FINANCIAL /CORPORATE INFORMATION

7

Message from the Senior Vice President,
Finance & Accounting Division
I would like to take this opportunity to provide an overview of the Groupʼsbusiness results highlights and ﬁnancial position, for the year ended March
31, 2013 as well as details of its investment plans and funding.
Business Results Highlights for
the Year Ended March 31, 2013
Consolidated net sales for the year ended March
31, 2013 resulted ¥1,216.5 billion increased by
2.5% and consolidated net income resulted ¥183.0
billion decreased by 5.7% from the previous ﬁscal
year. Despite this decrease, the Group recognized
one-off gain on transfer of the Ichthys interest of
approximately ¥50.0 billion, in similar fashion to thegain on transfer of the Masela interest recognized in
the year ended March 31, 2012. As a result, INPEX
maintained a high level of income.
The substantial depreciation of the yen against
the U.S. dollar toward the end of the year ended
March 31, 2013 had a positive effect on the Groupʼs
results, such as pushing net sales up by ¥47.2 billion. On the other hand, foreign exchange loss
occurred on foreign-currency denominated loansof ¥30.1 billion as other expenses. Meanwhile,
the Group recognized foreign exchange gain on
foreign-currency denominated bonds attributableto yen depreciation, which is not reﬂected in thestatement of income, but as unrealized holding gain
on securities in net assets. The risks associated with
the Groupʼs foreign-currency denominated transactions are considered to be in effect offset by efforts
to balance its foreign-currency denominated assets
and liabilities.

Financial Position
Consolidated total assets as of March 31, 2013
increased by ¥549.8 billion to ¥3,616.2 billion fromthe previous ﬁscal year mainly due to the development investment in the Ichthys Project, and theacquisition of interests in the shale gas projects in
Canada and the Prelude FLNG Project in Australia.
The Group relies mainly on operating cash ﬂows
and external loans to procure funds for these investments. At the same time, the available cash on handas of March 31, 2013 was approximately ¥1,500.0
billion and secured for those investments planned in
the “Medium- to Long-Term Vision of INPEX.” Recognizing that its investments are generally in U.S.
dollars, the vast majority of available cash on handis in effect denominated in U.S. dollars.

Consolidated net assets as of March 31, 2013
increased by ¥356.8 billion to ¥2,671.0 billion. In
addition to the increase in retained earnings of¥155.6 billion attributable to net income for theperiod, the increase in net assets largely reﬂected
the impact of yen depreciation on unrealized gainfrom hedging instruments and translation adjustments, which rose ¥118.7 billion. The increases
in unrealized gain from hedging instruments andtranslation adjustments were derived from foreignexchange gain by yen depreciation, resulting fromthe foreign exchange forward contracts and capital
investments in the overseas subsidiaries under yen
appreciation situation.
Yen depreciation contributed to improve theGroupʼs ﬁnancial condition. Its equity ratio which
resulted 68.6% as of March 31, 2013 remained
substantially higher than our long-term ﬁnancial
target of 50%. Moreover, net assets per share also
increased by 13.9% from the previous ﬁscal year.

Investment Plans and Funding“Medium- to Long-Term Vision of INPEX” issued in

May 2012 expresses ¥3.5 trillion investment plansover the 5 years period from the year ended March
31, 2013 to the year ending March 31, 2017. In
accordance with the plans, INPEX is continuing toengage in exploration and development investments toward future growth. In light of the recent
trend of yen depreciation, INPEX has revised its
medium- to long-term assumption of exchange
rate from ¥80 in May 2012 to ¥95 to the U.S. dollar. As a result, the investment amount on yen basis
has ﬂuctuated upward. For the sake of investments
denominated in U.S. dollars, the Group plans to
procure the required funds mainly through U.S. dollar based external loans including project ﬁnanceas well as U.S. dollar based operating cash ﬂows.
As previously mentioned, the vast majority of available cash on hand is denominated in U.S. dollars.
The current amount held is sufﬁcient to meet theGroupʼs needs for U.S. dollar based exploration anddevelopment investments in the next four years.
Taking this into consideration, INPEX is not required
to incur additional debt as a result of yen depreciation and accordingly does not contemplate theneed for further ﬁnancing.
The Group will make efforts to manage its balance sheet while taking care of ﬁnancial condition
to maintain the long-term ﬁnancial targets of “anequity ratio of 50% or more” and “a net debt to net
total capital employed ratio of 20% or less”.
` For details regarding the Groupʼs investment plans and

Masahiro
Murayama
Director,
Senior Vice President,
Finance & Accounting Division096

INPEX CORPORATION Annual Report 2013

funding please refer to the “The Medium- to LongTerm Vision of INPEX and Investment Plans” section of
the report on pp. 40 and 41.

Notes* EBIDAX = Net income + Minority interests + Deferred tax + (1 – Tax rate) ×(Interest expense – Interest income) + Exchange profit and loss + Depreciation
and amortization + Amortization of 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 the equity-method
afﬁliates. The reserves from March 31, 2007 to March 31 2010 were evaluated by
DeGolyer & MacNaughton, and from 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 the others are doneinternally.
The proved reserves are evaluated in accordance with SEC regulations.
The probable reserves are sum of proved reserves and probable reserves evaluatedin accordance with SPE/WPC/AAPG/SPEE guideline Petroleum Resources
Management System 2007(PRMS) approved in March 2007 after deduction ofproved reserves evaluated in accordance with SEC regulations.The probablereserves include reserves of bitumen. Probable reserves as of March 31, 2007 areevaluated in accordance with the guideline established by 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 tothe net economic take of the Group.
Calculation of the conversion factor from gas to oil equivalent was altered from theyear ended March 31, 2012.
* Exploration and development expenditures = Exploration expenditures +Development expenditures + Acquisition costs
Exploration and development expenditures include the Group’s share of investmentin the Ichthys downstream entity (Ichthys LNG Pty Ltd, an equity-method afﬁliate)from the year ended March 31, 2012.

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 andchanged the corporate name to INPEX CORPORATION on October 1, 2008.
2 INPEX Corporation settles accounts in March; Teikoku Oil Co., Ltd. settled accounts in
December up to the period ended December 31, 2005.
3 Due to a change of the accounting period, amounts of consolidated ﬁnancial statement of
Teikoku Oil Co., Ltd. of the period ended March 31, 2006 reﬂect the three-month period
from January 1, 2006 to March 31, 2006. Per share data and Financial indicators for theperiod 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.

097

INPEX CORPORATION Annual Report 2013

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.

Millions of yen
2002/3
2001/12

2003/3
2002/12

2004/3
2003/12

2005/3
2004/12INPEX ¥ 184,203
Teikoku Oil
75,767
INPEX
79,120
Teikoku Oil
45,036
INPEX
105,083
Teikoku Oil
30,730
INPEX
97,049
Teikoku Oil
11,864
INPEX
76,855
Teikoku Oil
7,799
INPEX
27,605
Teikoku Oil ¥5,704¥ 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

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

As of or years ended March 31,(Results of operations)
Net sales
Cost of sales
Gross profit
Operating income
Income before income taxes
and minority interests
Net income(Financial position)
Current assets
Tangible fixed assets
Intangible assets
Investments and otherassetsTotal assets
Current liabilities
Long-term liabilities
Net assets*

99,09659,89423,44496,403
4,233
841
160,874
45,229287,649
202,369
17,73024,07438,317
41,232
231,600
137,061* 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
end of the year

INPEX ¥
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil ¥51,83015,971(39,626)(19,666)
9,443
6,238
49,77534,001¥¥

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¥15,726.17*
17.11
143,389.73*
444.903,333*¥
6.00¥19,612.92*
22.09
157,275.33*
512.183,333*¥
6.00¥40,255.92
30.22
214,163.98
543.62
4,000
¥
7.50

(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%

¥

51,282
15,004(40,533)(27,166)
21,237(407)
78,41423,020(Per share data)
Earnings per share (EPS)(Yen)
Net assets per share (Yen)
Cash dividends per share(Yen)

INPEX ¥15,617.64*
Teikoku Oil
18.63
INPEX 130,586.85*
Teikoku Oil
438.79INPEX
3,333*
Teikoku Oil ¥7.00* Retroactively adjusted for a three-for-one stock split in May 2004

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

098

INPEX CORPORATION Annual Report 2013

INPEX
Teikoku Oil
INPEX
Teikoku Oil
INPEX
Teikoku Oil(82.8)%(15.0)
80.2
66.4
13.5
17.5%

Millions of yen
2006/3
2005/12
2006/3

2007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

943,080¥ 1,186,732¥ 1,216,533

INPEX¥ 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¥

969,713 ¥ 1,202,965¥ 1,076,165¥

840,427¥

343,795

390,554

319,038

298,168

334,833

395,443426,326

625,918

812,411757,127542,259

608,247

791,289

790,207559,077

714,211663,267

461,668

529,743

709,358

693,448586,263

685,800

616,167

442,027

508,587

767,039

718,146¥

165,092¥

173,246¥

145,063¥474,124¥565,111¥411,110¥

107,210¥

128,699¥

194,001¥

492,855¥

492,932¥

908,702¥ 1,106,504

182,962

INPEX¥ 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¥

219,227

254,481

297,636

358,094

379,862

383,698584,541

265,822265,481

253,681239,205

249,111233,318

380,156

648,934

722,828805,618

923,624

1,558,475

1,540,680

1,544,958

1,608,107

1,807,901

1,768,045

2,013,778

2,680,380

3,066,398

3,616,159

266,248

325,286

206,059

227,905

254,729

367,844414,977

261,843

243,802

199,925

295,270

328,268

384,361

530,198¥ 1,080,016¥ 1,238,813¥ 1,362,061¥ 1,490,603¥ 2,097,383¥ 2,314,193¥ 2,670,984

