Consolidated Financial Results for the Six Months Ended September 30, 2016
<under Japanese GAAP>
November 8, 2016
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:
Samdeck Nakamoto, General Manager, Media and Investor Relations Department
TEL: +81-3-6268-7110 (from overseas)
Scheduled date to file Quarterly Report:
November 10, 2016
Scheduled date to commence dividend payments:
December 13, 2016
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, 2016
(April 1, 2016 – September 30, 2016)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Six months ended

Operating income

Millions of yen% Millions of yen

Profit attributable toowners of parent

Ordinary income% Millions of yen% Millions of yen%

September 30, 2016

91,494 (26.3)(3,213)–(2,238)–(1,267)–

September 30, 2015

124,157 (15.5)

5,407(64.2)

8,842(64.3)

7,963(57.8)

Note: Comprehensive income: Six months ended September 30, 2016: (20,072) million yen (– %)Six months ended September 30, 2015: (22,665) million yen (– %)Basic earnings per share
Six months ended

Diluted earnings per share

Yen

Yen

September 30, 2016(22.17)–

September 30, 2015139.34–(2)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of September 30,
2016684,515475,145

59.4

As of March 31, 2016

707,601495,31759.5

Reference: Equity

2.

As of September 30, 2016: 406,763 million yen

As of March 31, 2016: 421,009 million yen

Cash dividends

Fiscal year ended
March 31, 2016
Fiscal year ending
March 31, 2017
Fiscal year ending
March 31, 2017
(Forecasts)

First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

25.00

–

25.00

50.00

–

5.00
–

–

–

Note: Revisions to the latest forecasts of cash dividends: Yes
Cash dividends of the fiscal year-end and total of the annual dividends are yet to be determined.

-1-

Total
Yen

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2017 (April 1, 2016 – March 31, 2017)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2017

Operating income

Profit attributable Basic earnings per
Ordinary income to owners of parent
shareMillionsof yenMillionsof yen%Millionsof yen189,528(21.1)(1,285)%–(3,725)%–

Millionsof yen
(341)

%
–

Yen
(5.97)

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): Yes
Exclusion: one company (Japex Philippines Ltd.)
Note: For details, please refer to “(1) Changes in significant subsidiaries during the six months under review” of “2. Matters regardingsummary information (notes)” on page 4 of the attached material.

(2)

Application of specific accounting for preparing quarterly consolidated financial statements: Yes
Note: For details, please refer to “(2) Application of specific accounting for preparing quarterly consolidated financial statements” of“2. Matters regarding summary information (notes)” on page 4 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: 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) Changes in accounting policies, changes in accounting estimates, and restatement” of “2. Mattersregarding summary information (notes)” on page 4 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 September 30, 201657,154,776 shares
As of March 31, 201657,154,776 sharesb. Number of treasury shares at the end of the period
As of September 30, 2016
2,139 shares
As of March 31, 2016
2,139 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Six months ended September 30, 201657,152,637 shares
Six months ended September 30, 2015
57,152,637 shares* Indication regarding execution of quarterly review procedures
At the time of disclosure of this quarterly financial results report, the quarterly review procedures for thequarterly consolidated financial statements in accordance with the Financial Instruments and Exchange 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. As such,they do not constitute guarantees by the Company of future performance. 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 “(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, 2016” onpage 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 9, 2016.
JAPEX plans to post the material distributed at this presentation meeting on its website promptly after the
meeting is held.

