Consolidated Financial Results for the Three Months Ended June 30, 2018
<under Japanese GAAP>
August 8, 2018
Note: The following report is a summary of the Japanese-language original.

Company name: Japan Petroleum Exploration Co., Ltd.
Listing:
Tokyo Stock Exchange, First Section
Securities code: 1662
URL:
https://www.japex.co.jp/
President:
Hideichi Okada
Inquiries:
Shigeyoshi Hasegawa, General Manager, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
August 10, 2018
Scheduled date to commence dividend payments:–
Presentation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results presentation meeting (for institutional investors and analysts): None
(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the three months ended June 30, 2018
(April 1, 2018 – June 30, 2018)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Three months ended

Operating profit

Millions of yen% Millions of yen

Profit attributable toowners of parent

Ordinary profit% Millions of yen% Millions of yen%

June 30, 2018

57,623(3.6)(2,634)–(3,181)–(2,261)

June 30, 2017

59,803

42.1

2,270

–

5,735

73.1

5,492 187.7

Note: Comprehensive income: Three months ended June 30, 2018:
Three months ended June 30, 2017:(22,130) million yen (– %)601 million yen (– %)Basic earnings per share
Three months ended

Diluted earnings per share

Yen

Yen

June 30, 2018(39.57)–

June 30, 2017

96.10

–

(2)

–

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of June 30, 2018

652,010436,370

62.0

As of March 31, 2018699,536459,255

60.8

Reference: Equity

2.

As of June 30, 2018: 404,140 million yen

As of March 31, 2018: 425,114 million yen

Cash dividends

Fiscal year ended
March 31, 2018
Fiscal year ending
March 31, 2019
Fiscal year ending
March 31, 2019
(Forecast)First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

10.00

–

10.00

20.00

10.00

–

10.00

20.00

AnnualYen–

Note: Revisions to the latest forecasts of cash dividends: None

-1-

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2019 (April 1, 2018 – March 31, 2019)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2019

Operating profit

Ordinary profit

Profit attributable Basic earnings per
to owners of parent
shareMillionsof yen%Millionsof yen%Millionsof yen%Millionsof yen284,019

23.1

2,125

(75.8)

10,003161.3

11,007%–

Yen
192.59Note: Revisions to the consolidated financial forecasts most recently announced: Yes

*
(1)

Notes
Changes in significant subsidiaries during the three months under review (changes in specified subsidiaries
resulting in the change in scope of consolidation): None

(2)

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

(3)

Changes in accounting policies, changes in accounting estimates, and restatementa. Changes in accounting policies due to revisions to accounting standards and other regulations: Yes
b. Changes in accounting policies due to other reasons: Nonec.
Changes in accounting estimates: None
d. Restatement: None
Note: For details, please refer to “(3) Notes to consolidated financial statements (Changes in accounting policies)” of “2. Consolidated
financial statements and significant notes thereto” on page 9 of the attached material.

(4)

Number of issued shares (common shares)
a. Total number of issued shares at the end of the period (including treasury shares)
As of June 30, 201857,154,776 shares
As of March 31, 201857,154,776 sharesb. Number of treasury shares at the end of the period
As of June 30, 2018
2,139 shares
As of March 31, 2018
2,139 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 201857,152,637 shares
Three months ended June 30, 201757,152,637 shares* Quarterly financial results reports are exempt from quarterly review conducted by certified public
accountants or an audit corporation.
* Proper use of financial forecasts, and other special matters
The forward-looking statements, including the financial forecasts shown in this document are based on
information currently available to the Company and on certain assumptions deemed to be reasonable. As
such, they do not constitute guarantees by the Company of future performance. Actual performance and otherresults may differ materially from these forecasts due to various factors.
For the suppositions that form the assumptions for financial forecasts and cautions concerning the use
thereof, please refer to “(3) Explanation of consolidated financial forecasts and other forward-looking
statements” of “1. Qualitative information regarding settlement of accounts for the three months ended June30, 2018” on page 4 of the attached material to the quarterly financial results report.
(Method of accessing supplementary material on quarterly financial results)
On August 8, 2018, JAPEX posts a supplementary material on its website.

