Consolidated Financial Results for the Nine Months Ended December 31, 2010

<under Japanese GAAP>
February 9, 2011
Note: The following report is a summary of the Japanese-language original.

Company name:
Listing:
Securities code:
URL:
President:
Inquiries:

Japan Petroleum Exploration Co., Ltd.
Tokyo Stock Exchange, First Section1662
http://www.japex.co.jp/
Osamu Watanabe
Shigeyoshi Hasegawa, Manager, Media Relations, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
February 10, 2011
Scheduled date to commence dividend payments:–
Presentation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results presentation meeting:
None(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the nine months ended December 31, 2010
(April 1, 2010 – December 31, 2010)(Percentages indicate year-on-year changes.)
Consolidated operating results (cumulative)
Net sales

Operating income

Nine months ended

Millions of yen% Millions of yen

December 31, 2010

144,508

21.6

December 31, 2009

118,844(27.9)Net income per share

Ordinary income% Millions of yen% Millions of yen

6,144

(4.5)

9,059

(9.2)

5,552

(32.7)

6,435(67.3)

9,974(49.9)

8,245(20.9)%

Diluted net
income per share

Nine months ended

Yen

Yen

December 31, 2010

97.15

–

December 31, 2009144.26–(2)

Net income

Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen%

Yen

As of December 31,
2010

475,877

363,59174.7

6,221.67

As of March 31, 2010

521,009398,74775.0

6,839.05

Reference: Equity

2.

As of December 31, 2010: 355,585 million yen

As of March 31, 2010: 390,870 million yen

Cash dividends

Fiscal year ended
March 31, 2010
Fiscal year ending
March 31, 2011
Fiscal year ending
March 31, 2011
(Forecasts)
Note:

First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

20.00

–

20.00

40.00

–

20.00

–
20.00

40.00

Revisions to the forecasts of cash dividends in the current quarter: None

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Total
Yen

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2011 (April 1, 2010 - March 31, 2011)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2011

Operating income

Millionsof yen%194,606

8.3

Net income%

Millionsof yen%Millionsof yen%Yen

9,396 (28.4)

13,028(43.9)

9,083(49.4)

158.93

Millionsof yen

Note:

Revisions to the consolidated financial forecasts in the current quarter: Yes

4.
(1)

Others (For details, please refer to “Other information” on page 4.)
Changes in significant subsidiaries during the current quarter: None
Note:

(2)

Application of simplified accounting and specific accounting for preparing quarterly consolidated financial
statements

Changes in accounting policies and procedures and methods of presentation
a. Changes due to revisions to accounting standards and other regulations: Yes
b. Changes due to other reasons: None
Note:

(4)

Changes in specified subsidiaries resulting in changes in the scope of consolidation during the current quarter

Application of simplified accounting and specific accounting: Yes
Note:

(3)

Net income per
share

Ordinary income

Changes in accounting policies and procedures and methods of presentation for preparing quarterly consolidated
financial statements stated in the section of “Changes in significant matters forming the basis of preparing thequarterly consolidated financial statements”

Number of issued shares (common stock)a. Total number of issued shares at the end of the period (including treasury stock)
As of December 31, 2010
57,154,776 shares
As of March 31, 2010
57,154,776 sharesb. Number of treasury shares at the end of the period
As of December 31, 2010
2,105 shares
As of March 31, 2010
1,961 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Nine months ended December 31, 2010
57,152,757 shares
Nine months ended December 31, 2009
57,152,932 shares* Indication regarding execution of quarterly review proceduresThis quarterly financial results report is not subject to the quarterly review procedures in accordancewith the Financial Instruments and Exchange Act. At the time of disclosure of this quarterly financial
results report, the quarterly review procedures in accordance with the Financial Instruments andExchange Act are in progress.
* 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.
Actual performance and other 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 the section of “Qualitative information regarding consolidated financial forecasts” on page 4 of theattached material to the quarterly financial results report.

