Consolidated Financial Results for the Six Months Ended September 30, 2010

<under Japanese GAAP>
November 5, 2010
Note: The following report is a summary of the Japanese-language original.

Company name:
Listing:
Securities code:
URL:
President:
Inquiries:

Japan Petroleum Exploration Co., Ltd.
Tokyo Stock Exchange, First Section1662
http://www.japex.co.jp/
Osamu Watanabe
Shigeyoshi Hasegawa, Manager, Media Relations, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
November 11, 2010
Scheduled date to commence dividend payments:
November 26, 2010
Presentation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results presentation meeting:Yes (for analysts and institutional investors)(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the six months ended September 30, 2010
(April 1, 2010 – September 30, 2010)(Percentages indicate year-on-year changes.)
Consolidated operating results (cumulative)
Net sales

Six months ended

Operating income

Millions of yen% Millions of yen

Ordinary income% Millions of yen

September 30, 2010

92,369

30.9

3,845

September 30, 2009

70,567(36.4)

2,864 (77.2)

Net income per share

34.3% Millions of yen

%

(4.9)

1,896 (45.8)

5,184 (61.1)

3,498 (62.7)

Diluted net
income per share

Six months ended

Yen

Yen

September 30, 2010

33.18

–

September 30, 2009

61.22

–

(2)

4,929

Net income

Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen%

Yen

As of September 30,
2010

450,039

347,78475.5

5,946.51

As of March 31, 2010

521,009398,74775.0

6,839.05

Reference: Equity

2.

As of September 30, 2010: 339,859 million yen

As of March 31, 2010: 390,870 million yen

Cash dividends

Fiscal year ended
March 31, 2010
Fiscal year ending
March 31, 2011
Fiscal year ending
March 31, 2011
(Forecasts)
Note:

First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

20.00

–

20.00

40.00

–

20.00
–

20.00

40.00

Revisions to the forecasts of cash dividends in the current quarter: None

-1-

Total
Yen

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2011 (April 1, 2010 - March 31, 2011)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2011

Operating income

Millionsof yen%192,319

7.0

Net income%

Millionsof yen%Millionsof yen%Yen

8,144 (37.9)

10,454(55.0)

7,434(58.6)

130.07

Millionsof yen

Note:

Revisions to the consolidated financial forecasts in the current quarter: Yes

4.
(1)

Others (For details, please refer to “Other information” on page 4.)
Changes in significant subsidiaries during the current quarter: None
Note:

(2)

Application of simplified accounting and specific accounting for preparing quarterly consolidated financial
statements

Changes in accounting policies and procedures and methods of presentation
a. Changes due to revisions to accounting standards and other regulations: Yes
b. Changes due to other reasons: Yes
Note:

(4)

Changes in specified subsidiaries resulting in changes in the scope of consolidation during the current quarter

Application of simplified accounting and specific accounting: Yes
Note:

(3)

Net income per
share

Ordinary income

Changes in accounting policies and procedures and methods of presentation for preparing quarterly consolidated
financial statements stated in the section of “Changes in significant matters forming the basis of preparing thequarterly consolidated financial statements”

Number of issued shares (common stock)a. Total number of issued shares at the end of the period (including treasury stock)
As of September 30, 2010
57,154,776 shares
As of March 31, 2010
57,154,776 sharesb. Number of treasury shares at the end of the period
As of September 30, 2010
2,033 shares
As of March 31, 2010
1,961 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Six months ended September 30, 2010
57,152,769 shares
Six months ended September 30, 2009
57,152,951 shares* Indication regarding execution of quarterly review proceduresThis quarterly financial results report is not subject to the quarterly review procedures in accordancewith the Financial Instruments and Exchange Act. At the time of disclosure of this quarterly financial
results report, the quarterly review procedures in accordance with the Financial Instruments andExchange Act are in progress.
* Proper use of financial forecasts, and other special matters
The forward-looking statements, including the financial forecasts shown in this document are based on
information currently available to the Company and on certain assumptions deemed to be reasonable.
Actual performance and other results may differ materially from these forecasts due to various factors.
For the suppositions that form the assumptions for financial forecasts and cautions concerning the use thereof,
please refer to the section of “Qualitative information regarding consolidated financial forecasts” on page 4 of theattached material to the quarterly financial results report.

