Consolidated Financial Results for Fiscal Year Ended March 31, 2005
May 16, 2005
Note: The following report is a summary of the Japanese-language original.
Company Name: Japan Petroleum Exploration Co., Ltd.
Stock Listing: Tokyo Stock Exchange
Company Code: 1662
Location of Head Office: Tokyo(URL: http://www.japex.co.jp/)
President: Yuji Tanahashi
Inquiries: Koichi Shimomura, Manager, Media Relations, Administration Department TEL: (03) 5461-7413
Date of the Board of Directors meeting to settle year-end consolidated accounts: May 16, 2005
U.S. GAAP not applied
1. Consolidated Results for Fiscal 2005 (April 1, 2004 – March 31, 2005)(1) Consolidated Operating Results
Net Sales(¥ million)(Amounts less than one million yen have been omitted)

Operating Income(¥ million)%

Ordinary Income(¥ million)%%

FY2005

103,150

6.7

14,67817.9

19,001

31.3

FY200496,713

6.6

12,449(21.3)

14,468

13.3

Net Income

Net Income
per Share

Diluted Net
Income per
ShareOrdinary
Income-to-Total
Assets Ratio

Return on
EquityOrdinary
Income-to-Net
Sales Ratio(¥ million)

%

(¥)

(¥)

%

%

%

13,23432.9

230.05

−

5.4

5.9

18.4

FY2005

FY20049,960
12.8
172.76
−
5.2
5.9
15.0
(Notes)
1. Equity in net income (loss) of non-consolidated subsidiaries and affiliates: FY2005 ¥116 million FY2004 (¥2,072 million)
2. Average number of outstanding shares (Consolidated): FY2005: 57,154,118 shares
FY2004: 57,154,715 shares
3. Changes in accounting methods: Yes
4. Percentage figures for net sales, operating income and other monetary items represent changes compared with the previous fiscal year.
5. Diluted net income per share is not shown because there are no shares with a dilutive effect.
(2) Consolidated Financial Position
Total Assets

FY2005

Shareholders’ Equity(¥ million)(¥ million)

393,733

293,152

Shareholders’ Equity Ratio

Shareholders’ Equity
per Share%

FY2004
246,765
195,715(Note) Number of shares issued and outstanding (consolidated) at fiscal year-end:

(¥)

74.5

5,127.67

79.3
FY2005 57,153,822
FY2004 57,154,472

3,422.80(3) Consolidated Cash Flows
Operating Activities

FY2005Investing Activities

Financing Activities

Cash and Cash Equivalents
at Period-end(¥ million)(¥ million)(¥ million)(¥ million)

21,936(15,805)786

34,568FY2004
21,522(12,677)(4,599)27,851(4) Number of Consolidated Subsidiaries and Affiliates
Consolidated subsidiaries: 17 Non-consolidated subsidiaries accounted for by the equity method: 1 Equity-method subsidiaries: 8(5) Changes in Scope of Consolidation and Application of Equity Method
Consolidated subsidiaries (Added): 4 (Excluded): 0 Equity-method affiliates (Added): 0(Excluded): 3
2. Forecasts for Fiscal 2006 (April 1, 2005 – March 31, 2006)
Net Sales

Ordinary Income(¥ million)

Interim Period

Net Income(¥ million)

44,325

7,352

Full Year
96,897
18,630(Reference) Estimated net income per share for the year ending March 31, 2006 is ¥238.21(¥ million)
6,282
13,615

Note: The above estimates have been made based on information available as of the date of this release. Actual results may differ from theseestimates due to a variety of factors. Please refer to the attached materials for more information related to these estimates.

1II. Management Policies
1. Fundamental Business Policies
Since its establishment in 1955, Japan Petroleum Exploration Co., Ltd. (JAPEX) has pursued its mission ofcontributing to Japan’s energy supplies by securing reserves and expanding production centered on the exploration,
development, and sale of petroleum and natural gas. Guided by this mission, the Company has steadily discovered
petroleum and natural gas reserves to result in the business base of today.
In light of its expanding role as a supplier and, consequently, related increases in its responsibility to society withregard to a stable supply, JAPEX Group is actively focused on constructing a new business model that not only relies
on expanding reserves but also upgrading and expanding transmission systems for natural gas and other initiatives.
As such, the Group aims to move forward as a company with the competitive capabilities required to respond tochanges in its operating environment. The section below outlines the Group’s business philosophy in this respect.

Taking on the challenge of new energy value creation and increasing corporate value・Contribute to the supply of energy through global exploration and production (E&P) activities.
・Contribute to coexistence between the planet and its population by developing and promoting the use ofenvironment-friendly natural gas.
・Pursue sustainable growth and maximize shareholder value by placing top priority on winning andmaintaining the trust of society, customers, shareholders and employees.