¥

¥

¥

INPEX

¥ 218,239
15,1189,872(252,399)(20,287)(4,705)
14,3507,845
5,480
114,967¥ 25,545¥ 36,175¥¥

231,982¥363,995¥

230,352¥

241,373274,094

320,692

252,347(209,243)(261,767)(240,168)(251,812)(844,511)(280,864)(489,870)

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

68,937548,057

29,294137,069

189,417 ¥

222,270

162,845 ¥

216,395¥¥

182,025¥

249,233¥

199,859

INPEX¥
53,814.47—
50.61
262,966.53—
646.90
5,500
—
¥
9.00
¥

¥ 70,423.45¥ 73,510.14¥ 61,601.60¥ 45,553.56¥ 40,832.40¥ 53,137.93¥ 50,114.22

436,467.92

491,168.09

540,100.10

589,548.88

546,958.90

596,908.99

679,639.63¥

7,000.00¥

7,500.00¥

8,000.00¥

5,500.00¥

6,000.00¥

7,000.00¥

7,000.00

(1.0)

—

51.9
67.1

—

43.6
14.7%

—%

(18.6)%(36.1)%(31.2)%(30.6)%(48.9)%(60.7)%(43.9)%

64.0

64.0

71.9

68.9

74.5

71.1

68.6

24.2%

16.8%

12.9%

17.3%

13.7%

14.6%

19.2%

INPEX CORPORATION Annual Report 2013

Financial /Corporate Information

INPEX(19.6)%

7099

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

Recoverable costs under the PSCs

or sever al oil and gas development companies ser ve as

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.”

contractors 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 nm e nt a n d t he co nt r ac to r s in line 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 based100

portion.”INPEX CORPORATION Annual Report 2013

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

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. These(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 ofdisposition of the oil and gas it extracts. Revenues are returnedto the host country in the form of royalties, taxes, etc., on sales.

Acquisition 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

depreciation expenses are recorded within the cost of sales.

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))

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)

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

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.

well as the reported amounts of revenues and expenses for thereporting 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

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 2013

Financial /Corporate Information

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

7101

reserve equal to exploration costs is recorded within “Allowance— Provision for exploration projects

for recoverable accounts under production sharing“ to provide

A provision for exploration projec ts is provided for future

for potential losses from unsuccessful exploration. This reserve

expenditures of consolidated subsidiaries at the exploration

typically remains unchanged on the balance sheet until it exceeds

stage based on a schedule of investments in exploration.

the residual balance of exploration costs that previously had

Although the Group believes that assessments relating to thebeen capitalized within “Recoverable accounts under production

schedule of investments are reasonable, changes to the schedulesharing“ during the exploration phase. Reﬂecting the uncertainty

could signiﬁcantly affect future operating results.

associated with oil and gas projects, a reserve is recorded within“Allowance for recoverable accounts under production sharing“— Deferred tax assets

to provide for probable losses on development activities, as

Deferred tax assets reﬂect temporary differences (including net

individually estimated for each project. Although assessments

operating loss carry-forwards) arising mainly from the write-

and accounting estimates are made on a reasonable basis, actual

down of exploration expenditures, foreign taxes payable andoperating results can change depending on the project status.

excess of tax allowable depreciation. Valuation allowances are— Unit-of-production method

tax assets has become the more probable outcome. The effectprovided once it is judged that the non-realization of deferred
Overseas mining facilities, mining rights and exploration andof foreign tax credits is taken into account in the calculation ofdevelopment rights that are acquired during the development

such valuation allowances. The realization of deferred tax assets

and production phase are mainly depreciated or amor tizedis principally dependent on the generation of sufﬁcient taxable

based on the unit-of-production method. This approach requires

income, based on the available information. Adjustments tothe estimation of reserves. Although the Group believes thatdeferred tax assets could be required if future taxable income

the assessment of reserves is done in an appropriate manner,

was lower than expected due to market conditions, foreign

any changes in these estimates could signiﬁcantly affect futureexchange rate ﬂuctuations or poor operating performance.

operating results.

— Retirement beneﬁts to employees— Asset retirement obligations

Retirement benefit obligation to employees are recognized at

Asset retirement obligations are recorded by a reasonable

the net present value of future obligations as of the end of theestimate of retirement costs incurred upon termination of theaccounting period, taking into account any periodic beneﬁt costs

operation with respect to oil and gas production facilities in casethat have arisen during the period. The calculation of retirementthat the Group is obliged to retire such facilities by oil and gas

benefit obligations and retirement benefit expenses is based

contracts or laws and regulations within the countries in which

on various actuarial assumptions, including the discount rate,

the Group operates or has working interests. Although the Group

employee turnover and retirement rates, remuneration growth

believes that such estimates of the present value of retirement

rates, and the expected return on pension plan assets. Future

costs are reasonable, changes to estimates of the present value

operating results could be significantly affected by deviationof retirement costs could significantly affect future operating

between the base assumptions and actual results or the revision

results.

of such assumptions which were to generate actuarial gains orlosses.

— 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.

102

INPEX CORPORATION Annual Report 2013

— 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, 2013, the Japanese economy
showed a gradual recovery owing to the reconstruction demand
from the Great East Japan Earthquake. Although the economy
weakened owing to the slowdown of the global economy
stemming from the European debt crisis in the second half ofthe fiscal year towards its end, there is a growing expectation
for an economic upturn from the effect of the new government’s
economic and monetary policies.
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, 2013, at US$125.43 per barrel but fell to US$89.23
per barrel in late June due to mounting crude oil inventories
worldwide and the European debt crisis. However, after EU
leaders agreed on a solution for the debt crisis, an upward
trend began and the price reached US$116.90 per barrel in midAugust, remaining at around US$110 per barrel until the end of
2012. As economic indicators in the United States and Europe
were strong from the beginning of 2013, the Brent crude oil pricewent up to US$118.90 per barrel in early February but began to
decline from the concerns of a recurrence of the European debt
crisis and closed at US$110.02 per barrel for the year ended
March 31, 2013. Meanwhile, domestic prices of crude oil andpetroleum products tracked movement in the international crude
oil prices. Reﬂecting these circumstances, the Group’s averagesales price of crude oil for the year ended March 31, 2013, was
US$110.11 per barrel, which was US$2.86 lower than that for theyear ended March 31, 2012.

The foreign exchange market, another important factor
that affects the business of the Group, began the year ended
March 31, 2013, with the yen trading at around ¥83 to the U.S.
dollar. Yen appreciation continued steadily against the U.S. dollar
early in the ﬁscal year ended March 31, 2013, to the ¥77 level in
mid-September while the U.S. economy showed a decelerating
recover y and concerns about sovereign and the financial
institutions arose in Europe. However, the yen depreciatedsharply to the U.S. dollar beginning of December 2012, aroundthe time of the Japanese Lower House election, in line withexpectations for the new administration’s economic policy andadditional monetary easing measures by the Bank of Japan, as
well as increased yen selling reﬂecting trends in Japan’s actual
trade deﬁcit. Since the beginning of the year, the yen continued
to depreciate to the U.S. dollar supported by the expectation ofmonetary easing related to the appointment of a new governorof the Bank of Japan and the U.S. dollar appearing to appreciate
against major currencies, reﬂecting discussions that the end ofquantitative easing began partly against the background of asteady recovery of the U.S. economy.
In March 2013, the yen temporarily dropped to the range of¥96 to the U.S. dollar, which was the lowest level in three and halfyears and, as a result, the TTM closed at ¥93.99 to the U.S. dollar
on March 31, 2013, which was ¥11.85 lower than that on March
31, 2012. Reﬂecting these situations, the average sales exchange
rate for the Group for the year ended March 31, 2013, was ¥82.68
to the U.S. dollar, which was ¥3.55 lower than that for the year
ended March 31, 2012.

PERFORMANCE OVERVIEW
Net sales31, 2012. The average sales price of overseas crude oil was
US$110.11 per barrel, a decrease of US$2.86, or 2.5%, comparedwith the year ended March 31, 2012. The average sales price ofoverseas natural gas was US$13.43 per thousand cubic feet (Mcf),a decrease of US$0.69, or 4.9%, compared with the year ended
March 31, 2012. The average sales price of domestic natural
gas was ¥47.02 per m 3, an increase of ¥2.46 per m 3, or 5.5%,
compared with the year ended March 31, 2012.
The increase of ¥29.8 billion in net sales was mainly
derived from the following fac tor s: the increase in sales
volume contributing ¥7.6 billion to the increase, a decrease in

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

1,200

1,203.0

1,186.7

1,216.5

2012

2013

7

1,076.2
943.1

900

Financial /Corporate Information

Consolidated net sales for the year ended March 31, 2013,
increased by ¥29.8 billion, or 2.5%, to ¥1,216.5 billion from
¥1,186.7 billion for the year ended March 31, 2012, due to anincrease in sales volume of crude oil and the positive effect ofthe depreciation of the yen against the U.S. dollar, despite adecrease in the sales prices of crude oil and natural gas.
Compared with the year ended March 31, 2012, net salesof crude oil increased by ¥61.9 billion, or 8.5%, to ¥788.1 billion
from ¥726.2 billion, and net sales of natural gas decreased by¥31.3 billion, or 7.3%, to ¥397.8 billion from ¥429.1 billion. Net
sales excluding crude oil and natural gas decreased by ¥0.8
billion, or 2.6%, to ¥30.6 billion from ¥31.4 billion.
Crude oil sales volume increased by 5,452 thousand barrels,
or 6.8%, to 86,189 thousand barrels compared with the year
ended March 31, 2012. This was mainly due to an increase in sales
volume in the Kitan Oil Field and the ADMA Block. The sales
volume of natural gas decreased by 39 billion cubic feet (Bcf),
or 10.9%, to 319 Bcf compared with the year ended March 31,
2012. Of this, the sales volume of overseas natural gas decreasedby 39 Bcf, or 13.2%, to 253 Bcf compared with the year ended
March 31, 2012, mainly due to a decrease in sales volume in
the Offshore Mahakam Block. The sales volume of domestic
natural gas decreased by 5 million m3, or 0.3%, to 1,753 million
m3 (equivalent to 65 Bcf) compared with the year ended March

