Consolidated Financial Results for the Nine Months Ended December 31, 2009
February 9, 2010
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 & Investor Relations Department
TEL: (03) 6268-7110
Scheduled date to file Quarterly Report:
February 10, 2010

(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the nine months ended December 31, 2009
(April 1, 2009 – December 31, 2009)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Operating income% Millions of yen

Ordinary income

Nine months ended

Millions of yen

December 31, 2009

118,844(27.9)

6,435(67.3)

9,974(49.9)

8,245(20.9)

December 31, 2008

164,912–

19,704–

19,898–

10,420–Net income per share% Millions of yen

Net income%

Diluted net
income per share

Nine months ended

Yen

Yen

December 31, 2009144.26–

December 31, 2008

182.33–(2)% Millions of yen

Consolidated financial position
Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen%

Yen

As of December 31,
2009

512,976

389,98574.6

6,691.67

As of March 31, 2009

500,444378,22774.1

6,486.85

Reference: Equity

2.

As of December 31, 2009: 382,447 million yen

As of March 31, 2009: 370,743 million yen

Cash dividends
Cash dividends per shareFirst quarter

Fiscal year ended
March 31, 2009
Fiscal year ending
March 31, 2010
Fiscal year ending
March 31, 2010
(Forecast)Second quarter

Third quarter

Fiscal year-end

Total

Yen

Yen

Yen

Yen

Yen

–

20.00

–

20.00

40.00

–

20.00

–
20.00

40.00

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

–1–

3.

Consolidated financial forecasts for the fiscal year ending March 31, 2010 (April 1, 2009 – March 31, 2010)(Percentages indicate year-on-year changes.)
Net sales

Fiscal year ending
March 31, 2010

Operating income

Ordinary income

Net income pershare

Net income

Millionsof yen%Millionsof yen%Millionsof yen%Millionsof yen%Yen

177,851(12.0)

11,192(44.3)

19,728(11.8)

15,56623.9

272.36

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

4.
(1)

OthersChanges in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change
in scope of consolidation): None

(2)

Application of simplified accounting and special accounting for preparing the quarterly consolidated financial
statements: Yes
Note:

(3)

Changes in accounting policies, procedures, and methods of presentation for preparing the quarterly
consolidated financial statements (changes described in the section of “Changes in significant matters forming
the basis of preparing the quarterly consolidated financial statements”)
a. Changes due to revisions to accounting standards and other regulations: Yes
b. Changes due to other reasons: Yes
Note:

(4)

For more details, please refer to the section of “4. Others” of “[Qualitative Information and Financial
Statements]” on pages 4-5.

For more details, please refer to the section of “4. Others” of “[Qualitative Information and Financial
Statements]” on pages 4-5.

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, 2009
57,154,776 shares
As of March 31, 2009
57,154,776 sharesb. Number of treasury shares at the end of the period
As of December 31, 2009
1,961 shares
As of March 31, 2009
1,783 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Nine months ended December 31, 2009
57,152,932 shares
Nine months ended December 31, 2008
57,153,249 shares* Proper use of financial forecasts, and other special matters
Concerning the financial forecasts for the fiscal year ending March 31, 2010, refer to “Notice of Financial
Forecast Revision” released today.
The forecast statements shown in this document are based on information that was available at the time of
preparation. Actual performance may differ materially from these forecasts due to various factors.

–2–

[Qualitative Information and Financial Statements]
1.