2. Fundamental Policy on Dividends
The Company’s basic policy is to sustain stable dividends over the long term. Taking into account the medium andlong-term outlook for the business, dividend payments are set based on respect for the return of profits toshareholders. While considering the need to acquire new reserves as an energy company that plays a role inproviding stable supplies of petroleum and natural gas, indispensable resources for society, the policy also takes into
account the need for retained earnings to finance the acquisition of new reserves and to upgrade and improvetransmission systems, primarily pipelines.

3. Medium-term Business Strategy and Critical Issues
Japan’s energy industry is entering an era of full-scale competition, ushered in by rapid deregulation, beginning withrevisions to the Gas Business Law and the Electric Utility Law. As such, competition is intensifying almost on adaily basis with the entry of new players into each energy sector.
Specifically, the Gas Business Law was revised in April 2004, thereby further expanding the scope of deregulation.
In addition, the Japanese government has introduced the “common carrier” concept in gas transmission. Under thisconcept, companies, including JAPEX, that possess gas pipelines above a certain capacity are obligated to open theirpipelines for third-party access. Efforts are presently under way to formulate the necessary terms and conditions forthe start of these operations. As a result of these and other developments, the Company’s gas business is facing amajor turning point.
In the current environment, natural gas, a major earnings base for the JAPEX Group, is drawing significant attention
for its clean energy characteristics. Government efforts to bolster environmental measures in the wake ofenforcement of the Kyoto Protocols, coupled with activities to tackle global warming on the corporate and individuallevel, are likely to continue to drive demand for natural gas. This presents opportunities for JAPEX to further
develop its natural gas business. Moreover, petroleum will continue to play a critical part in the Group’s businessbase, based on recognition of the central role this resource still plays as a primary energy source in Japan.
The mounting concerns over recent escalation in global fuel prices and supply stability, has underscored theimportance of exploration and development operations. JAPEX Group, for its part, will continue to position these
activities as key elements of its business base. Accordingly, expanding natural gas sales and maintaining and2enlarging reserves of oil and natural gas are critical issues for the Company.

Expanding sales of natural gas and upgrading and expanding the supply system
To cope with the intensifying competitive environment as well as expand sales of environment-friendly natural gas,
the Group is working to construct a natural gas business that seamlessly integrates services and facilities, fromupstream (E&P) through mid-stream (transmission and storage) to downstream (supply to large users and local
distribution companies, or LDCs).
From this perspective, the Company is stepping up efforts to expand sales of natural gas passing through its
Yufutsu-Sapporo and Niigata-Sendai pipelines. Simultaneously, it is working to expand and upgrade its transmission
network by constructing a new natural gas pipeline, slated for completion in 2006, between the cities of Shiraishi andKoriyama by branching its Niigata-Sendai pipeline.
JAPEX’s LNG Satellite System is designed to serve customers in geographic areas not reached by its pipeline
network. LNG is loaded onto tanker trucks and railway tank containers and shipped to the Tohoku, Hokuriku, andKyushu regions to supply natural gas to a broader base of customers. To expand supply to users within Hokkaido by
LNG tank containers from its LNG plant in Yufutsu, which is located in the region, JAPEX is taking steps toaugment a liquefaction plant scheduled for completion in fiscal 2008.
Through the ongoing development of its gas operations, JAPEX is targeting natural gas sales volume of 1.7 billion
m3 in fiscal 2008. Moreover, leveraging the Group’s upstream division uniqueness, JAPEX is upgrading its natural
gas transmission and underground storage network organically linking a range of facilities and services in a drive to
put gas operations on a more solid footing.

Conducting efficient E&P and securing new reserves
With its business centered on E&P, the JAPEX Group continually works to maintain and expand its reserves, andstrives to further expand and upgrade its system for providing stable supplies of petroleum and natural gas over thelong term. Specifically, to significantly expand cost-competitive domestic reserves, a key source of earnings, theCompany is conducting exploration, mainly in Niigata, Akita, and Hokkaido prefectures with the aim of adding
substantial new gas reserves. It is also conducting exploration aimed at tapping reserves in areas surrounding existinggas fields. In this way, the Company is able to conduct interlocking, tactical exploration that affords greater
efficiencies.
Furthermore, recognizing the importance of establishing a stable business base from a long-term viewpoint overseas,
the Company will work to increase operating efficiency and carry out exploration in areas identified as key
geographies. Specifically, the Company aims to increase the efficiency of operations and development at fields
where it currently carries out oil and gas production. Moreover, in uncovering new business, the Company seeks toacquire the rights to oil and gas fields that are already on stream, as well as fields that have been discovered but
remain undeveloped, both of which offer relatively low risk and high early returns, with consideration given to thebalanced preservation of exploration assets over long-term operating periods.
In line with the disposal of assets held by the Japan National Oil Corporation (JNOC) in the wake of its dissolution
on April 1, 2005, JAPEX, from the perspective of maximizing corporate value, acquired additional shares in Japex
New Nanhai Ltd., Canada Oil Sands Co., Ltd. and other entities. JAPEX has long played a leading role in guiding
the operations of these companies, and, with this change, is committed to improving operational efficiency andenlarging its overseas business base. The Company is also proactively considering the acquisition of shares in projectcompanies inherited by the national government following JNOC’s dissolution where its dovetails with its own
business strategies.