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(Attached Material)
1. Qualitative information regarding settlement of accounts for the six months ended September 30,
2016(1) Explanation of operating results
During the six months ended September 30, 2016, net sales was ¥91,494 million, a decrease of ¥32,663
million (-26.3%) year on year. Gross profit was ¥11,675 million, a decrease of ¥14,733 million (-55.8%) year
on year. The main factors behind the year-on-year decreases in net sales and gross profit were falls in sales
prices of crude oil and natural gas, and decreases in sales volumes of domestically produced crude oil anddomestic natural gas.
Exploration expenses was ¥645 million, a decrease of ¥4,124 million (-86.5%) year on year. This was mainly
the result of a considerable decrease in overseas expenditures. Selling, general and administrative expenses
was ¥14,243 million, a decrease of ¥1,987 million (-12.2%) year on year, mainly by the result of aconsiderable decrease in domestic expenditures. As a result, operating income deteriorated by ¥8,621 million
year on year to an operating loss of ¥3,213 million (operating income of ¥5,407 million in the same period of
the previous fiscal year). Ordinary income deteriorated by ¥11,081 million year on year to an ordinary loss of¥2,238 million (ordinary income of ¥8,842 million in the same period of the previous fiscal year), mainly
because of a decrease in share of profit of entities accounted for using equity method.
Profit before income taxes also decreased by ¥11,280 million year on year to a loss before income taxes of¥2,509 million, as a result of a turnaround from ordinary income to ordinary loss. Profit attributable to ownersof parent also decreased by ¥9,230 million year on year to a loss attributable to owners of parent of ¥1,267
million.
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG) and bitumen) came to ¥71,951 million, adecrease of ¥26,162 million (-26.7%) year on year. This was mainly the result of fall in sales price anddecreases in sales volumes of domestically produced crude oil and domestic natural gas.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥3,987 million, a decreaseof ¥1,555 million (-28.1%) 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¥15,555 million, a decrease of ¥4,945 million (-24.1%) year on year.

(2) Explanation of financial position
At the end of the second quarter, total assets decreased by ¥23,086 million to ¥684,515 million as comparedto the end of the previous fiscal year. The main factors behind this decrease were a decrease of ¥11,897
million in total investments and other assets partly due to the progress of recovery of recoverable accounts, adecrease of ¥7,653 million in total property, plant and equipment partly due to the impact of exchange rate,
and a decrease of ¥2,617 million in total current assets.
Total liabilities decreased by ¥2,914 million from the previous fiscal year-end to ¥209,369 million. The main
factors behind this decrease were a decrease of ¥1,558 million in total current liabilities, and a decrease of¥1,356 million in total non-current liabilities partly due to a decrease in long-term loans payable due to theimpact of exchange rate.
Total net assets decreased by ¥20,171 million from the previous fiscal year-end to ¥475,145 million. The
main factor behind this decrease was a decrease of ¥16,187 million in foreign currency translation adjustment,a decrease of ¥5,925 million in non-controlling interests, and a decrease of ¥2,302 million in retained
earnings, despite an increase of ¥4,235 million in valuation difference on available-for-sale securities andother increases.

-3-(3) Explanation of consolidated financial forecasts and other forward-looking statements
The consolidated financial forecasts for the fiscal year ending March 31, 2017 and forecasts of cash dividends
have been revised from the forecasts announced on August 5, 2016.
Please refer to the “Notice of Financial Forecasts Revision and Interim Dividend Payout and Year-end
Dividend Forecast Revisions” released on November 8, 2016, the same day of this report.

2. Matters regarding summary information (notes)(1) Changes in significant subsidiaries during the six months under review
During the second quarter ended September 30, 2016, liquidation of JAPEX’s specified subsidiary Japex
Philippines Ltd. was completed on July 28, 2016.

(2) Application of specific accounting for preparing quarterly consolidated financial statements
a. 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.
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 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.

(3) Changes in accounting policies, changes in accounting estimates, and restatement
Changes in accounting policies(Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016)
Following the revision to the Corporation Tax Act, certain domestic consolidated subsidiaries have appliedthe “Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016” (ASBJ PITF No. 32,
June 17, 2016) from the first quarter ended June 30, 2016, and changed the depreciation method forfacilities attached to buildings and structures acquired on or after April 1, 2016 from the declining balancemethod to the straight line method.
The effect of this on the consolidated financial results for the six months ended September 30, 2016 isimmaterial.

(4) Additional information(Implementation Guidance on Recoverability of Deferred Tax Assets)
The “Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26,
March 28, 2016) has been applied from the first quarter ended June 30, 2016.

