencies)
As most of the Company’s business is conducted overseas, theCompany is exposed to exchange rate fluctuation risk due to a large
portion of monetary assets and liabilities held in foreign currencies
such as cash and deposits, accounts receivables and loans requiredin overseas projects. As a result of fiscal year-end conversion,
yen appreciation causes a foreign exchange loss on assets and aforeign exchange gain on liabilities while yen depreciation causes
a foreign exchange gain on assets and a foreign exchange loss
on liabilities. For this reason, the Company endeavors to reduce
exchange rate fluctuation risk by maintaining the position between
assets and liabilities in foreign currencies. In addition to planned
expenditures in foreign currencies on the Ichthys Project and others,
the Company manages exchange rate fluctuation risk throughderivative transactions such as foreign exchange forwards and others
as necessary.

(Management of derivative transactions)
For the above derivative transactions, the Company follows
its derivative transactions management outline. For derivativetransactions exposed to market price fluctuation, market values ofthese derivatives are regularly reported to the Executive Committee,

and the Company only transacts with financial institutions with highcredit ratings to reduce counterparty risks for the use of derivatives.

(Management of liquidity risk related to financing)
The finance and accounting division controls cash management
based on a monthly financing plan prepared by each project divisionand secures sufficient liquidity on hand to prepare for liquidity risk.

5. SECURITIES(a) Information regarding other securities as of March 31, 2013 and 2014 is as follows:
Millions of yen
March 31, 2013

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 11,937¥ 21,926
Stock
Bonds:
356,284
357,528
Public bonds
60,05060,152
Corporate bonds
33,64837,549Other debt securities
205,185
228,948
Other
667,104
706,103
Subtotal
Securities with acquisition costs exceeding their carrying values
40,45137,824Stock
Bonds:
29,13728,982Public bonds
35,00034,966
Corporate bonds
104,588
101,772
Subtotal¥771,692¥807,875
Total

Unrealized gain
(loss)¥ 9,989
1,244
102
3,901
23,76338,999(2,627)(155)(34)(2,816)¥36,183

Millions of yen
March 31, 2014

Acquisition cost

Carrying value

Securities with carrying values exceeding their acquisition costs¥ 16,699¥ 29,652
Stock
Bonds:
166,875
167,554
Public bonds
70,31670,353
Corporate bonds
25,09931,444
Other debt securities
139,524
169,346
Other
418,513468,349
Subtotal
Securities with acquisition costs exceeding their carrying values
35,69032,324Stock
Bonds:
2,025
2,025
Public bonds
37,71534,349Subtotal¥456,228¥502,698
Total

Unrealized gain
(loss)

Thousands of U.S. dollars
Unrealized gain
Acquisition cost
Carrying value(loss)¥12,953$ 162,252$ 288,107$125,855

679
37
6,345
29,822
49,836

1,621,405
683,210
243,869
1,355,655
4,066,391

1,628,002
683,570
305,519
1,645,414
4,550,612

6,597
360
61,650289,759484,221(3,366)

346,774

314,069(32,705)(0)(3,366)¥46,470

19,676366,450$4,432,841

19,676
333,745$4,884,357(0)(32,705)$451,516(b) Information regarding sales of securities classified as other securities for the years ended March 31, 2013 and 2014 is as follows:Year ended March 31, 2013

Proceeds
from sales

Bonds
Public bonds
Total¥121,781¥121,781

Year ended March 31, 2014

Proceeds
from sales

Bonds
Public bonds
Other
Total

¥ 72,563
76,307¥148,870

Millions of yen
Gain on
sales

¥187
¥187
Millions of yen
Gain on
sales

¥

182
10,307¥10,489

Loss on
sales

¥—
¥—

Loss on
sales

¥—
—
¥—

Proceeds
from sales$ 705,043
741,420$1,446,463

Thousands of U.S. dollars
Gain on
sales

$

1,768
100,146$101,914

Loss on
sales

$—
—
$—

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014105

(c) Components of securities for which it is extremely difficult to determine fair value as of March 31, 2013 and 2014 are summarized as follows:
Millions of yen
March 31,

Other securities
Unlisted securities
Preferred securities
Stocks of subsidiaries and affiliates
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 30,728
5,000
110,655¥146,383¥ 33,842
5,000
112,576¥151,418$ 328,819
48,581
1,093,820$1,471,220

These securities are not included in (a) as they have no quoted market prices and it is extremely difficult to determine their fair value. For sharesof exploration companies among unlisted securities and stocks of subsidiaries and affiliates, an allowance for investments in exploration isprovided at an estimated amount based on the financial position of the investees.
(d) Redemption schedule for securities with maturity dates classified as other securities as of March 31, 2014 is as follows:
Millions of yen
March 31, 2014

Bonds
Public bonds
Corporate bonds
Other debt securities
Other
Total

1 year or lessMore than 1
year but lessthan 5 years¥ 66,000
18,50015,45066,004¥165,954¥ 80,000
51,80015,43866,096¥213,334

Thousands of U.S. dollars

More than 5More than 10
years but less
1 year or lessyears
than 10 years¥22,500———¥22,500

¥—
—
—
—
¥—

More than 1
year but lessthan 5 years$ 641,275
179,751
150,116
641,314$1,612,456

More than 5More than 10
years but lessyears
than 10 years$ 777,303
503,303150,000
642,208$2,072,814$218,616———$218,616

$—
—
—
—
$—

(e) Loaned securities classified as investment securities as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

2013

Investment securities¥—

Thousands of U.S. dollars

2014

2014

¥20,064$194,948

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT(a) Short-term borrowings as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.950% to 2.174% and from
0.839% to 1.963% at March 31, 2013 and 2014)

Thousands of U.S. dollars

2013

2014

2014

¥1,170¥4,327$42,042(b) Long-term debt as of March 31, 2013 and 2014 is as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.509% to 2.700% and from 0.366%
to 2.500% at March 31, 2013 and 2014)
Less: Current portion

Thousands of U.S. dollars

2013

2014

2014

¥474,300¥579,301$5,628,653

7,391¥466,909

17,627¥561,674

171,269$5,457,384(c) Assets pledged as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31,

Buildings and structures
Wells
Machinery, equipment and vehicles
Investment securities
Other
Total

106

INPEX CORPORATION Annual Report 20142013

¥ 2,091
1,214
8,974
7,395
227
¥19,901

Thousands of U.S. dollars

2014¥ 2,082
181
8,027
790
222
¥11,3022014$ 20,229
1,759
77,992
7,676
2,157$109,813

(d) The above assets were pledged against the following liabilities:
Millions of yen
March 31,

Short-term borrowings
Accounts payable—other
Long-term debt
Other
Total

Thousands of U.S. dollars

2014

2013

2014

¥ 946
385
492
17
¥1,840

¥ 997
5,119
1,437
17
¥7,570$ 9,192
3,741
4,780
165
$17,878(e) In addition, assets pledged as collateral for the Ichthys LNG Project Finance and the BTC Pipeline Project Finance are as follows:(Ichthys LNG Project Finance)
Millions of yen
March 31,

Cash and cash equivalents
Accounts receivable—other
Other (Current assets)
Land
Construction in progress
Investment securities
Long-term loans receivable
Total

¥

2013

3,602
160
64,631
133
172,378
15,758—¥256,662¥

Thousands of U.S. dollars

2014

7,835
—
5,430
146
382,224—
27,309¥422,944$

2014

76,127—52,7591,419
3,713,797—
265,342$4,109,444(BTC Pipeline Project Finance)
Millions of yen
March 31,

Investment securities

Thousands of U.S. dollars

2014

2013

¥6,378¥5,2402014$61,970(f) The aggregate annual maturities of long-term debt subsequent to March 31, 2014 are summarized as follows:
Years ending March 31,

Millions of yen

Thousands of U.S. dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total¥ 17,627
23,74460,71935,76555,931
385,515¥579,301$ 171,269
230,703589,963
347,503
543,442
3,745,773$5,628,653

7Financial &Corporate Information

INPEX CORPORATION Annual Report 2014107

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to income taxes which, in the aggregate, resulted in a statutory tax rate of
approximately 33.3% for the years ended March 31, 2013 and 2014.
(a) The effective tax rates reflected in the consolidated statement of income for the years ended March 31, 2013 and 2014 differ from thestatutory tax rate for the following reasons:Years ended March 31,

Statutory tax rate
Effect of:Permanently non-taxable expenses such as entertainment expenses
Permanently non-taxable income such as dividends income
Valuation allowance
Foreign taxes
Foreign tax credits
Adjustment of deducted amounts of foreign taxes
Amortization of goodwill
Differences of effective tax rates applied to tax effect accounting
Other
Effective tax rates

2013

2014

33.3%

33.3%

0.6
(0.7)
2.6
69.3
(22.1)(10.7)
0.3
(0.2)
1.3
73.7%

0.6
(0.7)
0.6
73.5
(15.1)(15.7)
0.3
(2.0)
0.3
75.1%

(b) The significant components of deferred tax assets and liabilities as of March 31, 2013 and 2014 are as follows:
Thousands of U.S.
dollars

Millions of yen
March 31,

Deferred tax assets
Exploration expenditures
Loss on valuation of investment securities
Recoverable accounts under production sharing (foreign taxes)
Allowance for investments in exploration
Foreign taxes payable
Net operating loss carry forward
Accumulated depreciation
Accrued retirement benefits
Liability for retirement benefits
Provision for loss on businessTranslation differences of assets and liabilities denominated in foreign
currencies
Asset retirement obligations
Allowance for doubtful accounts
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Foreign taxes
Translation differences of assets and liabilities denominated in foreign
currencies
Reserve for overseas investment loss
Translation differences due to an application of purchase accounting
methodReserve for exploration
Unrealized holding gain on securities
Unrealized gain from hedging instruments
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

108

INPEX CORPORATION Annual Report 2014

2013

2014

¥ 90,332
3,205
6,992
2,579
33,28846,021
43,238
2,659
—
1,140

¥ 94,419
3,196
10,0401,054
32,221
62,175
11,649
—
2,369
2,148

2014
$

917,402
31,05397,551
10,241
313,068
604,110113,185—
23,01820,871

795

8,385

81,471

5,574
5,974
21,642
263,439(195,665)
67,774

10,8293,901
18,788261,174(188,518)
72,656105,218
37,903
182,550
2,537,641(1,831,695)
705,946

27,04884,960825,496

3,551

955

9,279

5,377

4,671

45,385

1,759

1,795

17,441

11,274
1,424
10,442
4,780
65,655¥ 2,119

11,218
1,807
—
4,821
110,227¥ (37,571)

108,997
17,557—
46,842
1,070,997$ (365,051)

8. COMPREHENSIVE INCOME
Amount of reclassification adjustments and income tax effects allocated to each component of other comprehensive income for the years ended
March 31, 2013 and 2014 are as follows:
Millions of yen
Years ended March 31,

Unrealized holding gain on securities
Amount recognized during the period
Amount of reclassification adjustments
Before income tax effect adjustment
Amount of income tax effectUnrealized gain (loss) from hedging instruments
Amount recognized during the period
Amount of income tax effectTranslation adjustments
Amount recognized during the period
Share of other comprehensive income ofaffiliates accounted for by the equity-method
Amount recognized during the period
Adjustment for acquisition cost of assets
Total other comprehensive income

Thousands of U.S. dollars

2013

2014

2014

¥ 29,075(138)
28,937(1,150)27,787¥ 20,843(10,473)
10,370(388)
9,982$ 202,517(101,759)
100,758(3,770)96,98824,873(8,104)
16,769(31,329)
10,441(20,888)(304,402)
101,448(202,954)

105,692

176,311

1,713,088(1,964)387(1,577)¥148,671(14,316)
7,642(6,674)¥158,731(139,099)
74,252(64,847)$1,542,275

9. NET ASSETSThe Company conducted a stock split at a ratio of 1:400 of common
stock with October 1, 2013 as the effective date. As a result, the total
number of the Company’s shares issued consisted of 1,462,323,600
shares of common stock and 1 Class A stock as of March 31, 2014.
Class A stock has no voting rights at the common shareholders’meeting, but the ownership of Class A stock gives its holder a rightof veto over certain important matters described below. However,requirements stipulated in the Articles of Incorporation need to be
met in cases involving the exercise of the veto over the appointment
or removal of directors, the disposition of material assets or businessintegration;• Appointment and removal of directors• Disposition of material assets• Amendments to the Article of Incorporation with respect to (i) the
purpose of the Company’s business and (ii) the granting of voting
rights to the Company’s shares other than common stock• Business integration• Capital reduction• Dissolution

Class A stock shareholder may request the Company to acquireClass A stock. Besides, the Company may also acquire Class A stockby a resolution of the meeting of the Board of Directors in case where
Class A stock is transferred to a non-public entity.
For Class A stock, no stock split was conducted. The Articles ofIncorporation specifies that dividends of Class A stock are equivalent
to dividends of a common stock prior to the stock split. The cash
dividends of Class A stock for the year ended March 31, 2014
amounted to ¥7,200.
Under the Companies Act of Japan, 10% of the amount to be
distributed as dividends from capital surplus (other than capitalreserve) and retained earnings (other than legal reserve) should betransferred to capital reserve and legal reserve, respectively, up to
the point where total amount of capital reserve and legal reserve
equals 25% of the common stock account.
Distributions can be made at any time by a resolution of themeeting of shareholders, or the Board of Directors if certain
conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

10. AMOUNTS PER SHARE
Yen

U.S. dollars

Years ended March 31,

2013

2014

Net assets per share¥1,699.10¥1,911.25$18.57

17.50

18.00

0.17

¥ 125.29¥ 125.78$ 1.22

Cash dividends per share
Net income per share

2014

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information

Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
Net assets per share are computed based on the net assets excluding minority interests and the number of common stock outstanding at theyear end.
Cash dividends per share represent the cash dividends proposed by the Board of Directors together with the interim cash dividends paid.
Net income per share is computed based on the net income available for distribution to shareholders of common stock and the average
number of shares of common stock outstanding during the year.
The Company conducted a stock split at a ratio of 1:400 of common stock with October 1, 2013 as the effective date. Net assets per share,
cash dividends per share and net income per share are calculated based on the assumption that the stock split was conducted on April 1, 2012.