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(Attached Material)
1. Qualitative information regarding settlement of accounts for the three months ended June 30,
2018(1) Explanation of operating results
During the three months ended June 30, 2018, net sales was ¥57,623 million, a decrease of ¥2,180 million(-3.6%) year on year. Gross profit was ¥5,079 million, a decrease of ¥4,569 million (-47.4%) year on year.
The main factors behind the year-on-year decreases in net sales and gross profit were decreases in sales
volumes of crude oil and natural gas, despite rises in sales prices of crude oil and natural gas.
Exploration expenses was ¥143 million, a decrease of ¥223 million (-60.9%) year on year. Selling, generaland administrative expenses was ¥7,571 million, an increase of ¥559 million (+8.0%) year on year. As aresult, operating profit deteriorated by ¥4,905 million year on year to an operating loss of ¥2,634 million(operating profit of ¥2,270 million in the same period of the previous fiscal year).
Ordinary profit deteriorated by ¥8,917 million year on year to an ordinary loss of ¥3,181 million (ordinary
profit of ¥5,735 million in the same period of the previous fiscal year), mainly because of a decrease inshare of profit of entities accounted for using equity method and an increase in foreign exchange losses.
Profit before income taxes deteriorated by ¥8,974 million year on year to a loss before income taxes of¥3,244 million (profit before income taxes of ¥5,729 million in the same period of the previous fiscal year).
Profit attributable to owners of parent also deteriorated by ¥7,754 million year on year to a loss attributableto owners of parent of ¥2,261 million (profit attributable to owners of parent of ¥5,492 million in the same
period of the previous fiscal year).
Below is a breakdown of sales.
(i) Oil and Gas
Net sales from oil and gas (including liquefied natural gas (LNG) and diluted bitumen) came to¥45,807 million, a decrease of ¥2,732 million (-5.6%) year on year. This was mainly the result of
decreases in sales volumes of crude oil and natural gas, despite rises in sales prices of crude oil andnatural gas.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥1,178 million, an
increase of ¥26 million (+2.3%) year on year.
(iii) Other Businesses
Net sales from other businesses, such as the sale of oil products, including liquefied petroleum gas(LPG), fuel oil and the like, the transportation of natural gas, etc., as well as other subcontracted tasks,
came to ¥10,637 million, an increase of ¥526 million (+5.2%) year on year.

(2) Explanation of financial position
At the end of the first quarter, total assets decreased by ¥47,526 million from the previous fiscal year-end
to ¥652,010 million.
Current assets decreased by ¥12,130 million from the previous fiscal year-end, mainly due to a decrease in
cash and deposits. Non-current assets decreased by ¥35,395 million. This was due to the fall in market
values of investment securities, the decline in property, plant and equipment resulting from the impact offluctuation in foreign exchange rates, progress in the recovery of recoverable accounts included in other ininvestments and other assets, and other factors.
Liabilities decreased by ¥24,641 million from the previous fiscal year-end to ¥215,640 million.
Current liabilities decreased by ¥9,332 million from the previous fiscal year-end, mainly due to decreases
in accounts payable - other and income taxes payable, which are included in other in current liabilities, anda decrease in notes and accounts payable - trade. Non-current liabilities decreased by ¥15,309 million fromthe previous fiscal year-end. This was mainly the result of the decrease in long-term loans payable due to-3-the impact of fluctuation in foreign exchange rates and the reclassification of loans payable withrepayments due in one year or less to current liabilities, and the decrease of deferred tax liabilities resulting
from the above-mentioned fall in market values of investment securities.
Net assets decreased by ¥22,884 million from the previous fiscal year-end to ¥436,370 million. The main
factors were decreases in valuation difference on available-for-sale securities, foreign currency translation
adjustment, retained earnings and non-controlling interests.
Please note that the “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ
Statement No. 28, February 16, 2018) and relevant Guidances have been applied from the beginning of thefirst quarter ended June 30, 2018. Accordingly, the figures presented for the financial position for the fiscal
year ended March 31, 2018 have been retrospectively adjusted in order to conduct comparison and analysis
against the previous fiscal year using figures that reflect the application of the aforementioned standard,etc.

(3) Explanation of consolidated financial forecasts and other forward-looking statements
The consolidated financial forecasts for the fiscal year ending March 31, 2019 have been revised from theforecasts announced on May 11, 2018.
Please refer to the “Notice of Financial Forecasts Revision” released on August 8, 2018, the same day ofthis report.

