Consolidated Financial Results for the Three Months Ended June 30, 2017
<under Japanese GAAP>
August 8, 2017
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:
http://www.japex.co.jp/
President:
Hideichi Okada
Inquiries:
Kazunari Hirata, General Manager, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
August 9, 2017
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, 2017
(April 1, 2017 – June 30, 2017)
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, 2017

59,803

42.1

2,270

–

5,735

73.1

5,492 187.7

June 30, 2016

42,096 (29.9)

(974)

–

3,313

(60.1)

1,909

Note: Comprehensive income: Three months ended June 30, 2017:
Three months ended June 30, 2016:

601 million yen (– %)(9,838) million yen (– %)Basic earnings per share
Three months ended

Diluted earnings per share

Yen

Yen

June 30, 2017

96.10

–

June 30, 2016

33.41

–

(2)

(72.0)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of June 30, 2017

728,841

509,11060.2

As of March 31, 2017746,739

510,609

58.6

Reference: Equity

2.

As of June 30, 2017: 439,117 million yen

As of March 31, 2017: 437,518 million yen

Cash dividends

Fiscal year ended
March 31, 2017
Fiscal year ending
March 31, 2018
Fiscal year ending
March 31, 2018
(Forecasts)

First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

5.00

–

10.00

15.00

10.00

–

10.00

20.00

Total
Yen

–

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

-1-

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2018 (April 1, 2017 – March 31, 2018)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2018

Operating profit

Ordinary profit

Profit attributable Basic earnings per
to owners of parent
shareMillionsof yen%Millionsof yen%Millionsof yen%Millionsof yen%Yen

211,025

1.9

4,489

555.3

(910)

–

1,219

(64.6)

21.33

Note: 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” 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: Noneb. Changes in accounting policies due to other reasons: Nonec.
Changes in accounting estimates: None
d. Restatement: None(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, 201757,154,776 shares
As of March 31, 201757,154,776 sharesb. Number of treasury shares at the end of the period
As of June 30, 2017
2,139 shares
As of March 31, 2017
2,139 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 201757,152,637 shares
Three months ended June 30, 201657,152,637 shares* Quarterly financial results reports are not required to be subjected to quarterly reviews.
* 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, 2017” 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, 2017, JAPEX posts a supplementary material on its website in the same time.

-2-

(Attached Material)
1. Qualitative information regarding settlement of accounts for the three months ended June 30,
2017(1) Explanation of operating results
During the three months ended June 30, 2017, net sales was ¥59,803 million, an increase of ¥17,706
million (+42.1%) year on year. Gross profit was ¥9,649 million, an increase of ¥3,202 million (+49.7%)
year on year. The main factors behind the year-on-year increases in net sales and gross profit wereincreases in sales volumes of domestically produced crude oil and domestic natural gas and rises in sales
prices of crude oil and natural gas.
Exploration expenses was ¥367 million, an increase of ¥241 million (+193.1%) year on year. Selling,
general and administrative expenses was ¥7,011 million, a decrease of ¥283 million (-3.9%) year on year.
As a result, operating profit increased by ¥3,244 million year on year to ¥2,270 million (operating loss of¥974 million in the same period of the previous fiscal year).
Ordinary profit increased by ¥2,422 million (+73.1%) year on year to ¥5,735 million. This was because of
the increase in operating profit, despite the fact that in non-operating income and expenses, negative
factors, including the turnaround from foreign exchange gains to foreign exchange losses, outweighed thepositive factors, including the turnaround from share of loss of entities accounted for using equity methodin the same period of the previous fiscal year to share of profit of entities accounted for using equity
method.
Profit before income taxes increased by ¥2,669 million (+87.3%) year on year to ¥5,729 million. Profit
attributable to owners of parent increased by ¥3,583 million (+187.7%) year on year to ¥5,492 million.
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG) and bitumen) came to ¥48,540 million, an
increase of ¥15,108 million (+45.2%) year on year. This was mainly the result of increases in sales
volumes of crude oil and domestic natural gas, as well as rises in sales prices.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥1,152 million, an
increase of ¥20 million (+1.8%) 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 ¥10,110 million, an increase of ¥2,576 million (+34.2%) year on year.