710911. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting
There is no derivative not subject to hedge accounting as of March 31, 2013 and 2014.

(b) Derivatives subject to hedge accounting
Contract amounts and fair value regarding derivatives subject to hedge accounting as of March 31, 2013 and 2014 are as follows:
Millions of yen
March 31, 2013

Principal items hedged

Contract amounts

Due after one year

Fair value

Forecasted
transactions inforeign currencies¥157,614¥—¥31,329

Long-term debt¥

¥4,760*2Foreign exchange forwards *1
Buy (USD)(Deferred hedge accounting)Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

4,820

Millions of yen
March 31, 2014

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Due after one year

¥4,760Long-term debt

Fair value¥4,760*2

Thousands of U.S. dollars
March 31, 2014

Interest rate swaps
Payment fixed, receipt fluctuated (Special treatment)

Principal items hedged

Contract amounts

Due after one year

Long-term debt

$46,250$46,250

Fair value*2*1 Fair value is the price obtained from the counterpar ty financial institutions.
*2 Fair value of derivatives for which special treatment of interest rate swaps is applied is included in the estimated fair value of the longterm debt as disclosed in Note 12.(a) since the interest rate swap is treated together with long-term debt subject to hedging.

12. OTHER FINANCIAL INSTRUMENTS(a) The carrying value and estimated fair value of financial instruments excluding marketable securities and investment securities which aredisclosed in Note 5.(a) and derivatives which are disclosed in Note 11 as of March 31, 2013 and 2014 are as shown below. The following
summary also excludes cash and cash equivalents, and accounts receivable-trade for which fair values approximate their carrying amounts.
Millions of yen
March 31, 2013

Carrying value

Estimated fair value

Time deposits¥ 284,469¥ 284,502

Long-term time deposits

287,273

289,007

Short-term borrowings and current portion of long-term debt
Long-term debt

8,561
¥466,909

8,507¥456,404

Millions of yen

Thousands of U.S. dollars

March 31, 2014

Carrying value

Estimated fair value

Carrying value

Estimated fair value

Time deposits¥555,948¥560,455$5,401,749$5,445,540

Long-term time deposits
Short-term borrowings andcurrent portion of long-term debt
Long-term debt

364,103367,841

3,537,728

3,574,048

21,954

21,744

213,311211,271¥561,674¥551,721$5,457,384$5,360,678(b) For other financial instruments, computation methods of estimated fair value are as shown below.

(Time deposits)
The fair value of current portion of long-term time deposits included in time deposits is calculated by the same method as long-term time
deposits. For the other time deposits, the relevant carrying value is used since the item is settled in a short period of time and its market
value is almost the same as the carrying value.

(Long-term time deposits)
The fair value of long-term time deposits is calculated by applying a discount rate to the total of principal and interest. The discount rate isbased on the assumed interest rate if a similar new deposit is entered into.

110

INPEX CORPORATION Annual Report 2014

(Short-term borrowings and current portion of long-term debt)
The estimated fair value of current portion of long-term debt is calculated by the same method as long-term debt. For short-termborrowings, the relevant carrying value is used since these items are settled in a short periods of time and its fair value is almost the same as
the carrying value.

(Long-term debt)
The estimated fair value of long-term debt is calculated by applying a discount rate to the total of principal and interest. The discount rate isbased on the assumed interest rate if a similar new loan is entered into.

13. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses included in selling, general and administrative expenses amounted to ¥99 million and ¥40 million ($389
thousand) for the years ended March 31, 2013 and 2014, respectively.

14. RETIREMENT BENEFITS
Retirement benefits for the year ended March 31, 2013 are as follows:(a) Retirement benefit obligations
Millions of yen

Retirement benefit obligations
Plan assets at fair value¥(19,388)
10,808

Unfunded retirement benefit obligations
Unrecognized actuarial gain or loss
Accrued retirement benefits to employees(8,580)—¥ (8,580)(b) Retirement benefit expenses
Millions of yen

Service cost
Interest cost

¥ 877
301

Expected return on plan assets(235)

Amortization of actuarial gain or loss
Other*
Retirement benefit expenses

2,211
473
¥3,627*“Other” consists of the amount of contribution to defined contribution plan.

(c) The assumptions used in accounting for the above plans are as follows:
Discount rate
Expected return rate on plan assets
Period for amortization of actuarial gain or loss

1.0%
2.5%
Amortized as incurred

Retirement benefits for the year ended March 31, 2014 are as follows:(a) Defined benefit plans (excluding plans included in (b))(Reconciliation of beginning and ending balances of the retirement benefit obligations)Thousands of U.S.
dollars

Balance at beginning of the year
Service cost
Interest cost

¥18,743948
185$182,112
9,211
1,798

Actuarial loss (gain)
Retirement benefits paid
Balance at end of the year

25
(456)
¥19,445

242(4,430)$188,933

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Millions of yen

111

(Reconciliation of beginning and ending balances of plan assets at fair value)

Millions of yen

Thousands of U.S.
dollars

Balance at beginning of the year
Expected return on plan assets
Actuarial gain (loss)¥10,611265
1,024$103,099
2,575
9,949

Contributions to the plans
Retirement benefits paid
Balance at end of the year

541
(320)
¥12,121

5,257(3,109)$117,771(Reconciliation between retirement benefit obligations and plan assets at fair value and liability for retirement benefits and asset for retirement
benefits on the consolidated balance sheet)

Millions of yen

Thousands of U.S.
dollars¥19,445(12,121)$188,933(117,771)

Net liability (asset) on consolidated balance sheet

7,324

71,162

Liability for retirement benefits
Net liability (asset) on consolidated balance sheet

7,324¥ 7,324

71,162$ 71,162

Millions of yen

Thousands of U.S.
dollars

Retirement benefit obligations (funded plans)
Plan assets at fair value(Details of retirement benefit expenses)

Service cost
Interest cost

¥948
185

$9,211
1,798

Expected return on plan assets
Amortization of actuarial gain or loss
Retirement benefit expenses for defined benefit plans

(265)
(999)
¥(131)(2,575)(9,707)$(1,273)(Plan assets)
Components of plan assets

General accounts
Stock

44%
40%

Bonds
Other
Total

15%
1%
100%

(Basis of measurement for long-term expected return rate on plan assets)
The expected long-term return rate on plan assets is determined based on the current and expected future distribution of plan assets and thecurrent and expected future long-term return rate on various assets of which plan assets are composed.
(Basis of the actuarial assumptions)

1.0%
2.5%

Discount rateLong-term expected return rate on plan assets(b) Defined benefit plans applying simplified methods(Reconciliation of beginning and ending balances of liability for retirement benefits)

Millions of yen

112

Thousands of U.S.
dollars

Balance at beginning of the year
Retirement benefit expenses
Retirement benefits paid

¥448
100
(57)

$4,353972(554)

Contributions to the plans
Other
Balance at end of the year

(35)
13
¥469

(340)
126
$4,557INPEX CORPORATION Annual Report 2014

(Reconciliation between retirement benefit obligations and plan assets at fair value and liability for retirement benefits and asset for retirement
benefits on the consolidated balance sheet)

Millions of yen

Thousands of U.S.
dollars

Retirement benefit obligations (funded plans)
Plan assets at fair value

¥278
(216)

$2,702(2,099)Retirement benefit obligations (unfunded plans)

62
407

603
3,954

Net liability (asset) on consolidated balance sheet

469

4,557

Liability for retirement benefits
Net liability (asset) on consolidated balance sheet

469
¥469

4,557
$4,557(Retirement benefit expenses)

Millions of yen¥100

Retirement benefit expenses under simplified methods

Thousands of U.S.
dollars$972(c) Defined contribution plans
The Group’s contributions for defined contribution plans were ¥957 million ($9,298 thousand).

15. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2013 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2013

2014

2014

Balance at beginning of the year

¥13,142711
429¥17,395
6,209
782$169,015
60,328
7,598

New obligations
Accretion expenses
Obligations settled
Change in estimates *1
Other *2
Balance at end of the year

(359)

(198)

(1,924)

1,997
1,475
¥17,395

2,275
1,844
¥28,307

22,105
17,917$275,039*1 ”Change in estimates” for the year ended March 31, 2014 mainly reflects increasing site restoration and decommissioning costs of certain
subsidiaries which became evident in the year ended March 31, 2014.
*2 ”Other” mainly includes the change due to foreign exchange rates fluctuation.

16. GOODWILL
The changes in the carrying amount of goodwill for the years ended March 31, 2013 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2013

2014

2014

Balance at beginning of the year
Goodwill acquired during the year
Amortization of goodwill
Balance at end of the year

¥94,602—(6,761)¥87,841¥87,841—(6,761)¥81,080$853,488—(65,692)$787,796

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014113

17. LEASES
Future minimum lease payments subsequent to March 31, 2014 for operating lease transactions are summarized as follows:(a) As lessee
Millions of yen

Thousands of U.S. dollars¥ 4,398
11,492¥15,890$ 42,732
111,660$154,392

Millions of yen

Thousands of U.S dollars

20152016 and thereafter
Total(b) As lessor

¥104
277
¥381

2015
2016 and thereafter
Total$1,0102,692$3,702

18. CONTINGENT LIABILITIESAs of March 31, 2014, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of affiliates in theaggregate amount of ¥25,186 million ($244,714 thousand).
In addition, the Company guarantees for derivative transactions utilized to hedge exchange rate fluctuation risk regarding payments ofdevelopment costs for the Ichthys LNG Project. The relevant loss on valuation as of March 31, 2014 was ¥17,531 million ($170,336 thousand).
In connection with the Ichthys LNG Project Finance, the Company and other project participants provide lenders with a guarantee of liabilities
during the construction phase based on each participating interest. The portion guaranteed by the Company as of March 31, 2014, was¥600,030 million ($5,830,062 thousand).

19. SEGMENT INFORMATION
Segment information for the years ended March 31, 2013 and 2014(a) Overview of reportable segments
The reportable segments for the Group’s oil and gas development activities are composed of individual mining area and others for which
separate financial information is available in order for the Board of Directors to make Group management decisions. Since the Group operates
oil and gas businesses globally, the Group’s reportable segments are the mining areas and others by geographical region, categorized in”Japan”, ”Asia & Oceania” (mainly Indonesia, Australia and East Timor), ”Eurasia (Europe & NIS)” (mainly Azerbaijan), ”Middle East & Africa”(mainly UAE) and ”Americas.”
The Company produces oil and gas in each segment. In addition, the Company conducts marketing activities for petroleum products andothers in ”Japan” segment.

(b) Basis of measurement for sales, income (loss), assets and other items by reportable segment
Accounting policies for the reportable segments are substantially the same as those described in ”Note 2. SUMMARY OF SIGNIFICANTACCOUNTING POLICIES.”(c) Information on sales and income (loss), assets and other items by reportable segment
Millions of yen

114

Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaYear ended March 31, 2013

Japan

Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assets¥118,937
118,937
28,568265,467¥485,275
485,275
281,623
690,763¥ 85,541
85,541
41,752526,519¥520,835
520,835
357,343
266,649

17,603

17,033

9,066

—

—

—

1,857

46,818¥ 24,656¥203,853

INPEX CORPORATION Annual Report 2014¥

Americas

¥

Total

5,945
5,945
(6,089)188,209¥1,216,533
1,216,533
703,197
1,937,607

5,850

1,012

—

(192)

—

53,243

1,024¥ 20,595

Adjustments *1 Consolidated *2¥——(9,749)1,678,552¥1,216,533
1,216,533
693,4483,616,159

50,564

1,352

51,916

(192)

6,953

6,761

4,159

106,077—

106,077¥108,373¥ 358,501

1,486¥ 359,987¥

Millions of yen
Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas¥ 11,435 ¥1,334,626
11,435
1,334,626(7,646)
743,759
265,348
2,413,674

Adjustments *1 Consolidated *2

Year ended March 31, 2014

Japan

Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assets¥120,268
120,268
22,771
286,414¥ 485,069
485,069
264,849
1,038,265¥ 96,341
96,34142,601
535,046¥621,513
621,513421,184
288,601

18,838

8,822

10,417

6,772

4,672

49,521

1,396

50,917

—

—

—

—

(192)

(192)

6,953

6,761

2,000

39,124—65,184

2,015

108,323—

108,323¥ 42,404¥ 285,903

4,073¥ 35,195¥ 51,583¥ 419,158417¥ 419,575

¥

Total

¥

— ¥1,334,626—
1,334,626(10,149)
733,610
1,624,465
4,038,139¥

Thousands of U.S. dollars
Eurasia
Middle East &Asia & Oceania(Europe & NIS)
AfricaAmericas$ 111,106 $12,967,606
111,106
12,967,606(74,291)
7,226,574
2,578,197
23,451,943

Adjustments *1 Consolidated *2

Year ended March 31, 2014

Japan

Sales to third parties
Total sales
Segment income (loss)
Segment assets
Other items
Depreciation andamortization
Amortization of goodwill
Investment to affiliates
accounted for by theequity-method
Increase of tangible fixed
assets and intangible
assets$1,168,558
1,168,558
221,250
2,782,880$ 4,713,068
4,713,068
2,573,348
10,088,078$ 936,077
936,077
413,923
5,198,659$6,038,797
6,038,797
4,092,344
2,804,129

183,035

85,717

101,215

65,79945,394

481,160

13,564

494,724

—

—

—

—

(1,866)(1,866)67,55865,692

19,433

380,140—

633,346

19,5781,052,497—

1,052,497$ 412,009$ 2,777,915

39,574$ 341,965$ 501,195$ 4,072,658

4,052$ 4,076,710

$

Total

$

— $12,967,606—
12,967,606(98,611)
7,127,963
15,783,764
39,235,707$*1 Adjustments include elimination of inter-segment transactions and corporate incomes, expenses and assets that are not allocated to areportable segment.
*2 Segment income is reconciled with operating income on the consolidated statements of income.

