Consolidated Financial Results for the Six Months Ended September 30, 2017
<under Japanese GAAP>
November 10, 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:
November 13, 2017
Scheduled date to commence dividend payments:
December 13, 2017
Presentation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results presentation meeting (for institutional investors and analysts): Yes(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the six months ended September 30, 2017
(April 1, 2017 – September 30, 2017)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Six months ended

Operating profit

Millions of yen% Millions of yen

Profit attributable toowners of parent

Ordinary profit% Millions of yen% Millions of yen%

September 30, 2017

112,382

22.8

3,452

–

8,888

–

7,756

–

September 30, 2016

91,494 (26.3)(3,213)–(2,238)–(1,267)–

Note: Comprehensive income: Six months ended September 30, 2017: 14,436 million yen (– %)Six months ended September 30, 2016: (20,072) million yen (– %)Basic earnings per share
Six months ended

Diluted earnings per share

Yen

Yen

September 30, 2017135.71–

September 30, 2016(22.17)–(2)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of September 30,
2017746,006

522,945

60.5

As of March 31, 2017746,739

510,609

58.6

Reference: Equity

2.

As of September 30, 2017: 451,649 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

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

-1-

Total
Yen

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

213,802

3.2

4,314

529.8

654

(70.6)

1,737(49.6)

30.38

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

*
(1)

Notes
Changes in significant subsidiaries during the six 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: 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 September 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 September 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)
Six months ended September 30, 201757,152,637 shares
Six months ended September 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 six months ended
September 30, 2017” on page 4 of the attached material to the quarterly financial results report.
(Method of accessing supplementary material on quarterly financial results)
JAPEX plans to hold a presentation meeting for institutional investors and analysts on November 13, 2017.
JAPEX plans to post the material distributed at this presentation meeting on its website promptly after the
meeting is held.

-2-

(Attached Material)
1. Qualitative information regarding settlement of accounts for the six months ended September 30,
2017(1) Explanation of operating results
During the six months ended September 30, 2017, net sales was ¥112,382 million, an increase of ¥20,887
million (+22.8%) year on year. Gross profit was ¥17,884 million, an increase of ¥6,209 million (+53.2%)
year on year. The main factors behind the year-on-year increases in net sales and gross profit were rises insales prices of crude oil and natural gas, and an increase in sales volume of domestic natural gas.
Exploration expenses was ¥643 million, a decrease of ¥1 million (-0.3%) year on year. Selling, general andadministrative expenses was ¥13,788 million, a decrease of ¥455 million (-3.2%) year on year. As a result,operating profit improved by ¥6,666 million year on year to ¥3,452 million (operating loss of ¥3,213
million in the same period of the previous fiscal year).
Ordinary profit improved by ¥11,126 million year on year to ¥8,888 million (ordinary loss of ¥2,238
million in the same period of the previous fiscal year), mainly because of an increase in share of profit ofentities accounted for using equity method and the turnaround from foreign exchange losses to foreignexchange gains.
Profit before income taxes improved by ¥11,385 million year on year to ¥8,875 million (loss before
income taxes of ¥2,509 million in the same period of the previous fiscal year), as a result of a turnaroundfrom ordinary loss to ordinary profit. Profit attributable to owners of parent also improved by ¥9,023
million year on year to ¥7,756 million (loss attributable to owners of parent of ¥1,267 million in the same
period of the previous fiscal year).
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG) and bitumen) came to ¥87,520 million, an
increase of ¥15,569 million (+21.6%) year on year. This was mainly the result of a rise in sales price of
crude oil and natural gas and an increase in sales volume of domestic natural gas.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥5,237 million, an
increase of ¥1,249 million (+31.3%) 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 ¥19,624 million, an increase of ¥4,068 million (+26.2%) year on year.

(2) Explanation of financial position
At the end of the second quarter, total assets decreased by ¥733 million from the previous fiscal year-end
to ¥746,006 million.
Current assets increased by ¥263 million from the previous fiscal year-end, mainly due to an increase in
cash and deposits. Non-current assets decreased by ¥997 million. This was due to the decline in property,
plant and equipment resulting from the impact of fluctuation in foreign exchange rates and depreciation,
progress in the recovery of recoverable accounts included in other in investments and other assets, andother factors, despite the increase in investment securities resulting from the rise in market values andother factors.
Liabilities decreased by ¥13,068 million from the previous fiscal year-end to ¥223,060 million.
Current liabilities decreased by ¥8,124 million from the previous fiscal year-end, mainly due to a decreasein notes and accounts payable - trade. Non-current liabilities decreased by ¥4,944 million. This was due tothe impact of fluctuation in foreign exchange rates and the reclassification of loans payable with-3-

repayments due in one year or less to current liabilities in long-term loans payable.
Net assets increased by ¥12,335 million from the previous fiscal year-end to ¥522,945 million. The main
factors were increases in retained earnings and valuation difference on available-for-sale securities, despite
decreases in foreign currency translation adjustment and non-controlling interests.

