Consolidated Financial Results for the Nine Months Ended December 31, 2018
<under Japanese GAAP>
February 12, 2019

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/
Representative: Hideichi Okada, Representative Director and President
Inquiries:
Shigeyoshi Hasegawa, General Manager, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
February 13, 2019
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
1.
(1)(Millions of yen with fractional amounts discarded, unless otherwise noted)

Consolidated financial results for the nine months ended December 31, 2018
(April 1, 2018 – December 31, 2018)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Operating profit% Millions of yen

Profit attributable toowners of parent

Ordinary profit

Nine months ended

Millions of yen% Millions of yen

December 31, 2018

207,425

31.1

1,040

(76.4)

December 31, 2017

158,274

9.4

4,400

–

% Millions of yen%

12,275 198.5

11,402–

4,111(30,337)––

Note: Comprehensive income: Nine months ended December 31, 2018: (14,536) million yen (– %)Nine months ended December 31, 2017: (41,789) million yen (– %)Basic earnings per share

Diluted earnings per share

Nine months ended

Yen

Yen

December 31, 2018199.51–

December 31, 2017

(530.82)–(2)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of December 31,
2018674,332

443,392

60.8

As of March 31, 2018699,536459,255

60.8

Reference: Equity

2.

As of December 31, 2018: 409,870 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

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

-1-

AnnualYen

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 yen282,32622.4

326(96.3)

9,831

156.8

12,469%–Yen
218.18

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

*
(1)

Notes
Changes in significant subsidiaries during the nine 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(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 (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.

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 December 31, 201857,154,776 shares
As of March 31, 201857,154,776 sharesb. Number of treasury shares at the end of the period
As of December 31, 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)
Nine months ended December 31, 201857,152,637 shares
Nine months ended December 31, 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 andother 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 “(3) Explanation of consolidated financial forecasts and other forward-looking
statements” of “1. Qualitative information regarding settlement of accounts for the nine months ended
December 31, 2018” on page 4 of the attached material to the quarterly financial results report.
(Method of accessing supplementary material on quarterly financial results)
On February 12, 2019, JAPEX posts a supplementary material on its website.

-2-

(Attached Material)
1. Qualitative information regarding settlement of accounts for the nine months ended December 31,
2018(1) Explanation of operating results
During the nine months ended December 31, 2018, net sales was ¥207,425 million, an increase of ¥49,151
million (+31.1%) year on year. Gross profit was ¥25,445 million, a decrease of ¥1,371 million (-5.1%)
year on year. The main factors behind the year-on-year increase in net sales were rises in sales price of
crude oil and natural gas, and contribution from sales of bitumen in Japan Canada Oil Sands Limited(JACOS) Hangingstone leases where production operation was started in August 2017. On the other hand,gross profit decreased year on year, due to the increase in operating costs for the Soma LNG terminal,
which commenced operation in March 2018, and other factors.
Exploration expenses was ¥617 million, a decrease of ¥378 million (-38.0%) year on year. Selling, generaland administrative expenses was ¥23,787 million, an increase of ¥2,367 million (+11.1%) year on year. As
a result, operating profit decreased by ¥3,360 million year on year to ¥1,040 million.
Ordinary profit increased by ¥8,163 million year on year to ¥12,275 million, due to an increase in share of
profit of entities accounted for using equity method and a decrease in depreciation of inactive non-current
assets in the previous fiscal year(*1) and other factors, despite negative factors stemming from theturnaround from foreign exchange gains to foreign exchange losses.
Profit before income taxes increased by ¥82,352 million year on year to ¥12,880 million, due to a decreasein impairment loss recorded in the previous fiscal year(*2). Profit attributable to owners of parent
increased by ¥41,740 million year on year to ¥11,402 million.
(*1) The property, plant and equipment relating to the 3.75 Section Area (the DEMO Area) at the Hangingstone leases
was depreciated by the unit-of-production accounting method. This follows the exit from operations of bitumen
production using SAGD method (One of the methods to extract ultra-heavy crude oil by injecting steam into theformation to increase fluidity of ultra-heavy crude oil and to use the gravity effect for extraction) in the area by
JACOS.
(*2) The impairment loss on the asset of JAPEX Montney Ltd. relating to the shale gas project (hereinafter “theUpstream Project”) was posted due to the development plan of the Upstream project being revised to a plan without
the assumption of the Pacific NorthWest LNG Project (hereinafter “the PNW LNG Project”) following the decision
not to proceed the PNW LNG Project.

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¥169,410 million, an increase of ¥50,433 million (+42.4%) year on year. This was mainly the result ofrises in sales price of crude oil and natural gas, and the above-mentioned sales of diluted bitumen.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥4,997 million, adecrease of ¥1,559 million (-23.8%) 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 ¥33,018 million, an increase of ¥277 million (+0.8%) year on year.