(d) Products and service information(Sales to third parties)

Millions of yen

Crude oil
Natural gas (excluding LPG)
LPG
Other
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 788,135
370,528
27,23830,632¥1,216,533¥ 858,754
431,187
24,227
20,458¥1,334,626$ 8,343,898
4,189,536
235,396
198,776$12,967,606

Years ended March 31,(e) Geographical information(Sales)Millions of yen

Japan
Asia & Oceania
Other
Total

Thousands of U.S. dollars

2013

2014

2014

¥ 634,788
564,253
17,492¥1,216,533¥ 682,353
620,339
31,934¥1,334,626$ 6,629,936
6,027,390
310,280$12,967,606

Years ended March 31,(Tangible fixed assets)

Millions of yen

Thousands of U.S. dollars

March 31,

2013

2014

Japan
Australia
Other
Total

¥235,674
227,358
121,509¥584,541¥248,247
520,976
182,556¥951,779

2014$2,412,039
5,061,951
1,773,766$9,247,756(Sales to major customers)

Millions of yen

Thousands of U.S. dollars

Years ended March 31,

2013

2014

2014

PERTAMINA
Idemitsu Kosan Co., Ltd.

¥206,282¥132,908¥217,519¥156,151$2,113,476$1,517,208

Segment
Asia & Oceania
Middle East & Africa

INPEX CORPORATION Annual Report 2014

Financial &Corporate Information(f) Information by major customer

7

115

20. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the years ended March 31, 2013 and 2014.

(a) Affiliated company
Year ended March 31, 2013
Amounts
Description of
the business Transaction detail
Millions of yen
relationship

Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Transportation,
Serve theliquefaction and sales ofofficer
Western$482,700 oil and natural gas through Indirectly
concurrently,
Australia,
pipeline in WA-50-L
66.07%
thousandcapitalAustralia
block in offshore Western
subscription
Australia

Capitalinvestment

Nature ofoperations

Votinginterest

Amounts
Title of accountLoans of funds*
Collection ofloans*¥141,153

Debt guarantee

128,864—

Exploration, development,
Angola€18
production and sales of Indirectly Capital Subscription for
Hague,
Block 14
Netherlands thousand oil in Block 14 in offshore 49.99% subscription new shares
B.V.
Republic of Angola¥ 37,621—

Millions of yen

Short-term loans
119,139 receivable¥58,700——¥* The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.

Year ended March 31, 2014
Name ofrelatedparty

Ichthys
LNG PtyLtd

Location

Capitalinvestment

Nature ofoperations

Votinginterest

Descriptionof thebusinessrelationshipAmounts

Amounts
Transaction
detailTransportation,liquefaction andServe the Interest
sales of oil andWestern
officer income*$482,700
Indirectly
natural gas throughAustralia,
concurrently,
66.07%
thousandpipeline in WA-50-L
Australia
capitalblock in offshore
subscription
Western Australia

Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars¥

Debt
guarantee

7,976¥600,030$

Current
assets:other(accrued
77,497 revenue)¥ 2,133$ 20,725

Longterm loans
receivable

27,309265,342$5,830,062

—

¥

—

$

—

* The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.

(b) Note related to the parent company or significant affiliated companies
The significant affiliated company for the year ended March 31, 2013 and 2014 is Ichthys LNG Pty Ltd. The summary of its financial information
are as follows:
Millions of yen

2013

Total current assets¥ 47,429¥

Total fixed assets

550,378

1,262,541

Total current liabilities

227,942

57,265556,403

Total long-term liabilities

336,847

1,229,360

11,944,812

Total net assets

33,01923,154

224,971

Net sales
Net loss before income taxes
Net loss

116

Thousands of U.S. dollars

Years ended March 31,

INPEX CORPORATION Annual Report 2014¥2014
47,238

2014$

458,978
12,267,208

—

—

—

1,511

3,367

32,715

694

¥

2,018

$

19,607

Independent Auditorʼs Report

Independent Auditor’s Report
The Board of Directors
INPEX CORPORATION
We have audited the accompanying consolidated financial statements of INPEX CORPORATION and its
consolidated subsidiaries, which comprise the consolidated balance sheet as at March 31, 2014, and theconsolidated statements of income, comprehensive income, changes in net assets, and cash flows for theyear then ended and a summary of significant accounting policies and other explanatory information, allexpressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to
express an opinion on the effectiveness of the entity’s internal control, but in making these risk
assessments the auditor considers internal controls relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of INPEX CORPORATION and its consolidated subsidiaries
as at March 31, 2014, and their consolidated financial performance and cash flows for the year thenended in conformity with accounting principles generally accepted in Japan.
Convenience Translation
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented
for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements
have been properly translated on the basis described in Note 3.

7
Financial &Corporate Information

June 25, 2014
Tokyo, JapanINPEX CORPORATION Annual Report 2014117

Subsidiaries and Affiliates
As of March 31, 2014

Consolidated Subsidiaries
Company name

Voting rights
held by us (%)

Main business

INPEX Natuna, Ltd.

5,000

100.00%Exploration, development, production and sales ofoil and natural gas in the South Natuna Sea Block B,
Indonesia

INPEX Sahul, Ltd.

4,600

100.00%Exploration, development, production and sales ofoil and natural gas in the JPDA03-12 Block and BayuUndan gas-condensate field in the Timor Sea JPDA

INPEX Alpha, Ltd.

8,014

100.00%Exploration, development, production and sales ofoil and natural gas in the WA-35-L Block and others,
Australia

INPEX Tengah, Ltd.

1,020

100.00%Exploration, development, production and sales of oil
and natural gas in the Tengah Block in Offshore East
Kalimantan, Indonesia

INPEX Browse, Ltd.

418,190

100.00%Financing for oil and natur al gas explor ation anddevelopment in the WA-285-P Block and others, Australia

INPEX Ichthys Pty Ltd(Thousands of
U.S. dollars)

100.00%Exploration and development of oil and natural gas in
the Ichthys gas-condensate field (WA-50-L), Australia

INPEX Browse E&P Pty Ltd(Thousands of
U.S. dollars)

100.00%Exploration of oil and natural gas in the WA-494-P
Block and others, Australia

INPEX Masela, Ltd.

35,42851.93%

Exploration and development of oil and natural gas in
the Masela Block in the Arafura Sea, Indonesia

INPEX South Makassar, Ltd.

1,097

100.00%Exploration, development, production and sales of oil
and natural gas in the Sebuku Block in the Makassar
Strait, Indonesia

INPEX Timor Sea, Ltd.

6,712

100.00%Exploration, development, production and sales of oil
and natural gas in the JPDA06-105 Block in the Timor
Sea JPDA(Thousands of
U.S. dollars)

100.00%Exploration and development of oil and natural gas in
the Prelude gas field (WA-44-L) and others, Australia

INPEX Babar Selaru, Ltd.

1,107

51.02%

Exploration of oil and natural gas in the Babar Selaru
Block, Offshore Indonesia

INPEX Offshore North West Sabah, Ltd.

2,045

100.00%Exploration of oil and natural gas in the deepwater
Block S located offshore Sabah, Malaysia

INPEX Southwest Caspian Sea, Ltd.

53,59451.00%

Exploration, development, production and sales of oilin the ACG Oil Fields, Azerbaijan

INPEX North Caspian Sea, Ltd.

50,68045.00%

Exploration and development of oil in the Offshore
North Caspian Sea Block, Kazakhstan

Japan Oil Development Co., Ltd.

18,800100.00%Exploration, development, production and sales ofoil in the ADMA Block in Offshore Abu Dhabi, United
Arab Emirates

INPEX ABK, Ltd.

2,500

100.00%Exploration, development, production and sales of oilin the Abu Al Bukhoosh Block in Offshore Abu Dhabi,
United Arab Emirates

10100.00%Exploration, development, production and sales of oilin the Offshore D.R. Congo Block100.00%Inves t ment in oil ex plor ation, develop ment,
production and sales in Block 14, Offshore Angola

100.00%Exploration, development, production and sale ofnatural gas in the Copa Macoya Block and exploration,
development, production and sale of oil in the Guarico
Oriental Block, Bolivarian Republic of Venezuela

INPEX Oil & Gas Australia Pty Ltd

Teikoku Oil (D.R. Congo) Co., Ltd.

118

Issued capital*(Millions of yen)

802,688245,186

400,000

475,600

INPEX Angola Block 14 Ltd.

(Thousands of
U.S. dollars)

Teikoku Oil and Gas Venezuela, C.A.

(Thousands ofbolivars)

Teikoku Oil (North America) Co., Ltd.

(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oil
and natural gas in the Lucius oil field and others, in the
US Gulf of Mexico

INPEX Canada, Ltd.

20,580100.00%Exploration and development of oil including oil sandsin the Joslyn project, Canada

Teikoku Oil (Suriname) Co., Ltd.

7,257

56.78%

Exploration of oil in the Offshore Block 31, Suriname

INPEX CORPORATION Annual Report 2014

1,620

19,793

Company name

INPEX Gas British Columbia Ltd.

Issued capital*(Millions of yen)

1,043,488(Thousands
Canadian dollars)

Teiseki Pipeline Co., Ltd.

100
86,135INPEX DLNGPL Pty Ltd(Thousands of
AUS dollars)

INPEX BTC Pipeline, Ltd.

(Thousands of
U.S. dollars)

63,800

Voting rights
held by us (%)

Main business45.09%

Exploration, development, production and salesof natural gas in the shale gas blocks of Horn River,
Cordova and Liard basins in British Columbia, Canada

100.00%Natural gas transportation, pipeline operation,
maintenance and management

100.00%Investment in Darwin LNG Pty Ltd, which constructs
and operates the undersea pipeline and LNG plantconnecting Bayu Undan Gas/Condensate Field andDarwin (Australia)

100.00%Investment in the pipeline construction andmanagement business that connects Baku (Azerbaijan),
Tbilisi (Georgia) and Ceyhan (Turkey)

INPEX Trading, Ltd.

50

100.00%

Sales, agency and brokerage of crude oil and market
research and sales planning in connection with oil andnatural gas sales

Saitama Gas Co., Ltd.

60

62.67%

City gas sales

37 other subsidiaries

Equity-Method Affiliates
Voting rights
held by us (%)

Main business44.00%

Exploration, development, production and sales ofnatural gas in the Berau Block and the Tangguh LNG
Project, West Papua province, Indonesia(Thousands of
U.S. dollars)

66.07%Engaged in laying the undersea pipeline from theIchthys gas-condensate field to the Darwin Onshore
LNG Plant and building the LNG plant, Australia

Angola Japan Oil Co., Ltd.

8,000

19.60%

Exploration, development, production and sales of oilin the Offshore 3/05 Block, Angola

INPEX Offshore North Campos, Ltd.

6,852

37.50%

Financing for oil and natural gas exploration,
development, production and sales in the Frade Blockin Offshore North Campos, Brazil

49.99%

Exploration, development, production and sales of oilin Block 14, Offshore Angola

Company name

MI Berau B.V.
Ichthys LNG Pty Ltd

Angola Block 14 B.V.

Issued capital*(Millions of yen)

888,601(Thousands of
U.S. dollars)

482,700

18(Thousands ofeuros)

14 other equity-method affiliates

Subsidiaries of Equity-Method Affiliates
7
Frade Japão Petróleo Limitada

Issued capital*

103,051(Thousands
reais)

Main business

0.00%

Exploration, development, production and sales of oil
and natural gas in the Frade Block in Offshore North
Campos, Brazil

Financial &Corporate Information

Company name

Voting rights
held by us (%)

2 other subsidiaries of equity-method affiliates* Rounding off fractions less than the unit.

INPEX CORPORATION Annual Report 2014

119

Business Risks

The following is a discussion on key items that can be considered potential risk factors relating to the business of INPEXCORPORATION, its subsidiaries and affiliates (the “Group”). From the standpoint of information disclosure to investors andshareholders, we proactively disclose matters that are not necessarily the business risks but that can be considered to have important
effects on the investment decisions of investors. The following discussion does not completely cover all business risks relating to theGroup’s businesses.
Unless stated otherwise, forward-looking statements in the discussion are the judgment of the Group as of June 26, 2014 and are
subject to change after such date due to various factors, including changes in social and economic circumstances.

1. CHARACTERISTICS OF AND RISKS ASSOCIATED WITH THE
OIL AND NATURAL GAS DEVELOPMENT BUSINESS(1) Risk of failure in exploration, development or
production

Payment of compensation is ordinarily necessary to acquireparticipating interests. Also, surveying and exploratory drilling
expenses (exploration expenses) become necessar y at thetime of exploration activities for the purpose of discoveringresources. When resources are discovered, it is necessary tofurther invest in substantial development expenses according tovarious conditions, including the size of the recoverable reserves,development costs and details of agreements with oil-producing
countries (including gas-producing countries; hereinafter thesame shall apply).
There is, however, no guarantee of discovering resources
on a scale that makes development and production feasible.
The probability of such discoveries is considerably low despite
various technological advances in recent years, and even whenresources are discovered the scale of the reserves does notnecessarily make commercial produc tion feasible. For thisreason, the Group conservatively recognizes expenses related to
exploration investment in our consolidated financial statements.
The Group maintains financial soundness by booking 100% as
expenses in the case of concession agreements (including mining
rights awarded in Japan as well as permits, licenses and leases
awarded overseas) and by booking 100% of exploration project
investment as allowances in the case of production sharing
agreements. In addition, if there are impossibilities of recovery
of investment in a development project, we also book thecorresponding amount of investment in the development projectas allowances while considering the recovery possibility of eachproject.
To increase recoverable reserve and production volumes,
the Group plans to always t ake an interes t in promisingproperties and plans to continue exploration investment. At thesame time, we plan to invest in development projects, including
the acquisition of interests in discovered undeveloped fields andproducing fields, so as to maintain an overall balance between
assets at the exploration, development, and production stages.
A l t h o u g h e x p l o r a t i o n a n d d e ve l o p m e n t ( i n c l u d i n g
the acquisition of interes t s) are neces sar y to secure thereserves essential to the Group’s future sustainable businessdevelopment, each type of investment involves technologicaland economic risks, and failed exploration or development could
have an adverse effect on the results of the Group’s operations.