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3. Consolidated financial statements(1) Consolidated quarterly balance sheet(Millions of yen)
As of March 31, 2016

As of September 30, 2016

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

104,359
24,642
23,551
4,414
29
4,135
12,536(30)
173,638

126,958
20,854
1,299
4,566
288
6,089
10,991(28)
171,020

179,420
156,797336,218

180,577
147,986
328,564

9,698
9,698

8,780
8,780

135,261
55,691(58)(2,847)
188,046
533,963
707,601

137,494
41,419(58)(2,705)
176,149
513,494
684,515

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-

(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, 2016

As of September 30, 2016

8,585
68
23,63632,2909,265
117
21,34930,731130,030
24,267229
3,574
17,811
4,079
179,994
212,284

128,10925,621454
3,476
17,2093,767
178,638
209,369

14,288
157
345,674(10)
360,109

14,288157
343,372(10)
357,807

50,55454,7903
10,087
253
60,89974,308495,317707,601(2)(6,099)266
48,95568,382475,145684,515

(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, 2015
Net sales
Cost of sales
Gross profit
Exploration expenses
Exploration expenses
Exploration subsidies
Total exploration expenses
Selling, general and administrative expenses
Operating income (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 income (loss)
Extraordinary income
Gain on sales of non-current assets
Total extraordinary income
Extraordinary losses
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)
Loss attributable to non-controlling interests
Profit (loss) attributable to owners of parent-7-

Six months ended
September 30, 2016

124,157
97,74826,40891,49479,81911,675

4,791
(21)
4,769
16,231
5,407

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

800
1,046

587
1,045

2,350

71

424
4,622

520
2,224

392
593
201
1,187
8,842

472
491
284
1,249
(2,238)

0
0

–
–

71
–
1
72
8,770
3,660
5,109
(2,853)
7,963

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

Consolidated quarterly statement of comprehensive income(Millions of yen)Six months ended
September 30, 2015
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
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, 2016

5,109

(2,924)(20,205)(55)(7,512)
6

4,249
(6)
(20,434)71(9)(1,027)(27,775)(22,665)(17,148)(20,072)(17,480)(14,450)(5,185)(5,622)

(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 and the Scope of Application of the Equity Method)1) Significant changes in the scope of consolidation
Since liquidation of Japex Philippines Ltd. and Japex Buton Ltd. was completed during the second
quarter ended September 30, 2016, they were excluded from the scope of consolidation. However,statements of income until liquidation day were consolidated.

2)

Significant changes in the scope of application of the equity method
There have been no significant changes in the scope of application of the equity method.
Furthermore, from the first quarter ended June 30, 2016, the results of the subsidiaries and associatesof Japan Drilling Co., Ltd. have been included in the calculation when applying the equity method,as their importance has increased.

-9-

4. Supplemental information
Status of production and sales(1) Production
Six months ended
September 30, 2015
(April 1, 2015 –September 30, 2015)
Crude oil (kl)E&P

Natural gas(thousand m3)
LNG (t)Bitumen (kl)Six months ended
September 30, 2016
(April 1, 2016 –September 30, 2016)(Reference)
Fiscal year ended
March 31, 2016
(April 1, 2015 – March 31, 2016)

882,059

777,429

1,908,080(704,192)(625,336)(1,564,057)

684,307677,202

1,331,251(280,533)(313,503)(507,328)

250

8,437

2,202

142,664

90,751

306,432(142,664)(90,751)(306,432)

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
Six months ended
September 30, 2015
(April 1, 2015 –September 30, 2015)
AmountVolumeSix months ended
September 30, 2016
(April 1, 2016 –September 30, 2016)
AmountVolumeCrude oil (kl)

1,336,750

54,2201,623,849

43,2022,926,653

98,023Natural gas(thousand m3)

820,504

33,031

844,862

23,184

1,780,537

68,469LNG (t)81,898

7,934

78,4594,974

208,246

17,715

Bitumen (kl)

143,288

2,927

91,624589

306,436

4,894(Millions of yen)

E&P

(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2016
(April 1, 2015 – March 31, 2016)
AmountVolume(Millions of yen)

Subtotal

98,113

71,951

189,103

Contract services
Oil products
Other/merchandisebusinesses
Others

5,542

3,987

9,797

16,14013,17932,609

4,360

2,375

8,792

Subtotal

20,50015,55541,401

Total

124,157

91,494

240,302

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.

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