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2. Consolidated financial statements and significant notes thereto(1) Consolidated quarterly balance sheet(Millions of yen)
As of March 31, 2018
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, 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 non-current assets
Total assets-5-

As of June 30, 2018

115,313
26,073
2,200
5,447
381
5,524
14,246(34)
169,151

103,142
23,128
2,400
5,019
360
8,858
14,145(34)
157,021

187,073
142,416
329,490

185,571129,090314,662

8,226
8,226

7,908
7,908

167,342
27,357(50)(1,982)
192,667
530,384
699,536

152,177
22,188(50)(1,896)
172,418494,989
652,010(Millions of yen)
As of March 31, 2018
Liabilities
Current liabilities
Notes and accounts payable - trade
Provision
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Net defined benefit liability
Provision
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets-6-

As of June 30, 2018

13,544
1,415
28,656
43,615

11,542
1,190
21,55034,283

135,959
34,8333,496
640
18,664
3,071
196,665
240,281

126,318
30,171
3,363
566
18,043
2,893
181,356
215,640

14,288183317,679(10)
332,140

14,288183
314,846(10)
329,307

86,667

74,121

3
5,149
1,152
92,97334,140459,255
699,536

34
(468)
1,145
74,83232,229436,370652,010

(2) Consolidated quarterly statement of income and Consolidated quarterly statement ofcomprehensive income
Consolidated quarterly statement 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 profit (loss)
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity
methodOther
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on sales of non-current assets
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Other
Total extraordinary losses
Profit (loss) before income taxes
Income taxes
Profit (loss)
Loss attributable to non-controlling interests
Profit (loss) attributable to owners of parent-7-

Three months ended
June 30, 2017

Three months ended
June 30, 2018

59,80350,153
9,649

57,62352,543
5,079

433
(66)
367
7,011
2,270

143
–
143
7,571
(2,634)

345
1,099

351
1,022

2,771

2,387

259
4,476

276
4,037

325
485
200
1,011
5,735

860
3,437
287
4,584
(3,181)

1
1

0
0

3
3
6
5,729
634
5,095
(397)
5,492

58
4
62
(3,244)602(3,846)(1,585)(2,261)

Consolidated quarterly statement of comprehensive income(Millions of yen)Three months ended
June 30, 2017
Profit (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method
Changes in equity interest
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners ofparentComprehensive income attributable tonon-controlling interests-8-

Three months ended
June 30, 2018

5,095

(3,846)(1,058)230(5,692)
38(12,546)25(5,608)
(7)

(37)

(145)

2,025
(4,493)
601–(18,283)(22,130)

2,170(20,402)(1,569)(1,727)(3)Notes to consolidated financial statements(Notes on premise of going concern)
No item to report.

(Notes on significant changes in the amount of shareholders’ equity)
No item to report.

(Changes in the scope of consolidation or the scope of application of the equity method)
Significant changes in the scope of application of the equity method
In the first quarter ended June 30, 2018, Japan Drilling Co., Ltd. was excluded from the scope of
application of the equity method, since it filed a petition for commencement of corporate rehabilitation
proceedings and no longer has a significant effect on quarterly consolidated financial statements.
The said company received an order commencing corporate rehabilitation proceedings from the Tokyo
District Court as of July 25, 2018.

(Application of specific accounting for preparing quarterly consolidated financial statements)
Deferral accounting of cost variance
Cost variance arising from seasonal changes in production level is deferred as current liabilities (other)because such variance is expected to be almost completely eliminated by the end of the cost accounting
period.

Calculation of taxes
For the taxes, JAPEX and some of its consolidated subsidiaries compute first by reasonably estimating theeffective tax rate after applying tax effect accounting against profit before income taxes for the fiscal year
including the first quarter, and next by multiplying the quarterly profit before income taxes by such
estimated effective tax rate.
However, in cases where the calculation of taxes using such estimated effective tax rate yields a resultthat is not reasonable to a significant extent, the effective statutory tax rate is used.
Note that income taxes - deferred is included in income taxes.