(2) Crude oil, condensate, LPG and natural gas reserves
1) Proved reserves
INPE X CO R P O R ATI O N (t h e “C o m p a ny ”) c o m mi s s i o n e d
DeGolyer and MacNaughton, an independent petroleum
engineering consultant in the United States, to assess the main
proved reserves of the Group of which projects with a significant

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INPEX CORPORATION Annual Report 2014

amount of future development investment might materiallyaffect future performance. An assessment of other projects wasundertaken by the Company. The definition of proved reserves isbased on the U.S. Securities and Exchange Commission’s (SEC)
Regulation S-X, Rule 4-10(a), which is widely known among U.S.
investors. Regardless of whether the deterministic approachor probabilistic approach is used in evaluation, proved oil
and gas reserves are estimated quantities that geological andengineering data demonstrate with reasonable certainty to be
recoverable from known reservoirs under existing economic
and operating conditions, from the date of evaluation throughto the expiration date of the agreement granting operatingrights (or in the event of evidence with a reasonable certainty ofagreement, extension through to the expiration of the projected
extension period). For definition as “proved reserves,” operators
must have a reasonable degree of certainty that the recovery ofhydrocarbons has commenced or that the project will commence
within an acceptable period of time. This definition is widely
regarded as being conservative. Nevertheless, the strictness ofthe definition does not imply any guarantee of the production of
total reserves during a future production period.
For f ur ther det ails on proved reser ves of cr ude oil,condensate, LPG and natural gas held by the Group, including
affiliates accounted for under the equity method, please see
the section “Oil and Gas Reserves and Production Volume” on
P. 128.
2) Probable reserves and possible reserves
In addition to the assessment of proved reserves based on
the SEC standards, the Company commissioned DeGolyer
and MacNaughton to assess its probable reser ves and thepossible reserves of which projects with a significant amountof future development investment might materially affect the
future performance, similar to proved reserves. An assessmentof other projects was undertaken by the Company, based on
the Petroleum Resources Management System 2007 (PRMS)
published by four organizations: the Society of Petroleum
Engineers (SPE), the World Petroleum Congress (WPC), theAmerican Association of Petroleum Geologists (A APG), andthe Society of Petroleum Evaluation Engineers (SPEE). Probablereserves, as defined by PRMS guidelines established by thefour organizations, are reserves of oil and gas volumes outside
proved reserves that are less likely to be recovered than proved
reserves but more certain to be recovered than possible reserves
based on analyses of geological and engineering data. In thiscontext, when probabilistic methods are employed, there
should be at least a 50% probability that the quantities actually
recovered will equal or exceed the sum of estimated proved
and probable reserves. In addition, possible reserves are also
defined in accordance with PRMS guidelines as reserves of oiland gas volumes which are not categorized as proved reserves
or probable reserves and which are less likely to be recovered
than probable reserves based on analyses of geological andengineering data. In this case, it is unlikely that the actual
quantity of oil and gas recovered will exceed the sum of proved
reserves, probable reserves and possible reserves. Furthermore,when probabilistic methods are employed to calculate possible
reserves, there should be at least a 10% probability that thequantities recovered will equal or exceed the sum of proved
reserves, probable reserves and possible reserves. Probablereserves and possible reserves can be upgraded to proved
reser ves af ter the addition of new technical data or when
uncertainty has been reduced due to clarification of economic
conditions or operational conditions. Nevertheless, probablereserves and possible reserves do not offer a guarantee of the
production of total reserves during a future production periodwith the same certainty as proved reserves.
For fur ther details on probable reser ves and possible
reserves of crude oil, condensate, LPG and natural gas held by
the Group, including affiliates accounted for under the equity
method, please see the section “Oil and Gas Reserves andProduction Volume” on P. 128.
3) Possibility of changes in reserves
A reserve evaluation depends on the available geological andengineering data from oil and gas reservoirs, the maturity ofdevelopment plans and a considerable number of assumptions,factors and variables including economic conditions as of thedate such an estimate is made. Reserves may be revised in the
future on the basis of geological and engineering data as well
as development plans and information relating to changes in
economic and other conditions made newly available throughprogress in production and operations. As a result, there is apossibility that reserves will be restated upwards or downwards.
As to the reserves under a PSC, not only production, but also
oil and gas prices, investments, recovery of investments due
to contractual conditions and remuneration fees may affectthe economic entitlement. This may cause reserves to increaseor decrease. In this way, the assessed value of reserves could
fluctuate because of various data, assumptions and changes ofdefinition.

(3) In the oil and natural gas development business theperiod from exploration to sales is highly capital intensive
and funds cannot be recovered for a long time(4) Operatorship

In the oil and natural gas development business, companies
frequently form business partnerships for the purpose of thedispersion of risk and financial burden. In such partnerships,
one of the companies becomes the operator, which performs
the actual work and bears the responsibility for operations onbehalf of the partners. The companies other than the operator,
as non-operators, participate in the business by providing apredetermined amount of funds and either carefully examining
the exploration and development plan devised and implemented
by the operator, or participating in some operations.
The integration of INPEX CORPORATION and Teikoku OilCo., Ltd., was completed on October 1, 2008. The resultant
company possesses abundant operational capabilities thanks
to the amalgamation of the former t wo companies’ knowhow based on extensive operation experience in exploration,
development and production both within Japan and overseas aswell as their high level proprietary technologies.
The Group intends to actively pursue operator projects
focusing on the two large-scale LNG Ichthys and Abadi projects
taking into consideration the effective application of businessresources as well as the balance between operator and nonoperator projects, based on the Group’s technical capability,
which has been considerably enhanced by the above-statedbusiness integration. Although the Company lacks operator
experience in LNG development projects, it has significant
expertise as an operator in the development and productionof crude oil and natural gas both in Japan and overseas as well
as a wealth of know-how and knowledge accumulated overmany years as a participant in LNG and other projects in suchcountries as Indonesia and Australia. In addition, we believe thatby utilizing the services of specialized subcontractors and highly
experienced external consultants, a practice similar to foreign
oil companies including the majors, it will be possible to executebusiness appropriately as an operator.
Engaging in projec t coordination as an operator willcontribute to the expansion of oppor tunities of block anda c r eag e a c q ui s i t io n t hro u g h e n ha n c e m e nt of te c h nic alcapabilities and greater presence in oil-producing countries
and the industry. At the same time, there exist risks such as
constraints on the recruitment of personnel who have specialized
operational skills and an increase in financial burden. Inability toadequately cope with such risks could have an adverse effect on
the Group’s results of operations.

(5) Project partners

In the oil and natural gas development business, as previously
mentioned, several companies often engage in joint businessfor the purpose of dispersion of risk and financial burden. In
such cases, the partners generally enter into a joint operating
agreement among themselves to decide on the decision-making
procedure for execution of the joint business, or to decide on
an operator that conducts business on their behalf. A company

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Considerable time and expense is required for explorationac tivities. Even when promising resources are discovered
through exploration, substantial expenses including production
facility construction costs, and an extended period of time, arenecessary at the development stage leading up to production.
For this reason, a long period of 10 years or more is required
from the time of exploration and development investment until
the recovery of funds through production and sales. In particular,
the development of the Ichthys and the Abadi, large-scale
LNG projects, being pursued by the Company requires a verylarge amount of investment, and the financing of these projects
could be impacted by changes in the economic and financial
environment. Following the discovery of resources, a delay inthe development schedule or the loss of the economic viabilityof the properties during the development process leading up
to production and the commencement of sales could have an
adverse effect on the Group’s operational results. Such delays
or losses may occur due to changes in the business environment

including a delay in the acquisition or modification of government
approvals, the occurrence of unanticipated problems related
to geological conditions, fluctuations in the price of oil or gas,fluctuations in foreign exchange rates, or escalating prices ofequipment and materials. In the case of LNG projects, suchdelays or losses may occur due to an inability to complete suchprocedural requirements as FID owing to the lack of any longterm contractual agreement with prospective purchasers withrespect to production.

121

that is a partner in one property in which the Group is engaged
in joint business may become a competitor in the acquisition ofother participating interests, even though the relationship withthe partner may be good.
In undertaking the joint business, participants in principle
bear a financial burden in proportion to their interest share. Any
inability by a joint business partner to fulfill this financial burden
may adversely affect the project.

(6) Disaster and accident risks

Oil and natural gas development entails the risk that operational
accidents and disasters may occur in the process of exploration,
development, production and transportation. Should such an
accident, disaster or other such incident occur, there is the riskthat costs will be incurred, excluding compensation covered byinsurance, due to facility damage, as well as the risk of a major
accident or disaster involving loss of life. In addition, a costburden for recovery or opportunity loss from the interruption ofoperations could occur. For the domestic natural gas business,
the Company has continued to procure as source gas natural gas
regasified from imported LNG since January 2010. Furthermore,
the Company will take steps to procure imported LNG as source
gas in connection with its Naoetsu LNG Terminal from August
2013. An inabilit y to procure natural gas regasified fromimported LNG and other imported gas as source gas due totroubles concerning suppliers or the Company’s Naoetsu LNG
Terminal may interfere with the Company’s ability to supply to
its customers. This could in turn have an adverse effect on the
Company’s domestic natural gas business.
W i t h re g ar d to e nv iro n m e nt al p ro b l e m s, t h e re is apossibility of soil contamination, air pollution, and freshwaterand seawater pollution. The Group has established a “Health,
Safety and Environment Policy,” and as a matter of course
abides by the environmental laws, regulations, and standards ofthe countries in which we operate and give due consideration
to the environment in the conduct of business, based on our
independent guidelines. In the event of an operating accident ordisaster which impacts the environment, there is the possibilityof incurring a response or cost burden for recovery from thatincident, of incurring obligation of payment for procedural
costs, compensation or other cost related to the start of civil,
criminal or government procedures, or of incurring loss from theinterruption of operations. Furthermore, in the event of changes
to or the strengthening of the environmental laws, regulations,and standards (including support measures for the promotion ofnew, renewable energies) of the countries in which we operate, it
may be necessary for the Group to devise additional measures,
and an associated cost burden could occur.
Although the Group maintains accident insurance in thenatural conduct of its operations, should such an accident ordisaster be attributable to willful misconduct or negligence on
the part of the Group, the occurrence of a cost burden could
have an adverse effect on financial results. Also, such accident
or trouble would result in receiving administrative punishment or
result in damage to the Group’s credibility and reputation as anoil and natural gas development company, and could therefore
have an adverse effect on future business activities.
In November 2011, an oil sheen was discovered spreading in
the vicinity of the Frade oil field, in which an approximately 18.3%
interest is held by Frade Japão Petróleo Limitada (“FJPL”), which
is a subsidiary of INPEX Offshore North Campos, Ltd. (which isan equity-method affiliate of INPEX CORPORATION and in which
INPEX CORPORATION holds a 37.5% interest).

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INPEX CORPORATION Annual Report 2014

In March 2012, Chevron Brasil Upstream Frade Ltda., theFrade oil field project operator (“Chevron”), also identified asmall, new oil seepage emanating from a location different fromthat of the November 2011 oil seep. As a result, Chevron andits partner companies, including FJPL, temporarily suspended
production in the Frade oil field with production resuming on
April 30, 2013.
Relevant Brazilian agencies filed multiple lawsuits against,
and other notices with, Chevron, the operator of the field andother companies requesting compensation for damage and asuspension in operations and other measures in connection withthe oil seeps in November 2011 and March 2012. For example,
two lawsuits were filed by Brazil’s Federal Prosecution Service
against Chevron and other companies demanding damages
in the amount of 20 billion real (about 9 hundred billion yen at
the rate of one real to about 45 yen) as well as the temporary
suspension of operations in relation to each of the incidents in
November 2011 and March 2012.
On September 13, 2013, Chevron signed an agreement
to settle the aforementioned two lawsuits filed by Brazil’sFederal Prosecution Service. On September 27, 2013, the firstFederal Cour t of the Capital of the State of Rio de Janeiro
approved this agreement and handed down a ruling dismissing
the aforementioned two lawsuits. On November 11, 2013, thesame court issued a certificate certifying that its ruling became
final and binding. As a result of this, whilst some incidental
or connected proceedings remain outstanding pending theconclusion of future judgments to be made by the courts, theaforementioned two lawsuits are effectively considered to beconcluded. The INPEX group (including FJPL) is not a direct party
to any of these lawsuits or other actions, but if Chevron is madeto pay settlement money or bear any other financial burden asa result of signing the agreement related to these lawsuits or
actions, FJPL will be required to bear financial burden equivalent
to the portion of interest held by FJPL in accordance with the
Joint Operating Agreement for the Frade oil field, and, in such acase, FJPL would be liable to pay 17 million real (about 8 hundred
million yen at the same rate as set out above).
Additionally, in September 2013, INPEX CORPORATION’s
consolidated subsidiary, INPEX North Caspian Sea, Ltd. (“INCS”)
in which INPEX CORPORATION holds a 45% interest, began
crude oil production at the Kashagan oil field within the Offshore
North Caspian Sea Block in the Republic of Kazakhstan, in which
INCS holds a 7.56% interest. However, shortly after crude oil
production had begun, such production was suspended due tothe discovery of a leak from the gas pipeline. In response to thegas leak, North Caspian Operating Company, the operator, andAgip KCO, the company responsible for operations management(together, the “Operators”), flared the gas remaining in thegas pipeline at the produc tion facilities and emitted it. In
connection with this activity, the Atyrau Region of the Ministryof Environment Protection of the Republic of Kazakhstan issued
a notice on March 7, 2014, in relation to its monetary claim foran amount of 134.3 billion Kazakhstani Tenge (about 75 billion
yen at the rate of one Kazakhstani Tenge to about 0.56 yen), tothe Operators for the alleged violation of environmental laws.
The Operators are currently in dispute seeking revocation of
the notice. If the amount is ultimately assessed against the
Operators, there is a possibility that INCS will be required toshare responsibility in proportion to its interest under the Joint
Operating Agreement (about 5.7 billion yen).