3

Addressing environmental issues
JAPEX, as a company that supplies environment-friendly natural gas, feels an obligation to contribute toenvironmental protection. The Company therefore works to increase internal environmental awareness throughongoing use of internal environment management systems (all company sites have acquired ISO 14001 certification),and to reduce the environmental impact of its business activities. At the same time, JAPEX is contributing toenvironmental activities on the societal level by, among other actions, participating in and funding tree planting
programs in Japan and overseas.
In Japan, emissions rights trading and other new environmental businesses are being steadily generated in an effort tohelp reduce the nation’s greenhouse gas levels. For its part, JAPEX will continue pushing ahead with efforts topromote natural gas use from a variety of angles, and appropriately apply Group technologies in the environment
business field. To this end, the Company is proactively taking on R&D themes in new fields such as gas-to-liquid
technology, which can be used to extract liquid fuel from methane, the main component of natural gas, andtechnologies for storing carbon dioxide underground.
The JAPEX Group aims to utilize these activities to further strengthen its operating base and enhance its
competitiveness as well as bolster operating efficiency. The ultimate goal is to achieve sustainable development andmaximize shareholder value.

4. Basic Stance and Progress on Strengthening Corporate Governance(1) Basic stance on corporate governance
The JAPEX Group recognizes the importance of corporate governance in translating efficient management intohigher earnings and in ensuring the Company plays a valuable and useful role in society. The Company therefore
makes it a top priority to continually reinforce and upgrade its corporate governance systems.
(2) Measures to strengthen corporate governancec Company organizations
The Board of Directors and corporate auditors (together with the Audit Committee, comprising all the Company’s
corporate auditors) are responsible for overseeing executive actions carried out by each director. JAPEX therefore
employs what is known as the corporate auditor system.
Board of Directors
The Board of Directors meets monthly. In addition to making decisions pertaining to important business and affairsof the corporation, the Board oversees executive actions based on status reports it receives from directors. Also, fromthe perspective of speeding up decision-making, an Executive Committee, comprising full-time directors that residein Tokyo, meets weekly, in principle, to make decisions regarding items that are not subject to decision by the Boardof Directors. It also deliberates on items in support of decision-making by the Board. There are no outside directors
on the Board of Directors.
(Adoption of the executive officer system)
To clarify its business execution framework, JAPEX plans to adopt the executive officer system on June 24, 2005.
Accompanying this change, the number of directors will be reduced. Both these moves should expedite
decision-making by the Board of Directors.
Corporate Auditors and Audit Committee
Corporate auditors attend meetings of the Board of Directors, and full-time corporate auditors also attend meetings ofthe Executive Committee and other important Company meetings. At the same time, corporate auditors also
exchange opinions with Board members with executive functions as part of their oversight function.
The Company has four corporate auditors, two of whom are outside auditors. While each auditor has the authority to
conduct audits on an independent basis, general audit policy and the allocation of auditing tasks is decided by the
Audit Committee. One staff member, concurrently attached to JAPEX’s Internal Auditing Dept., is posted in theoffice that assists corporate auditors in the execution of their duties.

4

The Audit Committee receives pre-audit briefings from the independent auditor, as well as details on the specificareas audited upon receipt of the independent auditor’s report. As needed, the full-time corporate auditors also
receive status reports on the progress of audits by the independent auditor.
Outside auditors have no special conflicts of interests with the Company.

d Internal audits
The Internal Auditing Dept., which is under the direct authority of the Company president, is responsible formonitoring each department and division to ensure compliance with all laws and internal regulations in the course ofbusiness operations. One of the three members on staff serves concurrently in the Audit Committee office. Internal
audits are conducted based on yearly audit plans, with audit results reported to the president. The Internal Auditing
Dept. also provides instruction and advice to departments and divisions as needed.
Internal audit reports submitted to the president are shared with the Audit Committee and the corporate auditors. The
Internal Auditing Dept. also provides briefings to full-time corporate auditors regarding the status of audits on aregular basis.
e IR activities
In addition to implementing corporate governance based on this management structure, the Company conducts
investor relations activities, including holding earnings results meetings and posting data on its corporate website, toincrease management transparency, with the goal of ensuring optimal business execution in any operating
environment.
f Remuneration for directors, corporate auditors, and the independent auditor
Information regarding remuneration for JAPEX directors and corporate auditors, as well as fees paid to the
independent auditor, in the fiscal year ended March 31, 2005 is outlined below.
Remuneration for directors and corporate auditors
Directors ¥363 million
Corporate auditors ¥34 million
Note: The remuneration for directors and corporate auditors listed above does not include bonuses appropriated from
earnings, retirement allowances or wages for directors holding concurrent posts as salaried employees.
Fees for independent auditors
Compensation pursuant to Article 2-1 of Japan’s CPA Law ¥30 million
Other compensation ¥3 million
g Matters regarding the independent auditor
Financial statements for the fiscal year ended March 31, 2005 were audited by Shin Nihon & Co. The names of thecertified public accountants (CPAs) responsible for executing audits and those assisting in audit operations aredetailed below.
CPAs responsible for audit execution
Atsuhiro Umesawa, Hiroaki Kosugi
Staff assisting in audits
CPAs, assistants

