Japan Petroleum Exploration Co., Ltd.

Corporate Report 2019
Financial Data Book
For the year ended March 31, 2019
(From April 1, 2018 to March 31, 2019)

Contents

Management’s Discussion and Analysis����������������������������������������������������������������������������������������� 1
Consolidated Balance Sheet����������������������������������������������������������������������������������������������������������� 6
Consolidated Statement of Income������������������������������������������������������������������������������������������������� 8
Consolidated Statement of Comprehensive Income���������������������������������������������������������������������� 9
Consolidated Statement of Changes in Equity����������������������������������������������������������������������������� 10
Consolidated Statement of Cash Flows���������������������������������������������������������������������������������������� 12
Notes to Consolidated Financial Statements������������������������������������������������������������������������������� 13
Independent Auditor’s Report������������������������������������������������������������������������������������������������������� 40

Management’s Discussion and Analysis

Overview of Operating Results
In the fiscal year ended March 31, 2019 (FY2019/3), net sales were ¥267,980 million, an increase of ¥37,350 million(+16.2%) year on year, and gross profit was ¥34,846 million, a decrease of ¥4,416 million (−11.2%), compared withthe previous fiscal year. The year-on-year increase in net sales was mainly due to rises in sales price of crude oil andnatural gas, as well as contribution from sales of bitumen in Japan Canada Oil Sands Limited (JACOS) Hangingstone
leases where production operation was started in August 2017. On the other hand, gross profit decreased year on
year due to a decline in profit from diluted bitumen sales stemming from the widening heavy-light differential(between Western Canadian Select, which is the reference price for heavy crude oil from the oil sands, and the WTI,
which is the reference price of light crude oil) in the oil sands business, the increase in operating costs in association
with full-year operation of the Soma LNG terminal (commenced operation in March 2018), and other factors.
Exploration expenses were ¥788 million, a decrease of ¥535 million (−40.4%) year on year. Selling, general and administrative expenses were ¥31,743 million, an increase of ¥2,570 million (+8.8%) year on year. As a result, operating
profit was ¥2,313 million, a decrease of ¥6,451 million (−73.6%) year on year.
Ordinary profit was ¥12,523 million, an increase of ¥8,695 million (+227.1%) year on year, due mainly to the following
positive factors. Share of loss of entities accounted for using equity method turned around to share of profit of entities
accounted for using equity method. In FY2018/3, at Japan Canada Oil Sands Limited (JACOS), a decision was madeto not restart operation of bitumen production using the SAGD process in the 3.75 Section Area (hereinafter “theDEMO Area”) at the Hangingstone leases. The property, plant and equipment relating to the DEMO Area was subsequently depreciated by the unit-of-production method, which was posted to depreciation of inactive non-current
assets. This depreciation of inactive non-current assets decreased in FY2019/3. These and other positive factors offset negative factors stemming from the reversal of foreign exchange gains to foreign exchange losses of ¥5,296 million.
Profit before income taxes totaled ¥13,074 million, an increase of ¥82,477 million from a loss before income taxes in
the previous fiscal year. Following the decision not to proceed with the Pacific NorthWest LNG Project (hereinafter “thePNW 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, an impairment loss on the asset of JAPEX Montney Ltd.
(JML) relating to the Upstream Project was posted in the previous fiscal year. However, this impairment loss declined
in FY2019/3, and profit attributable to owners of the parent totaled ¥14,770 million, up ¥45,729 million from a loss
attributable to owners of the parent in the previous fiscal year.
Overview of Financial Position
Total assets at the end of FY2019/3 decreased by ¥44,248 million from the previous fiscal year-end to ¥655,288 million.
Current assets decreased by ¥3,063 million from the previous fiscal year-end, mainly due to a decrease in notes andaccounts receivable—trade.
Non-current assets decreased by ¥41,184 million from the previous fiscal year-end. This was mainly due to thedecrease in market values of securities held in investment securities and the decline in property, plant and equipment
resulting from the impact of fluctuation in foreign exchange rates and depreciation.
Total liabilities decreased by ¥35,150 million from the previous fiscal year-end to ¥205,131 million.
Current liabilities decreased by ¥11,236 million from the previous fiscal year-end, mainly due to decreases in notes andaccounts payable—trade and short-term loans payable included in other in current liabilities. Non-current liabilities
decreased by ¥23,913 million from the previous fiscal year-end. This was mainly due to a decrease in deferred tax liabilities resulting from the above-mentioned mark-to-market valuation of securities held and the reclassification of loans
payable with repayments due in one year or less to current liabilities in long-term loans payable.