2. EFFECTS OF FLUCTUATIONS IN CRUDE OIL PRICES, NATURALGAS PRICES, FOREIGN EXCHANGE AND INTEREST RATES ON
FINANCIAL RESULTS(1) Effects of fluctuations in crude oil prices and natural
gas prices on financial results(2) The effect of fluctuations in exchange rates on
financial results

A large percentage of crude oil prices and natural gas prices
in overseas businesses are determined by international market
conditions. In addition, those prices fluctuate significantly inresponse to the influence of a variety of factors including global
or local supply and demand as well as trends and conditionsin the global economy and financial markets. The vast majorityof these factors are beyond the control of the Company. In
this regard, INPEX is not in a position to accurately predict
movements in future crude oil and natural gas prices. The
Group’s sales and profits are subject to the effects of such pricefluctuations. Such effects are highly complex and are caused by
the following factors.
1) Although a majority of natural gas selling prices in overseas
businesses are linked to crude oil prices, they are not in direct
proportion to crude oil prices.
2) Because sales and profits are determined on the basis of
crude oil prices and natural gas prices at the time sales arebooked, actual crude oil transaction prices and the averageoil price during the accounting period do not necessarily
correspond.
For the domestic natural gas businesses, the Company
has continued to purchase as source gas natural gas regasified
from imported LNG as a raw material in addition to natural
gas produced in Japan since January 2010. The price of theCompany’s natural gas sold in Japan is comprised of a fixed priceportion as well as a portion that reflects fluctuations in the priceof imported LNG. In addition to the direct impact of trends inthe market prices of LNG and competing energy sources on that
portion that reflects fluctuations in the price of imported LNG,
contract negotiations held each fiscal year with end purchasers
could have an indirect effect on the fixed price portion.

As most of the Group’s business consists of E&P conducted
overseas, associated revenues (sales) and expenditures (costs) aredenominated in foreign currencies (primarily in U.S. dollars), andprofit and loss is subject to the effects of the foreign exchange
market. In the event of appreciation in the value of the yen, yendenominated sales and profits decrease. Conversely, in the eventof depreciation in the value of the yen, yen-denominated sales
and profits increase.
On the other hand, when borrowing necessar y funds,
the Company borrows in foreign currencies. In the event ofappreciation in the value of the yen, a foreign exchange gain on
foreign-currency denominated borrowings is recorded as a resultof fiscal year-end conversion; in the event of depreciation in thevalue of the yen, a foreign exchange loss is incurred. For thisreason, the exchange risk associated with the above businessis diminished and the impact of fluctuations in exchange rates
on profit and loss tends to be mitigated. Moreover, although
the Company is taking measures to reduce a portion of the risks
associated with movements in foreign currency exchange rates,
these measures by no means cover all possible risks. As a result,the impact of fluctuations in foreign currency exchange rates
cannot be completely eliminated.

(3) The effect of fluctuations in interest rates on
financial results
The Group raises some of the funds necessary for explorationand development operations through borrowing. Much ofthese borrowings are with variable-rates, long term borrowings
based on the U.S. dollar six-month LIBOR rate. Accordingly, theCompany’s profits are subject to the influence of fluctuations
in U.S. dollar interest rates. Furthermore, although the Grouphas devised methods to reduce a portion of interest rate risk,these methods do not cover all risks of interest rate fluctuation
incurred by our Group and do not entirely remove the effect offluctuations in interest rates.

3. OVERSEAS BUSINESS ACTIVITIES AND COUNTRY RISKof OPEC production ceilings in OPEC member countries andchanges in the legal system and taxation system of thosecountries (including the establishment or abolition of laws or
regulations and changes in their interpretation or enforcement)
could have a significant impact on the Group’s business or results
unless the impact is compensated by insurance.
Additionally, against the background of rising development
costs and other changes in the business environment, theprogress of oil and gas projects, and the need to addressenvironment al is sues, the gover nment s of oil- producing
countries may seek to renegotiate the fiscal conditions including
conditions of existing oil contracts related to par ticipatinginterests. In the event that the fiscal conditions of contracts were
to be renegotiated, this could have an adverse effect on theGroup’s business performance.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

The Group engages in a large number of oil and natural gas
development projects overseas. Because the Group’s businessactivities, including the acquisition of participating interests,
are conducted on the basis of contracts with the governmentsof oil-producing countries and other entities, steps taken byoil-producing countries to further tighten controls applicable
to home country natural resources, suspension of operation
due to conflicts and other factors, and other such changes
in the political, economic, and social circumstances in such
oil-producing countries or neighboring countries (including
government involvement, stage of economic development,
economic growth rate, capital reinvestment, resource allocation,
res tr ic tion of economic ac tivities by global communit y,government control of foreign exchange or foreign remittances,and the balance of international payments), the application1234. DEPENDENCE ON SPECIFIC GEOGRAPHICAL AREAS OR
PROPERTIES(1) Production volume
The Group engages in stable production of crude oil and natural
gas in the Offshore Mahakam Block (Indonesia), the ADMA
Block (United Arab Emirates), the Minami Nagaoka Gas Field(Japan) and so on. Through a process of business integration,
the Group had established a wide ranging, diversified yetbalanced portfolio that encompassed the Asia-Oceania regions(particularly Japan, Indonesia, and Australia), the Middle East
and Africa, Eurasia including Caspian Sea area and the Americas.
For the year ended March 31, 2014 however, the Middle East
and Africa regions accounted for about 41% and the Asiaand Oceania regions accounted for about 41% of the Group’s
production volume, making up the vast majority of the Group’s
operations.
Looking ahead, the Group will endeavor to further enhance
the balance of its asset portfolio on a regional basis. However,the Group currently relies heavily on specific geographical areasand properties for its production volume, and the occurrence inthese properties of an operational problem or difficulty could
have an adverse effect on the Group’s operational results.

(2) Contract expiration dates in principal business areas

Expiration dates are customarily stipulated in the agreements
related to participating interests, which are prerequisites for theGroup’s overseas business activities. Although March 30, 1997
was the initial contract expiration date in the production sharing
contract for the Offshore Mahakam Block of Indonesia, theGroup’s principal geographical business area, an extension wasapproved in 1991, and the current expiration date is December
31, 2017. On the basis of the concession agreement for the
ADMA Block, the concession expiration date is March 8, 2018
(However, the expiration date for the Upper Zakum Oil Field
has been extended to December 31, 2041.) Although the Groupplans to make efforts together with partners to further extend
these agreements, inability to re-extend the agreements or
unfavorable contract terms and conditions at the time of reextension could have an adverse effect on the Group’s results.

Even should the agreements be re-extended, we anticipate
that remaining recoverable reserves may decrease at the timeof re-extension. Although the Group is striving to acquireinterests that can substitute these properties, failure to acquireparticipating interests in oil and gas fields to fully substitute forthese properties could have an adverse effect on the Group’s
results. In addition, the period for exploration in oil and gas fields
currently under exploration is fixed by contracts, and in the caseof fields where oil and/or gas reserves are found that are deemed
to be commercialized, and the Company is unable to decideon the transition to the development stage by the expiration of
the current contract, efforts will be made through negotiations
with the government of the oil- or gas-producing country inquestion to have the periods extended. However, there remains
the possibility that such negotiations may not be successfully
concluded, in which event the Company would be forced towithdraw from operations in the oil or gas field concerned. Also,
as a rule, when there has been a major breach of contract on
the part of one party, it is customary for the other party to havethe right to cancel the agreement before the expiration date.
The agreements for properties in these principal geographicalbusiness areas contain similar provisions. The Group has neverexperienced early cancellation of an agreement due to breachof contract, and we do not anticipate such an occurrence in the
future. Nevertheless, a major breach of contract on the partof a party to an agreement could result in cancellation of anagreement before the expiration date.
A n d i n t h e ove r s e a s n a t u r a l g a s d e ve l o p m e n t a n d
production activities, in many cases we are selling and supplying
gas based on long-term sales and supply contracts in which
expiration dates are stipulated. We plan to make efforts withpartners to extend or re-extend the expiration date before thedeadline stipulated in these contracts. Nevertheless, inability
to extend the contracts, or the occurrence of cases in which
extension is made but sales and supply volumes are reduced,
could have an adverse effect on the Group’s business or results.

5. PRODUCTION SHARING CONTRACTS(1) Details of production sharing contracts
The Group has entered into produc tion sharing contrac ts
with countries including Indonesia and Caspian Sea area, andtherefore holds numerous par ticipating interests in thoseregions.
Production sharing contracts are agreements by which one
or several oil and natural gas development companies serve ascontractors that undertake at their own expense explorationand development work on behalf of the governments of oilproducing countries or national oil companies and receive
production from the projects as cost recovery and compensation.
That is to say, when exploration and development work results inthe production of oil or natural gas, the contractors recover the
exploration and development costs they incurred by means ofa share in the production. The remaining production (crude oiland gas) is shared among the oil-producing country or nationaloil company and the contractors according to fixed allocation
ratios. (The contactors’ share of production after cost recovery
is called “profit oil and gas.” In the case of natural gas, sales
are conducted by Indonesia and the contractors receive cost

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INPEX CORPORATION Annual Report 2014

recovery and profit gas in the form of cash.) On the other hand,in cases when exploration fails and expected production is notrealized, the contractors are not to recover their invested funds.

(2) Accounting treatment of production sharing
contracts
When a company in the Group owns participating interests under
production sharing contracts, as mentioned above, in the role ofcontractor it invests technology and funds in the exploration anddevelopment of the property, recovers the invested costs fromthe production produced, and receives a share of the remaining
production after recovery of invested costs as compensation.
Costs invested on the basis of production sharing contracts
are recorded on the balance sheet as assets for which future
recovery is anticipated under the item “Recoverable accounts
under produc tion sharing.” Af ter the star t of produc tion,
recovered costs on the basis of those agreements are deductedfrom this balance sheet item.
As production received under production sharing contracts
is divided into the cost recovery portion and the compensationp or tion, t he met ho d of c alc ulating cos t of s ales is als odistinctive. That is to say, the full amount of production received
is temporarily charged to cost of sales as the cost of received
production, and subsequently the amount of the compensation
portion is calculated and this amount is booked as an adjustment

item to cost of sales (“Free of charge production allocated”).
Consequently, only the cost recovery portion of production after
deduction of the compensation portion is booked as cost of
sales.

6. RELATIONSHIP WITH THE JAPANESE GOVERNMENT(1) The Company’s relationship with the Japanese
government
Although the government of Japan (the Minister of Economy,
Trade and Industry) holds 18.94% of the Company’s commonshares issued and a Class A Stock as of June 26, 2014, theCompany autonomously exercises business judgment as a
private corporation. There is no relationship of control, such as
through the dispatch of officers or other means between the
Company and the Japanese government. Moreover, we believethat no such relationship will develop in the future. Furthermore,
there is no concurrent posting or secondment to the Company ofofficers or employees from the Japanese government.

(2) Ownership and sale of the Company’s shares by theJapanese government (the Minister of Economy, Tradeand Industry)
The Ministry of Economy, Trade and Industry (METI) holds 18.94%
of the Company’s common shares issued. METI succeeded tothe shares that had been held by Japan National Oil Corporation(JNOC) following the dissolution of JNOC on April 1, 2005.
With regard to the liquidation and disposition of the oil andgas upstream assets owned by JNOC, the Policy Regarding
the Disposal of Oil and Gas Development-Related Assets Heldby Japan National Oil Corporation (hereinafter, the “Report”)

was announced on March 18, 2003 by the Japan National Oil
Corporation Asset Evaluation and Liquidation Deliberation
Subcommit tee of the Advisor y Commit tee on Energy andNatural Resources, an advisory body of the Ministry of Economy,
Trade and Industry. The Report describes the importance ofappropriate timing in selling the shares on the market, taking into
consideration enterprise value growth. In addition, METI may, in
accordance with the Supplementary Provision Article 13 (1) 2 of
the “Special Measures Act for Reconstruction Finance Keeping
After the Great East Japan Earthquake” (“the Reconstruction
Finance Keeping Act“ (provisional translation, the same shallapply hereinaf ter)) enacted December 2, 2011, sell of f theCompany’s shares in Japan or overseas after examining thepossibility of disposal of the said shares based on a review of theholdings from the perspective of energy policy. This could havean impact on the market price of the Company’s shares.
METI also holds one share of the Company’s Class A Stock.
As the holder of a Class A Stock, METI possesses veto rights
over certain resolutions of the Company’s general shareholders’meetings and meetings of the Board of Directors. For details on
the Class A Stock, please refer to “8. CLASS A STOCK” below.