Qualitative information regarding consolidated operating results
During the nine months ended December 31, 2009 (from April 1, 2009 to December 31, 2009), net sales was¥118,844 million, a decrease of ¥46,067 million (-27.9%) year on year, as gross profit decreased by ¥20,161
million (-35.3%) year on year to ¥37,023 million. The main factors behind the year-on-year falls in both net
sales and gross profit include not only drops in crude oil and bitumen prices, but also decreased income as aresult 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 decreased both domestic and overseas by ¥5,177 million (-39.2%) year on year, despite
exploratory drilling activities in Libya, to ¥8,021 million. Selling, general and administrative expenses
declined by ¥1,714 million (-7.1%) year on year to ¥22,566 million as a result of a fall in special petroleum
gain levy in China following the expiry of the commercial production period of Japex New Nanhai Ltd. As aresult of the above, operating income dropped by ¥13,268 million (-67.3%) year on year to ¥6,435 million.
Ordinary income was ¥9,974 million, a decrease of ¥9,924 million (-49.9%) year on year due to an increase inother of non-operating income and decreases in loss on valuation of securities and foreign exchange losses.
The rise in other of non-operating income mainly resulted from a turnaround from equity in losses of affiliates
to equity in earnings of affiliates.
Please note that, because of the increase in the importance of Diamond Gas Netherlands B.V., an affiliate of
JAPEX, it is included in the scope of equity-method applicable companies from the three months ended June30, 2009.
Income before income taxes and minority interests was ¥10,878 million, a decrease of ¥4,603 million(-29.7%) year on year due in part to decreases in a loss on retirement of noncurrent assets and an impairment
loss for the Numanohata SK-8D well compared with the corresponding amounts posted in the same period of
the previous fiscal year, as well as a gain on change in equity added to extraordinary income, and net income
was ¥8,245 million, a decrease of ¥2,175 million (-20.9%) year on year as a result of lower income taxes.
The gain on change in equity occurred as a result of the issuance of new shares after the listing of Japan
Drilling Co., Ltd., an equity-method applicable affiliate of JAPEX.
Below is a summary of earnings by business division.
(i) E&P Division
The E&P Division sells crude oil, natural gas, liquefied natural gas (LNG) and bitumen. During the ninemonths ended December 31, 2009, this Division posted net sales of ¥102,056 million, down ¥50,119
million (-32.9%) year on year, due to drops in crude oil and bitumen prices and the expiry of thecommercial production period of Japex New Nanhai Ltd.
(ii) Contract Services Division
The Contract Services Division is primarily involved in drilling and geophysical surveys. During thenine months ended December 31, 2009, it recorded net sales of ¥3,084 million, up ¥1,081 million(+54.0%) year on year due in part to the adoption of the percent of completion method.
(iii) Other Businesses Division
The Other Businesses Division is primarily involved in the sale of oil products, including liquefied
petroleum gas (LPG) and fuel oil, the transportation of natural gas and oil products on consignment aswell as other subcontracted tasks. During the nine months ended December 31, 2009, this Division
posted net sales of ¥13,703 million, up ¥2,969 million (+27.7%) year on year, partly because Japex
Energy Co., Ltd., which is mostly involved in the sale of oil products, became a consolidated subsidiaryof the Company.

–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 increased by¥12,532 million to ¥512,976 million as a result of a rise in noncurrent assets that offset a fall in current assets.
The increase in noncurrent assets is attributable partly to an increase in property, plant and equipment
resulting from drilling two wells at the Yufutsu oil and gas field in Hokkaido and an increase in investment
securities due to the rise in the stock price of INPEX CORPORATION.
Regarding liabilities and net assets, total liabilities was up ¥774 million from the previous fiscal year end to¥122,990 million, with total net assets also up ¥11,757 million to ¥389,985 million, mainly due to the increasein deferred tax liabilities and a greater valuation difference on available-for-sale securities brought upon by
the aforementioned increase in investment securities and an increase in retained earnings, offsetting a decreasein long-term loans payable.

3.

Qualitative information regarding consolidated financial forecasts
The full-year forecasts released on November 6, 2009, has been revised. Please refer to the “Notice ofFinancial Forecast Revision” released on the same day of this report, February 9, 2010.

4.

Others(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in
the change in scope of consolidation)
No items to report(Reference)
Although inapplicable to specified subsidiaries, from the third quarter under review, Japex Energy Co., Ltd.
was included in the scope of consolidation due to our acquisition of its shares.

(2) Application of simplified accounting and special accounting for preparing the quarterly consolidated
financial statements
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, the Company and some of its consolidated subsidiaries compute first by reasonably
estimating the effective tax rate after applying tax effect accounting against income before income taxes
and minority interests for the fiscal year including the third quarter under review, and next by multiplying
the quarterly income before income taxes and minority interests by such estimated effective tax rate. Notethat income taxes–deferred is included in income taxes.