1

Total net assets decreased by ¥9,098 million year on year, to ¥450,156 million.
The main factors was an increase in retained earnings, despite an decrease in valuation difference on
available-for-sale securities.
Please note that the “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28,
February 16, 2018) and relevant Guidances have been applied from April 1, 2018. Accordingly, the figures presented
for the financial position for the fiscal year ended March 31, 2018 have been retrospectively adjusted to reflect theapplication of the standard, etc. in order to facilitate comparison and analysis against the previous fiscal year.
Cash Flows
As of March 31, 2019, cash and cash equivalents (hereinafter “net cash”) increased by ¥740 million compared withthe end of the previous fiscal year, to ¥100,633 million. Below is a summary of cash flows for each activity.
Cash flows from operating activities
Net cash provided by operating activities amounted to ¥30,970 million. The main factors were profit before income
taxes of ¥13,074 million and ¥23,296 million in depreciation.
Cash flows from investing activities
Net cash used in investing activities amounted to ¥13,969 million. Net cash was mainly used in payments of recoverable accounts of ¥25,107 million and purchase of property, plant and equipment of ¥12,955 million, while net cash
was mainly provided by interest and dividend income received of ¥16,126 million and collection of loans receivable of¥6,912 million.
Cash flows from financing activities
Net cash used in financing activities was ¥15,493 million. Net cash was mainly used for a decrease in short-term loans
payable of ¥7,877 million, repayments of long-term loans payable of ¥4,990 million and interest expenses paid of¥3,865 million.
Exchange Rates and Crude Oil Prices
The average unit sales price of crude oil received by JAPEX during FY2019/3 was ¥50,078 per kiloliter, an increase of¥12,071 per kiloliter compared with the previous fiscal year.
The sales price of domestic crude oil is essentially linked to yen translations of the price of imported crude oil.
The weighted average price of crude oil based on the Japan Crude Cocktail (JCC) price was $71.94 per barrel, an
increase of $15.75 from the level per barrel of the previous fiscal year. Compared with the previous fiscal year, the yen
appreciated ¥1.31 versus the US dollar, for a weighted average exchange rate of ¥110.35.
The Group’s average crude oil sales price increased compared with FY2018/3 as a result of the increases in­dollar-denominated crude oil prices, shown above, which more than offset the decreases in crude oil prices due toyen appreciation.
For sales of imported crude oil, fluctuations in crude oil prices and foreign exchange rates have a limited effect onearnings because the sales price is linked to changes in the purchase price.
The weighted average unit sales price of diluted bitumen was $36.67 per barrel, a year-on-year decrease of $2.96.

2Capital Expenditures and Depreciation
Capital expenditures decreased ¥30,898 million year on year to ¥10,903 million. Major components of these expenditures included investments related to the Soma LNG Terminal and the drilling of production wells in Niigata Prefecture.
Depreciation and amortization decreased ¥73 million year on year to ¥23,296 million.
Payments of recoverable accounts rose ¥10,092 million year on year to ¥25,107 million, mainly for development of theGarraf Oil Field in Iraq, and recovery of recoverable accounts totaled ¥11,118 million, a decrease of ¥16,263 million
from the previous fiscal year.
Exploration Activities
Exploration expenses declined ¥788 million year on year, to ¥535 million.
The decrease in exploration expenses is mainly attributable to geothermal surveys and drilling operations for our geothermal business in Hokkaido Prefecture, Japan.
Net Sales
In FY2019/3, net sales in the E&P business amounted to ¥215,429 million, accounting for 80.4% of the total. Net
sales of Contract Services were ¥7,342 million, or 2.7% of the total. Net sales of the Other Businesses were ¥45,207
million, or 16.9% of the total.
The following is an analysis of net sales in the E&P business, which accounts for the largest share of sales:
Crude oil sales volume decreased 457 thousand kiloliters, or 19.5%, compared with FY2018/3 to 1,888 thousand
kiloliters, mainly due to a decrease in oil sales volume for the Garraf Oil Field in Iraq. Nevertheless, crude oil sales
increased ¥5,406 million, or 6.1%, year on year to ¥94,579 million owing to rising crude oil sales prices.
Natural gas sales volume decreased 41 million cubic meters, or 2.4%, year on year to 1,731 million cubic meters.
However, sales of natural gas increased ¥7,388 million, or 12.2%, year on year to ¥67,820 million, as the unit sales
price of natural gas increased ¥5.09 per cubic meter year on year to ¥39.17 per cubic meter.
The decline in sales volume was mainly attributable to a temporary drop in demand from a particular segment of consumers in Japan.
LNG sales volume decreased 58 thousand tons, or 15.4%, year on year to 322 thousand tons, and LNG sales rose¥978 million, or 4.5%, to ¥22,913 million.
As a result of having started full-scale production in the JACOS Hangingstone lease area from August 2017, diluted
bitumen sales volume was 1,176 thousand kiloliters, an increase of 1,015 thousand kiloliters, or 634.1%, year on year,
and diluted bitumen sales increased ¥25,603 million, or 567.4%, year on year to ¥30,116 million.
Operating Expenses
The cost of sales increased ¥41,766 million compared with the previous fiscal year, to ¥233,133 million. This was
mainly the result of an increase in operating costs following the start of full-scale bitumen production operations, anincrease in operating costs following the full-year operation of the Soma LNG Terminal (began from March 2018), andan increase in the sales price and in the sales volume of imported crude oil.
Selling, general, and administrative (SG&A) expenses increased ¥2,570 million from the previous fiscal year, to¥31,743 million.
Please see the Exploration Activities section above for information on exploration expenses.
As a result, operating income declined ¥2,313 million compared with FY2018/3, to ¥6,451 million.
3