7. TREATMENT OF SHARES OF THE GROUP’S PROJECT COMPANYOWNED BY JAPANESE GOVERNMENT AND JOGMEC(1) Treatment of shares of the Group’s projectcompany previously owned by Japan National Oil
Corporation (JNOC)

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

In the aforementioned Report, INPEX CORPORATION (prior to
the integration with Teikoku Oil; reorganized on October 1, 2008)
was identified as a company that should comprise part of a corecompany, and is expected to play a role in efficient realizationof a stable supply of energy for Japan through the involvement
by a national flagship company. In response to the Report, theCompany (also, the Group since our acquirement of Teikoku Oil
on October 1, 2008) has sought to promote efficient realizationof a stable supply of energy for Japan while taking advantage
of synergy with the efforts of active resource diplomacy on thepart of the Japanese government, and has aimed to maximize
shareholder value by engaging in highly transparent and efficientbusiness operations.
As a result, with regard to the integration by means oftransfer of shares held by JNOC proposed in the Report, INPEXCORPORATION and JNOC concluded the Basic Agreement
Concerning the Integration of Assets Held by JNOC into INPEXCORPORATION of February 5, 2004 (hereinafter the “Basic
Agreement”) and a memorandum of understanding related
to Basic Agreement (hereinafter “MOU”). On March 29, 2004,
INPEX CORPORATION and JNOC entered into related contracts
including the Basic Contract Concerning the Integration ofAssets Held by JNOC into INPEX CORPORATION (hereinafter
the “Basic Contract”), achieving the agreement on the details
including the treatment of the project companies subject to theintegration and shareholding ratios.
I n 2 0 0 4 I N P E X C O R P O R AT I O N a c c o m p l i s h e d t h e
integration of Japan Oil Development Co., Ltd. (JODCO), INPEXJava Ltd. (disposal was completed on September 30, 2010) and
INPEX ABK, Ltd. which are three of four companies covered by
the Basic Agreement. Although INPEX Southwest Caspian Sea
Ltd. (hereinafter “INPEX Southwest Caspian”) would become awholly owned subsidiary of INPEX CORPORATION by means of ashare exchange and the procedures were undertaken, the shareexchange contract was invalidated owing to failure to accomplish
the terms and conditions of the share exchange contract and theplanned share exchange was cancelled. Following the dissolutionof JNOC on April 1, 2005, the Minister of Economy, Trade andIndustry succeeded to the INPEX Southwest Caspian shares
held by JNOC. The Company continues to study the possibility
to acquire the shares. However, the METI’s future treatmentof these shares is undecided and, depending on the result ofreview in accordance with the Reconstruction Finance Keeping
Act, acquisition of INPEX Southwest Caspian shares could be
unavailable.
The treatment of Sakhalin Oil and Gas Development Co.,
Ltd. (hereinafter “SODECO”), INPEX Offshore North Campos,

125

Ltd., INPEX Nor th Makassar, Ltd. (liquidation proceedings
completed on December 19, 2008), INPEX Masela, Ltd., and
INPEX North Caspian Sea, Ltd. was agreed between INPEXCORPORATION and JNOC in the MOU of February 5, 2004.
Regarding the treatment of shares of SODECO, refer to thesection “(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese government”
below. With regard to the transfer to INPEX CORPORATION of
the shares in the above project companies other than SODECO,
it was decided that the shares are to be transferred for cash
compensation as soon as prerequisites such as the consent of
the oil-producing country and joint venture partners and thepossibility of appropriate asset evaluations are in place. However,
the transfer of shares held by JNOC in the above companies has
not been decided and the shares in the above project companies
were succeeded to by the Japan Oil Gas and Metals National
Corporation (hereinafter “JOGMEC”) on the dissolution of JNOC
on April 1, 2005, except shares related to INPEX North Makassar,
Ltd., to which the Minister of Economy, Trade and Industr y
succeeded. JOGMEC states in its “medium-term objective” and“medium-term plan” that the shares succeeded to from JNOC
will be disposed of at an appropriate time and in an appropriatemanner, but the timing and manner of the disposal for the shares
held by JOGMEC have not been decided, and it is possible that
the Company will be unable to acquire the shares.

(2) Treatment of the shares of Sakhalin Oil and Gas
Development (SODECO) owned by the Japanese
government
The Japanese government (the Minister of Economy, Tradeand Industry) owns 50% of the shares of SODECO. SODECO
was established in 1995 to engage in an oil and natural gas
exploration and development project located on the northeast
continental shelf off Sakhalin Island. SODECO owns a 30.0%
interest in the Sakhalin-1 Project, of which ExxonMobil of theUnited States is the operator. In October 2005, Phase 1 ofthis project started with the goal of advanced production ofoil and natural gas. Furthermore, there is a plan for additional
development operations (Phase 2) for the purpose of the fullscale production of natural gas. The Company holds 6.08% of
SODECO shares issued and outstanding.
In the previously mentioned Report, SODECO, along withINPEX CORPORATION and JODCO, has been identified as acompany that should comprise part of a core company in Japan’s
oil and natural gas upstream industry in the future.
In accordance with the Report, it is assumed that privatesec tor shareholders, including INPEX CORPOR ATION, will
acquire shares of SODECO issued and outstanding to which the
Minister of Economy, Trade and Industry succeeded and thatwere previously held by JNOC (50.0%). The Company plans tohold a maximum of 33% of the SODECO shares to become its
largest shareholder. In the event that the consent of SODECO’s
joint-venture par tner s, the relevant Rus sian gover nment
entity, or other parties is necessary for the acquisition of theshares, obtaining the consent is a prerequisite for acquisition.
In addition, it will be necessary to reach agreement on theshareholder composition for SODECO, the share transfer price,and other matters.
In the event that the additional acquisition of the SODECO
shares is realized, the Group will hold a substantial ownershipinterest in oil and natural gas assets in Russia, as well as in Asiaand Oceania, the Middle East, Caspian Sea area, and otherregions, and we expect the acquisition to contribute to theachievement of a more balanced overseas asset portfolio for theGroup.
However, at this time it is undecided whether agreement
concerning acquisition of the shares with the Minister of
Economy, Trade and Industry will be reached as anticipated andwill be realized. Also, even in the event that the acquisition isrealized, the conditions and time of acquisition are undecided
and, depending on the result of review in accordance with theReconstruction Finance Keeping Act, the acquisition by theCompany could be unavailable.

8. CLASS A STOCK(1) Overview of the classified share
1) Reason for the introduction
The Company was established as the holding company througha stock transfer between INPEX CORPORATION and Teikoku
Oil Co., Ltd. on April 3, 2006. Along with this, a classified shareoriginally issued by INPEX CORPORATION (prior to the merger)
was transferred and at the same time the Company issued aclassified share with the same effect (hereinafter the “Class A
Stock”) to the Minister of Economy, Trade and Industry. The
classified share originally issued by INPEX CORPORATION
was the minimally required and a highly transparent measure
to eliminate the possibility of management control by foreign
capital while not unreasonably impeding the efficiency andflexibility of management based on the concept in the Reportdiscussed in the above section 7. “TREATMENT OF SHARES OF
THE GROUP’S PROJECT COMPANY OWNED BY JAPANESEGOVERNMENT AND JOGMEC.” INPEX CORPOR ATION is
identified as a company that should comprise part of a corecompany for Japan’s oil and gas upstream industr y and is
expected to play a role in efficient realization of a stable supply

126

INPEX CORPORATION Annual Report 2014of energy for Japan as a national flagship company. On the basisof the concept of the Report, the Company issued the Class
A Stock because it can be considered an effective means ofpreventing risks such as a speculative hostile takeover.
2) Shareholders’ meeting resolutions, dividends, distributionof residual assets, and redemption
Unless otherwise provided by laws or ordinances, the Class A
Stock does not have any voting rights at the Company’s generalshareholders’ meetings. The holder of the Class A Stock will
receive the same amount of dividends, interim dividends, anddistributions of residual assets as a holder of common stock.
The Class A Stock will be redeemed by resolution of the Boardof Directors of the Company if the holder of the Class A Stockrequests redemption or if the Class A Stock is transferred to a
party other than the government of Japan or an independentadministrative body that is fully funded by the government ofJapan.
3) Veto rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an
approval resolution of the meeting of the holder of the Class A

Stock is necessary in addition to resolutions of the Company’s
general shareholders’ meetings and resolutions of meetings ofthe Board of Directors for the decisions on certain important
mat ters such as the appointment or removal of Direc tors,
disposition of material asset s, changes to the Ar ticles ofIncorporation, business integration, capital reduction or company
dissolution in connection with the business of the Company.
Accordingly, the Minister of Economy, Trade and Industry, as theholder of the Class A Stock, has veto rights over these importantmatters.
4) Criteria for the exercise of veto rights provided in theguidelines
Guidelines concerning the exercise of the veto rights havebeen established in a Ministry of Economy, Trade and Industry
Notice (No. 220, 2008) (hereinafter the “Notice”). The guidelines
stipulate the exercise of veto rights only in the following specificcases.
• When resolutions pertaining to appointment or removal of
Directors and integration are not voted down and it is judgedthat the probability is high that the Company will engage inmanagement inconsistent with the role that a core company
should perform for efficient realization of a stable supply ofenergy to Japan.
• When resolutions pertaining to disposition of material assets
are not voted down and the objects of disposition are oil andnatural gas exploration or production rights or rights similar
thereto or shares or ownership interest in the Company’s
subsidiary whose principal assets are said rights and it isjudged that the probability is high that the Company will
engage in management inconsistent with the role that a corecompany should perform for efficient realization of a stablesupply of energy to Japan.
• When resolutions pertaining to amendments to the Company’s
Articles of Incorporation relating to changes in the Company’sbusiness objectives, capital reduction, or dissolution are notvoted down and it is judged that the probability is high that
the Company will engage in management inconsistent withthe role that a core company should perform for efficient
realization of a stable supply of energy to Japan.
• When resolutions pertaining to amendments to the Articles ofIncorporation granting voting rights to any shares other thanthe common shares of the Company are not voted down andcould have an effect on the exercise of the voting rights of theClass A Stock.
It is provided that the above guidelines shall not be limited in theevent that the Notice is changed in the light of energy policy.

(2) Risk in connection with the Class A Stock
Although the Class A Stock was issued as a minimally required
measure to eliminate the possibility of management controlled
by foreign capital while not unreasonably impeding the efficiency
and flexibility of management, anticipated risks in connection
with the Class A Stock include the following.
1) Possibility of conflict of interest between national policy
and the Company and its common shareholders
It is conceivable that the Minister of Economy, Trade and Industry
could exercise the veto rights in accordance with the above
guidelines provided in the Notice. As the guidelines have been
provided from the standpoint of efficient realization of a stablesupply of energy to Japan, it is possible that the exercise of theveto rights by the Minister of Economy, Trade and Industry could
conflict with the interest of other shareholders who hold theCompany’s common shares. Also, it is possible that the above
guidelines could be changed in the light of energy policy.
2) Impact of the exercise of veto rights on the price ofshares of common stock
As mentioned above, as the holder of the Class A Stock has theveto rights over certain important matters in connection with thebusiness of the Company, the actual exercise of the veto rights
over a certain matter could have an impact on the price of theCompany’s shares of common stock.
3) Impact on the Company’s degree of freedom in businessand business judgment
As the Minister of Economy, Trade and Industry holds the Class
A Stock with the previously mentioned veto rights, the Company
needs a resolution of the meeting of the holder of the Class
A Stock concerning the above matters. For this reason, theCompany’s degree of freedom in management in those matters
could be restricted by the judgment of the Minister of Economy,
Trade and Industry. Also, attendant on the need for a resolutionof the meeting of the holder of the Class A Stock concerning theabove matters, a certain period of time is required for procedures
such as the convening and holding of meetings and resolutions
and for the processing of formal objections, if necessary.

9. CONCURRENTLY SERVING OUTSIDE DIRECTORSAt the same time, however, the shareholder corporations are
involved in businesses that overlap with those of the Company.
The Company therefore recognizes that it must pay particularattention to corporate governance to avoid conflicts of interest inconnection with competition and other matters.
To this end, all Company direc tors, including the four
outside directors described above, are required to sign a written
undertaking to carry out their duties as officers of the Company
appropriately and with the highest regard for the importance ofsuch matters as their obligations in connection with noncompetitive
practices under the Japanese Companies Act, the proper mannerfor dealing with conflict of interest, and confidentiality.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

The Board of Directors of the Company is composed of 16
members, five of whom are outside directors.
The four outside directors have many years of management
experience in the Company’s business and are able to offer
objective, professional advice regarding operations. For thisreason, they were asked to join the Board of Direc tors tocontribute to the development of the Company’s business.
The four outside directors concurrently serve as director
or advisors of Japan Petroleum Exploration Co., Ltd., Mitsubishi
Corporation, Mitsui Oil Exploration Co., Ltd. and JX Holdings,
Inc. (hereinafter “shareholder corporations”), respectively.

127

Oil and Gas Reserves and Production Volume

1. OIL AND GAS RESERVES
Proved reserves
The following tables list the proved reser ves of crude oil,condensate, LPG and natural gas of INPEX CORPORATION,
its consolidated subsidiaries and equity-method affiliates (the“Group”) on main projects. Disclosure contents for proved
reser ves are determined in accordance with the rules andregulations of the U.S. Financial Accounting Standards Board (theJapan
Crude oil(MMbbl)Gas(Bcf)

Proved developed and undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2012
16
651
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates
07Interim production(1)(49)
As of March 31, 201315609
Equity-method affiliates
As of March 31, 2012——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2013——
Proved developed and undeveloped reserves
As of March 31, 2013
15
609
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2013
15
609
Extensions and discoveries
7261
Acquisitions and sales——
Revisions of previous estimates(0)(8)
Interim production(1)(46)
As of March 31, 201421816
Equity-method affiliates
As of March 31, 2013——
Extensions and discoveries——
Acquisitions and sales——
Revisions of previous estimates——Interim production——
As of March 31, 2014——
Proved developed and undeveloped reserves
As of March 31, 2014
21
816
Proved developed reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 201414557
Equity-method affiliates——
As of March 31, 2014
Proved undeveloped reserves
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 20146259
Equity-method affiliates
As of March 31, 2014——

Asia & Oceania“FASB”), and are presented in accordance with the AccountingStandards Codification Topic 932 “Extractive Activities —Oiland Gas” (“Topic 932”). The Group’s proved reserves as of March
31, 2014 were 1,278.38 million barrels for crude oil, condensate
and LPG, and 6,735.2 billion cubic feet for natural gas, for a totalof 2,531.85 million boe.
Eurasia(Europe & NIS)

Middle East &AfricaAmericas

Total

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)Gas(Bcf)

Crude oil(MMbbl)

Gas
(Bcf)

255
—
(24)
(1)
(21)
208

6,509
—
(698)
(92)
(212)
5,507

188
—
—
4
(9)
183

—
—
—
42
—
42

371
—
—
23
(31)
363

—
—
—
—
—
—

0
—
9
(0)
(0)
9

195
63
7
55
(24)
296

831
—
(15)
26
(63)
779

7,354
63
(691)
12
(284)
6,454

2
0
—
0
(0)
3

439
11
—
(116)
(19)
314

—
—
—
—
—
—

—
—
—
—
—
—

147
—
10
12
(27)
142

—
—
—
—
—
—

1
—
—
5
—
6

0
—
—
0
—
0

150
0
10
17
(27)
151

439
11
—
(116)
(19)
315

211

5,821

183

42

505

—

15

297

929

6,768

208
—
—
8
(17)
199

5,507
3
—
12
(217)
5,306

183
—
—
13
(10)
186

42
—
—
(15)
—
27

363
408
—
2
(31)
742

—
—
—
—
—
—

9
—
—
(0)
(0)
9

296
22
—
7
(37)
288

779
414
—
23
(59)
1,157

6,454
286
—
(4)
(300)
6,437

3
—
—
(1)
(0)
2

314
—
—
(1)
(15)
298

—
—
—
—
—
—

—
—
—
—
—
—

142
—
—
3
(30)
115

—
—
—
—
—
—

6
—
—
(1)
(0)
5

0
—
—
0
(0)
1

151
—
—
1
(31)
121

315
—
—
(1)
(15)
298

201

5,603

186

27

857

—

13

289

1,278

6,735

22

399

39

—

543

—

0

140

619

1,096

1

182

—

—

100

—

5

1

106

183

178

4,906

147

27

199

—

9

149

539

5,341

1

116

—

—

15

—

—

—

15

116

Note 1. Based on SEC disclosure standards, the Group discloses proved reserves in each country containing 15% or more of its proved reserves. As of March 31, 2014, the Group held proved
reserves in Australia of approximately 170.98 million barrels for crude oil and approximately 4,641.4 billion cubic feet for natural gas, for a total of 1,036.09 million boe.
2. Proved reserves (as of March 31, 2014) of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%), Americas: Copa Macoya (30%), Horn River Area (54.91%)
3. MMbbl: Million barrels
4. Bcf: Billion cubic feet
5. Crude oil includes condensate and LPG

128

INPEX CORPORATION Annual Report 2014

Standardized measure of discounted future net cash flows and their changes relating to proved oil and gas reserves
for the year ended March 31, 2014
Disclosure contents for the standardized measure of discounted
future net cash flows and their changes relating to proved
reserves for the year ended March 31, 2014 are determined inaccordance with the rules and regulations of the FASB, and arepresented in accordance with Topic 932.
In calculating the standardized measure of discounted
future cash inflows, the arithmetic average of oil and gas prices
at the first day of each month during the current fiscal year
is applied to the estimated annual future production fromproved reserves. Future development and production costs are
estimated based upon the assumptions of constant oil and gas
prices and the continuation of existing economic, operating andregulatory conditions. Future income tax expenses are calculated
by applying the year-end statutory tax rates to estimated future
pretax cash flows less the tax basis of the properties involved
based upon laws and regulations already legislated at year-end.