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(Attached Material)
1. Qualitative information regarding consolidated results for the nine months ended December 31, 2010
(1) Qualitative information regarding consolidated operating results
During the nine months ended December 31, 2010 (from April 1, 2010 to December 31, 2010), net sales was¥144,508 million, an increase of ¥25,663 million (+21.6%) year on year, and gross profit decreased by ¥664
million (-1.8%) year on year to ¥36,359 million. The main factors behind the year-on-year increase in net
sales include not only an increase in net sales thanks to a rise in crude oil prices, and increases in sales volume
and sales prices of natural gas, but also an increase in net sales of oil products, etc. by Japex Energy Co., Ltd.,
which became a consolidated subsidiary of JAPEX in the third quarter of the previous fiscal year. The main
factors behind the year-on-year decrease in gross profit include higher operating costs, such as depreciationand others, and decreased income as a result of the expiry of the commercial production period of
consolidated subsidiary Japex New Nanhai Ltd., which had been producing crude oil in China.
Exploration expenses remained roughly at the same level as in the same period of the previous fiscal year,with an increase of ¥26 million (+0.3%) year on year to ¥8,048 million. Selling, general and administrative
expenses decreased by ¥399 million (-1.8%) due to a decrease in goodwill amortization. As a result, operating
income decreased by ¥291 million (-4.5%) year on year to ¥6,144 million.
Ordinary income was ¥9,059 million, a decrease of ¥914 million (-9.2%) year on year due to a decrease inother of non-operating income, notwithstanding factors, such as an increase in dividend income and the lackof provision for cost of abandonment due to the application of the Accounting Standard for Asset Retirement
Obligations, pushing up earnings . The main reasons for the above decrease in other of non-operating income
were a turnaround from equity in earnings of affiliates to equity in losses of affiliates, and the lack of thereceipt of compensation related to indemnity rights and delinquency rights from JJI S&N B.V., anequity-method affiliate, posted in the same period of the previous fiscal year.
Income before income taxes and minority interests was ¥6,522 million, a decrease of ¥4,355 million (-40.0%)
year on year due in part to the recording as extraordinary loss of ¥2,339 million of loss on adjustment forchanges of accounting standard for asset retirement obligations, and to the posting, in the same period of theprevious fiscal year, of gain on change in equity to extraordinary income as a result of the issuance of newshares on the listing of Japan Drilling Co., Ltd., an equity-method affiliate of JAPEX, and net income was¥5,552 million, a decrease of ¥2,692 million (-32.7%) year on year.
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG) and bitumen) was ¥111,486 million, an
increase of ¥9,430 million (+9.2%) year on year, mainly due to rise in crude oil price and increases insales volume and sales prices of natural gas.
(ii) Contract services
Net sales from contract services (involved in drilling and geophysical surveys) was ¥4,691 million, an
increase of ¥1,606 million (+52.1%) year on year.
(iii) Other businesses
Net sales from other businesses, such as the sale of oil products, including liquefied petroleum gas (LPG)
and fuel oil, the transportation of natural gas and oil products on consignment as well as othersubcontracted tasks, was ¥28,330 million, an increase of ¥14,626 million (+106.7%) year on year partly
because of an increase in net sales of oil products, etc. of Japex Energy Co., Ltd., which became aconsolidated subsidiary of JAPEX in the third quarter of the previous fiscal year.

-3-(2) Qualitative information regarding consolidated financial position
At the end of the third quarter, as compared to the end of the previous fiscal year, total assets decreased by¥45,131 million to ¥475,877 million. This is mainly due to a decrease in investment securities due to the fallin the stock price of INPEX CORPORATION.
Regarding liabilities and net assets, total liabilities was down ¥9,975 million from the previous fiscal year end
to ¥112,286 million, with total net assets also down ¥35,155 million to ¥363,591 million, mainly due to thedecrease in both deferred tax liabilities and valuation difference on available-for-sale securities brought uponby the aforementioned decrease in investment securities.

(3) Qualitative information regarding consolidated financial forecasts
JAPEX expects that the consolidated financial forecasts for net sales, operating income, ordinary income andnet income for Fiscal 2011 (April 1, 2010 - March 31, 2011) will be higher compared to the previous
consolidated financial forecasts announced on November 5, 2010. This is mainly due to the revision of theJapan Crude Cocktail (JCC) price and the foreign exchange rate assumptions for the fourth quarter (January 1,
2011 - March 31, 2011), reflecting the recent trend. The previous JCC price and foreign exchange rate
assumptions announced on November 5, 2010 were $80 per barrel and ¥85/$, respectively. The revised JCC
price and foreign exchange rate assumptions for the fourth quarter (January 1, 2011 - March 31, 2011) are$88.16 per barrel ($85.00 per barrel for January and $90 per barrel for February and March) and ¥83/$,
respectively. Please refer to the “Notice of Financial Forecast Revision” released on the same day of thisreport, February 9, 2011.