Non-operating Income (Loss)
Total non-operating income increased ¥11,997 million year on year, to ¥20,804 million, mainly owing to the reversal of
the previous fiscal year’s share of loss of entities accounted for using equity method, which was turned around toshare of profit of entities accounted for using equity method, as well as the recording of gain on reversal of asset
retirement obligations following the transfer of interests in JACOS’s DEMO Area. This was despite foreign exchange
gains in the previous fiscal year turning to foreign exchange losses.
Non-operating expenses were ¥10,594 million, decreasing ¥3,148 million compared with the previous fiscal year
mainly as a result of the following factors. Share of loss of entities accounted for using equity method turned around toshare of profit of entities accounted for using equity method. In FY2018/3, at JACOS, following the decision not torestart operation of bitumen production using the SAGD process in the DEMO Area, 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. This depreciation of inactive non-current assets decreased in FY2019/3.
As a result, ordinary income increased ¥8,695 million compared with FY2018/3, to ¥12,523 million.
Extraordinary Gain (Loss)
JAPEX recorded extraordinary income of ¥716 million, down ¥4,286 million from FY2018/3, as a result of such factors
as a decline in subsidy income.
Extraordinary losses decreased ¥78,068 million year on year to ¥165 million largely a result of the following factors.
Following the decision not to proceed with the PNW LNG Project involving JML, the development plan of the Upstream
Project was revised without the assumption of the PNW LNG Project. As a result, an impairment loss on the project
asset of JML relating to the Upstream Project was posted in the previous fiscal year. However, this impairment loss
declined in FY2019/3. Cancellation expenses with respect to pipeline construction plans relating to the PNW LNG
Project were recorded as other in extraordinary losses in the previous fiscal year. These extraordinary losses declined
in FY2019/3.
As a result of the above, JAPEX recorded profit before income taxes of ¥13,074 million, a ¥82,477 million increase
from a loss before income taxes in the previous fiscal year.
Profit Attributable to Owners of Parent
Current and deferred income taxes amounted to negative ¥1,254 million, a ¥1,494 million decrease compared withthe previous fiscal year. Meanwhile, loss attributable to non-controlling interests was ¥441 million, a ¥38,242 million
improvement from the previous fiscal year.
As a result of the above, after deducting income taxes and non-controlling interests, JAPEX recorded profit attributable to owners of parent of ¥14,770 million, up ¥45,729 million from a loss attributable to owners of the parent in theprevious fiscal year.
Financial Policy
The following section describes practices of the JAPEX Group with respect to its capital resources and liquidity.
The JAPEX Group’s financing needs primarily consist of funds used as working capital with respect to its operating
activities and funds for capital investment and overseas investment with respect to its investing activities.
Although working capital is primarily procured using internal funds, the JAPEX Group curtails its interest-bearing debt
by arranging intercompany loans such as those using CMS (cash management systems) in an effort to improve funding efficiency. In addition, as of the end of FY2019/3, JAPEX had also entered into overdraft agreements and loan

4commitment agreements in a total amount of ¥151,652 million with six of its banking partners for the purpose of efficiently procuring working capital.
With funds used for capital investments and overseas investments, when the investment amount warrants long-term
debt, financing is occasionally used in light of the quality of the project and the balance of liquidity in hand. The total of
long-term loans payable (including loans payable within one year) as of the end of FY2019/3 was ¥134,115 million.
The primary components were ¥4,439 million in loans as capital for development of the Kangean Block in Indonesia
and ¥66,247 million and ¥60,178 million, respectively, in loans as capital for oil sands development and shale gas
development in Canada.
In addition, as of the end of FY2019/3, the JAPEX Group maintained contingent liabilities totaling ¥11,638 million forguarantees of bank and other financing used for operating capital of overseas project companies and for employee
home loans. Provisions for these obligations, however, ensure adequate liquidity through cash on hand and marketable securities.
Dividend Policy
JAPEX has the basic policy on profit distribution to maintain long-term and stable dividends for shareholders. As acompany with the role of providing a stable supply of oil and natural gas essential for the function of society, the specific dividend amount is set after giving comprehensive consideration to investments aimed at securing new, proved
reserves worldwide and retaining earnings to fund development and expansion of our supply infrastructure in light ofthe medium to long-term outlook for the business environment. In addition to the above, we need to consider the levelof earnings for each fiscal year and any future funding needs.
Our basic policy is to pay dividends on surplus twice a year, in the form of interim and year-end dividends. The interim
dividend is determined by resolution of the Board of Directors, whereas the year-end dividend is determined by resolution of the General Meeting of Shareholders.
As for the FY2019/3 dividends, we issued an interim dividend of ¥10 per share and, although we had previously
announced a year-end dividend forecast of ¥10 per share, issued a year-end dividend of ¥30 per share in consideration of the basic policy detailed above and the consolidated performance for FY2019/3.
In short, we decided to issue an annual dividend for FY2019/3 of ¥40 per share (interim dividend of ¥10 per share anda year-end dividend of ¥30 per share).
In accordance with the stipulations of Paragraph 5, Article 454 of the Companies Act of Japan, JAPEX’s Articles ofIncorporation permit the interim dividend to be determined by resolution of the Board of Directors, with September 30
as the date of record.

5Consolidated Balance SheetJapan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2019

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥117,468¥115,313$1,067,890

Notes and accounts receivable - trade (Note 11)20,82526,073

189,318

Securities (Notes 4, 11 and 20)

2,330

2,200

21,181

Merchandise and finished goods (Note 3)

4,559

5,447

41,445

362

381

3,290

Raw materials and supplies (Note 3)

7,589

5,524

68,990

Short-term loans receivable (Note 11)

4,575

6,449

41,590

Other

8,410

7,796

76,454ASSETS
Current assets:
Cash and deposits (Notes 11 and 20)

Work in process (Note 3)

Less—allowance for doubtful accounts
Total current assets

(33)

(34)

(300)

166,087

169,151

1,509,881

Non-current assets:
Property, plant and equipment (Notes 5 and 17):  Land16,732

16,783

152,109   Buildings and structures

335,648

328,2123,051,345  Wells

116,070

116,387

1,055,181   Machinery, equipment and vehicles

146,276

116,313

1,329,781   Construction in progress

26,82571,936

243,863  Other

37,31630,906339,236  Less—accumulated depreciation(369,754)(351,050)(3,361,400)