March 31, 2013
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows
Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows
Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows

The discount is computed by applying a prescribed discount rateof 10% to the estimated future net cash flows.
The translation of U.S. dollar amounts into yen amounts iscomputed by applying the year-end exchange rates (TTM) of¥93.99 and ¥102.92 to the U.S. dollar as of March 31, 2013 and2014, respectively.
Since these figures are calculated in accordance with therules set forth by the FASB, which have the following aspects,
they do not represent the fair market value nor the Group’s
estimation for the present value of the cash flows of reserves ofcrude oil, condensate, LPG and natural gas.
• No economic value is attributed to potential reserves.
• A prescribed discount rate of 10% is applied.
• Oil and gas prices are subject to constant fluctuations despite
the assumptions of constant oil and gas prices of Topic 932.

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
Africa

Total

Japan

Americas¥12,788,034(4,119,855)(5,057,270)
3,610,909(2,264,436)
1,346,473¥960,873(176,309)(277,685)
506,879(244,270)
262,609¥6,238,258(2,242,999)(2,078,271)
1,916,987(1,369,592)
547,396¥1,702,492(438,236)(265,673)
998,583(545,223)
453,359¥3,736,754(1,188,643)(2,417,554)
130,557(80,178)
50,379¥149,658(73,669)(18,087)
57,903(25,172)
32,731

1,696,889(566,833)(974,897)
155,159(63,444)

—
—
—
—
—

168,545(76,271)(47,627)
44,647(31,381)

—
—
—
—
—

1,470,807(446,072)(925,608)
99,127(28,798)

57,537(44,490)(1,662)
11,385(3,265)91,715—

13,266—70,3308,119¥ 1,438,188¥262,609¥ 560,661¥ 453,359¥ 120,708¥ 40,850

Millions of yen
Asia &
Eurasia
Middle East &Oceania(Europe & NIS)
AfricaAmericasNote: Reserves of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

March 31, 2014
INPEX CORPORATION and Consolidated Subsidiaries
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Standardized measure of discounted future net cash flows

Total consolidated and equity-method affiliates in standardized
measure of discounted future net cash flows¥17,341,495(5,214,355)(7,756,030)
4,371,111(2,724,139)
1,646,972

Japan¥1,216,700 ¥ 6,010,999(232,106) (2,022,074)(390,578) (1,791,151)
594,016
2,197,774(353,477) (1,399,641)
240,539
798,133¥1,830,647 ¥ 8,114,992(475,798) (2,430,435)(294,204) (5,270,507)
1,060,645
414,050(638,328)(301,903)
422,316
112,146¥168,157(53,942)(9,589)104,627(30,790)
73,837

1,502,675(559,626)(807,541)
135,508(34,528)

—
—
—
—
—

172,531(100,520)(37,642)
34,369(18,128)

—
—
—
—
—

1,283,450(422,426)(768,867)
92,158(13,834)

46,694(36,681)(1,032)8,981(2,566)

100,980—

16,242—78,324

6,414¥ 1,747,952¥ 240,539

814,375¥ 422,316

190,471¥ 80,252¥¥

Note: Reserves of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Equity-method affiliates
Future cash inflows
Future production and development costs
Future income tax expenses
Future net cash flows
10% annual discount for estimated timing of cash flows
Share of equity-method investees’ standardized measure of
discounted future net cash flows

Total

129

INPEX CORPORATION and Consolidated
Subsidiaries
Standardized measure at beginning of the period
As of April 1, 2013
Changes resulting from:
Sales and transfers of oil and gas produced, netof production costs
Net changes in oil and gas prices and production
costs
Development costs incurred
Changes in estimated future development costs
Revisions of previous quantity estimates
Accretion of discountNet change in income taxes
Extensions, discoveries and improved recoveries
OtherStandardized measure at end of the period
As of March 31, 2014

Millions of yen
Eurasia
Middle East &(Europe & NIS)
Africa

Total

Japan

Asia &
Oceania¥1,438,188¥262,609¥ 547,396¥453,359¥ 50,379¥32,731¥ 91,715(940,350)(64,803)(307,805)(87,312)(240,554)(5,615)(234,260)(767,958)(67,001)(370,213)(47,267)(249,342)(1,478)(32,656)

503,931(49,289)
857,625
176,596389,751
3,398
136,061—(4,216)48,17424,516
16,311—
24,950377,559
9,002
99,41083,103308,170—
51,511

49,610(19,356)(32,763)
48,49814,459—43,087

31,463(21,508)
724,450
5,944(196,868)
3,398
4,786

27,595(2,474)
6,518
5,756
7,794
—
3,011

17,704(10,737)
11,837
8,779
239,886—
8,714¥1,747,952¥240,539¥ 798,133¥422,316¥ 112,146¥73,837¥ 100,980

Americas

Equity-method
affiliates

Notes: 1. Reserves of the following blocks and fields include the portion attributable to minority interests.
Eurasia (Europe & NIS): ACG (49%), Kashagan (55%)/Americas: Copa Macoya (30%), Horn River Area (54.91%)
2. Extensions, discoveries and improved recoveries include acquisition and sales.

Probable reserves and possible reserves
The following tables list the probable and possible reserves of crude oil, condensate, LPG and natural gas of the Group on main
projects. Our probable reserves as of March 31, 2014 were 853.66 million barrels for crude oil, condensate and LPG, and 6,026.9 billion
cubic feet for natural gas, for a total of 1,945.44 million boe. In addition, the Group’s possible reserves as of March 31, 2014 were 121.34
million barrels for crude oil, condensate and LPG, and 2,556.0 billion cubic feet for natural gas, for a total of 604.76 million boe.

March 31, 2014
Probable reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

March 31, 2014
Possible reserves
Crude oil, condensate and LPG(MMbbl)Natural gas (Bcf)

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

Subtotal

INPEX CORPORATION Annual Report 2014

Total

2

176

368

190

89

825

29

854

80

5,724

126

—

49

5,979

48

6,027

Asia &
OceaniaJapan

Eurasia
Middle East &(Europe & NIS)
AfricaAmericas

SubtotalInterest inreserves heldby equitymethod
affiliates

Total

2

87

4

2

10

105

16

121

65

2,349

—

—

36

2,450

106

2,556

Notes: 1. MMbbl: Million barrels
2. Bcf: Billion cubic feet
3. Bitumen reserve volumes are included in the net probable and possible reserves of crude oil, condensate and LPG for the Americas.

130Interest inreserves heldby equitymethod
affiliates

2. OIL AND GAS PRODUCTION
The following tables list average daily production for crude oil, natural gas, and the total of crude oil and natural gas by region. The
proportional interests in production by the equity-method affiliates are not broken down by geographical regions.
The Group’s production for the year ended March 31, 2014 was 244.9 thousand barrels per day for crude oil, condensate and LPG,
and 876.4 million cubic feet per day for natural gas, for a total of 408.8 thousand boed. Our method for calculating the conversion ofnatural gas volumes to barrels of oil equivalent (boe) was changed effective the year ended March 31, 2012.
2009

2010

2011

2012

2013

2014

Crude oil, condensate and LPG (Mbbld):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (MMbbl)

4.9
44.7
24.8
81.0
2.7
158.1
65.1
223.2
81.5

4.5
47.7
26.9
73.3
5.5
158.0
60.4
218.3
79.7

3.9
65.1
27.9
73.0
2.3
172.2
67.4
239.6
87.5

3.8
62.5
25.0
84.3
0.1
175.7
75.4
251.2
91.9

3.9
58.0
25.1
84.4
0.1
171.5
74.4
245.9
89.8

3.6
45.8
26.1
84.4
0.1
160.0
84.9
244.9
89.4

Natural gas (MMcf/d):
Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (Billions of cubic feet)

164.9
842.8
—
—
82.3
1,090.0—
1,090.0
397.8

155.1
880.5
—
—
86.9
1,122.6—
1,122.6
409.7

128.7
836.0
—
—
81.1
1,045.9
56.6
1,102.5
402.4

127.6
665.0
—
—
72.4
865.0
62.7
927.7
339.5

133.7
586.4
—
—
90.9
811.0
52.4
863.4
315.1

125.5
602.8
—
—
107.4
835.7
40.7
876.4
319.9

Crude oil and natural gas (Mboed):Japan
Asia & Oceania
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Proportional interest in production by equity-method affiliates
Total
Annual production (MMboe)

32.4
185.1
24.8
81.0
16.4
339.7
65.1
404.9
147.8

30.4
194.5
26.9
73.3
20.0
345.1
60.4
405.4
148.0

25.3
204.4
27.9
73.0
15.8
346.5
76.8
423.3
154.5

27.7
189.5
25.0
84.3
13.1
339.7
86.5
426.2
156.0

29.0
169.4
25.1
84.4
16.2
324.0
83.8
407.8
148.8

27.2
159.9
26.1
84.4
19.0
316.7
92.1
408.8
149.2

Years ended March 31,

7
Financial &Corporate Information

INPEX CORPORATION Annual Report 2014

131

Oil and Gas Glossary■ BarrelIn the case of oil, one barrel is equal to
42 gallons (approx. 159 liters).

■ Barrel of Oil Equivalent (BOE)

BOE is mainly used to convert a cubic
volume of natural gas (i.e., cubic feet)
into a cubic volume (i.e., a barrel) of crude
oil. It is a standard unit of thermal energy
based on the energy released in the combustion of one barrel of crude oil.
■ Brent Crude

A type of crude oil that holds a major
position in the market for crude oil
prices. Brent crude is a light oil with low
sulfur content and is mainly extracted
from the Brent oil field located in the
North Sea of the United Kingdom.

■ Concession Contract

A contract that directly grants mining
rights (including mining rights in Japanand permits, licenses and leases in othercountries) to oil companies through acontract or approval from the government of oil-producing countries or fromnational oil companies. The oil company
itself makes the investment and holds
the right for disposition for the acquired
oil and gas. Oil-producing countries
receive taxes or royalties from sales.
} See pp. 100–101 for Accounting Methods for

Types of Agreements.

■ Condensate

Generally, a type of crude oil extracted
as a liquid from gas fields. Liquid (oil)that exists as a gas underground butthat condenses when extracted to thesurface is referred to as condensate oilor simply as condensate.

■ Contingent Resources

Other than proved reserves, probablereserves and possible reserves, contingent resources are quantities that are
estimated to be potentially recoverable
in the future from known accumulation,
but which are not currently considered
to be commercially recoverable due toone or more contingencies.

132

INPEX CORPORATION Annual Report 2014

■ CoreCylinder rock samples extracted fromunderground geological formations inwells during various types of exploratory drilling. Normally, the samples
are extracted by core drilling.

■ EPC Contractor

The oil and gas exploration and development business involves the participation of a number of contractors, suchas drilling contractors and geophysicalexploration subcontractors. Of these,an engineering, procurement and construction (EPC) contractor is in charge ofengineering, procurement and construction work.

■ Exploratory Wells

A well drilled to search for still unknown
oil fields. These wells are often referred
to as “wild cat wells.” Drilling wells to
confirm the dimensions of a new oil field
and to acquire an overall image of an oil
field is a part of exploration, and wells forthis purpose are referred to as exploratory wells.

■ FEED

FEED is an acronym for Front End Engineering Design. FEED work is done
prior to engineering, procurement andconstruction (EPC) work. FEED work
involves field studies and budgeting,including technical issue identificationand cost outlines, upon which biddingfor EPC work is based.

■ Final Investment Decision (FID)

The FID refers to the final decision toinvest in an oil or natural gas project.
An FID triggers the shift to a development phase (design, procurement andconstruction operations). The necessary
approvals, procurement of funds, sales
plan and other key issues need to beaddressed at the time a final investment
decision is made.
■ Floating LNG

A floating LNG is created by installingan LNG plant on a large vessel. Thisdevelopment method allows for natural
gas to be processed into liquid at thatplant and then directly offloaded to an
LNG carrier.

■ FPSOFPSO refers to a floating production,
storage and offloading system whererefined crude oil and condensate arestored in tanks within a vessel. From
here, the vessel offloads oil directly totankers.

■ International Energy Agency (IEA)

An autonomous organization comprisedof the main oil-consuming countries
established in 1974 under the OECD forcollective action on energy.