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(Attached Material)
1. Qualitative information regarding consolidated results for the six months ended September 30, 2010
(1) Qualitative information regarding consolidated operating results
During the six months ended September 30, 2010 (from April 1, 2010 to September 30, 2010), net sales was¥92,369 million, an increase of ¥21,802 million (+30.9%) year on year, and gross profit increased by ¥1,034
million (+4.5%) year on year to ¥24,140 million. The main factors behind the year-on-year increase in net
sales include not only an increase in net sales thanks to rise in crude oil and bitumen prices, but also an
increase in net sales of oil products, etc. by Japex Energy Co., Ltd., which became a consolidated subsidiaryof JAPEX in the third quarter of the previous fiscal year. The main factor behind the year-on-year increase ingross profit is the rise in crude oil and bitumen prices.
Exploration expenses increased by ¥636 million (+11.8%) year on year to ¥6,023 million due to an increase indomestic expenditures, despite a decrease in overseas expenditures, with selling, general and administrative
expenses down ¥582 million (-3.9%), and as a result, operating income increased by ¥981 million (+34.3%)
year on year to ¥3,845 million.
Ordinary income was ¥4,929 million, a decrease of ¥255 million (-4.9%) year on year due to an increase inloss on valuation of securities and a decrease in other of non-operating income, notwithstanding factors
pushing up earnings such as the reversal of provision for overseas investment loss and the lack of provision
for cost of abandonment due to the application of the Accounting Standard for Asset Retirement Obligations.
The main reasons for the above decrease in other of non-operating income was a decrease in equity inearnings of affiliates and the lack of the receipt of compensation related to indemnity rights and delinquency
rights from JJI S&N B.V., an equity-method affiliate, posted in the same period of the previous fiscal year.
Income before income taxes and minority interests was ¥2,514 million, a decrease of ¥2,466 million (-49.5%)
year on year due in part to the recording as extraordinary loss of ¥2,339 million of loss on adjustment forchanges of accounting standard for asset retirement obligations and net income was ¥1,896 million, a decreaseof ¥1,602 million (-45.8%) year on year.
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG) and bitumen) was ¥71,361 million, an
increase of ¥8,116 million (+12.8%) year on year, mainly due to rise in crude oil and bitumen prices.
(ii) Contract services
Net sales from contract services (involved in drilling and geophysical surveys) was ¥2,631 million, an
increase of ¥1,248 million (+90.3%) year on year.
(iii) Other businesses
Net sales from other businesses, such as the sale of oil products, including liquefied petroleum gas (LPG)
and fuel oil, the transportation of natural gas and oil products on consignment as well as othersubcontracted tasks, was ¥18,376 million, an increase of ¥12,437 million (+209.4%) year on year partly
because of an increase in net sales of oil products, etc. of Japex Energy Co., Ltd., which became aconsolidated subsidiary of JAPEX in the third quarter of the previous fiscal year.

(2) Qualitative information regarding consolidated financial position
At the end of the second quarter, as compared to the end of the previous fiscal year, total assets decreased by¥70,969 million to ¥450,039 million. This is mainly due to a decrease in investment securities due to the fallin the stock price of INPEX CORPORATION.
Regarding liabilities and net assets, total liabilities was down ¥20,006 million from the previous fiscal year
end to ¥102,255 million, with total net assets also down ¥50,962 million to ¥347,784 million, mainly due tothe decrease in both deferred tax liabilities and valuation difference on available-for-sale securities brought
upon by the aforementioned decrease in investment securities.

-3-(3) Qualitative information regarding consolidated financial forecasts
JAPEX expects that the consolidated financial forecasts for net sales, operating income, ordinary income andnet income for Fiscal 2011 (April 1, 2010 - March 31, 2011) will be below expectations compared to theprevious consolidated financial forecasts announced on May 14, 2010. This is mainly due to the revision of
the foreign exchange rate assumption reflecting the recent trend and the downward revision of the production
and sales plans for natural gas and crude oil for the third quarter-fourth quarter period (October 1, 2010 March 31, 2011). The previous foreign exchange rate assumption announced on May 14, 2010 was ¥90/$. The
revised foreign exchange rate assumption for the third quarter-fourth quarter period (October 1, 2010 - March
31, 2011) is ¥85/$. Note that the Japan Crude Cocktail (JCC) price assumption for the third quarter-fourth
quarter period (October 1, 2010 - March 31, 2011) of $80 per barrel was not revised. Please refer to the“Notice of Financial Forecast Revision” released on the same day of this report, November 5, 2010

2. Other information(1) Summary of changes in significant subsidiaries
No items to report(2) Summary of simplified accounting and specific accounting
a. Deferral accounting of cost variance
Cost variance arising from seasonal changes in production level is deferred as current liabilities (other)because such variance is expected to be almost completely eliminated by the end of the cost accounting
period.
b. Calculation of taxes
For the taxes, JAPEX and some of its consolidated subsidiaries compute first by reasonably estimating theeffective tax rate after applying tax effect accounting against income before income taxes and minority
interests for the fiscal year including this second quarter, and next by multiplying the quarterly income
before income taxes and minority interests by such estimated effective tax rate. Note that income
taxes–deferred is included in income taxes.