(Changes in accounting policies)
Application of the Implementation Guidance on Accounting Standard for Tax Effect Accounting
The “Implementation Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No.
28, February 16, 2018) has been applied from the beginning of the first quarter ended June 30, 2018, andthe treatment of taxable temporary differences relating to shares of subsidiaries and others in
non-consolidated financial statements has been reviewed.
This change in accounting policies has been applied retrospectively. For the previous fiscal year, theconsolidated financial statements reflecting the retrospective application are shown.
Consequently, in the consolidated balance sheet for the previous fiscal year, deferred tax liabilities
decreased by ¥2,047 million and retained earnings increased by ¥2,047 million compared with figures
before the retrospective application.

(Additional information)
Application of “Partial Amendments to Accounting Standard for Tax Effect Accounting” andrelevant Guidances
The “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28,
February 16, 2018) and relevant Guidances have been applied from the beginning of the first quarter ended
June 30, 2018. Accordingly, deferred tax assets were presented under investments and other assets, anddeferred tax liabilities were presented under non-current liabilities.

(Significant subsequent events)
Sale of oil sands assets in the 3.75 Section Area of Hangingstone leases in the province ofAlberta, Canada
Japan Canada Oil Sands Limited, a foreign consolidated subsidiary of JAPEX, entered into an agreementwith Greenfire Hangingstone Operating Corp., a wholly-owned subsidiary of Greenfire Oil and Gas Ltd.
(head office: province of Alberta, Canada), for sale of the participating interest in the 3.75 Section Area ofHangingstone leases in the province of Alberta, Canada and assets including wells and facilities relating to
production operation owned by Japan Canada Oil Sands Limited on April 3, 2018 (local time in Calgary,
Canada), and obtained approval from the Alberta Energy Regulator in the province of Alberta, Canada on
August 3, 2018 (local time in Calgary, Canada).
-9-Given this approval, approximately US$30 million will be recorded as non-operating income due toreversal of asset retirement obligations and other factors in the fiscal year ending March 31, 2019.
Filing of lawsuit
A lawsuit has been filed against Sakhalin Oil and Gas Development Co., Ltd. (“SODECO”), an
equity-method affiliate of JAPEX, by Russian company Rosneft in an arbitration court in the Sakhalin
Region.
The lawsuit was received by the aforementioned court on July 20, 2018.
It is publically disclosed in a Russian legal database that Rosneft is claiming a total monetary amount of
26.7 billion rubles from SODECO.
It is difficult to reasonably forecast the effect of the aforementioned lawsuit on the future financial resultsof the Company.

- 10 -

3. Supplemental information
Status of production and sales(1) Production
Three months ended
June 30, 2017
(April 1, 2017 –June 30, 2017)
Crude oil (kl)Oil andgas

Natural gas(thousand m3)
LNG (t)Bitumen (kl)Three months ended
June 30, 2018
(April 1, 2018 –June 30, 2018)(Reference)
Fiscal year ended
March 31, 2018
(April 1, 2017 – March 31, 2018)376,854

278,551

1,272,188(300,183)(214,383)(977,887)

343,960

291,660

1,263,648(147,666)(136,210)(494,680)

2,800

2,032

8,391

–

167,674

143,152(–)(167,674)(143,152)

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.

(2) Sales
Three months ended
June 30, 2017
(April 1, 2017 –June 30, 2017)
AmountVolume(Millions of yen)

Oil andgas

Three months ended
June 30, 2018
(April 1, 2018 –June 30, 2018)
AmountVolume(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2018
(April 1, 2017 – March 31, 2018)
AmountVolume(Millions of yen)

Crude oil (kl)872,496

29,530468,426

23,6272,346,258

89,173Natural gas(thousand m3)

435,632

13,769406,216

13,845

1,773,035

60,431

LNG (t)96,044

5,240

41,146

2,898

380,955

21,935––240,541

5,436

160,203

4,512

Dilutedbitumen (kl)Subtotal

48,54045,807

176,051

Contract services
Oil products
Other/merchandisebusinesses
Others

1,152

1,178

8,484

8,724

9,383

40,162

1,386

1,254

5,930

Subtotal

10,110

10,63746,093

Total

59,80357,623

230,629

Notes: 1. “Oil products/merchandise” includes liquefied petroleum gas (LPG), fuel oil, gas oil and kerosene, and “Others”
includes the transportation of natural gas and oil products as well as other subcontracted tasks.
2. Diluted bitumen is bitumen diluted by ultra-light crude oil for pipeline transportation.
3. Monetary amounts in the table do not include consumption taxes.

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