■ LNG (Liquefied Natural Gas)

After removing impurities such as moisture, sulfur compounds and carbon
dioxide from natural gas with a chief
constituent of methane, the gas is liquefied by cooling to ultra-low temperatures (-162 Celsius). This process compresses the volume of the gas to 1/600,
thus making it possible to transportlarge quantities in a single shipment.

■ LPG (Liquefied Petroleum Gas)

LPG is an oil product that is a mixtureof hydrocarbon gases with a carbon
number of 3 or 4, for example, propane, propylene, butane, butylene ora mixture of these as main constituents. Although LPG is a gas at ambient
temperature and normal pressure, it isliquefied through exposure to low pressures or temperatures (cooling).

■ Lump-Sum Contract

A contract agreeing upon and approving
a fixed total for construction and work.
It is distinguished from a cost-plus-fee
contract, which promises in advance thepayment of a certain fee added to a certain amount of actual incurred expenses.
■ Methane Hydrate
As one type of unconventional gas,methane hydrate is a solid crystalline
structure in which methane molecules
are trapped within a latticework formedby the hydrogen bonding of water molecules. Methane hydrate is stable under
low-temperature, high-pressure conditions, so it can be found within thepermafrost layer in Siberia, Canada andAlaska, as well as in the ocean at depthsof 500 meters or more.

■ Net Production Volume

Net production volume is the net economical portion of total production volume. Specifically, it is the volume of oil
and natural gas that can be sold after
deducting portions allocated to thegovernments of oil-producing countries
in accordance with production sharing
agreements, and portions allocated tointerest owners in accordance with concession agreements.

■ Oil Majors

The Oil majors are also known as majorinternational oil companies. ExxonMobil (US), Royal Dutch Shell (UK/Netherlands), BP (UK), Chevron (US) and
TOTAL (France) are well known as thefive oil majors. Each of these companies
possesses an integrated system including departments for conducting both
upstream and downstream business.

■ Oil Sands

Sandstone beds that contain an extremely
viscous tar-like crude oil that has no fluidity in its initial state. This is as opposed toconventional crude oil, which can be easily
pumped upward using a well. Dependingon the level of viscosity, crude oil extracted
from oil sand is referred to as bitumen or
extra heavy crude oil.
} See p. 69 for the Joslyn Oil Sands Project.

■ Operator

In the case of multiple parties to a contract regarding blocks of oil/gas andassociated E&P work, a joint operating
agreement is entered into between theparties and it is necessary to achieve
agreement on the rights and obligations for all items required when conducting operations. At that time, theparty responsible for the execution
and management of the operations isreferred to as the operator. In contrast,
parties other than the operator arereferred to as non-operators.

■ Primary Energy

The definition of probable reserves is inaccordance with regulations (PRMS)
formulated by the Society of Petroleum
Engineers (SPE) through support fromthe World Petroleum Council (WPC),
the American Association of Petroleum
Geologists (AAPG) and the Society ofPetroleum Evaluation Engineers (SPEE).
The rule defines probable reserves as
the estimated quantities of crude oiland natural gas that can be added toproved reserves and commercially collected based on geological and engineering data.

■ Production Sharing Contract (PSC)

A contract in which one or more companies involved in the development of oil
and natural gas acts as a contractor andundertakes operations for explorationand development on behalf of the governments of oil-producing countries or
national oil companies. The contractor is
responsible for the costs associated withthe operations. Corresponding amounts
for cost recovery and compensation arereceived from production by a contractor.
} See pp. 100–101 for Accounting Methods for

Types of Agreements.

■ Proved Reserves

The definition of proved reserves is inaccordance with SEC Regulation S-X
Rule 4-10 (a), a rule that is well known
among investors in the United States.
The rule defines proved reserves as theestimated quantities of crude oil andnatural gas that can, with reasonablecertainty and under current economic
and operating conditions, be collectedfrom a given date forward based on
geological and engineering data.

■ Renewable Energy

A collective term used for energy
acquired from within natural phenomena
replenished repeatedly on earth such as
solar, wind, hydro, oceans and biomass,
as opposed to fossil fuels such as coaland oil, which are forecast to run out inthe future. There is no fear of renewableenergy running out, and it does not generate air pollution. Technology to use
renewable energy as an energy source isundergoing development.

■ Reserves-to-Production Ratio

The reserves-to-production ratio (R/P
ratio) is calculated by subtracting the
production for a given year from thereserves at the end of that year. The
resulting figure is an indication of thenumber of years production can be continued if annual production continues at
the amount for that year.

■ Rig

Machinery for drilling a well that is used tosearch for and produce oil and natural gas.

■ Royalty

Royalty refers to a specific share of
production reserved by the owner ofunderground minerals (e.g., a state ora municipality) when granting mining
rights, without taking responsibility for
production costs. In some cases, theshare increases according to increases
in production. Royalties may be paid in
kind or in cash.

■ Secondary energy

Electric power, city gas, coke, etc., which
are acquired by converting and processing primary energy sources, are referred
to as secondary energy.

■ Shale Gas

Shale gas is a kind of natural gas thatis considered to be an unconventional
natural gas. It refers to gas that is foundin hard shale beds and not in the usual
gas fields of conventional natural gas.
It is necessary to excavate the horizontal wells, using the hydraulic fracturingmethod to create a crack in the shale
bed so that the gas can be extracted.
In recent years, due to advancementsin these gas mining technologies, theproduction of shale gas is making great
strides, particularly in North America.

■ Unconventional Natural Gas

Natural gas not produced from regularoil and gas fields. Includes gas (tightgas sands, coal bed methane, biomass
gas and shale gas) that has alreadyundergone partial commercial production and gas (e.g., methane hydrate anddeep gas) expected to undergo futurecommercial production.

INPEX CORPORATION Annual Report 2014

7
Financial &Corporate Information

Energy recovered directly from naturesuch as coal, oil, natural gas, fuelwood,hydroelectricity, nuclear power, wind
power, current power, geothermal andsolar energy.

■ Probable Reserves (our company)

133

Index/Unit Conversion

Financial/Accounting

Non-Financial Information

12-Year Financial Information ............................................. 82­83
Background Information(Oil and Gas Accounting Policies and Treatment) ...... 84­86
Consolidated Balance Sheet .............................................. 94­95
Consolidated Statement of Cash Flows ......................... 100­101
Consolidated Statement of Income...............................................96
Dividends/Return for Shareholders ...............................12, 16, 28
Finance and Funding ...........................................................29, 81
Financial and Operating Highlights.............................. 14­15, 16
Investment Plan ............................................................ 28­31, 81
MD&A (Management’s Discussion and Analysisof Financial Condition and Results of Operations) .......... 87­
Net Sales/Operating Income by Segment ......................... 46­47
Notes to Consolidated Financial Statements ................. 102­116
Subsidiaries and Affiliates .............................................. 118­119

Business Model and Strengths ............................... 22­25, 30­31
Comparison with Peers (Production and Reserve Volume)........32
Gas Supply Chain ......................................................................43
Market Environment, Business Environment ...................... 26­27
Message from the President................................................. 4­12
Number of Projects ............................................................ 46­47
Oil and Gas Demand .................................................................27
Oil Price, Exchange Rate and INPEX Share Price ............... 14­15
Press Releases .................................................................... 18­20
Production Volume ............................................... 17, 46­47, 131
Reserves ............................................. 6, 17, 30, 46­47, 128­130Strategies and Management Plan
(Medium- to Long-Term Vision of INPEX) ............... 8, 28­29

Projects
Abadi LNG Project (Indonesia) .................................................51
ACG Oil Fields (Azerbaijan) .......................................................55
ADMA Block (U.A.E.) ................................................................57
Bayu-Undan Project(Timor Sea Joint Petroleum Development Area (JPDA)) ...53
Berau Block Tangguh LNG Project (Indonesia)..........................52
BTC Pipeline Project ..................................................................55
Copa Macoya and Guarico Oriental Blocks (Venezuela) ...........61
Frade Block (Brazil) ....................................................................61
Geothermal ..............................................................................64
Ichthys LNG Project (Australia) .......................................... 34­41
Joslyn Oil Sands Project (Canada) ............................................60
Kitan Oil Field (JPDA) ...............................................................53
Naoetsu LNG Terminal .......................................................42, 63
Natural Gas Business in Japan ..................................................63
Offshore Angola Block 14 (Angola) ...........................................57
Offshore D.R. Congo Block (Democratic Republic of Congo)...57
Offshore Mahakam Block and Attaka Unit (Indonesia) ..............49
Offshore North Caspian Sea Contract Area
(Kashagan Oil Field (Kazakhstan)) ......................................54
Power Generation Business in Japan .......................................64
Prelude FLNG Project (Australia) ..............................................52
Sebuku Block Ruby Gas Field (Indonesia) .................................50
Shale Gas Project (Canada) .......................................................59
South Natuna Sea Block B (Indonesia) ......................................50
Van Gogh Oil Field and Ravensworth Oil Field (Australia) ........53

ESG (Environment/Social/Governance)
Advisory Committee..................................................................75
Board of Directors,
Auditors and Executive Directors .................... 72­73, 76­78
Business Risks ................................................................. 120­127Class A Stock ............................................................ 71, 126 –127
Compensation for Directors and Auditors.................................71
Corporate Governance....................................................... 70­78
CSR Initiatives ..................................................................... 66­69
Disclosure Structure and IR Activities ................................. 74­75
Internal Committees ..................................................................74
Number of Employees ............................................... 14­15, 135
Total GHG Emissions .................................................................17
Volume of Water Sources Used .................................................17

Unit Conversion
Crude oil

Natural gas

1 kl

6.29 barrels

1 cf

1 ton

7.4 barrels

1 barrel

6,000 cf (natural gas)100,000 barrels/day
4 million tons/year (LNG)

Sale gas

LPG

LNG

1 ton
10.5 barrels(crude oil)

1 ton
8.8 barrels (crude oil)
1,400 m3 (natural gas)
53 million Btu*

1,000 Btu*

1 billion m3

700,000 tons (LNG)

100 million cf/day
700,000 tons/year (LNG)
1 trillion cf 1 million tons
(LNG) (20 million tons)

1m

3

37.32 cf

20 years*British thermal unit
Note: Unit-equivalent figures are estimates. Conversion figures used for production and reserves in this Annual Report may be different from the above conversion figures. We do notguarantee those figures’ accuracy as applied to dealing or verification.

134

INPEX CORPORATION Annual Report 2014

Corporate Information(As of March 31, 2014)

Corporate Data
Company Name
INPEX CORPORATION
Established
April 3, 2006
Capital¥290,809,835,000
Company Headquarters
Akasaka Biz Tower, 5-3-1 Akasaka, Minato-ku,
Tokyo 107-6332, Japan

Number of Employees (Consolidated) 2,874
Main BusinessResearch, exploration, development, production and sales of oil, natural gas and othermineral resources, other related businesses
and investment and lending to the companies
engaged in these activities, etc.

Organization Chart (As of June 30, 2014)
General Meeting of
Shareholders

Board of Directors

Board of Auditors

INPEX Advisory
Committee

Executive
Committee

President

CSR Committee

Audit Unit

Technical Division

Masela Project Division

HSE Unit

Oil & Gas Business Division 1

Ichthys Project Division

General Administration
Division

Oil & Gas Business Division 2

Domestic Project DivisionCorporate Strategy &Planning Division

Asia, Oceania & Offshore
Japan Project Division

Gas Supply &Infrastructure Division

New Ventures Division

America & Africa
Project Division

Finance & Accounting Division

Eurasia & Middle East
Project Division

Compliance Committee
Corporate HSE
Committee
Information Security
Committee

Logistics & IMT Division

Stock Data
Authorized Shares: 3,600,000,000 common stocks*1

Total Number of Shareholders and Issued Shares
Common Stocks: 39,546 shareholders / 1,462,323,600 shares*1
Class A Stock*2:
1 shareholder (Minister of Economy,
Trade and Industry) / 1 share

1 Class A Stock*1 Implemented a stock split at a rate of 1:400 of common stock at the effective date ofOctober 1, 2013.
*2 The Company’ s Articles of Incorporation stipulate that certain major corporate decisions require a resolution by the holder of the Class A Stock in addition to the approval of the shareholders’ meetings or Board of Directors.

Major Shareholders (Common Stocks)

Shareholding by Shareholder Type

Name

Number of Percentage ofshares total shares* (%)

Minister of Economy, Trade and Industry

276,922,800

18.94

Japan Petroleum Exploration Co., Ltd.

106,893,200

7.31

Mitsui Oil Exploration Co., Ltd.

53,154,000

3.63Japan Trustee Services Bank, Ltd. (Trust Account) 45,528,500

3.11

JX Holdings, Inc.

3.00

43,810,800

The Master Trust Bank of Japan, Ltd.
41,004,300(Trust Account)
The Chase Manhattan Bank, N.A. London Secs
40,224,357
Lending Omnibus Account

2.80

Shareholder type

CBNY - Orbis Funds

28,738,943

1.97

JP Morgan Chase Bank 385632

21,032,265

1.44

State Street Bank and Trust Company 505223

19,446,693

1.33

Number of Percentage ofsharestotal shares*1 (%)

Financial Institutions(Including Trust Accounts)

106

205,871,300

14.08

Securities Companies

48

12,812,864

0.88

Other Domestic Corporations

405

244,083,824

16.69

1

276,922,800

18.94

691

678,718,803

46.41

38,29441,947,609

2.87

1

1,966,400

0.13

Minister of Economy,
Trade and Industry*2
Foreign Corporations and Other
Individuals and Other

2.75

Number ofshareholders

Treasury Stock*1 Percentage of total shares are for all issued and outstanding shares.
*2 Excludes one Class A Stock* Percentage of total shares are for all issued and outstanding shares.

Home Page

Inquiries

The Company’s Web site provides investors with the most up-todate IR information, including financial statements.
} www.inpex.co.jp/english

For IR inquiries, as well as to offer comments and opinions about
this report, please contact below.
Corporate Strategy & Planning DivisionCorporate Communications Unit
Investor Relations Group
Phone: +81-3-5572-0234, Fax: +81-3-5572-0235
Web site: www.inpex.co.jp/en/ir/inquiries

This Report was printed using environmentally conscious
methods, vegetable oil-based ink.