Consolidated Financial Results for the Three Months Ended June 30, 2020
<under Japanese GAAP>
August 11, 2020

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: Masahiro Fujita, Representative Director and President
Inquiries:
Masaru Asai, General Manager, Corporate Communication Office
TEL: +81-3-6268-7110 (from overseas)–
Scheduled date to commence dividend payments:
Scheduled date to file Quarterly Report:
August 11, 2020
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 three months ended June 30, 2020
(April 1, 2020 – June 30, 2020)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Three months ended

Operating profit

Millions of yen% Millions of yen

Profit attributable toowners of parent

Ordinary profit% Millions of yen% Millions of yen%

June 30, 2020

51,018 (45.3)(5,250)–(9,575)–(9,536)–

June 30, 201993,252

4,617

–

8,909

–

8,951

–

61.8

Note: Comprehensive income: Three months ended June 30, 2020:Three months ended June 30, 2019:(7,425) million yen (– %)2,599 million yen (– %)Basic earnings per share
Three months ended

Diluted earnings per share

Yen

Yen

June 30, 2020

(166.86)–

June 30, 2019

156.63–(2)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of June 30, 2020

620,390

430,21063.4

As of March 31, 2020

627,132

440,157

64.2

Reference: Equity

2.

As of June 30, 2020: 393,189 million yen

As of March 31, 2020: 402,706 million yen

Cash dividends

Fiscal year ended
March 31, 2020
Fiscal year ending
March 31, 2021
Fiscal year ending
March 31, 2021
(Forecast)First quarter
Yen

Second quarter
Yen

Annual dividends
Third quarter
Yen

Fiscal year-end
Yen

–

25.00

–

25.00

50.00

25.00

–

25.00

50.00

AnnualYen–

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

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3.

Consolidated financial forecasts for the fiscal year ending March 31, 2021 (April 1, 2020 – March 31, 2021)(Percentages indicate year-on-year changes.)

Net sales

Fiscal year ending
March 31, 2021

Operating profit

Ordinary profit

Profit attributable Basic earnings per
to owners of parent
shareMillionsof yen%Millionsof yen%Millionsof yen%Millionsof yen%Yen

219,923(31.0)(7,763)–(5,429)–(6,517)–(114.03)

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

*
(1)

Notes
Changes in significant subsidiaries during the three 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: 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 June 30, 2020
57,154,776 shares
As of March 31, 2020
57,154,776 sharesb. Number of treasury shares at the end of the period
As of June 30, 2020
2,336 shares
As of March 31, 2020
2,303 sharesc. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Three months ended June 30, 2020
57,152,444 shares
Three months ended June 30, 201957,152,569 shares

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.

* 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 three months ended June30, 2020” on page 4 of the attached material to the quarterly financial results report.

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(Attached Material)
1. Qualitative information regarding settlement of accounts for the three months ended June 30,
2020(1) Explanation of operating results
During the three months ended June 30, 2020, net sales was ¥51,018 million, a decrease of ¥42,233 million(-45.3%) year on year. Gross profit was ¥2,399 million, a decrease of ¥10,040 million (-80.7%) year on
year. Major factors behind the year-on-year decreases for net sales and gross profit were decreases in sales
volume and sale price of crude oil from Garraf project in Iraq as well as those of crude oil and natural gas
in Japan, and a decline in diluted bitumen sales.
Exploration expenses was ¥206 million, a decrease of ¥10 million (-5.0%) year on year. Selling, generaland administrative expenses was ¥7,443 million, a decrease of ¥162 million (-2.1%) year on year. As aresult, operating profit deteriorated by ¥9,867 million year on year to an operating loss of ¥5,250 million(operating profit of ¥4,617 million in the same period of the previous fiscal year).
Ordinary profit deteriorated by ¥18,484 million year on year to an ordinary loss of ¥9,575 million(ordinary profit of ¥8,909 million in the same period of the previous fiscal year), due mainly to theturnaround from foreign exchange gains to foreign exchange losses.
Profit before income taxes deteriorated by ¥18,483 million year on year to a loss before income taxes of¥9,578 million (profit before income taxes of ¥8,905 million in the same period of the previous fiscal
year). Profit attributable to owners of parent deteriorated by ¥18,488 million year on year to a loss
attributable to owners of parent of ¥9,536 million (profit attributable to owners of parent of ¥8,951 million
in the same period of the previous fiscal year).
Below is a breakdown of net sales.
(i) E&P BusinessNet sales from the E&P Business came to ¥22,904 million, a decrease of ¥31,228 million (-57.7%)
year on year. This was mainly the result of decreased sales volumes and sales prices of crude oil,natural gas (overseas) and diluted bitumen.
(ii) Infrastructure/Utility BusinessNet sales from the Infrastructure/Utility Business came to ¥20,997 million, a decrease of ¥2,174
million (-9.4%) year on year. This was mainly the result of decreased sales volumes and sales prices ofnatural gas (Japan) and liquefied natural gas (LNG), despite the sales of electricity with thecommencement of commercial operations of the No. 1 Unit of Fukushima Natural Gas Power Plant.
(iii) Other Businesses
Net sales from other businesses, such as the contract services (drilling and geological surveys, etc.),
sale of oil products, including liquefied petroleum gas (LPG), fuel oil and the like, as well as othersubcontracted tasks, came to ¥7,116 million, a decrease of ¥8,830 million (-55.4%) year on year.