2. Other information(1) Summary of changes in significant subsidiaries
No items to report(2) Summary of simplified accounting and specific accounting
a. 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.
b. 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 income before income taxes and minority
interests for the fiscal year including this third quarter, and next by multiplying the quarterly income before
income taxes and minority interests by such estimated effective tax rate. Note that income taxes–deferred isincluded in income taxes.

(3) Summary of changes in accounting policies and procedures and methods of presentation• Changes in accounting standards
a. Application of accounting standard for asset retirement obligations
Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard for
Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on
Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
Accordingly, the provision for cost of abandonment which was previously recorded was transferred to asset
retirement obligations.
As a result, operating income decreased by ¥376 million, ordinary income increased by ¥221 million,
income before income taxes and minority interests decreased by ¥2,117 million. The change in asset
retirement obligations due to the application of this accounting standard and guidance amounted to ¥4,267
million.
b. Application of the “Accounting Standard for Equity Method of Accounting for Investments” and the“Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using theEquity Method”-4-Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard for
Equity Method of Accounting for Investments” (ASBJ Statement No. 16, March 10, 2008) and the“Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using theEquity Method” (ASBJ PITF No. 24, March 10, 2008).
There was no effect from this change on ordinary income or income before income taxes and minority
interests.
c. Application of accounting standards for business combinations, etc.
Effective from the first quarter of the current fiscal year, JAPEX adopted the “Accounting Standard forBusiness Combinations” (ASBJ Statement No. 21, December 26, 2008), the “Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No. 22, December 26, 2008), the “Partial
Amendments to Accounting Standard for Research and Development Costs” (ASBJ Statement No. 23,
December 26, 2008), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
December 26, 2008), the “Accounting Standard for Equity Method of Accounting for Investments” (ASBJ
Statement No. 16, December 26, 2008) and the “Guidance on Accounting Standard for Business
Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No. 10, December 26,2008).

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3. Consolidated financial statements(1) Consolidated quarterly balance sheets(Millions of yen)
As of December 31, 2010
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, 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 noncurrent assets
Total assets-6-

As of March 31, 2010
(Summary)

30,561
25,18738,461
4,862
507
4,493
17,469(4)
121,540

24,314
19,774
17,669
4,632
386
5,398
33,403(10)
105,569

48,07553,462
41,870143,408

50,84847,53946,377
144,765

7,307
7,307

7,450
7,450

183,501
25,458(47)(5,291)
203,620354,337
475,877

246,141
22,921(46)(5,793)
263,223
415,439
521,009(Millions of yen)
As of December 31, 2010
Liabilities
Current liabilities
Notes and accounts payable-trade
Provision
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for cost of abandonment
Other provision
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total valuation and translation adjustments
Minority interests
Total net assets
Total liabilities and net assets-7-

As of March 31, 2010
(Summary)

11,692
115
16,294
28,102

5,914
138
15,933
21,98624,85140,893
6,943
–
679
9,732
1,084
84,183112,286

24,471
61,386
6,429
6,216
847
–
923
100,275
122,261

14,288275,124(10)
289,402

14,288271,858(10)
286,137

70,084(24)(3,876)
66,182
8,006
363,591
475,877

106,89624(2,186)
104,733
7,876
398,747
521,009(2) Consolidated quarterly statements of income(Millions of yen)

Nine months ended
December 31, 2009
118,844
81,82137,023(April 1, 2010 –December 31, 2010)
144,508
108,149
36,359

8,479
(458)
8,021
22,566
6,435

8,253
(205)
8,048
22,166
6,144

559
2,380
2,433
5,373

391
2,583
1,257
4,232

10
525
554
745
1,835
9,974

51
–
722
543
1,317
9,059

–
–
1,165
156
1,321

10
6
–
–
16

186
231

209
–

–

2,339

–
417
10,878
2,050
–
582
8,245

4
2,553
6,522
417
6,104
552
5,552

(April 1, 2009 –December 31, 2009)
Net sales
Cost of sales
Gross profit
Exploration expenses
Exploration expenses
Exploration subsidies
Total exploration expenses
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Other
Total non-operating income
Non-operating expenses
Loss on valuation of securities
Provision for cost of abandonment
Foreign exchange losses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Reversal of allowance for doubtful accounts
Gain on sales of noncurrent assets
Gain on change in equity
Other
Total extraordinary income
Extraordinary loss
Loss on retirement of noncurrent assets
Retirement benefit expenses for prior periods
Loss on adjustment for changes of accounting standard
for asset retirement obligations
Other
Total extraordinary losses
Income before income taxes and minority interests
Income taxes
Income before minority interests
Minority interests in income
Net income-8-