840.4

600

300

0

2008

2009

2010

2011

INPEX CORPORATION Annual Report 2013

103

(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 investment securities
Equity in earnings of affiliates
Gain on transfer of mining rights
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

2012

2013

¥1,186,732
726,223
429,065
31,444395,443
791,289
11,74748,286
21,898709,358
102,082
4,400
6,993
48
6,638
70,26013,74344,401
1,228—
14,816519
14,641
13,197
767,039
536,934
230,105
36,104¥ 194,001¥1,216,533
788,135
397,766
30,632426,326
790,207
20,12553,73422,900693,448
98,666
8,735
7,832
25,449—50,173
6,477
73,968
1,518
1,042
15,131
12,45230,056
13,769718,146529,275
188,871
5,909¥ 182,962

ChangeRatio¥ 29,801
61,912(31,299)(812)
30,883(1,082)
8,378
5,448
1,002
(15,910)(3,416)
4,335
839
25,401(6,638)(20,087)(7,266)29,567
290
1,042
315
11,933
15,415572(48,893)(7,659)(41,234)(30,195)¥(11,039)

2.5%
8.5
(7.3)
(2.6)
7.8
(0.1)
71.3
11.3
4.6
(2.2)
(3.3)
98.5
12.0
—
(100.0)(28.6)(52.9)
66.6
23.6
—
2.1
—
105.3
4.3
(6.4)
(1.4)
(17.9)(83.6)(5.7)%

average unit sales prices pushing sales down ¥24.2 billion, thedepreciation of the yen against the U.S. dollar contributing ¥47.2
billion to the increase and a decrease in net sales excluding
crude oil and natural gas of ¥0.8 billion.

and others, exploration expenses for the year ended March 31,
2013, increased by ¥8.4 billion, or 71.3%, to ¥20.1 billion from
¥11.7 billion for the year ended March 31, 2012, due to increased
exploration activities in the Middle East & Africa and other areas.

Cost of sales

Selling, general and administrative expenses

Cost of sales for the year ended March 31, 2013, increased by¥30.9 billion, or 7.8%, to ¥426.3 billion from ¥395.4 billion for theyear ended March 31, 2012. This was mainly due to an increasein royalties in the ADMA Block owing to an increase in sales, anincrease in depreciation and amortization in the Kitan Oil Field
and the trend of yen depreciation.

Selling, general and administrative expenses for the year ended
March 31, 2013, increased by ¥5.4 billion, or 11.3%, to ¥53.7
billion from ¥48.3 billion for the year ended March 31, 2012.
This was mainly due to an increase in personnel expenses, anoccurrence of transport costs for shale gas in Canada and anincrease in transport costs for ACG crude oil.

Exploration expenses

Depreciation and amortization

Despite a decrease in exploration expenses in the Americas

Depreciation and amortization for the year ended March 31,

Cost of sales

Operating income(¥billion)(¥billion)

500

800

400

714.2

426.3

390.6

709.4

693.4

2012

2013

663.3

395.4
600

319.0
300

529.7

334.8
298.2

461.7
400

200
200
100

0

0

2008

104

2009

2010

INPEX CORPORATION Annual Report 2013

2011

2012

2013

2008

2009

2010

2011

2013, increased by ¥1.0 billion, or 4.6%, to ¥22.9 billion from
¥21.9 billion for the year ended March 31, 2012, due to anincrease in the depreciation of exploration and development
rights for the ACG Oil Fields and others. 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.

¥29.6 billion, or 66.6%, to ¥74.0 billion from ¥44.4 billion for theyear ended March 31, 2012. This was mainly due to an increasein provision for exploration projects owing to an increase of
exploration activities in Asia and an increase in foreign exchange
loss.

Income taxes

As a result of the above, operating income for the year ended
March 31, 2013, decreased by ¥16.0 billion, or 2.2%, to ¥693.4
billion from ¥709.4 billion for the year ended March 31, 2012.

Total current income taxes and deferred income taxes for theyear ended March 31, 2013, decreased by ¥7.6 billion, or 1.4%,
to ¥529.3 billion from ¥536.9 billion for the year ended March 31,
2012. 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 73.7%
in the year under review.

Other income

Minority interests

Despite an increase in gain on sales of investment securities,
other income for the year ended March 31, 2013, decreased by¥3.4 billion, or 3.3%, to ¥98.7 billion from ¥102.1 billion for theyear ended March 31, 2012, due to a decrease in gain on transferof mining rights and others.

Minority interests for the year ended March 31, 2013, decreasedby ¥30.2 billion, or 83.6%, to ¥5.9 billion from ¥36.1 billion for theyear ended March 31, 2012.

Operating income

Other expenses
Other expenses for the year ended March 31, 2013, increased by

Net income
As a result of the above, net income for the year ended March 31,
2013, decreased by ¥11.0 billion, or 5.7%, to ¥183.0 billion from
¥194.0 billion for the year ended March 31, 2012.

FINANCIAL POSITION
Total assets as of March 31, 2013, increased by ¥549.8 billion,
or 17.9%, to ¥3,616.2 billion from ¥3,066.4 billion as of March
31, 2012. Current assets increased by ¥197.8 billion, or 21.8%,
to ¥1,106.5 billion from ¥908.7 billion due to an increase in time
deposits and others. Fixed assets increased by ¥352.0 billion,
or 16.3%, to ¥2,509.7 billion from ¥2,157.7 billion as of March
31, 2012, due to an increase in construction in progress, mining
rights, long-term time deposits and others.
Meanwhile, total liabilities increased by ¥193.0 billion,
or 25.7%, to ¥945.2 billion from ¥752.2 billion as of March 31,
2012. Current liabilities increased by ¥47.2 billion, or 12.8%, to¥415.0 billion from ¥367.8 billion as of March 31, 2012, due to anincrease in income taxes payable and provision for exploration
projects. Long-term liabilities increased by ¥145.8 billion, or
37.9%, to ¥530.2 billion from ¥384.4 billion as of March 31, 2012,
due to an increase in long-term debt and others.
Net as set s increased by ¥356.8 billion, or 15.4%, to¥2,671.0 billion from ¥2,314.2 billion as of March 31, 2012. Total
shareholders’ equity increased by ¥155.6 billion, or 7.1%, to¥2,340.0 billion from ¥2,184.4 billion as of March 31, 2012. Total
accumulated other comprehensive income increased by ¥146.4
billion to ¥141.3 billion from a loss of ¥5.1 billion as of March 31,
2012, and minority interests increased by ¥54.8 billion, or 40.6%,
to ¥189.7 billion from ¥134.9 billion as of March 31, 2012.

Net income

Total assets(¥billion)(¥billion)

200

194.0
173.2

3,066.43,000

72,680.4

145.1

150

3,616.2

3,500

183.0
2,500
2,000

107.2
100

Financial /Corporate Information

128.7
2,013.8
1,807.9

1,768.0

2008

2009

1,500
1,000

50

500
0

0

2008

2009

2010

2011

2012

2013

2010

2011

2012

2013

INPEX CORPORATION Annual Report 2013

105

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, 2012 and 2013:(Millions of yen)

Year ended March 31, 2012Japan

INPEX CORPORATION and Consolidated Subsidiaries
Exploration¥
31
Development
1,021
1,052
Subtotal* 1
Equity-method affiliates
Exploration—
Development—
Subtotal—
35,895
Other capital expenditures* 2
Total* 3¥36,947

Asia & Oceania

Eurasia(Europe & NIS)

Middle East &AfricaAmericasTotal¥ 15,700
90,878106,578¥ 1,094
59,66260,756¥ 1,074
18,24919,323¥14,915
2,922
17,837¥ 32,814
172,732
205,546—327
327
38,403¥145,308———
3¥60,759

38
225
263
5
¥19,591

—
1,768
1,768
—
¥19,605

38
2,320
2,358
74,306¥282,210*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 Receiving Terminal, and theGroup’s share of 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, 2012 was ¥471 million.

(Millions of yen)

Year ended March 31, 2013

Japan

INPEX CORPORATION and Consolidated Subsidiaries¥
62
Exploration
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 Receiving Terminal, and theGroup’s share of 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.