(2) Explanation of financial position
At the end of the first quarter, total assets decreased by ¥17,898 million from the previous fiscal year-end
to ¥728,841 million.
Current assets decreased by ¥4,414 million from the previous fiscal year-end, mainly due to a decrease innotes and accounts receivable - trade. Non-current assets decreased by ¥13,483 million. This was due tothe decline in property, plant and equipment resulting from the impact of exchange rate and depreciation,
progress in the recovery of recoverable accounts included in other in investments and other assets, andother factors.
Liabilities decreased by ¥16,399 million from the previous fiscal year-end to ¥219,730 million.
Current liabilities decreased by ¥8,110 million from the previous fiscal year-end, mainly due to a decreasein notes and accounts payable - trade. Non-current liabilities decreased by ¥8,288 million. This was due tothe impact of exchange rate and the reclassification of loans payable with repayments due in one year orless to current liabilities in long-term loans payable.
-3-

Net assets decreased by ¥1,499 million from the previous fiscal year-end to ¥509,110 million. The main
factors were decreases in foreign currency translation adjustment, valuation difference on
available-for-sale securities and non-controlling interests, despite an increase in retained earnings.

(3) Explanation of consolidated financial forecasts and other forward-looking statements
The consolidated financial forecasts for the fiscal year ending March 31, 2018 have been revised from theforecasts announced on May 12, 2017.
Please refer to the “Notice of Financial Forecasts Revision and Recognition of Non-Operating Expenses,
Extraordinary Losses, Income Taxes - Deferred” released on August 8, 2017, the same day of this report.

-4-

2. Consolidated financial statements(1) Consolidated quarterly balance sheet(Millions of yen)
As of March 31, 2017
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
Construction in progress
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, 2017

109,48828,283
1,302
4,282
84
5,414
12,534(31)
161,359

113,851
21,118
1,300
4,227
284
4,704
11,490(32)
156,944

217,984
165,805
383,790

216,312
159,760
376,073

8,487
8,487

8,089
8,089

148,237
47,466(51)(2,549)193,102585,380
746,739

151,611
38,646(49)(2,473)
187,734
571,896
728,841(Millions of yen)
As of March 31, 2017
Liabilities
Current liabilities
Notes and accounts payable - trade
Provision
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Deferred tax liabilities
Provision
Net defined benefit liability
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, 2017

13,63457
24,21937,9118,579
145
21,07429,800141,903
29,497
1,175
3,572
18,292
3,776
198,218
236,129

134,919
29,0791,148
3,434
17,833
3,514
189,930
219,730

14,288183345,693(10)
360,155

14,288183352,640(10)
367,101

69,832

68,771

(226)
7,301
455
77,36373,091
510,609746,739

(8)
2,756
495
72,01569,993509,110
728,841

(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
methodForeign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity
methodForeign exchange losses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Provision for loss on business liquidation
Other
Total extraordinary losses
Profit before income taxes
Income taxes
ProfitProfit (loss) attributable to non-controlling interests
Profit attributable to owners of parent-7-

Three months ended
June 30, 2016

Three months ended
June 30, 2017

42,09635,6506,446

59,80350,153
9,649

135
(10)
125
7,295
(974)

433
(66)
367
7,011
2,270

299
1,037

345
1,099

–

2,771

3,452
216
5,006

–
259
4,476

228

325

370

–

–
119
718
3,313

485
200
1,011
5,735

–
–

1
1

–
3
249
–
253
3,059
471
2,588
678
1,909

3
3
–
0
6
5,729
634
5,095
(397)
5,492

Consolidated quarterly statement of comprehensive income(Millions of yen)

ProfitOther 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, 2016

Three months ended
June 30, 2017

2,588

5,095

(4,746)(68)(6,874)35(1,058)230(5,692)
38

(772)

(37)

–
(12,426)(9,838)2,025(4,493)601(10,028)

2,170

189

(1,569)(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.

(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 assets (other) andcurrent liabilities (other) because such variance is expected to be almost completely eliminated by the endof 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 result thatis not reasonable to a significant extent, the effective statutory tax rate is used.
Note that income taxes - deferred is included in income taxes.