Nine months ended
December 31, 2010

(3) Notes on premise of going concern
No items to report(4) Notes on significant changes in the amount of shareholders’ equity
No items to report(5) Other notes
Changes in presentation method(Consolidated quarterly balance sheets)
The “buildings and structures, net” and “machinery, equipment and vehicles, net,” which were included in“property, plant and equipment” of noncurrent assets as of December 31, 2009 are presented separately asof December 31, 2010, because each of them exceeded 10% of the total assets. The “buildings andstructure, net” and “machinery, equipment and vehicles, net” included in “property, plant and equipment”
of noncurrent assets as of December 31, 2009, amounted to ¥51,771 million and ¥47,973 million,
respectively.
(Consolidated quarterly statements of income)1. The “reversal of allowance for doubtful accounts” and “gain on sales of noncurrent assets,” which were
included in “other” of extraordinary income for the nine months ended December 31, 2009 is presented
separately from the nine months ended December 31, 2010, because it exceeded 20% of the total
extraordinary income. The “reversal of allowance for doubtful accounts” and “gain on sales of
noncurrent assets” included in “other” of extraordinary income for the nine months ended December 31,
2009, amounted to ¥8 million and ¥0 million, respectively.
2. Following the adoption of the “Cabinet Office Ordinance Partially Revising Regulation on Terminology,
Forms and Preparation of Financial Statements” (Cabinet Office Ordinance No. 5 of March 24, 2009)
based on the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22,
December 26, 2008), “income before minority interests” is included in the consolidated statements ofincome for the nine months ended December 31, 2010.

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4. Supplemental information
Status of production and salesa.

Production
Nine months ended
December 31, 2010
(April 1, 2010 –December 31, 2010)

Nine months ended
December 31, 2009
(April 1, 2009 –December 31, 2009)
438,434

402,288614,401(20,078)(4,462)(21,556)

Natural gas(thousand m3)

868,951

896,7101,250,630(40,392)(9,061)(48,395)

LNG (t)38,06736,26957,599300,429

302,537

411,603(300,429)(302,537)(411,603)

Crude oil (kl)E&P

(Reference)
Fiscal year ended
March 31, 2010
(April 1, 2009 – March 31, 2010)

Bitumen (kl)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.

b.

Sales
Nine months ended
December 31, 2009
(April 1, 2009 –December 31, 2009)
AmountVolumeNine months ended
December 31, 2010
(April 1, 2010 –December 31, 2010)
AmountVolumeCrude oil (kl)

1,231,944

47,8591,189,303

52,047

1,714,012

69,308Natural gas(thousand m3)

1,028,914

38,437

1,092,180

42,144

1,499,236

55,593

LNG (t)124,267

8,348

143,471

9,577

186,268

12,268Bitumen (kl)299,940

7,410

302,574

7,716

411,394

11,433(Millions of yen)

E&P

Subtotal(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2010
(April 1, 2009 – March 31, 2010)
AmountVolume(Millions of yen)

102,056

111,486

148,604

3,084

4,691

4,859

Oil products
Otherbusinesses Others–

22,886

–

–

5,444

–

Subtotal

13,70328,33026,289Total

118,844

144,508

179,752

Contract services

Notes: 1. Effective from the three months ended June 30, 2010, JAPEX changed the presentation method of “Other
businesses” to disclose its sales amounts breakdown as “Oil products” and “Others,” therefore, sales amounts
relating to “Oil products” and “Others” for the nine months ended December 31, 2009 and the fiscal year ended
March 31, 2010 are omitted.
2. “Oil products” includes liquefied petroleum gas (LPG), fuel oil, diesel oil and kerosene, and “Others” includes thetransportation of natural gas and oil products on consignment as well as other subcontracted tasks.
3. Monetary amounts in the table do not include consumption taxes.

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