106

INPEX CORPORATION Annual Report 2013

Total investments for the year ended March 31, 2013, increased by ¥372.6 billion, or 132.0%, to ¥654.8 billion (including ¥1.6 billion for
exploration and development by equity-method afﬁliates) from ¥282.2 billion for the year ended March 31, 2012. 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, 2012 and 2013.
(Millions of yen, %)Years ended March 31,

2012

INPEX CORPORATION and Consolidated Subsidiaries
Japan¥ 9,071
Asia & Oceania
50,886
Eurasia (Europe & NIS)
6,901
Middle East & Africa
22,396
Americas417
Subtotal
89,671Equity-method affiliates
Asia & Oceania
312
Middle East & Africa
1,533
Americas
5,639
Subtotal
7,484
Total
¥97,155

2013
10.1%
56.7
7.7
25.0
0.5
100.0

¥

9,491
63,851
7,152
23,055868
104,417

9.1%
61.2
6.8
22.1
0.8
100.0

4.2
20.5
75.3
100.0
—%

525
1,724
1,746
3,995
¥108,412

13.1
43.2
43.7
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, 2012 and 2013. 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
Eurasia (Europe & NIS)
Middle East & Africa
Americas
Subtotal
Equity-method affiliates
Asia & Oceania
Middle East & Africa
Americas
Subtotal
Total

2012

2013

¥ —
601
—
—
601

—%
100.0
—
—
100.0

¥ 82,219
1,024—
94,088177,331

46.4%
0.6
—
53.0
100.0

—
—
—
—
¥601

—
—
—
—
—%

—
42,228—42,228¥219,559

—
100.0
—
100.0
—%

Total expenditures on acquisitions of upstream oil and gas projects for the year ended March 31, 2013, increased by ¥219.0 billion to¥219.6 billion (including ¥42.2 billion for acquisitions of projects by equity-method afﬁliates) from ¥0.6 billion for the year ended March
31, 2012, due to acquisitions of projects in the Asia & Oceania, Middle East & Africa, and Americas regions.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013107

— 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, 2012 and 2013.
(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 year2012
¥ 534,331
25,320123,762
50,055
4,501
53,54398,87017,238568,318¥(100,671)

2013¥ 568,318
22,044130,998
53,9195,102
54,087
107,938
27,790590,566¥(112,871)

The amount posted as ”Cost recovery—operating expenditures”

increased compared with the year ended March 31, 2012,

in recoverable accounts under production sharing is greater

mainly due to an increase in operating expenses in the Offshore

than that posted as operating expenses. Along with operating

Mahakam Block.

expenses, this is because a por tion of the exploration andCost recovery for the year ended March 31, 2013, increased

development cos t s, which are incur red and recover ablecompared with the year ended March 31, 2012. This was mainly

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

due to increases in cost recovery in the Offshore Mahakam Block

expenditures” account.

and the ACG Oil Fields, despite a decrease in cost recovery inE xploration cos t s for the year ended March 31, 2013,

the South Natuna Sea Block B.

decreased compared with the year ended March 31, 2012. ThisIn addition, other deduction was mainly due to the decrease

was mainly due to a decrease in exploration expenditures in thein recoverable accounts under production sharing related to theAmericas region.

transfer to other accounts.

Development costs for the year ended March 31, 2013,

The allowance for recoverable accounts under production

increased compared with the year ended March 31, 2012. Thissharing as of March 31, 2013, increased compared with March

was mainly due to increases in development expenditures in the31, 2012. This was mainly due to additional allowance provisions

Offshore Mahakam Block, the South Natuna Sea Block B and thein connection with an increase in recoverable accounts under

ACG Oil Fields, despite a decrease in those in the Kashagan Oil

production sharing with respect to exploration expenditures in

Field.

the Asia region.

Operating expenses for the year ended March 31, 2013,— Funding sources and liquidity
Oil and gas exploration and development projects, as well as the

The Ichthys downstream entity (Ichthys LNG Pty Ltd, anand other supply infrastructure, require significant funding.

equity-method afﬁliate), as the borrower, began utilizing external

The Group relies on cash flow derived from internal reserves,loans from 8 export credit agencies and 24 commercial banks for

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

project ﬁnancing during 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 on hand at all times to fund expenditures for existing andcash flow and external loans to fund development projects,

new oil and gas projects in a timely manner, while also keeping apipeline construction and the LNG receiving terminal. The Groupcushion of liquidity to provide for steep falls in oil and gas prices.

currently receives loans from the Japan Bank for International

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

Cooperation, Japanese commercial banks and others. The Japanrisk, highly liquid ﬁnancial instruments. The Group’s strategy is toOil, Gas and Metals National Corporation (JOGMEC) guarantee

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

expansion while continuing to maintain a sound ﬁnancial position

Japan and various Japanese commercial banks provide loans forwith sufﬁcient liquidity.

the construction and expansion of domestic pipelines and LNG

108

receiving terminal.

construction and expansion of pipelines, LNG receiving terminal

INPEX CORPORATION Annual Report 2013

— Maturities of long-term debt
The aggregate annual maturities of long-term debt subsequent to March 31, 2013, are summarized as follows:(Millions of U.S. dollars and Millions of yen)
Long-term debt denominated inYears ending March 31,

U.S. dollars

2014
2015
2016
2017
2018
2019 and thereafter
Total

$

38.5
116.2
154.6
258.6
258.6
3,211.4$4,037.9

Yen

Total yen equivalent¥ 3,776
5,630
7,788
32,674
7,722
37,187¥94,777¥

7,391
16,54722,321
56,981
32,029339,031¥474,300— Cash ﬂows
Cash ﬂows for the years ended March 31, 2012 and 2013, 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, 2013, was ¥252.3 billion, a decrease of ¥68.4 billion
from ¥320.7 billion for the year ended March 31, 2012. Thiswas mainly due to a decrease in income before income taxes
and minority interests caused by a decrease in the unit sales
prices for crude oil and natural gas and others, in addition to anincrease in income taxes paid.

Net cash used in investing activities

2012¥320,692(280,864)
29,294¥249,233

2013¥252,347(489,870)
137,069¥199,859

due to payments for long-term time deposits and payments forpurchase of mining rights recorded for the year ended March 31,
2013.

Net cash provided by ﬁnancing activities
Net cash provided by financing activities for the year ended
March 31, 2013, was ¥137.1 billion, an increase of ¥107.8 billion
from ¥29.3 billion for the year ended March 31, 2012. This was
mainly due to increases in proceeds from long-term debt andproceeds from minority interests for additional shares.

Net cash used in investing activities for the year ended March
31, 2013, was ¥489.9 billion, an increase of ¥209.0 billion from¥280.9 billion for the year ended March 31, 2012. This was mainly

CONSOLIDATED FINANCIAL FORECAST FOR THE YEAR ENDING
MARCH 31, 2014 (Announced on August 2, 2013)
stay at the same level due to a positive effect from depreciationof the yen against the U.S. dollar despite the forecasted declineof the crude oil price compared with the year ended March 31,
2013. On the other hand, operating income, income before
income taxes and minority interests, and net income for the year
ending March 31, 2014 are expected to decrease due to theabsence of one-off gain on transfer of interests in the Ichthys
Project, an increase in cost of sales and others.
The aforementioned forecasts are based on an average oil
price of US$100.8 per barrel for Brent crude oil and an averageexchange rate of ¥95.9 to the U.S. dollar for the year ending
March 31, 2014.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Consolidated net sales for the year ending March 31, 2014, areexpected to increase by ¥5.5 billion, or 0.4%, to ¥1,222.0 billion
compared with the year ended March 31, 2013. Operating
income for the year ending March 31, 2014, is expected todecrease by ¥78.4 billion, or 11.3%, to ¥615.0 billion comparedwith the year ended March 31, 2013. Income before income taxes
and minority interests are expected to decrease by ¥81.1 billion,or 11.3%, to ¥637.0 billion compared with the year ended March
31, 2013. Net income is expected to decrease by ¥41.0 billion, or
22.4%, to ¥142.0 billion compared with the year ended March 31,
2013.
Net sales for the year ending March 31, 2014, are expected to109Consolidated Balance Sheet
INPEX CORPORATION and Consolidated Subsidiaries
As of March 31, 2013

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

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

Intangible assets:
Goodwill (Note 16)
Exploration and development rights
Mining rights
Other

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
Deferred tax assets (Note 7)Long-term time deposits (Note 12)
Other investments (Note 6)
Less allowance for doubtful accounts
Less allowance for investments in exploration
Total assets
See accompanying notes to consolidated financial statements.

110

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥ 249,233¥ 199,859$ 2,126,386

84,665

284,469

3,026,588

119,460

117,4121,249,197

341,387

281,129

2,991,052

11,977

15,409163,943

18,693

10,111

107,575

71,912

94,333

1,003,649
1,262,911

24,388

118,701(13,013)(14,919)(158,729)

908,702

1,106,504

11,772,572

233,523240,218

2,555,782

237,363

247,1732,629,780

277,572

305,836

3,253,921

20,07019,560208,107

167,779

359,430

3,824,130

14,695

19,067

202,862

951,002

1,191,284

12,674,582(567,304)(606,743)(6,455,399)

383,698584,541

6,219,183

94,602

87,841

934,578

118,007

118,869

1,264,699

16,492

167,179

1,778,689

4,217

6,267

66,677233,318

380,156

4,044,643

568,318

590,566

6,283,285(100,671)(112,871)(1,200,883)

467,647

477,695

5,082,402

886,222673,129

7,161,709

48,1107,264

77,28530,55540,076426,386

55,000287,273

3,056,421

60,14265,434

696,180

(716)

(794)

(8,448)(6,280)(5,119)(54,463)

1,540,680

1,544,958

16,437,472¥3,066,398¥3,616,159$38,473,870

Thousands of
U.S. dollars(Note 3)

Millions of yen

LIABILITIES AND NET ASSETS

2012

2013

¥

¥

2013

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)

30,22841,402$

440,494

4,802

8,561

91,084

139,145

152,681

1,624,439

Accounts payable—other (Note 6)

133,153

133,233

1,417,523

Provision for exploration projects

5,551

26,857285,743

Accrued bonuses to ofﬁcers
Asset retirement obligations (Note 15)
Other (Note 7)

128

127

1,351

3,338

3,813

40,56851,49948,303513,917367,844414,977

4,415,119

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

313,973

466,909

4,967,645

Deferred tax liabilities (Note 7)

43,17834,988372,252

Accrued retirement beneﬁts to employees (Note 14)

6,341

8,580

91,286

Provision for loss on business

—

3,705

39,419Accrued special repair and maintenance

368

278

2,958

Asset retirement obligations (Note 15)

9,804

13,582

144,505

Other (Note 6)