(Significant subsequent events)
Decision not to proceed with LNG Project in British Columbia, Canada
With regard to Pacific NorthWest LNG project in British Columbia, Canada (hereinafter “the PNW LNG
Project”) which JAPEX pursued through its foreign subsidiary JAPEX Montney Ltd. (hereinafter “JML”),
JAPEX announced on July 25, 2017 (Pacific Daylight Time (PDT), Canada) that Pacific NorthWest LNG(hereinafter “PNWL”), an operating company, will not proceed with the project.
In April 2013, JAPEX took part, through JML, in shale gas development and production project(hereinafter “the Upstream Project”) as well as the PNW LNG Project for producing LNG from shale gas
reserves. We reached the decision, however, not to proceed due to changes to circumstances in the LNG
industry.
As a result of this decision, JAPEX will post approximately CAD 65 million of extraordinary losses fortermination of the pipeline construction plan relating to the PNW LNG Project and approximately CAD 37
million of share of loss of entities accounted for using equity method relating to PNWL in non-operating
expenses respectively in this fiscal year. We are examining impacts to the Upstream Project associatedwith the decision.
Decision not to re-start operation of bitumen by SAGD method in the 3.75 section area of Hangingstone in
the province of Alberta, Canada
JAPEX resolved at the meeting of Board of Directors held on August 8, 2017 not to re-start operations ofbitumen (ultra-heavy crude oil extracted from oil sands) production using SAGD (Steam Assisted Gravity
Drainage) method* in the 3.75 Section Area (hereinafter “the DEMO Area”) at the Hangingstone leases in
the province of Alberta, Canada by its foreign subsidiary Japan Canada Oil Sands Limited (hereinafter“JACOS”).
Since the start of the pilot production using SAGD method in the DEMO Area in 1999, JACOS has
produced a cumulative total of 35 million barrels of bitumen. However, the wildfires in May 2016 forced
suspension of operations, and aiming at improvement of our financial results under the stagnating oil
prices environment, we decided to leave the operations suspended rather than restart later that year.
We have been evaluating the possibility to restart operations, but in the continuing severe businessenvironment including low oil prices and the increasing technical risks of a re-start due to declining
temperature and pressure of the oil sands layer, we decided not to re-start production operations using
SAGD method in the DEMO Area.
As a result of this decision, JAPEX plans to post the whole amount of approximately US$69 million ofproperty, plant and equipment relating to the DEMO Area as non-operating expenses using theunit-of-production method in this fiscal year.
* One of the methods to extract ultra-heavy crude oil by injecting steam into the formation to increase
fluidity of ultra-heavy crude oil and to use the gravity effect for extraction.

-9-3. Supplemental information
Status of production and sales(1) Production
Three months ended
June 30, 2016
(April 1, 2016 –June 30, 2016)
Crude oil (kl)E&P

Natural gas(thousand m3)
LNG (t)Bitumen (kl)Three months ended
June 30, 2017
(April 1, 2017 –June 30, 2017)(Reference)
Fiscal year ended
March 31, 2017
(April 1, 2016 – March 31, 2017)

388,459

376,854

1,570,228(311,247)(300,183)(1,264,026)

358,243

343,960

1,380,939(166,930)(147,666)(600,976)

3,699

2,800

10,15465,396–90,751(65,396)(–)(90,751)

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, 2016
(April 1, 2016 –June 30, 2016)
AmountVolume(Millions of yen)

E&P

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

(Reference)
Fiscal year ended
March 31, 2017
(April 1, 2016 – March 31, 2017)
AmountVolume(Millions of yen)

Crude oil (kl)646,504

17,896872,496

29,5302,670,522

81,428Natural gas(thousand m3)

436,037

12,439435,632

13,7691,864,865

55,329LNG (t)40,542

2,765

96,044

5,240

398,295

20,278Bitumen (kl)

65,280329––

91,627669

Subtotal

33,431

48,540157,706

Contract services
Oil products
Other/merchandisebusinesses
Others

1,131

1,152

10,354

6,370

8,724

33,354

1,163

1,386

5,715

Subtotal

7,533

10,11039,069Total

42,09659,803

207,130

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. Monetary amounts in the table do not include consumption taxes.

- 10 -