(3) Summary of changes in accounting policies and procedures and methods of presentation• Changes in accounting standards
a. Application of accounting standard for asset retirement obligations
Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard for
Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on
Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
Accordingly, the provision for cost of abandonment which was previously recorded was transferred to asset
retirement obligations.
As a result, operating income decreased by ¥252 million, ordinary income increased by ¥147 million,
income before income taxes and minority interests decreased by ¥2,192 million. The change in asset
retirement obligations due to the application of this accounting standard and guidance amounted to ¥4,267
million.
b. Application of the “Accounting Standard for Equity Method of Accounting for Investments” and the“Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using theEquity Method”
Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard for
Equity Method of Accounting for Investments” (ASBJ Statement No. 16, March 10, 2008) and the“Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using theEquity Method” (ASBJ PITF No. 24, March 10, 2008).
There was no effect from this change on ordinary income or income before income taxes and minority
interests.
c. Application of accounting standards for business combinations, etc.
Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, December 26, 2008), the “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No. 22, December 26, 2008), the “Partial
Amendments to Accounting Standard for Research and Development Costs” (ASBJ Statement No. 23,-4-

December 26, 2008), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
December 26, 2008), the “Accounting Standard for Equity Method of Accounting for Investments” (ASBJ
Statement No. 16, December 26, 2008) and the “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, December 26,2008).
d. Change in depreciation method for significant depreciable assets (property, plant and equipment)
Effective from the third quarter of the previous fiscal year, JAPEX changed depreciation method for theassets held for management purposes of the Hokkaido Division Office from the declining-balance method,which was previously applied at the former Sapporo Division Office, to the straight-line method.
Accordingly, the depreciation method for that Office’s assets held for management purposes used in thesecond quarter of the previous fiscal year and this second quarter differs.
The effect of this change on operating income, ordinary income and income before income taxes andminority interests for the second quarter and first six months of the previous fiscal year, where applying themethod after the change, is immaterial.

-5-3. Consolidated financial statements(1) Consolidated quarterly balance sheets(Millions of yen)
As of September 30, 2010
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Other, net
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Investment securities
Other
Allowance for doubtful accounts
Allowance for overseas investment loss
Total investments and other assets
Total noncurrent assets
Total assets-6-

As of March 31, 2010
(Summary)

29,676
19,22823,458
4,768
451
6,098
32,102(3)
115,780

24,314
19,774
17,669
4,632
386
5,398
33,403(10)
105,569

48,80945,17951,600145,589

50,84847,53946,377
144,765

7,341
7,341

7,450
7,450

162,971
23,691(46)(5,288)181,327
334,258
450,039

246,141
22,921(46)(5,793)
263,223
415,439
521,009(Millions of yen)
As of September 30, 2010
Liabilities
Current liabilities
Notes and accounts payable-trade
Provision
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for cost of abandonment
Other provision
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets-7-

As of March 31, 2010
(Summary)

12,31180
14,516
26,9085,914
138
15,933
21,98624,30932,831
6,744
–
672
9,740
1,047
75,346102,255

24,471
61,386
6,429
6,216
847
–
923
100,275
122,261

14,288272,611(10)
286,889

14,288271,858(10)
286,137

56,078(10)(3,098)52,9697,925
347,784
450,039

106,89624(2,186)
104,733
7,876
398,747
521,009(2) Consolidated quarterly statements of income(Millions of yen)

Net sales
Cost of sales
Gross profit
Exploration expenses
Exploration expenses
Exploration subsidies
Total exploration expenses
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Other
Total non-operating income
Non-operating expenses
Loss on valuation of securities
Provision for overseas investment loss
Provision for cost of abandonment
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of allowance for doubtful accounts
Gain on prior period adjustment
Gain on sales of noncurrent assets
Other
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Retirement benefit expenses for prior periods
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Other
Total extraordinary losses
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests in income
Net income-8-