10,6972,156

22,939384,361

530,198

5,641,004

752,205

945,175

10,056,123

Common stock:
Authorized: 2012 — 9,000,001 shares2013 — 9,000,001 shares
Issued:2012 — 3,655,810 shares2013 — 3,655,810 shares
Capital surplus

290,810

290,810

3,094,053

679,288679,288

7,227,237

Retained earnings
Less: Treasury stock: 2012 — 4,916 shares2013 — 4,916 shares
Total shareholders’ equity

1,219,527

1,375,107

14,630,354(5,248)(5,248)(55,836)

2,184,377

2,339,957

24,895,808

Unrealized holding gain on securities

6,953

34,742369,635

Unrealized gain from hedging instruments (Note 11)

4,118

16,244

172,827

Translation adjustments(16,196)

90,350961,273

Total accumulated other comprehensive income(5,125)

141,336

1,503,735

134,941

189,691

2,018,204

2,314,193

2,670,984

28,417,747¥3,066,398¥3,616,159$38,473,870

Long-term liabilities:

Total liabilities
Net assets (Notes 9 and 10):

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

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Minority interests

111

Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013
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 investment securities
Equity in earnings of afﬁliates
Gain on transfer of mining rights
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 (Note 7):
Current
DeferredIncome before minority interests
Minority interests
Net income (Note 10)

2012

2013

2013

¥1,186,732
395,443
791,289
11,74748,286
21,898709,358¥1,216,533
426,326
790,207
20,12553,73422,900693,448$12,943,217
4,535,865
8,407,352
214,119571,699
243,643
7,377,891

4,400
6,993
48
6,638
70,26013,743102,082

8,735
7,832
25,449—50,173
6,477
98,666

92,93583,328
270,763—
533,81268,912
1,049,750

1,228
—

1,518
1,042

16,151
11,086

14,81615,131

160,985519
14,641
13,19744,401
767,039

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

132,482319,779
146,494
786,977
7,640,664

543,157(6,223)536,934
230,105
36,104¥ 194,001

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

5,736,866(105,682)
5,631,184
2,009,480
62,869$ 1,946,611

Consolidated Statement of Comprehensive Income
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013
Thousands of
U.S. dollars(Note 3)

Millions of yen

Income before minority interests
Other comprehensive income
Unrealized holding gain on securities
Unrealized gain 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
See accompanying notes to consolidated financial statements.

112

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥230,105¥188,871$2,009,480

5,499
4,118
2,082

27,787
16,769105,692

295,638
178,412
1,124,502(1,134)(1,577)(16,778)

10,565
240,670

148,671
337,542

1,581,774
3,591,254

204,268¥ 36,402

329,422¥ 8,120

3,504,862$ 86,392

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

Millions of yen

For the year ended March 31, 2012

Balance
as of April 1,
2011

Cash
dividends paid

Net income

¥

¥

¥

—

Balance
as of March 31,
2012¥¥ 290,810¥ 290,810

Capital surplus

679,288

—

—

—

—

679,288

1,047,431(21,905)

194,001—

172,096

1,219,527

Treasury stock—

Total changes
during theperiodCommon stock
Retained earnings—

Net changes in items
other than those inshareholders’ equity—(5,248)

—

—

—

—

(5,248)2,012,281(21,905)

194,001—

172,096

2,184,377

Unrealized holding gain
on securities

1,456

—

—

5,497

5,497

6,953

Unrealized gain fromhedging instruments

—

—

—

4,118

4,118

4,118

Translation adjustments(16,847)

—

—

651

651

(16,196)

Total accumulated othercomprehensive income(15,391)——

10,266

10,266(5,125)

Total shareholders’ equity

Minority interests

100,493——

34,44834,448

134,941

Total net assets¥2,097,383¥(21,905)¥194,001¥44,714¥216,810¥2,314,193

For the year ended March 31, 2013

Balance
as of April 1,
2012

Cash
dividends paid

Total changes
during theperiodBalance
as of March 31,
2013

Common stock¥ 290,810

Capital surplus

679,288

—

—

—

—

679,288

1,219,527(27,382)

182,962—

155,580

1,375,107

Millions of yen

Retained earnings
Treasury stock¥

Net income

—

¥

—

Net changes in items
other than those inshareholders’ equity

¥

—

¥

—

¥ 290,810(5,248)

—

—

—

—

(5,248)2,184,377(27,382)

182,962—

155,580

2,339,957

Unrealized holding gain
on securities

6,953

—

—

27,78927,78934,742

Unrealized gain fromhedging instruments

4,118

—

—

12,126

12,126

16,244

Translation adjustments(16,196)——

106,546

106,546

90,350Total accumulated othercomprehensive income(5,125)——

146,461

146,461

141,336

Total shareholders’ equity

Minority interests

134,941——

54,75054,750189,691

Total net assets¥2,314,193¥(27,382)¥182,962¥201,211¥356,791¥2,670,984

For the year ended March 31, 2013

Balance
as of April 1,
2012

Cash
dividends paid

Total changes
during theperiodBalance
as of March 31,
2013

Common stock$ 3,094,053$$$ 3,094,053

Capital surplus

7,227,237

—

—

—

—

7,227,237

Retained earnings

12,975,072(291,329)

1,946,611—

1,655,282

14,630,354

Thousands of U.S. dollars (Note 3)

Treasury stock—

Net income$—

Net changes in items
other than those inshareholders’ equity

$

—

—

—

—

—

—

(55,836)(291,329)

1,946,611—

1,655,282

24,895,808

Unrealized holding gain
on securities

73,976——295,659

295,659

369,635

Unrealized gain fromhedging instruments

43,813——129,014129,014

172,827

Translation adjustments(172,316)——

1,133,589

1,133,589

961,273

Total accumulated othercomprehensive income(54,527)——

1,558,262

1,558,262

1,503,735

Minority interests

1,435,695——

582,509582,5092,018,204

Total net assets$24,621,694$(291,329)$1,946,611$2,140,771$3,796,053$28,417,747

See accompanying notes to consolidated financial statements.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information(55,836)
23,240,526

Total shareholders’ equity

113Consolidated Statement of Cash Flows
INPEX CORPORATION and Consolidated Subsidiaries
For the year ended March 31, 2013

Thousands of
U.S. dollars(Note 3)

Millions of yen

Cash ﬂows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Amortization of goodwill
Provision for allowance for recoverable accounts under production sharing
Provision for exploration projects
Provision for accrued retirement beneﬁts to employees
Other provisions
Interest and dividend income
Interest expense
Foreign exchange loss (gain)
Equity in (earnings) losses of afﬁliates
Gain on transfer of mining rights
Loss (gain) on sales of investment securities
Recovery of recoverable accounts under production sharing(capital expenditures)
Recoverable accounts under production sharing(operating expenditures)
Accounts receivable—trade
Inventories
Accounts payable—trade
Accounts receivable—otherAccounts payable—other
Advances received
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash ﬂows from investing activities
Payments for time deposits
Proceeds from time deposits
Payments for long-term time deposits
Proceeds from long-term time deposits
Payments for purchases of tangible ﬁxed assets
Proceeds from sales of tangible ﬁxed assets
Payments for purchases of intangible assets
Payments for purchases of marketable securities
Proceeds from sales and redemptions of marketable securities
Payments for purchases of investment securities
Proceeds from sales and redemptions of investment securities
Investment in recoverable accounts under production sharing(capital expenditures)
Decrease (increase) in short-term loans receivable
Long-term loans madeCollection of long-term loans receivable
Payments for purchase of mining rights
Proceeds from transfer of mining rights
Other
Net cash used in investing activities
Cash ﬂows from ﬁnancing activities
Increase (decrease) in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from minority interests for additional shares
Cash dividends paid
Dividends paid to minority shareholders
Other
Net cash provided by ﬁnancing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
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
See accompanying notes to consolidated financial statements.

114

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥767,039
48,026
6,760
18,991(3,916)(637)(26)(11,393)
1,228
5,334
(6,638)(70,260)(48)¥718,146
51,916
6,761
16,354
21,132
2,285
5,547(16,567)
1,518
16,3301,041(50,173)(25,449)$7,640,664
552,357
71,933
173,997
224,832
24,31159,017(176,263)
16,151
173,742
11,076(533,812)(270,763)

53,54354,087575,455(21,041)(21,079)(224,269)(23,816)
195
6,562(19,774)
40,94323,891
418
815,381
16,997(943)(510,743)
320,692

2,795(3,232)
11,0304,910(900)(24,636)
3,091
774,907
19,652(1,344)(540,868)
252,347

29,737(34,387)
117,353
52,240(9,575)(262,113)
32,886
8,244,569
209,086(14,300)(5,754,527)
2,684,828(88,771)
6,065——(68,317)315(1,368)(4,090)136,614(238,568)
20,672(299,460)
134,162(252,082)
5,000(189,153)
116(4,256)(17,710)366,633(90,831)70,902(3,186,084)
1,427,407(2,682,009)
53,197(2,012,480)
1,234(45,281)(188,424)
3,900,766(966,390)
754,357(82,916)(82,696)(879,838)

3,759(38,094)
3,600—
71,487(1,252)(280,864)(85)(141,222)
119,238(176,232)
56,80011,006(489,870)(904)(1,502,522)
1,268,624(1,875,008)
604,320
117,098(5,211,937)(40)
50,913(4,317)
9,723(21,922)(4,992)(71)
29,294(2,664)66,458
182,025
750

991
121,572(4,682)55,852(27,385)(4,992)(4,287)137,069
51,498(48,956)
249,233440

10,544
1,293,457(49,814)594,233(291,361)(53,112)(45,611)
1,458,336
547,909(520,864)
2,651,697
4,681

—

(858)

(9,128)¥249,233¥199,859$2,126,386

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, 2013.

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 43 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 11
companies, 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(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

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

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

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.

115

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.

(i) Allowance for investments in exploration
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.