Total property, plant and equipment

309,114

329,4902,810,127

7,399

8,226

67,263

7,399

8,226

67,263

137,794

167,342

1,252,672

42

4,547

381

7,713

7,818

70,118Intangible assets:  Other
Total intangible assets

Investments and other assets:   Investment securities (Notes 4 and 11)   Long-term loans receivable (Note 11)   Deferred tax assets (Note 7)   Defined benefit asset (Note 8)

1,319

1,451

11,990   Other (Note 4)

26,92013,540244,727   Less—allowance for doubtful accounts   Less—allowance for overseas investment loss
Total investments and other assets

(50)

(418)

(1,982)(9,609)172,686

192,667

1,569,872

Total non-current assets

489,200

530,384

4,447,272

Total assets¥655,288¥699,536$5,957,163

See notes to consolidated financial statements.

6(46)(1,057)

LIABILITIES AND NET ASSETS

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥  7,666¥ 13,544$   69,690

Current liabilities:
Notes and accounts payable—trade (Note 11)
Provision for directors’ bonuses

25

20

227

Other (Note 6)

24,68630,050224,418

Total current liabilities

32,37843,615294,345

Long-term loans payable (Notes 6 and 11)

127,715

135,959

1,161,045

Deferred tax liabilities (Note 7)

22,33034,833203,000

86

83

781

Non-current liabilities:

Provision for directors’ retirement benefits
Defined benefit liability (Note 8)

3,452

3,496

31,381

Asset retirement obligations (Note 13)

15,335

18,664

139,409

3,831

3,628

34,827

Total non-current liabilities

Other (Note 6)

172,752

196,665

1,570,472

Total liabilities

205,131240,281

1,864,827

14,28814,288129,890

157

183

1,427

331,306

317,679

3,011,872

Commitment and contingent liabilities (Notes 10, 12 and 14)
Net assets (Note 9):
Shareholders’ equity:
Capital stock:  Authorized—120,000,000 shares   Issued—57,154,776 shares as of March 31, 2019 and 2018
Capital surplus
Retained earnings
Treasury shares; 2,207 shares as of March 31, 2019
2,139 shares as of March 31, 2018

(10)

(10)

(90)

345,741

332,140

3,143,100

66,296

86,667

602,690

(2)

3

(18)

Foreign currency translation adjustment

3,338

5,149

30,345Remeasurements of defined benefit plans

1,114

1,152

10,127

Total accumulated other comprehensive income

70,747

92,973643,154

Total shareholders’ equity

Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

Non-controlling interests

33,66834,140306,072

Total net assets

450,156459,255

4,092,327

Total liabilities and net assets¥655,288¥699,536$5,957,163

See notes to consolidated financial statements.

7

Consolidated Statement of Income
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2019

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

Net sales¥267,980¥230,629$2,436,181

Cost of sales (Note 3)

233,133

191,366

2,119,390

Gross profit

34,84639,263

316,781

788

1,380

7,163

Exploration expenses

—

(55)

—

788

1,324

7,163

Selling, general and administrative expenses (Note 16)

31,74329,173

288,572

Operating profit

2,313

8,764

21,027

Interest income

1,598

1,382

14,527

Dividend income

2,102

2,422

19,109

Exploration subsidies

Other income (expenses):Gain (loss) on sales of securities, net

2

1,350

18

Share of profit (loss) of entities accounted for using equity method

12,550(2,601)

114,090

Gain on reversal of asset retirement obligations

3,293

—

29,936—(7,797)—

Depreciation of inactive non-current assets (Note 22)
Foreign exchange gains (losses)(5,296)2,710(48,145)

Interest expenses(4,130)(2,178)(37,545)

Gain (loss) on sales of non-current assets, net

656

(3)

5,963

Loss on retirement of non-current assets

(74)

(74)

(672)

Subsidy income (Note 5)

—

5,000

—

Impairment loss (Note 17)(30)(67,721)(272)

Other, net

91(10,656)

827

10,760(78,167)

97,81813,074(69,403)

118,854

Income taxes—current

3,925

4,392

35,681

Income taxes—deferred(5,179)(4,152)(47,081)(1,254)240(11,400)

14,328(69,643)

130,254(441)(38,683)(4,009)¥ 14,770¥ (30,959)$  134,272

Profit (loss) before income taxes
Income taxes (Note 7):

Profit (loss)
Loss attributable to non-controlling interests
Profit (loss) attributable to owners of parent (Note 19)
See notes to consolidated financial statements.

8

Consolidated Statement of Comprehensive Income
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2019

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥14,328¥(69,643)$130,254(20,366)

16,791(185,145)

(5)

242

(45)

Foreign currency translation adjustment(1,705)32(15,500)

Remeasurements of defined benefit plans

(38)

632

(345)

(16)

(826)

(145)

—

2,040

—

Profit (loss)
Other comprehensive income (Note 21):
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges Share of other comprehensive income of entities accounted for using
equity method
Changes in equity interest
Total other comprehensive income(22,132)

18,912(201,200)

Comprehensive income¥ (7,804)¥(50,730)$ (70,945)¥ (7,455)¥(13,308)$ (67,772)(348)(37,421)(3,163)Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

9Consolidated Statement of Changes in Equity
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2019
Millions of yen
Shareholders’ equity

Balance as of March 31, 2017

Capital stock

CapitalsurplusRetainedearnings

Treasury shares

Total shareholders’equity¥14,288¥183¥345,693¥(10)¥360,155

Cumulative effects on changes inaccounting policies
Balance as of April 1, 2017

2,048
14,288

183

Dividends from surplus Loss attributable to owners of parent
Changes in equity interest