5. Relationships With Parent Company and Others
JAPEX has no parent company.

5III. Business Results and Financial Position
1. Business Results(1) Overview of the fiscal year ended March 31, 2005
In the fiscal year ended March 31, 2005, the Japanese economy moved onto a firm recovery track, as improvementsin the corporate sector finally spread to ordinary households. Nevertheless, the pace of recovery gradually lost
momentum from mid-year onward as weakness emerged in some sectors.
Looking at petroleum market conditions, although the yen strengthened in the currency market, a tight supply anddemand environment caused prices for internationally traded crude oil to remain at a high level, supporting sharp
growth in prices for domestic crude oil. Still, amid escalating competition among energy sectors due to accelerationin the pace of deregulation, domestic natural gas prices remained problematic for the Company.
Under these conditions, the JAPEX Group worked to maintain robust pipeline operations with the aim of ensuring
stable supplies of affordable and safe energy over the long term. In addition, the Group focused its collective efforts
on efficient E&P both in Japan and overseas.
In the fiscal year ended March 31, 2005, consolidated net sales totaled ¥103,150 million, up ¥6,436 million, or 6.7%,
from the previous fiscal year. Driving this growth was the price of crude oil, which stabilized at a high level.
Operating income totaled ¥14,678 million, up ¥2,228 million, or 17.9%, from the previous fiscal year, reflecting
increased sales and other factors, which outweighed a higher cost of sales and increased exploration expenses.
Ordinary income totaled ¥19,001 million, up ¥4,533 million, or 31.3%, from the previous fiscal year, mainly due toan increase in the amount of reversal of accrual for losses on projects and other factors.
As a result, consolidated net income totaled ¥13,234 million, up ¥3,273 million, or 32.9%, from the previous fiscal
year.
Among overseas operations companies led by JAPEX, additional shares were acquired in Japex New Nanhai Ltd.,Java Oil Co., Ltd., Canada Oil Sands Co. Ltd. and Japex Gulf Producing Corp. following the sale of assets held by
JNOC. However, in the case of Japex New Nanhai and Java Oil, only second-half business results for thesecompanies have been included in consolidated results for JAPEX for the year ended March 31, 2005, due to thetiming of the acquisition of additional shares.
Although detailed segment information has been omitted, below is a summary of earnings data for each of theCompany’s business segments by division.
① Oil and Natural Gas Segment(a) E&P Division
The E&P Division sells crude oil, natural gas and liquefied natural gas (LNG). Net sales totaled ¥82,966 million, up¥3,605 million, or 4.5%, from the previous fiscal year, reflecting higher crude oil sales on a sharp rise in crude oil
prices.
(b) Contract Services Division
The Contract Services Division accepts orders mainly for drilling projects and geological and geophysical surveys.
Net sales totaled ¥6,987 million, down ¥61 million, or 0.9%, from the previous fiscal year.
(c) Other Businesses DivisionThis division mainly includes the sale of petroleum products such as LPG and fuel oil, the transmission of third-party

6

gas and petroleum products, and other miscellaneous consignment orders. Net sales totaled ¥12,378 million, up¥3,164 million, or 34.3%, from the previous fiscal year, reflecting higher orders for third-party gas transmission andsales of petroleum products.
② Geothermal Energy Segment
Geothermal Energy Dvision
The Geothermal Energy Division sells steam used for electric power generation and undertakes work related togeothermal exploration technology and R&D on a contract basis. Net sales totaled ¥818 million, down ¥270 million,or 24.9%, reflecting lower steam sales volume.

(2) Outlook for the fiscal year ending March 31, 2006
In the fiscal year ending March 31, 2006, the Company expects consolidated net sales to decline ¥6.2 billion, or 6.1%,
from the previous fiscal year to ¥96.9 billion, based mainly on projections for lower sales for overseas crude oil.
The Company forecasts that ordinary income will decline ¥0.4 billion, or 2.0%, to ¥18.6 billion due largely to higher
exploration expenses from aggressive exploration activities, and increased selling, general and administrative (SG&A)
expenses accompanying the consolidation of subsidiaries. These factors are expected to offset a firm increase in salesof domestically produced crude oil and natural gas.
The Company expects net income to rise ¥0.4 billion, or 2.9%, to ¥13.6 billion, chiefly reflecting a projected decreasein extraordinary losses.
These forecasts were formulated on the following assumptions: 1) a price of US$42/barrel for imported crude oil and2) an exchange rate of ¥102/US$.

(3) Distribution of dividends
The Company plans to pay an annual dividend of ¥37.50 per share, comprising interim and year-end dividends of¥15 and ¥22.50 per share, respectively. In addition to the ordinary dividend of ¥30 per common share, this amountincludes a commemorative dividend of ¥7.50 per share marking the Company’s 50th anniversary.
Consequently, the dividend payout ratio for the year will be 20.1% and the ratio of dividends to shareholders’ equity
will be 0.8%.

