Consolidated Financial Results for the Nine Months Ended December 31, 2017
<under Japanese GAAP>
February 9, 2018
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:
February 13, 2018
Scheduled date to commence dividend payments:–
Presentation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results presentation meeting (for institutional investors and analysts): None
(Millions of yen with fractional amounts discarded, unless otherwise noted)

1.
(1)Consolidated financial results for the nine months ended December 31, 2017
(April 1, 2017 – December 31, 2017)
Consolidated operating results (cumulative)(Percentages indicate year-on-year changes.)
Net sales

Operating profit

Nine months ended

Millions of yen% Millions of yen

December 31, 2017

158,274

9.4

4,400

–

December 31, 2016

144,678 (22.8)(1,676)–

Profit attributable toowners of parent

Ordinary profit% Millions of yen% Millions of yen

%

4,111

–

(30,337)–274(95.9)

1,848(71.0)

Note: Comprehensive income: Nine months ended December 31, 2017: (41,789) million yen (– %)Nine months ended December 31, 2016: (1,401) million yen (– %)Basic earnings per share

Diluted earnings per share

Nine months ended

Yen

Yen

December 31, 2017

(530.82)–

December 31, 2016

32.35

–

(2)

Consolidated financial position
Total assets

Net assets

Equity ratio

Millions of yen

Millions of yen%

As of December 31,
2017708,612466,148

60.9

As of March 31, 2017746,739

510,609

58.6

Reference: Equity

2.

As of December 31, 2017: 431,756 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 yen230,553

11.3

6,785

890.5

5,408

143.4

(28,466)%–

Yen(498.07)

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

*
(1)

Notes
Changes in significant subsidiaries during the nine 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 10 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 December 31, 201757,154,776 shares
As of March 31, 201757,154,776 sharesb. Number of treasury shares at the end of the period
As of December 31, 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)
Nine months ended December 31, 201757,152,637 shares
Nine months ended December 31, 201657,152,637 shares-2-* 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 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 nine months ended
December 31, 2017” on page 5 of the attached material to the quarterly financial results report.
(Method of accessing supplementary material on quarterly financial results)
On February 9, 2018, JAPEX posts a supplementary material on its website in the same time.
(Significant impairment loss on non-current assets)
A foreign subsidiary, JAPEX Montney Ltd., has reduced the carrying amount of its assets in the shale gas
project in British Colombia, Canada (hereinafter “the Upstream Project”) to the recoverable amount andrecognized impairment loss due to the revision of the development plan of the Upstream Project without
the assumption of the Pacific NorthWest LNG Project (hereinafter “the PNW LNG Project”) following thedecision not to proceed with the PNW LNG Project, which had pursued the possibility of producing LNG(liquefied natural gas) producing from shale gas in the Upstream Project. Amount of impairment loss
recognized in the financial results during the nine months ended December 31, 2017 was ¥68,035 million.
For more information leading to the impairment loss, please refer to the announcement “Notice of
Recognition of Impairment Loss (Consolidated) and Loss on Valuation of Shares of Subsidiaries andAssociates (Non-Consolidated)” released on January 26, 2018.

-3-

(Attached Material)
1. Qualitative information regarding settlement of accounts for the nine months ended December 31,
2017(1) Explanation of operating results
During the nine months ended December 31, 2017, net sales was ¥158,274 million, an increase of ¥13,596
million (+9.4%) year on year. Gross profit was ¥26,816 million, an increase of ¥6,148 million (+29.7%)
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 ¥996 million, a decrease of ¥108 million (-9.8%) year on year. Selling, generaland administrative expenses was ¥21,419 million, an increase of ¥178 million (+0.8%) year on year. As aresult, operating profit improved by ¥6,077 million year on year to ¥4,400 million (operating loss of¥1,676 million in the same period of the previous fiscal year).
At Japan Canada Oil Sands Limited (JACOS), following the decision not to restart operation of bitumen
production using SAGD method* in the 3.75 Section Area (hereinafter “the DEMO Area”) at the
Hangingstone leases in the province of Alberta, Canada, the property, plant and equipment relating to the
DEMO Area was depreciated by the unit-of-production method and was posted to depreciation of inactive
non-current assets. Despite this and other negative factors, due to positive factors such as shifting share ofloss of entities accounted for using equity method in the previous fiscal year to share of profit, and anincrease in foreign exchange gains, as well as an improvement of operating profit, ordinary profit was¥4,111 million, an increase of ¥3,837 million year on year.
Following the decision not to proceed the Pacific NorthWest LNG Project (hereinafter “the PNW LNG
Project”), the development plan of the shale gas project (hereinafter “the Upstream Project”) was revised
without the assumption of the PNW LNG Project. As a result, due to the posting of impairment loss on theasset of JAPEX Montney Ltd. (JML) relating to the Upstream Project, and the posting of cancellation
expenses of pipeline construction plan relating to the PNW LNG Project as other in extraordinary losses,
loss before income taxes increased by ¥69,457 million to ¥69,472 million (loss before income taxes of ¥14
million in the same period of the previous fiscal year), and profit attributable to owners of parent decreased¥32,186 million year on year to loss attributable to owners of parent of ¥30,337 million (profit attributableto owners of parent of ¥1,848 million in the same period of the previous 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.
Below is a breakdown of sales.
(i) E&P
Net sales from E&P (including liquefied natural gas (LNG), bitumen and diluted bitumen) came to¥118,977 million, an increase of ¥7,468 million (+6.7%) year on year. This was mainly the result ofrises in sales price of crude oil and natural gas and increases in sales volume of domestic natural gas
and LNG.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥6,556 million, adecrease of ¥504 million (-7.1%) 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 ¥32,741 million, an increase of ¥6,632 million (+25.4%) year on year.