347,741

2,048
(10)

362,203(1,143)(1,143)(30,958)(30,958)

2,040

2,040

 Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance as of April 1, 2018——

(30,062)—(30,062)

14,288183317,679(10)

332,140

Dividends from surplus(1,143)(1,143)

Profit attributable to owners of parent

14,77014,770 Change in ownership interest of parent due to transactions with
non-controlling interests

(26)

(26)

Purchase of treasury shares

(0)

(0)

 Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance as of March 31, 2019

—

(26)

13,627(0)

13,600¥14,288¥157¥331,306¥(10)¥345,741
Millions of yen

Accumulated other comprehensive income

Balance as of March 31, 2017

Valuation­difference on
available-forsale securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated othercomprehensive
incomeNoncontrollinginterests

Total net
assets¥69,832¥(226)¥7,301¥  455¥77,363¥73,091¥510,609

Cumulative effects on changes inaccounting policies
Balance as of April 1, 2017

2,048
69,832

(226)

7,301

455

77,36373,091Dividends from surplus(1,143) Loss attributable to owners of parent(30,959)

Changes in equity interest Net changes of items other thanshareholders’ equity

10

512,658

2,040
16,834229(2,151)

Total changes of items during period

16,834229(2,151)

Balance as of April 1, 2018

86,667

3

5,149

697

15,610(38,950)(23,340)697

15,610(38,950)(53,402)

1,152

92,97334,140459,255

Dividends from surplus(1,143)

Profit attributable to owners of parent

14,770 Change in ownership interest of parent due to transactions with
non-controlling interests(26)

Purchase of treasury shares(0) Net changes of items other thanshareholders’ equity(20,370)(5)(1,810)(38)(22,225)(472)(22,698)

Total changes of items during period(20,370)(5)(1,810)(38)(22,225)(472)(9,098)

Balance as of March 31, 2019

¥66,296¥  (2)¥3,338¥1,114¥70,747¥33,668¥450,156

See notes to consolidated financial statements.

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance as of April 1, 2018

Capital stock

CapitalsurplusRetainedearnings

Treasury shares

Total shareholders’equity$129,890$1,663 $2,887,990$(90)$3,019,454

Dividends from surplus(10,390)(10,390)

Profit attributable to owners of parent

134,272

134,272 Change in ownership interest of parent due to transactions with
non-controlling interests

(236)

(236)

Purchase of treasury shares

(0)

(0)

123,881(0)

123,636$1,427 $3,011,872$(90)$3,143,100 Net changes of items other thanshareholders’ equity
Total changes of items during period
Balance as of March 31, 2019—
$129,890(236)

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income

Balance as of April 1, 2018

Valuation­difference on
available-forsale securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated othercomprehensive
income$787,881$ 27$46,809$10,472$845,209

Noncontrollinginterests

Total net
assets$310,363 $4,175,045

Dividends from surplus(10,390)

Profit attributable to owners of parent

134,272 Change in ownership interest of parent due to transactions with
non-controlling interests(236)

Purchase of treasury shares(0) Net changes of items other thanshareholders’ equity(185,181)(45)(16,454)(345)(202,045)(4,290)(206,345)

Total changes of items during period(185,181)(45)(16,454)(345)(202,045)(4,290)(82,709)

Balance as of March 31, 2019

$602,690$(18)$30,345$10,127$643,154$306,072 $4,092,327

See notes to consolidated financial statements.

11

Consolidated Statement of Cash Flows
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2019

Cash provided by (used in) operating activities:
Profit (loss) before income taxes
Depreciation and amortization
Impairment loss
Loss on retirement of property, plant and equipment
Loss (gain) on valuation of short-term and long-term investment securities
Increase (decrease) in allowance for doubtful accounts
Decrease (increase) in defined benefit asset
Increase (decrease) in defined benefit liability
Increase (decrease) in provision for directors’ retirement benefits
Increase (decrease) in allowance for overseas investment loss
Gain on reversal of asset retirement obligations
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)
Loss (gain) on sales of short-term and long-term investment securities
Share of loss (profit) of entities accounted for using equity method
Recovery of recoverable accounts
Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade
Increase (decrease) in accrued consumption taxes
Other, net   Subtotal
Proceeds from subsidy income
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash provided by (used in) investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments for asset retirement obligations
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Payments for investments in capital
Payments of recoverable accounts
Payments of loans receivableCollection of loans receivable
Interest and dividend income received
Proceeds from dividends of residual property
Proceeds from capital reduction of investments
Proceeds from transfer of mining rights
Other, net
Net cash provided by (used in) investing activities
Cash provided by (used in) financing activities:
Proceeds from short-term loans payable
Repayments of short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Interest expenses paid
Repayments of lease obligations
Proceeds from share issuance to non-controlling shareholders
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 20)
12

See notes to consolidated financial statements.