2. Financial Condition(1) Overview① Balance sheet
Total assets at the end of the fiscal year stood at ¥393,733 million, an increase of ¥146,967 million, or 59.6%, fromthe previous fiscal year end. This large increase was due chiefly to valuation gains on shares held by JAPEX in
INPEX CORPORATION, following the listing of that company’s shares on the First Section of the Tokyo Stock
Exchange.
Current assets increased ¥15,856 million, or 28.9%, primarily the result of the consolidation of two subsidiaries:
Japex New Nanhai and Java Oil.
In fixed assets, property, plant and equipment declined ¥5,642 million, or 5.6%. This decrease was mainly due todepreciation and amortization and impairment losses, which outweighed capital expenditures such as for theacquisition of gas supply facilities from the city of Shirone (since incorporated into the city of Niigata), expansion of
the central facilities of the Yurihara oil and gas field, and for constructing the basic layout of the Shiroishi-Koriyama
pipeline. However, the impairment losses, recorded at Japex Geothermal Kyushu Ltd., had no effect on the7consolidated statements of income because they are offset by the reversal of the accrual for losses on projects.
Intangible fixed assets increased ¥6,184 million, or 754.3%. The booking of goodwill following the acquisition of
additional shares in Canada Oil Sands and other companies owned by JNOC was the primary factor behind thisincrease.
Investments and others increased ¥130,569 million, or 144.4%. This increase stemmed from an increase of ¥131,696
million, or 155.4%, in investments in securities accompanying the stock market listing of INPEX.
Total liabilities rose ¥45,722 million, or 100.1%, to ¥91,380 million. One factor was an increase in interest-bearing
debt (short-term bank loans, long-term debt, and the current portion of long-term debt) of ¥4,064 million, or 34.1%.
Another was the booking of ¥46,213 million in deferred tax liabilities at the fiscal year-end from recognition of thetax effect on valuation gains on the aforementioned INPEX shares. There were no deferred tax liabilities at the endof the previous fiscal year.
Shareholders’ equity rose ¥97,437 million, or 49.8%, to ¥293,152 million. The primary factors underlying theincrease were a rise in retained earnings and an increase in unrealized holding gains on securities. Retained earnings
rose ¥10,290 million, or 5.7%, to ¥191,116 million, reflecting net income less dividends and other appropriations.
Unrealized holding gains on securities rose ¥84,900 million to ¥88,313 million due to valuation gains on shares of
INPEX.
As a result, the shareholders’ equity ratio declined from 79.3% to 74.5%, while shareholders’ equity per share
increased from ¥3,422.80 to ¥5,127.67.
Credit guarantees for bank loans taken out by affiliated companies and others, treated as contingent liabilities, rose
¥5,402 million, or 31.7%, to ¥22,432 million.
② Cash flows
As of March 31, 2005, cash and cash equivalents totaled ¥34,568 million, up ¥6,717 million, or 24.1%, compared tothe end of the previous fiscal year. This increase was mainly attributable to income before income taxes and minority
interests of ¥18,129 million and depreciation and amortization of ¥14,081 million in operating cash flows. These
factors and others offset ¥14,588 million in payments for purchase of investments in securities and ¥11,978 million
for additions to property, plant and equipment in investing cash flows.
Net cash provided by operating activities was ¥21,936 million, an increase of 1.9%, from the previous fiscal year.
The main components were ¥18,129 million in income before income taxes and minority interests and ¥14,081
million in depreciation and amortization, which outweighed ¥4,139 million in income taxes paid and other uses ofcash.
Net cash used in investing activities amounted to ¥15,805 million, up 24.7%, from the previous fiscal year. The mainuses were ¥11,978 million in additions to property, plant and equipment, as well as ¥3,033 million in net outlays
from the purchase and sale of marketable and investment securities.
Net cash provided by financing activities was ¥786 million, up 117.1% from the previous fiscal year. Cash mainly
increased due to ¥7,000 million in proceeds from long-term debt, outweighing cash of ¥2,854 million and ¥2,311
million used for dividend payments and the repayment of long-term debt, respectively.

(2) Outlook for the fiscal year ending March 31, 2006
The Company projects that, in net cash provided by operating activities, income before income taxes and minority
interests will remain essentially unchanged from the year under review. Depreciation and amortization is forecast to be
on a par with the previous year, at approximately ¥14.3 billion.

8

In investing activities, the Company is projecting that capital expenditure, including projects to upgrade capacity, will
nearly double to roughly ¥25.0 billion.
In financing activities, the Company plans to pay a year-end dividend of ¥22.50 and an interim dividend of ¥15 pershare. The Company also plans to continue repaying interest-bearing debt to result in a balance of around ¥7.0 billion.
Based on the aforementioned factors, the Company expects cash and equivalents as of March 31, 2006 to decline byaround ¥10.0 billion compared to the end of the fiscal year under review.