(2)

Explanation of financial position
At the end of the first quarter, total assets decreased by ¥6,742 million from the previous fiscal year-end to¥620,390 million.
Current assets decreased by ¥11,387 million from the previous fiscal year-end, mainly due to decreases incash and deposits, and notes and accounts receivable - trade. Non-current assets increased by ¥4,645
million from the previous fiscal year-end. This was mainly due to a rise in market values in investment
securities and an increase in recoverable accounts included in other investments and other assets, despite adecrease in property, plant and equipment due to the effect of foreign exchange.
Liabilities increased by ¥3,204 million from the previous fiscal year-end to ¥190,179 million.

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Current liabilities increased by ¥702 million from the previous fiscal year-end. This was mainly due to anincrease in notes and accounts payable - trade. Non-current liabilities increased by ¥2,501 million from theprevious fiscal year-end. This was mainly due to an increase in deferred tax liabilities resulting from theabove-mentioned rise in market values of investment securities.
Net assets decreased by ¥9,946 million from the previous fiscal year-end to ¥430,210 million.
The main factor was a decrease in retained earnings, despite an increase in valuation difference on availablefor-sale securities.

(3) Explanation of consolidated financial forecasts and other forward-looking statements
The consolidated financial forecasts for the fiscal year ending March 31, 2021 have been revised from theforecasts announced on May 14, 2020.
Please refer to the “Notice of Financial Forecasts Revision” released on August 11, 2020, the same day ofthis report.

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

As of March 31, 2020
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 June 30, 2020

160,077
27,510
4,000
5,223
167
11,1414,966(31)
213,054

155,037
23,258
4,000
4,052
755
9,215
5,378
(30)
201,666

173,682
120,355
294,038

170,101
118,323
288,424

6,823
6,823

6,644
6,644

88,922
25,052(44)(715)
113,216
414,078
627,132

96,07028,257(44)(629)
123,654418,723
620,390

(Millions of yen)
As of March 31, 2020
Liabilities
Current liabilities
Notes and accounts payable - trade
Provisions
Other
Total current liabilities
Non-current liabilities
Long-term borrowings
Deferred tax liabilities
Retirement benefit liability
Provisions
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
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 June 30, 2020

12,237555
22,94535,73813,137590
22,71236,440118,774
9,878
3,528
798
15,432
2,824
151,236
186,975

118,309
11,531
3,391
591
15,327
4,587
153,738
190,179

14,288350,934(11)
365,212

14,288339,057(11)353,334

33,06137,872

181
3,494
756
37,49437,450440,157
627,132(1,272)2,540
713
39,85437,021
430,210620,390

(2) Consolidated quarterly statement of income and Consolidated quarterly statement ofcomprehensive income
Consolidated quarterly statement of income
Three months ended
June 30, 2019
Net sales
Cost of sales
Gross profit
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 losses
Loss on sales of non-current assets
Loss on retirement of non-current assets
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-(Millions of yen)Three months ended
June 30, 2020

93,25280,812
12,440
217
7,605
4,617

51,01848,619
2,399
206
7,443
(5,250)