Millions of yen

Thousands of
U.S. dollars(Note 1)

2019

2018

2019

¥ 13,074
23,296
30
74
4
(4)
132
(43)
2
(924)
(3,293)(3,700)
4,130
5,444
(2)
(12,550)
11,1185,217(1,188)(11,131)970
8,443
39,101—(8,130)30,970¥ (69,403)
23,37067,721
46
284
1
(497)
(76)
14
(566)
—
(3,805)2,178(3,003)(1,349)2,601
27,381
2,209(1,571)
844
481
2,742
49,6025,000(1,721)
52,881$118,854
211,781
272
672
36
(36)
1,200
(390)
18
(8,400)(29,936)(33,636)
37,54549,490(18)(114,090)
101,072
47,427(10,800)(101,190)
8,818
76,754355,463—(73,909)281,545(68,859)
66,992(30)
500(12,955)
1,337
(734)
(221)
(52)
2
—
(25,107)(26)
6,912
16,126
21
1,636
543
(56)
(13,969)(28,458)
18,228—0(42,534)
94
(290)
(712)
(70)
1,350
(198)
(15,091)
(20)
4,456
8,873
9
208
—
(63)
(54,218)(625,990)
609,018(272)
4,545(117,772)
12,154(6,672)(2,009)(472)
18—(228,245)(236)
62,836146,600
190
14,872
4,936(509)(126,990)

2,939(7,877)—(4,990)(0)(1,143)(183)(3,865)(404)
32(15,493)(766)
740
99,892¥100,633

5,455
—
3,221
(4,760)—(1,144)(1,529)(1,862)(577)—(1,196)(1,204)(3,737)
103,630¥ 99,892

26,718(71,609)—(45,363)(0)(10,390)(1,663)(35,136)(3,672)290(140,845)(6,963)
6,727
908,109$914,845

Notes to Consolidated Financial Statements
Japan Petroleum Exploration Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2019

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Japan Petroleum Exploration Co., Ltd. (the “Company”)
and its Consolidated Subsidiaries (together, the “Group”) have been prepared in accordance with the provisions
set forth in the Financial Instruments and Exchange Act of Japan and its related accounting regulations and in
conformity with accounting principles generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards (“IFRS”).
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates.
As permitted by the regulations under the Financial Instruments and Exchange Act of Japan, amounts of lessthan one million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial statements in yen do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto
were translated from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥110 = U.S.
$1, the approximate rate of exchange at March 31, 2019, and were then rounded down to the nearest thousand. As a result, the totals shown in the accompanying consolidated financial statements in U.S. dollar do notnecessarily agree with the sums of the individual amounts. This translation of Japanese yen amounts into U.S.
dollar amounts is included solely for convenience of readers outside Japan. Such translation should not be construed as a representation that Japanese yen could be converted into U.S. dollars at that or any other rate.

2. Significant Accounting Policies(1)	Principles of consolidation and accounting for investments in unconsolidated subsidiaries andassociates
The consolidated financial statements as of and for the year ended March 31, 2019 include the accounts of theCompany and its 21 (23 in 2018) significant subsidiaries.
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able
to exercise control over operations are consolidated, and those companies over which the Group has the ability
to exercise significant influence are accounted for using the equity method.
For the year ended March 31, 2019, 11 (12 in 2018) associates are accounted for using the equity method.
Investments in the remaining unconsolidated subsidiaries and associates are stated at cost. If the equity
method of accounting was applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The goodwill (including the difference between the cost and the underlying net equity at fair value of investments in consolidated subsidiaries) is amortized by the straight-line method, in general, over a period of 5 years.
The difference between the cost and the underlying net equity at fair value of investments in entities accounted for using the equity method is amortized by the straight-line method over a period not exceeding 20 years,
except for minor accounts that are charged to income in the period of acquisition.
The accounts of certain consolidated subsidiaries with a fiscal year-end of December 31 are consolidated on
the basis of their fiscal year-end. The necessary adjustments have been made to the consolidated financial
statements for any significant transactions that took place between the day following their balance sheet date
and the consolidated balance sheet date.
Entities accounted for using the equity method whose fiscal year-ends are different than that of the Company
are accounted for on the basis of the entities’ respective fiscal year-end.
(2) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rates
prevailing at the consolidated balance sheet dates.
All revenues and expenses associated with foreign currencies are translated into yen at the exchange rates
prevailing when such transactions were made. The resulting exchange gains or losses are credited or charged
to income.
The revenue and expense accounts of the foreign consolidated subsidiaries are translated into yen at theexchange rates in effect at their balance sheet dates, and, except for the components of net assets excluding
non-controlling interests, the balance sheet accounts are translated into yen at the exchange rates in effect attheir balance sheet dates. The components of net assets excluding non-controlling interests are translated into
yen at their historical exchange rates.
13