(3) Cash Flow Indicators
Fiscal Years Ended March 31

2003

2004

2005

Shareholders’ equity ratio (%)
Shareholders’ equity ratio on
mark-to-market basis (%)
Debt repayment period (years)
Interest coverage ratio (times)

77.1

79.3

74.5

−

96.4

63.5

0.7
34.5

0.5
60.3

0.7
86.8

Notes:
Shareholders’ equity ratio: Shareholders’ equity/total assets
Shareholders’ equity ratio on mark-to-market basis: Total market capitalization/total assets
Debt repayment period: Interest-bearing debt/net cash provided by operating activities
Interest coverage ratio: Net cash provided by operating activities/interest paid
* JAPEX listed on the Tokyo Stock Exchange on December 10, 2003.
* The above indicators are calculated based on consolidated financial figures.
* Total market capitalization is calculated using the closing stock price at the end of the term multiplied by the number of shares
outstanding at the end of the term (excluding treasury stock).
* Net cash flow from operating activities is that shown on the statement of consolidated cash flows. Interest-bearing debt is all debt subject
to interest payments within liabilities shown on the consolidated balance sheets. Interest paid is that shown on the consolidated statementof cash flows.

3. Risk Factors
The following are a few of the range of different factors that could potentially impact the operating results of the
JAPEX Group. Please be aware that factors with the potential to affect business performance are not limited to those
discussed below.
c Risks associated with business operations
The exploration stage of business operations is inherently highly risky. These operations require substantial
investments and extended timeframes to conduct activities beginning with initial surveys and including exploration
work to the discovery of resources. Furthermore, there are no assurances that oil or gas will be found. Substantial
investments are also required to commercialize newly found reserves, as JAPEX must drill development wells andconstruct production and transmission facilities. Due to these factors, long lead times are typically required from thestart of a particular project until an investment can be recovered and earnings generated. During this period, theoperating environment can undergo any number of changes that may make it difficult to achieve the original
investment goals of the project.
d Factors causing volatility in crude oil sales
The price of crude oil JAPEX markets in Japan is closely linked to international crude oil prices. Consequently, thesales price of crude oil is affected by market trends, such as the level of output set by OPEC and trends in theinternational balance of supply and demand, as well as fluctuations in exchange rates. JAPEX may conduct crude oilswaps and other transactions to reduce exposure to these risks, but a certain degree of risk exposure inevitably
remains.
e Factors causing volatility in natural gas sales
In most cases, the unit sales price of natural gas that JAPEX markets in Japan is fixed, on a yen-denominated basis,

9each fiscal year in accordance with contracts with each customer. Prices are therefore not affected by short-term
fluctuations in international prices or exchange rates. However, in the case of gas supplied to LDCs, demand peaks inwinter and declines during the summer months. Moreover, abnormal weather conditions, such as a relatively warm
winter, affect sales volumes. Furthermore, over the longer term, the deregulation of Japan’s energy markets and otherfactors carry the risk of lower unit sales prices and lower sales volumes of natural gas.

10

Ⅳ．Consolidated Financial Statements
１．Consolidated Balance Sheets(As of March 31, 2004)
Description(Assets)
Ⅰ Current assets
１．Cash and deposits
２．Notes and accounts receivable
３．Marketable securities
４．Inventories
５．Deferred income taxes
６．Other current assets
Less: Allowance for doubtful receivables
Total current assets
Ⅱ Fixed assets
１．Property, plant and equipment(1) Buildings and structures
Accumulated depreciation(2) Wells
Accumulated depreciation(3) Machinery and equipment
Accumulated depreciation(4) Land(5) Construction in progress(6) Other property, plant and equipment
Accumulated depreciation
Property, plant and equipment, net
２．Intangible fixed assets(1) Goodwill(1) Others
Total intangible fixed assets
３．Investments and others(1) Investments in securities(2) Long-term loans receivable(3) Deferred tax assets(4) Others
Less: Allowance for doubtful receivables
Allowance for losses on overseas
investments
Total investments and others
Total fixed assets
Total assets

Amount (¥ million)

22,201
11,430
9,854
6,116
726
4,617
(13)
54,932

123,744
70,33230,295
23,154
59,61935,921

10,097
7,193(As of March 31, 2005)（％）

113,155
67,132
31,401
25,28264,09537,775

7,140
23,697
12,051
1,370

10,0977,193

1126,32011,191
2,536
2,743
94,933

0.3

5,082
1,922
7,004
216,4672,366
457
10,238(211)(13,334)(8,312)
36.6
77.7
100.0

18.0

6,118

84,771
2,562
4,966
11,592(123)

90,436
191,832
246,765（％）

46,023

40.8

−
819
819

32,77813,913
6,688
9,158
706
7,561
(17)
70,78822.3

53,411

2,904
100,576

Amount (¥ million)

221,005
322,944393,733

24.1

56.1
82.0
100.0

(As of March 31, 2004)