307
1,649

216
49

2,390

2,116

1,309
5,657

197
2,579

1,237
–
127
1,365
8,909

972
5,809
122
6,904
(9,575)

0
3
–
4
8,905
(206)
9,111
159
8,951

–
2
0
3
(9,578)173(9,752)(215)(9,536)

Consolidated quarterly statement of comprehensive income(Millions of yen)Three months ended
June 30, 2019
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 to noncontrolling interests-8-

Three months ended
June 30, 2020

9,111

(9,752)(6,394)
(2)
(12)
(51)

4,810
(65)
(1,049)(42)(50)(1,325)(6,512)
2,599

2,326
(7,425)

2,529(7,176)70(248)

(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

Effective the three months ended June 30, 2020, Fukushima Gas Power Co., Ltd., an affiliate of theCompany, became an equity method affiliate of the Company due to its increased material significancefollowing the launch of its power business upon the start of commercial operations of the Fukushima
Natural Gas Power Plant in April 2020.

(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 assets (other) becausesuch 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 first quarter, and next by multiplying the quarterly profit before income taxes by such estimatedeffective 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.

(Additional information)
Financial covenants

A part of loans from financial institutions to JAPEX Montney Ltd., a consolidated subsidiary of theCompany, amounting to ¥29,492 million includes certain financial covenants clauses. JAPEX MontneyLtd. has been breaching the financial covenants clauses as it has been in a state of insolvency. However,creditor financial institutions have agreed to suspend execution of their rights in relation to an acceleration
clause until March 2021.

Accounting estimates in connection with the spread of novel coronavirus disease (COVID-19)

The spread of COVID-19 infection is still expanding as of the end of the first quarter and domestic andoverseas economic activities have been considerably stagnant due to restriction on movement including
stay-at-home request and others. This situation poses challenges in coming up with forecasts given
uncertainties particularly with respect to not knowing how the virus might spread going forward or when it
might let up. Nevertheless, the Company deems that the situation is likely to improve incrementally after acertain period.
In terms of how the pandemic has affected projects both in Japan and abroad, development and production
operations at the Garraf Oil Field in the south of the Republic of Iraq were temporarily suspended fromMarch 16, 2020, but subsequently resumed production operations on July 21. Meanwhile, although thevirus has not markedly affected other projects as of yet, it may cause delays and otherwise impact otherprojects as has been the case with the Garraf Project, due to restrictions imposed on movement of people,
movement of objects, and use of services.
This situation has affected sales volumes of crude oil, natural gas, diluted bitumen, and electricity, in thatsales volume of domestic natural gas has decreased by 6.8% year on year to 248 million cubic meters
during the three months ended June 30, 2020. The Company deems that its sales volume will recover toprevious levels in a manner that aligns with resumption of economic activity, but it may take some time fordemand to recover with respect to certain customers.
During the three months ended June 30, 2020, the Company has not encountered any significant decreases
in sales volumes in relation to COVID-19, aside from Garraf crude oil and domestic natural gas.
Moreover, whereas the crude oil price recovered to about US$40 per barrel as a result of oil producing
countries having implemented a series of coordinated production cuts beginning in May, the Company
expects the price to remain at its current level during the fiscal year ending March 31, 2021, given that therecovery in prices has lacked momentum amid a scenario of sluggish energy demand due to ramifications-9-

of the COVID-19 pandemic. The price is likely to subsequently mount a gradual recovery over a certain
period of time, thereby returning to levels that had persisted prior to the spread of COVID-19.
Meanwhile, a scenario involving a prolonged COVID-19 pandemic extending beyond the Company’s
assumptions would suggest that diminished mobility is likely become a constant, thereby giving rise to thepossibility of irreversible structural changes in various areas encompassing people’s lifestyles, issues withrespect to work arrangements and employment, energy demand, and environmental concerns.
Should assumptions change under such circumstances, the Company has options involving impairment of
non-current assets and recoverability of deferred tax assets with respect to accounting estimates of highuncertainty. With respect to making such judgments, these accounting items are largely dependent on
estimates of future revenue and cash flows, such that the JAPEX Group is likely to generate from its
primary business activities. Accordingly, possibilities may involve recognition of impairment loss andreversal of deferred tax assets with respect to non-current assets listed on the consolidated balance sheet in
the event that forecasts project further decreases in such revenue and cash flows brought about by
declining sales prices or decreases in sales volume.