Differences arising from the translation are presented as foreign currency translation adjustment and non-controlling interests in the accompanying consolidated financial statements.
(3) Cash and cash equivalents
In preparing the consolidated statements of cash flows, the Company considers cash on hand, readily available
deposits and highly liquid short-term investments with maturities of three months or less when purchased thatare exposed to an insignificant risk of changes in value to be cash and cash equivalents.
(4) Securities and investment securities
In general, securities are classified into three categories: trading, held-to-maturity or available-for-sale securities.
Available-for-sale securities with a determinable market value are stated at fair value based on market value atthe balance sheet date, and unrealized gains and losses, net of applicable income taxes, are reported as a separate component of net assets. Cost of securities sold is computed based on the moving average method.
Available-for-sale securities without a determinable market value are stated at the moving average cost.
(5) Inventories
Merchandise and finished goods are mainly stated at the lower of cost determined by the first-in, first-out method or market. Raw materials and supplies are mainly stated at the lower of cost determined by the moving average method, or net realizable value.
(6) Property, plant and equipment (excluding leased assets)
Buildings (excluding attached facilities) acquired on or after April 1, 1998 and facilities attached to buildings andstructures of certain domestic consolidated subsidiaries acquired on or after April 1, 2016 as well as the Sendai
pipelines, the Shiroishi-Koriyama gas pipelines, Soma-Iwanuma gas pipelines, assets of the Hokkaido District
Office and Soma District Office of the Company and property, plant and equipment held by three domestic consolidated subsidiaries are depreciated by the straight-line method.
Property, plant and equipment held by three foreign consolidated subsidiaries (three in 2018) are depreciatedby the unit of production method.
Other property, plant and equipment (excluding leased assets) are depreciated by the declining-balance method.
The useful lives of property, plant and equipment are summarized as follows:   Buildings and structures
2 to 60 years   Wells
3 years   Machinery, equipment and vehicles 2 to 22 years(7) Intangible assets (excluding leased assets)
Intangible assets are amortized by the straight-line method.
Capitalized computer software costs are amortized by the straight-line method over a period of five years, andthose of one foreign consolidated subsidiary (one in 2018) are mainly amortized by the unit of production method.
(8) Deferred assets
Share issuance costs and development expenses are charged to income when incurred.
(9) Leased assets
For finance leases which do not transfer ownership of the leased assets to the lessee, leased assets are depreciated by the straight-line method over the lease terms with no residual value.
(10) Impairment on non-current assets
The Group reviews its non-current assets for impairment whenever events or changes in circumstance indicate
the carrying amount of an asset or asset group may not be recoverable.
The impairment loss is measured as the amount by which the carrying amount of the asset or asset groupexceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use andeventual disposition of the asset or the net selling value at disposition.
(11) Provision for directors’ retirement benefits
Consolidated subsidiaries recognize provision for directors’ retirement benefits at the amount required according
to the internal regulations at the end of the fiscal year.
(12) Allowance for doubtful accounts
The allowance for doubtful accounts is stated at the amount determined based on the historical experience ofbad debt with respect to ordinary receivables, plus an estimate of uncollectible amounts determined by reference to specific doubtful receivables from customers which are experiencing financial difficulties.

14(13) Provision for directors’ bonuses
The provision for directors’ bonuses is stated at the estimated amount of payment at the end of the fiscal year.
(14) Allowance for overseas investment loss
The allowance for overseas investment loss is stated at the amount determined based on the investees’ financial
position and certain other factors for possible losses arising from investments in the exploration and development of overseas natural resources.
(15) Asset retirement obligations
Asset retirement obligations recognized by the Group are determined based on the estimated costs of decommissioning oil and natural gas wells and production facilities in accordance with laws, land lease contracts, etc.
for wells and production facilities in Japan and overseas, and the appropriate discount rates.
(16) Retirement benefits(a) Method of attributing expected benefit to periods
The retirement benefit obligations for employees are attributed to each period by the benefit formula method
over the estimated year of service of the eligible employees.
(b) Accounting treatment of actuarial gains and losses and prior service costs
Prior service costs are amortized as incurred by the straight-line method over a certain period (10 years), which
is within the average remaining years of service of the employees.
Actuarial gains and losses are amortized in the year following the year in which the gains or losses are recognized by the straight-line method over a certain period (10 years), which is within the average remaining years ofservice of the employees.
(c) Application of simplified method for smaller enterprises
Certain consolidated subsidiaries apply the simplified method where the amount required for voluntary early
retirement at the fiscal year end is treated as retirement benefit obligations for calculating defined benefit liability
and retirement benefit expenses.
(17) Hedge accounting
Deferral hedge accounting is adopted for hedge transactions. Foreign exchange forward contracts are accounted
for by the allocation method if the foreign exchange forward contracts meet certain criteria to adopt the method.
The following summarizes hedging derivative instruments used by the Group and items hedged:   Hedging instruments: Foreign exchange forward contracts and foreign currency deposits   Hedged items:
Accounts receivable – trade, accounts payable – trade and accounts payable – otherIn addition, the nominal amount of the derivative transaction is limited to within the scope of actual demand,and the Group does not engage in speculative derivative transactions.
(18) Recognition of revenue and costs of construction contracts
The Group applies the percentage-of-completion method (the cost-comparison method is used to estimate theprogress of the construction activity) for construction contracts, if the outcome of the construction activity isdeemed certain at the end of the fiscal year. For contracts where the outcome of activity is uncertain, the completed-contract method is applied.
(19) Research and development expenses
Research and development expenses are charged to income when incurred.
(20) Income taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts forincome tax purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to be
applied to taxable income in the years in which the temporary differences are expected to be settled or realized.
The effect of deferred tax assets and liabilities due to change in tax rate is recognized in the statement of income
for the period including the enacted date.