-3-(2) Explanation of financial position
At the end of the third quarter, total assets decreased by ¥25,204 million from the previous fiscal year-end
to ¥674,332 million.
Current assets increased by ¥16,270 million from the previous fiscal year-end to ¥185,422 million, mainly
due to an increase in notes and accounts receivable - trade. Non-current assets decreased by ¥41,475
million from the previous fiscal year-end to ¥488,909 million, mainly due to a decrease in investment
securities resulting from the fall in market values of securities held, and the decline in property, plant andequipment resulting from depreciation.
Liabilities decreased by ¥9,341 million from the previous fiscal year-end to ¥230,940 million.
Current liabilities increased by ¥8,836 million from the previous fiscal year-end to ¥52,452 million, mainly
due to an increase in notes and accounts payable - trade. Non-current liabilities decreased by ¥18,178
million from the previous fiscal year-end to ¥178,487 million. This was mainly the result of the decreaseof deferred tax liabilities resulting from the above-mentioned fall in market values of securities held, thedecrease in long-term loans payable due to the reclassification of loans payable with repayments due in
one year or less to current liabilities, and reversal of asset retirement obligations.
Net assets decreased by ¥15,862 million from the previous fiscal year-end to ¥443,392 million.
Shareholders’ equity increased by ¥10,259 million from the previous fiscal year-end to ¥342,400 million.
Accumulated other comprehensive income decreased by ¥25,503 million from the previous fiscal year-end
to ¥67,469 million. Non-controlling interests decreased by ¥618 million from the previous fiscal year-end
to ¥33,522 million.
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 November 9, 2018.
Please refer to the “Notice of Financial Forecasts Revision” released on February 12, 2019, the same dayof this report.

-4-

2. Consolidated financial statements and significant notes thereto(1) Consolidated quarterly balance sheet(Millions of yen)

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 March 31, 2018

As of December 31, 2018

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

116,944
39,000
2,530
5,652
348
8,673
12,309(36)
185,422

187,073
142,416
329,490

191,136
128,342
319,478

8,226
8,226

7,662
7,662

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

137,104
25,856(46)(1,147)
161,768
488,909674,332(Millions of yen)

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 March 31, 2018

As of December 31, 2018

13,544
1,415
28,656
43,61523,892
1,402
27,15652,452

135,959
34,833640
3,496
18,664
3,071
196,665
240,281130,369
25,4391,371
3,352
15,195
2,758
178,487
230,940

14,288183317,679(10)
332,140

14,288183
327,938(10)
342,400

86,66760,537

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

(39)
5,841
1,130
67,46933,522
443,392
674,332(2) Consolidated quarterly statement of income and Consolidated quarterly statement ofcomprehensive income
Consolidated quarterly statement of income(Millions of yen)
Nine months ended
December 31, 2017
Net sales
Cost of sales
Gross profit
Exploration expenses
Exploration expenses
Exploration subsidies
Total exploration expenses
Selling, general and administrative expenses
Operating profit
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity
methodForeign exchange gains
Gain on reversal of asset retirement obligations
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Depreciation of inactive non-current assets
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Other
Total extraordinary income
Extraordinary losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
Impairment loss
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-

Nine months ended
December 31, 2018

158,274
131,457
26,816

207,425
181,980
25,445

1,051
(55)
996
21,419
4,400

617
–
617
23,787
1,040

1,061
2,303

1,157
2,064

1,630

8,895

3,889
–
665
9,550

–
3,369
891
16,379

1,258
–
7,823
757
9,840
4,111

3,090
1,244
–
808
5,144
12,275

2
0
3

715
–
715

3
71
68,035
5,476
73,587(69,472)(409)(69,063)(38,725)(30,337)

64
45
–
–
110
12,8802,000
10,879(522)
11,402

Consolidated quarterly statement of comprehensive income(Millions of yen)

Nine months ended
December 31, 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-

Nine months ended
December 31, 2018

(69,063)

10,87924,601
291
(79)
115

(26,126)
(42)
731
(22)

309

42

2,035
27,273(41,789)–(25,416)(14,536)(4,618)(14,101)(37,171)

(435)

(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 third 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.

-9-3. Supplemental information
Status of production and sales(1) Production
Nine months ended
December 31, 2017
(April 1, 2017 –December 31, 2017)
Crude oil (kl)Oil andgas

Natural gas(thousand m3)
LNG (t)Bitumen (kl)Nine months ended
December 31, 2018
(April 1, 2018 –December 31, 2018)(Reference)
Fiscal year ended
March 31, 2018
(April 1, 2017 – March 31, 2018)

984,937

801,671

1,272,188(762,822)(607,218)(977,887)

937,375

883,380

1,263,648(367,917)(379,522)(494,680)

7,831

5,501

8,391

24,491

639,003

143,152(24,491)(639,003)(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
Nine months ended
December 31, 2017
(April 1, 2017 –December 31, 2017)
AmountVolume(Millions of yen)

Oil andgas

Nine months ended
December 31, 2018
(April 1, 2018 –December 31, 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)

1,752,561

61,9501,577,301

80,016

2,346,258

89,173Natural gas(thousand m3)

1,272,080

42,433

1,248,114

45,667

1,773,035

60,431

LNG (t)249,660

14,201

257,746

17,527

380,955

21,935

Dilutedbitumen (kl)

14,979390

925,487

26,198160,203

4,512

Subtotal

118,977

169,410176,051

6,556

4,997

8,484

28,396

29,40140,162

4,345

3,617

5,930

Subtotal

32,74133,01846,093

Total

158,274

207,425

230,629

Contract services
Oil products
Other/merchandisebusinesses
Others

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.

- 10 -