(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.

(k) Intangible assets (except leased assets)
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.

(q) 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.

(r) 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.

(s) Hedge accounting
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.

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

(u) Income taxes

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

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.

(m) Provision for exploration projects(v) Standards issued but not effective

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

• ”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 revised accounting standard and guidance are scheduled totake effect from the end of the ﬁscal year ending March 31, 2014.
However, the revisions to the calculation method for retirement
benefit obligations and service costs will be applied from the
beginning of the ﬁscal year ending March 31, 2015.
(The impact of the adoption of the revised accounting standard andguidance)
The impact of the adoption of revised accounting standard andguidance on consolidated financial statements are now underevaluation.

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

(o) Asset retirement obligations
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.

(p) Accrued retirement beneﬁts to employees
Accrued retirement benefits to employees are provided at theamount calculated based on the expected retirement benefit
obligation and the fair value of pension plan assets at the end of
this period. Because certain subsidiaries are classified as small
enterprises, the simplified method (the amount which would be
required to be paid if all active employees voluntarily terminated116

their employment as of the balance sheet date) is applied for the
calculation of the retirement beneﬁt obligation of the subsidiaries.
Actuarial gains and losses are charged or credited to income as
incurred.

INPEX CORPORATION Annual Report 2013

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¥93.99=US$1.00, the approximate exchange rate in effect as of March 31, 2013. 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 pipelines and LNG receiving
terminal primarily from cash flow on hand and from bank loans.
Oil and gas development projects are primarily funded from longterm loans that the Company has secured from the Japan Bank forInternational Cooperation, Japanese commercial banks and others.
Japan Oil, Gas and Metals National Corporation has provided
guarantees for the principal on certain outstanding amounts of theCompany’s long-term loans. The Development Bank of Japan andJapanese commercial banks have provided long-term loans for theconstruction or expansion of domestic pipelines and LNG receiving
terminal. The Company generally borrows loans with variable interest
rates, while some loans are with a ﬁxed 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 ofthese 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 gas development projects
and construction or expansion of domestic pipelines and LNG
receiving terminal and others. The borrowing period is determinedconsidering the financial prospects of the project and useful livesof the facilities. Loans with variable interest rates are exposed tointerest rate fluctuation risk, however, the Company analyzes theimpact of interest rate ﬂuctuation at the time of borrowing and on anannual basis, and leverages ﬁxed-rate-loans or interest rate swaps asnecessary.

(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 endeavours 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.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013117

5. SECURITIES(a) Information regarding other securities as of March 31, 2012 and 2013 is as follows:
Millions of yen
March 31, 2012

Acquisition cost

Unrealized gain
(loss)

Carrying value

Securities with carrying values exceeding their acquisition costs:
¥
4,499
¥
9,318
Stock
Bonds:
726,075
727,734
Public bonds
23,50023,589Corporate bonds
25,39625,503
Other debt securities
204,862
209,855
Other
984,332
995,999
Subtotal
Securities with acquisition costs exceeding their carrying values:
47,93944,103Stock
Bonds:
30,19029,950Public bonds
40,00039,779Corporate bonds
8,385
8,348
Other debt securities
4,338
4,335
Other
130,852
126,515
Subtotal¥1,115,184¥1,122,514
Total¥ 4,819
1,659
89
107
4,993
11,667(3,836)
(240)
(221)
(37)
(3)
(4,337)¥ 7,330

Millions of yen
March 31, 2013

Acquisition cost

Unrealized gain
(loss)

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

Thousands of U.S. dollars
Unrealized gain
Acquisition cost
Carrying value(loss)¥ 9,989$ 127,003$ 233,280$106,277

1,244
102
3,901
23,76338,9993,790,658
638,898
357,996
2,183,051
7,097,606

3,803,894
639,983
399,500
2,435,876
7,512,533

13,236
1,085
41,504
252,825
414,927(2,627)430,376

402,426(27,950)

(155)
(34)
(2,816)¥36,183

310,001
372,380
1,112,757$8,210,363

308,352
372,018
1,082,796$8,595,329(1,649)(362)(29,961)$384,966(b) Information regarding sales of securities classiﬁed as other securities for the years ended March 31, 2012 and 2013 is as follows:Year ended March 31, 2012

Proceeds
from sales

Bonds:
Public bonds
Total¥41,395¥41,395

Year ended March 31, 2013

Proceeds
from sales

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

Millions of yen
Gain onsales

Loss on
sales

¥82
¥82

¥—
¥—

Millions of yen
Gain onsales

Loss on
sales

¥187
¥187

¥—
¥—

Proceeds
from sales

Thousands of U.S. dollars
Gain onsales$1,295,680$1,295,680$1,990$1,990Loss on
sales

$—
$—

(c) Components of securities for which it is extremely difﬁcult to determine fair value as of March 31, 2012 and 2013 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

2012

2013

2013

¥ 28,395
5,000
71,700¥105,095¥ 30,728
5,000
110,655¥146,383$ 326,929
53,197
1,177,306$1,557,432

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.

118

INPEX CORPORATION Annual Report 2013

(d) Redemption schedule for securities with maturity dates classiﬁed as other securities as of March 31, 2013 is as follows:
Millions of yen

March 31, 2013

1 year or lessMore than 1
year but lessthan 5 years¥167,000
33,5008,500
66,000¥275,000¥185,000
61,50028,197132,100¥406,797

Bonds:
Public bonds
Corporate bonds
Other debt securities
Other
Total

Thousands of U.S. dollars

More than 5More than 10
years but less
1 year or lessyears
than10 years¥31,500———¥31,500

¥—
—
—
—
¥—

$1,776,785
356,42190,435702,202$2,925,843

More than 1
year but lessthan 5 years$1,968,294
654,325300,000
1,405,469$4,328,088

More than 5More than 10
years but lessyears
than 10 years$335,142———$335,142

$—
—
—
—
$—

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2012 and 2013 are as follows:
Millions of yen
March 31,

Short-term borrowings from banks and others(Interest rates ranging from 0.970% to 1.325% and from0.950% to 2.174% at March 31, 2012 and 2013)
Total

Thousands of U.S. dollars

2012

2013

2013

¥120

¥1,170$12,448¥120¥1,170$12,448

Long-term debt as of March 31, 2012 and 2013 is as follows:
Millions of yen
March 31,

Loans from banks and others, due through 2028
(Interest rates ranging from 0.700% to 2.700% and from0.509% to 2.700% at March 31, 2012 and 2013)
Less: Current portion

Thousands of U.S. dollars

2012

2013

2013

¥318,655¥474,300$5,046,281

4,682¥313,973

7,391¥466,909

78,636$4,967,645

Assets pledged as of March 31, 2012 and 2013 are as follows:
Millions of yen
March 31,

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

Thousands of U.S. dollars

2012

2013

2013

¥ 2,251
2,737
9,190
7,633
231
¥22,042¥ 2,091
1,214
8,974
7,395
227
¥19,901$ 22,247
12,916
95,47878,6792,415$211,735

The above assets were pledged against the following liabilities:
Millions of yen

Thousands of U.S. dollars

March 31,

2012

2013

2013

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

¥1,589
5,090
2,434
17
¥9,130

¥ 997
5,119
1,437
17
¥7,570$10,60754,463
15,289181$80,540

In addition, assets pledged as collateral for the Ichthys LNG Project Finance and the BTC Pipeline Project Finance are as follows:
Ichthys LNG Project FinanceMillions of yen
March 31,

¥—
—
—
—
—
—
¥—

Thousands of U.S. dollars

2013
¥

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

2013$

38,323
1,702
687,637
1,415
1,834,004
167,656$2,730,737

BTC Pipeline Project FinanceMillions of yen

Thousands of U.S. dollars

March 31,

2012

2013

2013

Investment securities¥4,704¥5,240$55,751

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

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

2012

119

The aggregate annual maturities of long-term debt subsequent to March 31, 2013 are summarized as follows:
Years ending March 31,

Millions of yen

2014
2015
2016
2017
2018
2019 and thereafter
Total

Thousands of U.S. dollars

¥

7,391
16,54722,321
56,981
32,029339,031¥474,300$

78,636
176,051
237,483
606,245
340,770
3,607,096$5,046,281

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to corporate taxes and other which, in the aggregate, resulted in astatutory tax rate of approximately 36.2% and 33.3% for the years ended March 31, 2012 and 2013, respectively.
The effective tax rates reﬂected in the consolidated statement of income for the ﬁscal years ended March 31, 2012 and 2013 differ from thestatutory tax rate for the following reasons:Years ended March 31,

2012

2013

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

36.2%

33.3%

0.3
(0.6)
5.7
61.8
(23.1)
(8.2)
0.3
(1.6)
(0.8)
70.0%

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

The signiﬁcant components of deferred tax assets and liabilities as of March 31, 2012 and 2013 are as follows:
Thousands of U.S.
dollars

Millions of yen
March 31,

Deferred tax assets:
Exploration expenditures
Loss on revaluation of land
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
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

120

INPEX CORPORATION Annual Report 2013

2012

2013

2013

¥ 88,582
3,959
3,889
5,258
2,928
35,612
39,042
37,777
1,989—¥ 90,332
3,959
3,205
6,992
2,579
33,28846,021
43,238
2,659
1,140

1,704

795

8,458

4,239
4,940
14,475244,394(174,115)
70,2795,574
5,974
17,683
263,439(195,665)
67,77459,30463,560188,137
2,802,841(2,081,764)
721,077

30,164

27,048287,775

16,326

3,551

37,781

5,070

5,377

57,208

1,694

1,759

18,715

7,910
283
2,352
4,660
68,459¥ 1,820

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

119,949
15,151
111,097
50,856
698,532
22,545$$

961,081
42,122
34,10074,391
27,439354,165
489,637
460,028
28,29012,129

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, 2012 and 2013 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 from hedging instruments
Amount recognized during the period
Amount of income tax effectTranslation adjustments
Amount recognized during the period
Share of other comprehensive income of
afﬁliates 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

2012

2013

2013

¥ 5,082
539
5,621
(122)
5,499

¥ 29,075(138)
28,937(1,150)27,787$ 309,341(1,468)307,873(12,235)
295,638

6,456(2,338)4,118

24,873(8,104)
16,769264,634(86,222)
178,412

2,082

105,692

1,124,502(1,134)—(1,134)¥10,565(1,964)387(1,577)¥148,671(20,896)
4,118(16,778)$1,581,774

9. NET ASSETS
As of March 31, 2013, the total number of the Company’s sharesissued consisted of 3,655,809 shares of common stock and 1 Class A
Stock.
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.
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) shall betransferred to capital reserve and legal reserve, respectively, up to
the point where the total amount of capital reserve and legal reserve
equals 25% of the common stock account.
Distuributions can be made at any time by a resolution of
the meeting of shareholders, or the Board of Directors if certain
conditions are met, but neither capital reserve nor legal reserve isavailable for distributions.