(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 August 8, 2017.
Please refer to the “Notice of Financial Forecasts Revision” released on November 10, 2017, 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
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 March 31, 2017

As of September 30, 2017

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

119,546
20,464
1,500
4,313
228
4,861
10,742(33)
161,623

217,984
165,805
383,790

222,885
159,631
382,517

8,487
8,487

7,846
7,846

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

165,200
31,305(50)(2,436)
194,019584,382
746,006

(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, 2017

As of September 30, 2017

13,63457
24,21937,911

5,115
316
24,35529,786

141,903
29,497
1,175
3,572
18,292
3,776
198,218
236,129

134,604
32,698
1,320
3,469
18,0793,102
193,274
223,060

14,288183345,693(10)
360,155

14,288183354,900(10)
369,362

69,83278,033

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

124
3,594
535
82,287
71,295522,945746,006

(2) Consolidated quarterly statement of income and Consolidated quarterly statement ofcomprehensive income
Consolidated quarterly statement of income(Millions of yen)Six months ended
September 30, 2016
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
Loss on retirement of non-current assets
Provision for loss on business liquidation
Other
Total extraordinary losses
Profit (loss) before income taxes
Income taxes
Profit (loss)
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent-7-

Six months ended
September 30, 2017

91,49479,81911,675112,382
94,497
17,884

712
(67)
645
14,243(3,213)

698
(55)
643
13,788
3,452

587
1,045

686
1,108

71

3,349

520
2,224

1,422
6,566

472
491
284
1,249
(2,238)

714
–
416
1,131
8,888

–
–

2
2

0
21
249
–
270
(2,509)414(2,924)(1,657)(1,267)

3
10
–
0
14
8,875
1,108
7,767
10
7,756

Consolidated quarterly statement of comprehensive income(Millions of yen)Six months ended
September 30, 2016
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-

Six months ended
September 30, 2017

(2,924)

7,767

4,249
(6)
(20,434)
71

8,160
369
(4,126)76(1,027)

166–(17,148)(20,072)

2,022
6,669
14,436(14,450)

14,702(5,622)

(266)

(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 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 second 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.

-9-(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”),
Pacific NorthWest LNG (hereinafter “PNWL”), an operating company, decided not to proceed with the
project on July 25, 2017 (Pacific Daylight Time (PDT), Canada).
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 60 million of extraordinary losses fortermination of the pipeline construction plan relating to the PNW LNG Project and approximately CAD 36
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 production operation of bitumen by SAGD process in the 3.75 section area ofHangingstone in the province of Alberta, Canada
JAPEX and its foreign subsidiary Japan Canada Oil Sands Limited (hereinafter “JACOS”) both resolved attheir respective meetings of Board of Directors held on August 8, 2017 (local time on August 8, 2017), notto re-start production operations of bitumen (ultra-heavy crude oil extracted from oil sands formation)
production by JACOS using SAGD (Steam Assisted Gravity Drainage) process* in the 3.75 Section Area
(hereinafter “the DEMO Area”) at the Hangingstone leases in the province of Alberta, Canada.
Since the start of the pilot production using SAGD process 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 production operations suspended rather than re-start later thatyear.
We have been evaluating the possibility to re-start production operations, but in the continuing adverse
business environment including low oil prices and the increasing technical risks of a re-start due todeclining temperature and pressure of the oil sands formation, we decided not to re-start production
operations using SAGD process 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.

- 10 -

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

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

777,429

696,640

1,570,228(625,336)(547,370)(1,264,026)

677,202638,954

1,380,939(313,503)(268,529)(600,976)

8,437

6,729

10,15490,751–90,751(90,751)(–)(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 formation.

(2) Sales
Six months ended
September 30, 2016
(April 1, 2016 –September 30, 2016)
AmountVolume(Millions of yen)

E&P

Six months ended
September 30, 2017
(April 1, 2017 –September 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)

1,623,849

43,202

1,548,075

53,0862,670,522

81,428Natural gas(thousand m3)

844,862

23,184

833,721

26,8391,864,865

55,329LNG (t)78,4594,974

131,147

7,595

398,295

20,278Bitumen (kl)

91,624589––

91,627669

Subtotal

71,951

87,520157,706

Contract services
Oil products
Other/merchandisebusinesses
Others

3,987

5,237

10,354

13,17916,84233,354

2,375

2,781

5,715

Subtotal

15,555

19,62439,069Total

91,494112,382

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.

- 11 -