(3) Changes in accounting policies, procedures, and methods of presentation for preparing the quarterly
consolidated financial statements• Changes in accounting standards
a. Change in accounting standard for construction revenue and cost
Before the change, revenue from construction contracts was recognized on the percent of completion
method for long-term, large-scale projects (lasting one year or more and revenue of ¥3.0 billion or more).
Other projects were treated on the completed contract method. However, from the first quarter ended June30, 2009, the “Accounting Standard for Construction Contracts” (ASBJ Statement No. 15, December 27,2007) and the “Guidance on Accounting Standard for Construction Contracts” (ASBJ Guidance No. 18,
December 27, 2007), are adopted and, concerning the completed portion by the end of the third quarter(December 31, 2009) of construction contracts started during the first quarter, construction projects forwhich the portion of progress is recognized with a certainty are recorded on the percent of completion
method (rate of progress estimated by the cost-ratio method), and all other projects on the completed
contract method.

The effect on net sales, operating income, ordinary income and income before income taxes and minority
interests as a result of the above is immaterial.

–4–b. Change in depreciation method for significant depreciable assets (property, plant and equipment)
Regarding the assets held for management purposes of the Sapporo Division Office of JAPEX, although
the declining-balance method was previously applied, the move of the Sapporo Division Office from
Sapporo City, Hokkaido to Tomakomai City, Hokkaido on October 26, 2009, and changing its name to the
Hokkaido Division Office, and the organizational integration of the administrative division and all
production and manufacturing plants for the purpose of strengthening the support framework provided by
the former to the latter’s operations in the Yufutsu area, which consist of the core activities of the Hokkaido
Division Office, resulted in the application of the straight-line method from the third quarter under review
in hopes of applying the same depreciation method for the aforementioned assets as the method for theassets held for production and sales purposes of the Hokkaido Division Office. The effect on operating
income, ordinary income and income before income taxes and minority interests as a result of the above isimmaterial–5–5. Consolidated financial statements(1) Consolidated balance sheets(Millions of yen)

As of December 31, 2009

As of March 31, 2009
(Summary)

AssetsCurrent assets
Cash and deposits

22,30027,702

Notes and accounts receivable-trade18,345

17,050

Short-term investment securities

12,605

11,510

Merchandise and finished goods

5,884

4,255

498

553

Raw materials and supplies

4,950

6,200

Other

28,05829,859(13)(12)

92,631

97,120149,055

142,767

Other

3,905

4,392

Total intangible assets

3,905

4,392

Investment securities

252,622

241,945

Other

20,93320,091(49)(68)

Allowance for overseas investment loss

(6,122)(5,803)

Total investments and other assets

267,384

256,164

Total noncurrent assets

420,345

403,324

Total assets

512,976

500,444

Work in process

Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Intangible assets

Investments and other assets

Allowance for doubtful accounts–6–

(Millions of yen)

As of December 31, 2009

As of March 31, 2009
(Summary)

Liabilities
Current liabilities
Notes and accounts payable-trade

6,290

6,508

218

282

Other

17,84417,302

Total current liabilities

24,35324,093Long-term loans payable

23,30025,325

Deferred tax liabilities

61,49860,108Provision for retirement benefits

6,337

5,732

Provision for cost of abandonment

6,119

5,725

Other provision

739

694

Other

641

535

Total noncurrent liabilities

98,637

98,123

Total liabilities

122,990122,216

Capital stock

14,28814,288Retained earnings

262,164

255,499(10)(9)

Total shareholders’ equity

276,442

269,778

Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges

109,195

105,43034(0)Foreign currency translation adjustment(3,225)(4,465)

Total valuation and translation
adjustments

106,004

100,964

Minority interests

7,537

7,484

Total net assets

389,985

378,227

Total liabilities and net assets

512,976

500,444

Provision

Noncurrent liabilities

Net assets
Shareholders’ equity

Treasury stock–7–

(2) Consolidated statements of income(Millions of yen)