7
Financial /Corporate Information

INPEX CORPORATION Annual Report 2013121

10. AMOUNTS PER SHARE
Yen

U.S. dollars

Years ended March 31,

2012

2013

2013

Net income per share¥ 53,137.93¥ 50,114.22$ 533.19

7,000.00

7,000.00

74.48¥596,908.99¥679,639.63$7,230.98

Cash dividends per share
Net assets per share

Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
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.
Cash dividends per share represent the cash dividends proposed by the Board of Directors together with the interim cash dividends paid.
Net assets per share are computed based on the net assets excluding minority interests and the number of common stock outstanding at theyear end.

11. DERIVATIVE TRANSACTIONS(a) Derivatives not subject to hedge accounting
Contract amounts, fair value and valuation gain (loss) regarding derivatives not subject to hedge accounting as of March 31, 2012 and 2013 are
as follows:
Millions of yen
Contract amounts

March 31, 2012

Currency swap transactions

Due after one year

¥31,996

Fair value

Valuation gain

¥883

¥883

¥—

* Fair value is the price obtained from the counterpar ty financial institutions.

There is no derivative not subject to hedge accounting as of March 31, 2013.

(b) Derivatives subject to hedge accounting
Contract amounts and fair value regarding derivatives subject to hedge accounting as of March 31, 2012 and 2013 are as follows:

Millions of yen
March 31, 2012

Principal items hedged

Contract amounts

Due after one year

Forecasted
transactions inforeign currencies¥108,578¥—¥6,456Long-term debt¥

¥4,820*2

Fair value

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

6,240

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*21Foreign exchange forwards * :Buy (USD)(Deferred hedge accounting)Interest rate swaps:
Payment ﬁxed, receipt ﬂuctuated (Special treatment)

4,820

Thousands of U.S. dollars
March 31, 2013

Principal items hedged

Contract amounts

Forecasted
transactions inforeign currencies$1,676,923$—$333,323

Long-term debt$

$50,644*2

Due after one year

Fair value

1

Foreign exchange forwards * :Buy (USD)(Deferred hedge accounting)Interest rate swaps:
Payment ﬁxed, receipt ﬂuctuated (Special treatment)

51,282*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.

122

INPEX CORPORATION Annual Report 2013

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, 2012 and 2013 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, 2012

Carrying value

Estimated fair value¥ 4,802¥313,973¥ 4,830¥316,131

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

Millions of yen

Thousands of U.S. dollars

Estimated fairvalue

Estimated fairvalue

March 31, 2013

Carrying value

Time deposits¥284,469¥284,502$3,026,588$3,026,939

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

287,273

289,0073,056,421

3,074,870

8,561

8,507

91,08490,510¥466,909¥456,404$4,967,645$4,855,878

Carrying value(b) For other ﬁnancial instruments, computation methods of estimated fair value are as shown below.

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

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-term borrowings,
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 ¥402 million and ¥99 million ($1,053
thousand) for the years ended March 31, 2012 and 2013, respectively.

14. RETIREMENT BENEFITS(a) Retirement beneﬁt obligations as of March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2013

2013

Retirement beneﬁt obligations
Plan assets at fair value¥(15,881)
9,540¥(19,388)
10,808$(206,277)
114,991

Unfunded retirement beneﬁt obligation
Unrecognized actuarial gain or loss
Accrued retirement beneﬁts to employees(6,341)—¥ (6,341)(8,580)—¥ (8,580)(91,286)—$ (91,286)

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

March 31,123

(b) Retirement beneﬁt expenses for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain or loss
Other*
Retirement beneﬁt expenses

2012

2013

2013

¥ 877
301
(235)
2,211
473
¥3,627$ 9,3313,202(2,500)23,524
5,032$38,589

2012

2013

2.0%
2.0%
Amortized as
incurred

1.0%
2.5%
Amortized as
incurred

¥792
294
(170)
(205)
238
¥949

*“Other” consists of the amount of contribution to deﬁned contribution plan.

(c) The assumptions used in accounting for the above plans are as follows:
Years ended March 31,

Discount rate
Expected return rate on plan assets
Period for amortization of actuarial gain or loss

15. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen
Years ended March 31,

2012

2013

2013

Balance at beginning of the year
Accretion expenses¥12,653434
322¥13,142711
429$139,823
7,565
4,564

Obligations settled

(265)

(359)

(3,819)322(324)¥13,142

1,997
1,475
¥17,395

21,247
15,693$185,073

New obligations

Change in estimates *1
Other *2
Balance at end of the year

*1 ”Change in estimates” for the year ended March 31, 2013 mainly reﬂects increasing site restoration and decommissioning costs of certain
subsidiaries which became evident in the year ended March 31, 2013.
*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, 2012 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

124Years ended March 31,

2012

2013

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

¥101,362—(6,760)¥ 94,602¥94,602—(6,761)¥87,841

INPEX CORPORATION Annual Report 20132013
$1,006,511—(71,933)$ 934,578

17. LEASES
Future minimum lease payments subsequent to March 31, 2013 for operating lease transactions are summarized as follows:(a) As lesseeYears ending March 31,

Millions of yen

Thousands of U.S. dollars

20142015 and thereafterTotal¥ 2,873
7,291¥10,164$ 30,567
77,572$108,139

Millions of yen

Thousands of U.S dollars(b) As lessor
Years ending March 31,

20142015 and thereafter
Total

¥102
374
¥476

$1,085
3,979$5,064

18. CONTINGENT LIABILITIESAs of March 31, 2013, the Company and its consolidated subsidiaries were contingently liable as guarantors of indebtedness of afﬁliates in theaggregate amount of ¥26,529 million ($282,253 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, 2013, was ¥4,873 million ($51,846 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, 2013, was¥128,864 million ($1,371,039 thousand).

19. SEGMENT INFORMATION
Segment information for the years ended March 31, 2012 and 2013
Overview of reportable segments
The reportable segments of 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.

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.”

Information on sales and income (loss), assets and other items by reportable segment
Millions of yen
Eurasia
Middle East &(Europe & NIS)
AfricaJapan

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¥113,662
113,662
24,607
260,596¥483,187
483,187
299,599445,735¥ 84,325
84,32547,076
515,537¥500,033
500,033
354,136
198,987

18,485

12,775

8,503

—

—

—

—

49,156¥ 35,954¥ 27,146¥

AmericasTotal¥ 5,525
5,525(5,518)67,929¥1,186,732
1,186,732
719,900
1,488,784

6,550

374

—

(193)

—

6,860

9,606

519

¥ 10,388¥ 2,956¥

Adjustments *1 Consolidated *2——(10,542)
1,577,614¥1,186,732
1,186,732
709,358
3,066,398

46,687

1,339

48,026

(193)

6,953

6,760

65,622—

65,622

76,963

¥

¥

2,106

¥

79,069INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Year ended March 31, 2012

Asia &
Oceania125

Millions of yen
Year ended March 31, 2013

Japan

Asia &
Oceania

Eurasia
Middle East &(Europe & NIS)
AfricaSales 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

Japan

Asia &
Oceania¥

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¥

Thousands of U.S. dollars
Year ended March 31, 2013

Sales to third parties$1,265,422
Total sales
1,265,422
Segment income (loss)
303,947
Segment assets
2,824,418
Other items
Depreciation and
187,286
amortization
Amortization of goodwill—
Investment to afﬁliates
19,758accounted for by theequity-method
Increase of tangible ﬁxed
assets and intangible$ 262,326
assetsEurasia
Middle East &(Europe & NIS)
AfricaAmericas

Total

Adjustments *1 Consolidated *2$5,163,049
5,163,049
2,996,308
7,349,324$ 910,108
910,108444,217
5,601,862$5,541,387
5,541,387
3,801,926
2,836,993

181,22196,457

62,241

10,767537,972

14,385552,357———(2,043)(2,043)73,976

71,933

498,117—566,475

44,2491,128,599—

1,128,599

10,895$ 219,119$2,168,879$$

63,251 $12,943,217 $— $12,943,217
63,251 12,943,217— 12,943,217(64,783)
7,481,615(103,724)
7,377,891
2,002,437 20,615,034 17,858,836 38,473,870$1,153,027 $ 3,814,246 $

15,810 $ 3,830,056*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 statement of income.