(2) Explanation of financial position
At the end of the third quarter, total assets decreased by ¥38,126 million from the previous fiscal year-end
to ¥708,612 million.

-4-

Current assets decreased by ¥11,162 million from the previous fiscal year-end, mainly due to a decrease in
cash and deposits. Non-current assets decreased by ¥26,963 million. This was due to the decline inproperty, plant and equipment resulting from the above-mentioned impairment loss of business assets of
JML, progress in the recovery of recoverable accounts included in other in investments and other assets,
and other factors, despite the increase in investment securities resulting from the rise in market values andother factors.
Liabilities increased by ¥6,335 million from the previous fiscal year-end to ¥242,464 million.
Current liabilities increased by ¥5,948 million from the previous fiscal year-end, mainly due to an increasein short-term loans payable included in other in current liabilities. Non-current liabilities increased by ¥387
million. This was mainly due to the increase of deferred tax liabilities resulting from the above-mentioned
rise in market values of investment securities, despite the decrease due to the impact of fluctuation inforeign exchange rates and the reclassification of loans payable with repayments due in one year or less tocurrent liabilities in long-term loans payable.
Net assets decreased by ¥44,461 million from the previous fiscal year-end to ¥466,148 million. The main
factors were decreases in non-controlling interests and retained earnings, despite an increase in valuationdifference on available-for-sale securities.

(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 November 10, 2017.
Please refer to the “Notice of Financial Forecasts Revision and Non-operating Income and Extraordinary
Losses Recognition” released on February 9, 2018, the same day of this report.

-5-

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
Buildings and structures, net
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-6-

As of March 31, 2017

As of December 31, 2017

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

100,241
20,385
1,500
4,599
584
7,034
15,882(33)
150,196

39,433217,984
126,371383,790

185,593
77,842
71,137
334,573

8,487
8,487

7,587
7,587

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

188,762
29,892(49)(2,350)216,254
558,416
708,612(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-7-

As of March 31, 2017

As of December 31, 2017

13,63457
24,21937,911

9,472
776
33,61043,859141,903
29,497
1,175
3,572
18,292
3,776
198,218
236,129

133,464
38,745
1,367
3,496
18,374
3,157
198,605
242,464

14,288183345,693(10)
360,155

14,288183316,248(10)
330,70969,832

94,465

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

49
5,956
575
101,047
34,391
466,148
708,612(2) Consolidated quarterly statement of income and Consolidated quarterly statement ofcomprehensive income
Consolidated quarterly statement of income(Millions of yen)
Nine months ended
December 31, 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
methodForeign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Share of loss of entities accounted for using equity
methodDepreciation of inactive non-current assets
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sales of non-current assets
Other
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss
Provision for loss on business liquidation
Other
Total extraordinary losses
Loss before income taxes
Income taxes
Loss
Loss attributable to non-controlling interests
Profit (loss) attributable to owners of parent-8-

Nine months ended
December 31, 2017

144,678
124,010
20,668158,274
131,457
26,816

1,229
(124)
1,104
21,240(1,676)

1,051
(55)
996
21,419
4,400

919
2,072

1,061
2,303

–

1,630

626
759
4,378

3,889
665
9,550

707

1,258

1,244

–

–
476
2,427
274

7,823
757
9,840
4,111

–
–
–

2
0
3

38
–
249
0
288
(14)
620
(634)
(2,483)
1,848

71
68,035–
5,480
73,587(69,472)(409)(69,063)(38,725)(30,337)

Consolidated quarterly statement of comprehensive income(Millions of yen)
Nine months ended
December 31, 2016
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-9-

Nine months ended
December 31, 2017

(634)

(69,063)

24,955
25(25,463)
106

24,601
291
(79)
115

(389)

309

–
(766)
(1,401)

2,035
27,273(41,789)

6,376(4,618)(7,778)(37,171)

(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 third 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.

- 10 -

3. Supplemental information
Status of production and sales(1) Production
Nine months ended
December 31, 2016
(April 1, 2016 –December 31, 2016)
Crude oil (kl)E&P

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

1,153,670

984,937

1,570,228(924,184)(762,822)(1,264,026)

1,025,128

937,375

1,380,939(454,968)(367,917)(600,976)

9,656

7,831

10,15490,751

24,49190,751(90,751)(24,491)(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
Nine months ended
December 31, 2016
(April 1, 2016 –December 31, 2016)
AmountVolume(Millions of yen)

E&P

Nine months ended
December 31, 2017
(April 1, 2017 –December 31, 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)

2,229,233

63,125

1,752,561

61,9502,670,522

81,428Natural gas(thousand m3)

1,321,461

37,1701,272,080

42,433

1,864,865

55,329LNG (t)197,586

10,617

249,660

14,201

398,295

20,278Bitumen (kl)

91,620594––

91,627669

Dilutedbitumen (kl)––

14,979390––

Subtotal

111,508

118,977

157,706

7,060

6,556

10,354

22,13928,39633,354

3,969

4,345

5,715

Subtotal

26,10832,74139,069

Total

144,678

158,274

207,130

Contract services
Oil products
Other/merchandisebusinesses
Others

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. Diluted bitumen is bitumen diluted by ultra-light crude oil for pipeline transportation.
3. Monetary amounts in the table do not include consumption taxes.

- 11 -