Description(Liabilities)
Ⅰ Current liabilities
１．Notes and accounts payable
２．Short-term bank loans
３．Current portion of long-term debt
４．Income taxes payable
５．Other current liabilities
Total current liabilities
Ⅱ Long-term liabilities
１．Long-term debt
２．Deferred tax liabilities
３．Accrued retirement benefits for employees
４．Accrued retirement benefits for officers
５．Accrued estimated cost of abandonment of wells
６．Accrual for losses on projects
７．Other long-term liabilities
Total long-term liabilities
Total liabilities(Minority interests)
Minority interests in consolidated subsidiaries

Amount (¥ million)

2,353
600
2,306
1,610
9,928
16,798(As of March 31, 2005)

（％）

−

6.8

8,973
992
16,092
29,105

7.4

3,574
696
2,423
10,9752,186
28,85945,658

11.7
18.5

7,000
46,213
3,831
773
2,690
1,688
77
62,27591,380

15.8
23.2

5,392

2.2

9,199

2.3

14,288
180,826
3,412(2,810)(1)
195,715

5.8
73.2
1.4
(1.1)
(0.0)
79.3

14,288191,116
88,313(561)(4)
293,152

3.6
48.6
22.4
(0.1)
(0.0)
74.5

246,765

100.0

393,733

100.0

−

12

（％）

3,047

9,003

(Shareholders’ equity)
Ⅰ Common stock
Ⅱ Retained earnings
Ⅲ Unrealized holding gains on securities
Ⅳ Translation adjustments
Ⅴ Treasury stock
Total shareholders’ equity
Total liabilities, minority interests and shareholders’equityAmount (¥ million)２．Consolidated Statements of Income
FY2004(Apr. 1, 2003 – Mar. 31, 2004)
DescriptionⅠ
ⅡNet sales
Cost of sales
Gross profit
Ⅲ Exploration expenses
１．Exploration expenses
２．Exploration subsidies
Ⅳ Selling, general and administrative expenses
Operating income
Ⅴ Non-operating income
１．Interest income
２．Dividend income
３．Gain on sale of securities
４．Equity in profit of non-consolidated subsidiaries andaffiliates
５．Reversal of allowance for losses on overseas
investments
６．Reversal of accrual for losses on projects
７．Other non-operating income
Ⅵ Non-operating expenses
１．Interest expense
２．Loss on sale of securities
３．Loss on redemption of securities
４．Devaluation loss on securities
５．Equity in losses of non-consolidated subsidiaries andaffiliates
６．Provision for accrued estimated cost of abandonmentof wells
７．Provision for accrual for losses on projects
８．Other non-operating expenses
Ordinary income
Ⅶ Extraordinary gains
１．Reversal of allowance for doubtful receivables
Ⅷ

Extraordinary losses
１．Loss on disposal of fixed assets
２．Earthquake disaster recovery expenses
Income before income taxes and minority interests
Current income taxes
Deferred income taxes
Minority interests
Net income（％）

Amount (¥ million)

5,888
(675)

96,71358,06038,653

100.0
60.0
40.0

5,213
20,99012,449

5.4
21.7
12.9

FY2005(Apr. 1, 2004 – Mar. 31, 2005)
Amount (¥ million)

6,445
(317)

1,192
1,298
244

1,164
1,669
148

−

116

2,705

1,376

−
515

5,956

6.2

346
34

957
978

498

261
145
306
121

2,072

−

160

513

−

129
695

25

2,568
1,386

13

103,15061,046
42,104

100.0
59.2
40.8

6,127
21,298
14,678

5.9
20.7
14.2

6,411

6.2

−
3,937
14,468

4.1
15.0

739

2,088
19,001

2.0
18.4

25

0.0

−

−

−

286

0.3

665
206

14,207

14.7

3,955
291
9,960

4.1
0.3
10.3

286

−

（％）

1,801
2,469

871

0.8

18,129

17.6

4,270
624
13,234

4.2
0.6
12.8

３．Consolidated Statements of Shareholders’ Equity

Description
Retained earnings
Ⅰ Balance at beginning of year
Ⅱ Add:
１．Net income
Ⅲ Deduct:
１．Cash dividends paid
２. Bonuses to officers
Ⅳ Balance at end of year

FY2004(Apr. 1, 2003 – Mar. 31, 2004)

FY2005(Apr. 1, 2004 – Mar. 31, 2005)

Amount (¥ million)

Amount (¥ million)

172,370
9,960
1,428
75

14

9,960

1,504
180,826

180,826
13,2342,857
86

13,234

2,944
191,116

４．Consolidated Statements of Cash Flows

Description

FY2004(Apr. 1, 2003 –Mar. 31, 2004)

FY2005(Apr. 1, 2004 –Mar. 31, 2005)

Amount (¥ million)

Amount (¥ million)