(Significant subsequent events)
Resumption of production operations at the Garraf Oil Field in the south of the Republic of Iraq

The Company’s consolidated subsidiary, Japex Garraf Ltd., participates in the Garraf Oil Field
development and production projects (30% participating interest) in the south of the Republic of Iraq.
Following the spread of COVID-19, as a precautionary measure to ensure the health and safety of
employees from March 16, 2020, all expatriates had been evacuated from the country, necessitating thesuspension of development and production operations. However, on July 21, production operations wereresumed at an average production volume of approximately 50,000 barrels per day.
The Garraf Oil Field started crude oil production in August 2013. The average daily production volume for
2019, the most recent year, was approximately 96,000 barrels.

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3. Supplemental information
Status of production and sales(1) Production
Three months ended
June 30, 2019
(April 1, 2019 –June 30, 2019)
Crude oil (kl)E&P
Business

Natural gas(thousand m3)
Bitumen (kl)Three months ended
June 30, 2020
(April 1, 2020 –June 30, 2020)(Reference)
Fiscal year ended
March 31, 2020
(April 1, 2019 – March 31, 2020)

296,229

272,427

1,215,690(219,134)(199,944)(913,298)

272,743

246,935

1,083,862(109,938)(112,222)(434,194)

250,330

245,845

1,130,169(250,330)(245,845)(1,130,169)

LNG (t)1,752
1,589
Electricity(thousand
1,019
356,989
kWh)
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. “Electricity,” in addition to the solar power plant (mega solar) on the grounds of the Hokkaido District Office,includes the electricity generated by Fukushima Natural Gas Power Plant, which started commercial operations
from the first three months ended June 30, 2020.
Infrastructure/
UtilityBusiness- 11 -

4,405
3,049

(2) Sales
Three months ended
June 30, 2019
(April 1, 2019 –June 30, 2019)
Net sales
Sales volume(Millions of yen)

Crude oil (kl)E&P
Business

Dilutedbitumen (kl)Natural gas(overseas)(thousand m3)(Millions of yen)

(Reference)
Fiscal year ended
March 31, 2020
(April 1, 2019 – March 31, 2020)
Net sales
Sales volume(Millions of yen)

891,097

42,717

687,671

15,9362,924,245

128,152

402,024

10,689410,100

6,258

1,639,689

45,025

108,898726

111,347709

431,147

2,265

Subtotal

54,13322,904

175,443

Natural gas(Japan)(thousand m3)

267,100

14,846248,948

12,7981,268,448

64,965

LNG (t)111,126

7,501

53,533

3,597

273,312

19,3951,019

40

448,461

3,493

110,167

974

Infrastructure/Utility Electricity
Business(thousand kWh)

Others

783

1,108

3,353

23,171

20,997

88,6886,315

641

15,003

9,188

6,029

37,502

443

446

2,184

Subtotal

15,947

7,116

54,690Total

93,25251,018318,822

Subtotal

Otherbusinesses

Three months ended
June 30, 2020
(April 1, 2020 –June 30, 2020)
Net sales
Sales volume

Contract
Services
Oil products/merchandise
Others

Notes: 1. “Crude oil” includes crude oil that the Group produces in oil fields and the crude oil purchased from othercompanies.
2. Diluted bitumen is bitumen diluted by ultra-light crude oil for pipeline transportation.
3. “Natural gas (Japan)” of the Infrastructure/Utility Business refers to gas supplied in Japan via pipeline andcomprises the total of natural gas produced in Japan and LNG vaporized gas. Natural gas (Japan) is classified
under the Infrastructure/Utility Business, since both natural gas produced in Japan and LNG vaporized gas are
sold together by the Company’s supply network, which consists of the natural gas fields in Japan and the LNG
terminals that vaporize gas linked by a pipeline network.
4. “Others” of the Infrastructure/Utility Business includes contracted transportation of natural gas and contracted
vaporization of LNG used for power plant fuel.
5. Under the Other businesses, “Oil products/merchandise” includes liquefied petroleum gas (LPG), fuel oil, gas oiland kerosene, and “Others” includes other subcontracted tasks.
6. Monetary amounts in the table do not include consumption taxes.

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