Products and service information:
Sales to third parties

Millions of yen

Thousands of U.S. dollars

2012

2013

2013

Crude oil
Natural gas (excluding LPG)

¥ 726,223
404,735¥ 788,135
370,528$ 8,385,307
3,942,206

LPG
Other
Total

24,33031,444¥1,186,732

27,23830,632¥1,216,533

289,797
325,907$12,943,217

Years ended March 31,

Geographical information:
Sales

Millions of yen

2013

2013

Japan
Asia & Oceania (excluding Singapore)¥ 591,215
420,184¥ 634,788
421,505$ 6,753,782
4,484,573

Singapore
Other
Total

135,759
39,574¥1,186,732

142,748
17,492¥1,216,533

1,518,757
186,105$12,943,217

Tangible ﬁxed assets

126

Thousands of U.S. dollars

2012

Years ended March 31,

Millions of yen

Thousands of U.S. dollars

March 31,

2012

2013

Japan
Australia
Other
Total

¥229,889
77,98175,828¥383,698¥235,674
227,358
121,509¥584,541

INPEX CORPORATION Annual Report 20132013
$2,507,437
2,418,959
1,292,787$6,219,183

Information by major customer:
Sales to major customers
Millions of yen

Thousands of U.S. dollars

Years ended March 31,

2012

2013

PERTAMINA
Idemitsu Kosan Co., Ltd.

¥245,942¥103,631¥206,282¥132,908

2013

Segment$2,194,723$1,414,065

Asia & Oceania
Middle East & Africa

20. RELATED PARTY TRANSACTIONSThere are the following related party transactions for the year ended March 31, 2012:

Afﬁliated company
Name ofrelated party

Location

Ichthys LNG Western Australia,
Pty Ltd
Australia

Capitalinvestment$482,700
thousandNature ofoperations

Votinginterest

Description of
the business
relationshipAmounts

Transaction
detailMillions of yen

Contribution inTransportation, liquefaction
Serve the kind
Total inheritedand sales of oil and naturalofﬁcerIndirectlyassetsgas through pipeline in WAconcurrently,
76.00%
Total inherited
37-R block in offshore Western
capitalliabilities
Australia*2
subscription
Loans of funds *1¥34,752478¥38,062*1 The Company determines the interest rate on loans of funds based on market interest rates in a reasonable and appropriate manner.
*2 Upon the grant of production license, WA-37-R was registered as WA-50-L.

There are the following related party transactions for the year ended March 31, 2013:

Afﬁliated company
Descriptionof thebusinessrelationshipAmounts

Name ofrelatedparty

Location

Ichthys
LNG Pty
Ltd

Loans ofTransportation,liquefaction andServe the funds*
sales of oil and IndirectlyofﬁcerWestern$482,700
natural gas through 66.07% concurrently, Collection ofAustralia,
thousandpipeline in WA-50-L
capital loans*
Australia
block in offshore
subscription Debt
Western Australia
guarantee

Capitalinvestment

Nature ofoperations

Votinginterest

Transaction
detailExploration,
development,
Angola€18
Hague,
Indirectly Capital Subscription
production and sales ofBlock 14
Netherlands thousand
49.99% subscription for new shares
oil
in
Block
14
in
offshore
B.V.
Republic of Angola

Amounts
Title of
Millions of Thousands of account Millions of Thousands ofyen
U.S. dollars
yen
U.S. dollars¥141,153$1,501,787

Shortterm loans
receivable

119,139

1,267,571

128,864

1,371,039—¥ 37,621$ 400,266—¥58,700$624,535

—

—

—

¥

$

—

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

Note related to the parent company or signiﬁcant afﬁliated companies
The signiﬁcant afﬁliated company for the year ended March 31, 2013 is Ichthys LNG Pty Ltd. The summary of its ﬁnancial information is asfollows:

Net sales
Net loss before income taxes
Net loss

Millions of yen

Thousands of U.S. dollars¥ 47,429
550,378
227,942
336,847
33,019$ 504,618
5,855,708
2,425,173
3,583,860
351,303

—
1,511
694

—
16,076
7,384¥$

Note: Ichthys LNG Pty Ltd has qualified as a significant affiliated company from the year ended March 31, 2013, due to an increase in its
materiality.

INPEX CORPORATION Annual Report 2013

7
Financial /Corporate Information

Total current assets
Total ﬁxed assets
Total current liabilities
Total long-term liabilities
Total net assets

12721. Subsequent Events
Stock Split and Adoption of Share Unit System
The Company resolved to conduct a stock split of common stock and to adopt a share unit system for common stock and Class A Stock of theCompany at the Board of Directors meeting held on May 10, 2013, at the 7th ordinary general meeting of shareholders and necessary classshareholders meeting held on June 25, 2013.

(a) Purpose of the stock split and adoption of the share unit system
The Company resolved to conduct a stock split at a ratio of 400 shares per common stock for the purpose of increasing the number of the Company’s
investors by reducing the investment unit of shares of the Company considering the general price level for investment units of companies listed on theFirst Section of the Tokyo Stock Exchange. This measure is aimed at improving the investment environment for a variety of investors, including individual
investors, to facilitate their investments in the Company’s stock.
In addition, in accordance with the guidelines indicated in “Action Plan for Consolidating Trading Units” issued by the Japanese stock exchanges,
the Company intends to adopt a share unit system under which the number of shares constituting one share trading unit will be 100 shares. With these
initiatives implemented, the amount per investment unit of the Company’s shares will be one quarter (1/4) of that prior to the stock split and adoption of
the share unit system.
Meanwhile, no stock split will be implemented for Class A Stock (unlisted), and the share unit will be one share per unit.

(b) Outline of the stock split(Method of stock split)
With Monday, September 30, 2013, as the record date, shares of common stock held by shareholders registered or recorded in the final
shareholders’ register on the same date will be split at a ratio of 400 shares per common stock.

(Number of shares to be increased through the stock split)
Total number of shares issued before the stock split:
Common stock
Class A Stock
Total
Number of shares to be increased through the stock split:
Common stock
Total number of shares to be issued after the stock split:
Common stock
Class A Stock
Total
Total number of shares authorized for issuance after the stock
split:
Common stock
Class A Stock
Total

3,655,809
1
3,655,810
1,458,667,791
1,462,323,600
11,462,323,601
3,600,000,000
13,600,000,001(Schedule of the stock split)
Public notice of the record date: Friday, September 13, 2013
Record date: Monday, September 30, 2013
Effective date: Tuesday, October 1, 2013(c) Adoption of the share unit system(Number of share unit to be newly established)
A share unit system will be adopted as of the effective date in “(b) Outline of the stock split” above, according to which the share unit number
for common stock will be 100 shares and that for Class A Stock will be one share.

(Schedule for the new establishment)
Effective date: Tuesday, October 1, 2013
Note: The trading unit of the Company’s common stock on the Tokyo Stock Exchange will be changed from one share to 100 shares as ofThursday, September 26, 2013.

(d) Other information
Per share information based on the assumption that the stock split was conducted on April 1, 2011, is as follows:
Yen

U.S. dollars

Years ended March 31,

2012

2013

Net assets
Net income¥1,492.27¥ 132.84¥1,699.10¥ 125.29

Note: Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.

128

INPEX CORPORATION Annual Report 20132013
$18.08$ 1.33

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7
Financial /Corporate Information-XQH
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INPEX CORPORATION Annual Report 2013

129

Subsidiaries and Afﬁliates
As of March 31, 2013

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.

305,690

100.00%Exploration and development of oil and natural gas 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 in the WA-50-L Blockand others, Australia

INPEX Masela, Ltd.

33,34851.93%

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

INPEX Offshore North Mahakam, Ltd.

3,875

100.00%E x p l o r a t i o n of o il a n d n a t u r al g a s i n t h e E a s t
Kalimant an Block in O f f s hore Eas t Kalimant an,
Indonesia

INPEX South Makassar, Ltd.

1,097

100.00%Exploration and development 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

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

10100.00%Exploration, development, production and sales of oilin the Offshore D.R. Congo Block

Teikoku Oil (Algeria) Co., Ltd.

708

100.00%Exploration and development of oil and natural gas in
the El Ouar I/II Blocks, Algeria

100.00%Inves t ment in oil ex plor ation, develop ment,
production and sales in Block 14, Offshore Angola

100.00%F i n a n c i n g f o r o il a n d n a t u r al g a s ex p l o r a t i o n,development, produc tion and sales in the Copa
Macoya / Guarico Oriental Blocks, Venezuela(Thousands of
U.S. dollars)

100.00%Exploration, development, production and sales of oilin the United States

19,645100.00%Exploration and development of oil including oil sandsin Canada

INPEX Oil & Gas Australia Pty Ltd

INPEX Angola Block 14 Ltd.
Teikoku Oil (Venezuela) Co., Ltd.
Teikoku Oil (North America) Co., Ltd.
INPEX Canada, Ltd.

130

Issued capital*(Millions of yen)

INPEX CORPORATION Annual Report 2013

802,688

400,000

475,600(Thousands of
U.S. dollars)

100
18,253

Company name

Issued capital*(Millions of yen)

Teikoku Oil (Suriname) Co., Ltd.
INPEX Gas British Columbia Ltd.

7,257
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 business

56.78%

Exploration of oil in the Offshore Block 31, Suriname

45.09%

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

31 other subsidiaries

Equity-Method Afﬁliates
Company name

Issued capital*(Millions of yen)

656,279

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

MI Berau B.V.

(Thousandsof euros)

Ichthys LNG Pty Ltd(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%Development, production and sales of oil in 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

Angola Block 14 B.V.

482,700

18(Thousands ofeuros)

10 other equity-method afﬁliates

Subsidiaries of Equity-Method Afﬁliates

Frade Japão Petróleo Limitada

Issued capital*

103,051(Thousandsof reais)

Voting rights
held by us (%)

Main business

0.00%

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

2 other subsidiaries of equity-method afﬁliates

Financial /Corporate Information

Company name7

* Rounding off fractions less than the unit.
INPEX CORPORATION Annual Report 2013131