Nine months ended
December 31, 2008
(April 1, 2008 –December 31, 2008)
164,912Nine months ended
December 31, 2009
(April 1, 2009 –December 31, 2009)
118,844

Cost of sales

107,727

81,821Gross profit

57,18437,023

Exploration expenses

14,1198,479

Exploration subsidies

(920)

(458)

Total exploration expenses

13,199

8,021

Selling, general and administrative expenses

24,28022,566

Operating income

19,7046,435Interest income

1,032

559

Dividends income

2,677

2,380

Other

1,237

2,433

Total non-operating income

4,947

5,373

1,783

10

–

525

Foreign exchange losses

1,567

554

Other

1,402

745

Total non-operating expenses

4,753

1,835

Ordinary income

19,898

9,974

191

–

Gain on change in equity

–

1,165

Other

5

156

196

1,321

Loss on retirement of noncurrent assets

2,343

186

Impairment loss
Retirement benefit expenses for priorperiods
Other

2,263

–

–

231

6

–

Total extraordinary losses
Income before income taxes and minority
interests
Income taxes

4,613

417

15,481

10,878

3,968

2,050

Minority interests in income

1,091

582

Net income

10,4208,245

Net sales

Exploration expenses

Non-operating income

Non-operating expenses
Loss on valuation of securities
Provision for cost of abandonment

Extraordinary income
Subsidy

Total extraordinary income
Extraordinary loss–8–

(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

6.

Other information(1) Changes in presentation method(Quarterly consolidated balance sheets)
The “provision for cost of abandonment,” which was included in “other provision” of noncurrent liabilities asof December 31, 2008, is presented separately as of December 31, 2009, because it exceeded 1% of the totalof liabilities and net assets. The “provision for cost of abandonment” included in “other provision” of
noncurrent liabilities as of December 31, 2008, amounted to ¥4,246 million.
(Quarterly consolidated statements of income)The “provision for cost of abandonment,” which was included in “other” of non-operating expenses for thenine months ended December 31, 2008, is presented separately in the nine months ended December 31, 2009,
because it exceeded 20% of total non-operating expenses. The “provision for cost of abandonment” included
in “other” of non-operating expenses for the nine months ended December 31, 2008, amounted to ¥409
million.

–9–

(2) Status of production and salesa. Production
Oil and natural gas segment
Division

Product

Nine months ended
December 31, 2008
(April 1, 2008 –December 31, 2008)(Reference)
Fiscal year ended
March 31, 2009
(April 1, 2008 – March 31, 2009)

541,046

438,434

748,022(107,059)(20,078)(136,632)

Natural gas(thousand m3)

906,328

868,951

1,286,621(44,059)(40,392)(57,843)

LNG (t)29,55638,067

46,796

312,186

300,429

416,369(312,186)(300,429)(416,369)

Crude oil (kl)E&P

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

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.
4. The reason for the year-on-year decline in the production volume of overseas crude oil was the expiry in February
2009 of the commercial production period of a consolidated subsidiary Japex New Nanhai Ltd.

b.

Sales
Oil and natural gas segment

Division

Nine months ended
December 31, 2008
(April 1, 2008 –December 31, 2008)
AmountVolumeNine months ended
December 31, 2009
(April 1, 2009 –December 31, 2009)
AmountVolumeCrude oil (kl)

1,407,057

90,843

1,231,944

47,8591,919,959

102,845Natural gas(thousand m3)

1,030,981

36,966

1,028,914

38,437

1,485,961

54,126

LNG (t)128,974

9,389

124,267

8,348

177,401

13,412

Bitumen (kl)313,028

14,975299,940

7,410

417,423

13,087

Product(Millions of yen)

E&P

Subtotal(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2009
(April 1, 2008 – March 31, 2009)
AmountVolume(Millions of yen)

152,175

102,056

183,471

Contract services

2,003

3,084

4,739

Other businesses

10,733

13,703

13,916

164,912

118,844

202,127

Total

Notes: 1. Other Businesses Division is primarily involved in 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 other subcontracted tasks.
2. Monetary amounts in the table do not include consumption taxes.

– 10 –