Ⅰ Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Loss on devaluation of marketable securities and investments in securities
Increase (decrease) in allowance for doubtful receivables
Increase in provision for accrued retirement benefits for employees
Increase in provision for accrued retirement benefits for officers
Decrease in provision for accrued estimated cost of abandonment of wells
Decrease in provision for allowance for losses on overseas investments and accrual for losses
on projects
Interest and dividend income
Interest expense
Gain on redemption and sales of marketable securities and investments in securities
Loss on redemption and sales of marketable securities and investments in securities
Equity in losses (gains) of unconsolidated subsidiaries and affiliates
Decrease (increase) in notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in consumption tax payable
Other, net
Subtotal
Income taxes paid
Net cash provided by operating activities

14,207
11,043
498
(27)
303
97
(638)

18,12914,081
121
90
244
76
(12)

(3,830)(2,173)(2,491)
346
(305)
34
2,072
310
2,669
(2,161)(211)
1,408
23,326(1,803)
21,522(2,833)
261
(239)
452
(116)
(1,823)(3,042)
152
783
1,922
26,075(4,139)21,936(335)
15(2,998)7,890(15,734)38(423)(9,030)
5,106

(30)
330
(100)
4,220
(11,978)550(586)(14,588)
7,435

Ⅱ Investing activities
Investments in time deposits
Proceeds from time deposits
Payments for purchase of marketable securities
Proceeds from redemption and sale of marketable securities
Additions to property, plant and equipment
Proceeds from sales of property, plant and equipment
Additions to intangible fixed assets
Payments for purchase of investments in securities
Proceeds from redemption and sale of investments in securities
Payments for purchase of consolidated subsidiary stock accompanying changes in scope of
consolidation
Increase in loans receivable
Decrease in loans receivable
Interest and dividends received
Other, net
Net cash used in investing activities−(2,269)

(89)
554
2,638
(309)
(12,677)(1,127)
186
2,815
(662)
(15,805)

(300)

(600)
7,000
(2,311)(2)(2,854)
(192)
(252)
786
(199)
6,717
27,851
34,568

Ⅲ Financing activities
Decrease in short-term bank loans
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Cash dividends paid
Dividends paid to minority shareholders
Interest paid
Net cash provided by (used in) financing activities−(2,315)(1)(1,428)(197)(356)(4,599)(260)
3,984
23,86627,851Ⅳ Effect of exchange rate changes on cash and cash equivalents
Ⅴ Increase in cash and cash equivalents
Ⅵ Cash and cash equivalents at beginning of year
Ⅶ Cash and cash equivalents at period-end

15

V. Status of Production and Sales
1. Production(1) Oil and Natural Gas Segment
Division

Product

FY 2004(Apr. 1, 2003 – March 31, 2004)

FY2005(Apr. 1, 2004 – Mar. 31, 2005)

574,417 kl

696,814 kl(3,131)(101,436)

Crude oil
E&P

1,036,120 thousand m3

Natural gas

1,091,902 thousand m3(7,231)(2,904)

LNG

6,589 t19,771 t

LPG

10,811 t

10,338 t

Other Businesses
Fuel oil, etc.
52,393 kl(Notes)1. The figures in parentheses in E&P represent overseas production and are included in the total.
2. Part of the oil production volume is used as a feedstock for LPG, fuel oil and other products.
3. Part of the natural gas production volume is used as a feedstock for LNG, LPG and other energies.

49,751 kl(2) Geothermal Energy Segment
Division
Geothermal Energy

Product
Steam

FY 2004(Apr. 1, 2003 – Mar. 31, 2004)

FY2005(Apr. 1, 2004 – Mar. 31, 2005)

1,107,443 t

863,241 t

FY 2004(Apr. 1, 2003 – Mar. 31, 2004)
VolumeAmount

FY2005(Apr. 1, 2004 – Mar. 31, 2005)
VolumeAmount2. Sales(1) Oil and Natural Gas Segment
Division

Productkl
Crude oilE&P(¥ million)

1,528,507

32,963thousand m3
Natural gas

kl
1,380,337

38,211

thousand m3

1,296,389

42,5601,276,887

t

39,867t

LNG

75,883

3,837

98,825

4,888

Subtotal−

79,361−

82,966

−

7,049

−

7,049

Contract Services
Subtotalt
LPG
Other Businesses(¥ million)

31,506−−(¥ million)t(¥ million)

1,514

30,781

1,622

kl

kl
Fuel oil, etc.

89,090

6,987
6,987

3,517

94,4304,202

Others

−

4,182

−

6,553

Subtotal

−

9,213

−

12,378

Total−
95,624−(Notes)1. Others in Other Businesses includes revenue from the transmission of third-party gas through JAPEX’s pipeline network and salescommissions.
2. Monetary amounts in the table do not include consumption tax.

16

102,332(2) Geothermal Energy Segment
Division

Product

FY 2004(Apr. 1, 2003 – Mar. 31, 2004)
VolumeGeothermal Energy

SteamAmountt

FY2005(Apr. 1, 2004 – Mar. 31, 2005)
Volume(¥ million)

Amountt(¥ million)

1,061,336

1,089

813,999

818

−

1,089

−

818

Total
(Note)
1. Monetary amounts in the table do not include consumption tax.

17