Six months ended
September 30, 2009

Six months ended
September 30, 2010

(April 1, 2009 –September 30, 2009)
70,56747,461
23,106(April 1, 2010 –September 30, 2010)
92,36968,22824,140

5,655
(268)
5,386
14,855
2,864

6,112
(89)
6,023
14,272
3,845

390
1,528
1,914
3,833

258
1,509
768
2,536

79
320
341
501
270
1,513
5,184

577
–
–
602
272
1,452
4,929

2
147
–
0
149

10
–
6
–
16

122
231

91
–

–

2,339

–
353
4,980
1,231
–
250
3,498

0
2,431
2,514
243
2,270
374
1,896

(3) Notes on premise of going concern
No items to report(4) Notes on significant changes in the amount of shareholders’ equity
No items to report(5) Other notes
Changes in presentation method(Consolidated quarterly balance sheets)
The “buildings and structures, net” and “machinery, equipment and vehicles, net,” which were included in“property, plant and equipment” of noncurrent assets as of September 30, 2009 are presented separately asof September 30, 2010, because each of them exceeded 10% of the total assets. The “buildings andstructure, net” and “machinery, equipment and vehicles, net” included in “property, plant and equipment”
of noncurrent assets as of September 30, 2009, amounted to ¥50,319 million and ¥47,252 million,
respectively.
(Consolidated quarterly statements of income)1. The “gain on sales of noncurrent assets,” which was included in “other” of extraordinary income for thesix months ended September 30, 2009 is presented separately from the six months ended September 30,
2010, because it exceeded 20% of the total extraordinary income. The “gain on sales of noncurrent
assets” included in “other” of extraordinary income for the six months ended September 30, 2009,amounted to ¥0 million.
2. Following the adoption of the “Cabinet Office Ordinance Partially Revising Regulation on Terminology,
Forms and Preparation of Financial Statements” (Cabinet Office Ordinance No. 5 of March 24, 2009)
based on the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22,
December 26, 2008), “income before minority interests” is included in the consolidated statements ofincome for the six months ended September 30, 2010.

-9-

4. Supplemental information
Status of production and salesa.

Production
Six months ended
September 30, 2010
(April 1, 2010 –September 30, 2010)

Six months ended
September 30, 2009
(April 1, 2009 –September 30, 2009)
282,082

257,055

614,401(19,067)(3,215)(21,556)

Natural gas(thousand m3)

546,644568,580

1,250,630(26,847)(6,884)(48,395)

LNG (t)22,36026,56957,599188,781

198,302411,603(188,781)(198,302)(411,603)

Crude oil (kl)E&P

(Reference)
Fiscal year ended
March 31, 2010
(April 1, 2009 – March 31, 2010)

Bitumen (kl)Notes: 1. The figures in parentheses represent overseas production and are included in the total.
2. Part of the natural gas production volume is used as a feedstock for LNG.
3. Bitumen is a type of extra-heavy oil extracted from oil sands.

b.

Sales
Six months ended
September 30, 2009
(April 1, 2009 –September 30, 2009)
AmountVolume(Millions of yen)

E&P

Six months ended
September 30, 2010
(April 1, 2010 –September 30, 2010)
AmountVolume(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2010
(April 1, 2009 – March 31, 2010)
AmountVolume(Millions of yen)

Crude oil (kl)778,978

28,868748,695

32,7301,714,012

69,308Natural gas(thousand m3)

643,558

24,924

696,673

27,0391,499,236

55,593

LNG (t)73,202

5,311

91,3686,079

186,268

12,268Bitumen (kl)

188,3314,140

197,4075,512

411,394

11,433

Subtotal

63,24471,361

148,604

1,382

2,631

4,859

Oil products
Otherbusinesses Others–

14,626

–

–

3,750

–

Subtotal

5,939

18,376

26,289Total

70,56792,369179,752

Contract services

Notes: 1. Effective from the three months ended June 30, 2010, JAPEX changed the presentation method of “Other
businesses” to disclose its sales amounts breakdown as “Oil products” and “Others,” therefore, sales amounts
relating to “Oil products” and “Others” for the six months ended September 30, 2009 and the fiscal year ended
March 31, 2010 are omitted.
2. “Oil products” includes liquefied petroleum gas (LPG), fuel oil, diesel oil and kerosene, and “Others” includes thetransportation of natural gas and oil products on consignment as well as other subcontracted tasks.
3. Monetary amounts in the table do not include consumption taxes.

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