15

(21) Application of the Implementation Guidance on Tax Effect Accounting
The Company has applied the “Implementation Guidance on Tax Effect Accounting” (Accounting Standards
Board of Japan (“ASBJ”) Guidance No. 28, revised on February 16, 2018) effective from the beginning of theyear ended March 31, 2019, and has modified treatment of taxable temporary differences relating to subsidiaryshares in non-consolidated financial statements.
The change in the accounting policy has been retroactively applied and the consolidated financial statements
for the year ended March 31, 2018 are restated to reflect the retroactive adjustments.
As a result, deferred tax liabilities decreased by ¥2,047 million and retained earnings increased by ¥2,047 million
in the consolidated balance sheet as of March 31, 2018 compared to the balances before the retroactive adjustments.
The effect on per share information is presented in Note 19. Amounts per Share.
(22) Change in presentation
The Company has applied the “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ
Statement No. 28, revised on February 16, 2018) (hereinafter “Partial Amendments to Tax Effect Accounting”)
effective from the beginning of the year ended March 31, 2019. As a result, deferred tax assets and deferred tax
liabilities are presented in “Investments and other assets” and “Non-current liabilities,” respectively and certainchanges have been made to Note 7. Income Taxes.
As a result of this change, deferred tax assets previously presented in “Current assets” decreased by ¥151
million and deferred tax assets in “Investments and other assets” increased by ¥148 million as of March 31,
2018. Deferred tax liabilities previously presented in “Other” in “Current liabilities” decreased by ¥2,011 million
and deferred tax liabilities in “Non-current liabilities” increased by ¥2,008 million as of March 31, 2018.
Total assets decreased by ¥2 million due to offsetting deferred tax assets and deferred tax liabilities of thesame taxable entity.
Certain information is added to Note 7. Income Taxes as described in notes 8 (excluding total amount of valuation allowance) and 9 of explanatory notes to the “Accounting Standard for Tax Effect Accounting” as prescribed in Paragraphs 3 through 5 of the Partial Amendments to Tax Effect Accounting. However, information forthe year ended March 31, 2018 is not presented in accordance with the transitional treatment prescribed in
Paragraph 7 of the Partial Amendments to Tax Effect Accounting.
(23) Accounting standards issued but not yet effective- “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, issued on March 30, 2018)- “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, issued
on March 30, 2018)(a) Overview
International Accounting Standards Board (“IASB”) and Financial Accounting Standards Board of the UnitedStates of America (“FASB”) jointly developed a comprehensive accounting standard for revenue recognition andissued “Revenue from Contracts with Customers” (IFRS No. 15 issued by IASB and Topic 606 issued by FASB)
in May 2014. Considering the situation that IFRS No. 15 has become applicable from the fiscal year beginningon and after January 1, 2018 and Topic 606 from the fiscal year beginning after December 15, 2017, ASBJ
developed a comprehensive accounting standard for revenue recognition and issued it together with implementation guidance.
ASBJ’s basic policy in developing the accounting standard for revenue recognition was to establish accounting standards as a starting point to adopt basic principles of IFRS No. 15 from the viewpoint of comparability offinancial statements which is one of benefits of maintaining consistency with IFRS No. 15, and to add alternative
treatments to the extent not to impair comparability in case where previous practice and others in Japan should
be considered.
(b) Date of application
The “Accounting Standard for Revenue Recognition,” etc. are applied effective from the beginning of the fiscal
year ending March 31, 2022.
(c) Effect of application
The effect of applying the “Accounting Standard for Revenue Recognition,” etc. on the consolidated financial
statements is currently under assessment.

3. Inventories
The amount of book value reduced due to a decline in profitability which is included in cost of sales for the years
ended March 31, 2019 and 2018 was ¥2,033 million ($18,481 thousand) and ¥164 million, respectively.

16

4. Securities and Investment Securities
Securities and investment securities held by the Group are all classified as available-for-sale securities.
(1) Information of available-for-sale securities as of March 31, 2019 and 2018 is as follows:
Millions of yen

Thousands of U.S. dollars

Acquisition
cost

Unrealized
gain (loss)

Carrying
value

Acquisition
cost

Unrealized
gain (loss)¥114,340¥22,552¥91,787$1,039,454$205,018$834,427  Corporate bonds

30

30

0

272

272

0

   Other debt securities

—

—

—

—

—

—

March 31, 2019
Carrying value
Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities:

Other
Subtotal
Securities whose carrying value does not exceed theiracquisition cost:
Equity securities

—

—

—

—

—

—

114,370

22,582

91,787

1,039,727

205,290

834,427

1,326

1,464

(137)

12,054

13,309(1,245)

—

—

—

—

—

—

Debt securities:  Corporate bonds   Other debt securities
Other
Subtotal
Total

—

—

—

—

—

—

2,300

2,300

—

20,90920,909

—

3,626

3,764

(137)

32,96334,218(1,245)¥117,997¥26,346¥91,650$1,072,700$239,509$833,181

Millions of yen
Acquisition
cost

Unrealized
gain (loss)¥143,933¥23,997¥119,936  Corporate bonds

—

—

—

   Other debt securities

—

—

—

—

—

—

143,933

23,997

119,936

18

18—  Corporate bonds

—

—

—

   Other debt securities

—

—

—

Other

1,700

1,700

—

Subtotal

1,718

1,718

—

¥145,652¥25,716¥119,936

March 31, 2018
Carrying value
Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Debt securities:

Other
Subtotal
Securities whose carrying value does not exceed theiracquisition cost:
Equity securities
Debt securities:

Total

Unlisted equity securities, carrying values of which as of March 31, 2019 and 2018 were ¥1,830 million ($16,636
thousand) and ¥2,334 million, respectively, are not included in the above tables as no market prices were available and it was extremely difficult to determine the fair value.

17(2)	Information on sales of securities classified as available-for-sale for the years ended March 31, 2019 and2018 is as follows:
Millions of yen

March 31, 2019

Thousands of U.S. dollars

Sales amount

Aggregate
gain

Aggregate
loss

Sales amount

Aggregate
gain

Aggregate
loss

¥—

¥—

¥—

$—

$—

$—

Available-for-sale securities:
Equity securities
Debt securities:  Corporate bonds

—

—

—

—

—

—

   Other debt securities

—

—

—

—

—

—

—

—

—

—

—

—

¥—

¥—

¥—

$—

$—

$—

Sales amount

Aggregate
gain

Aggregate
loss¥1,350¥1,350¥0  Corporate bonds

—

—

—

   Other debt securities

—

—

—

Other
Total

Millions of yen

March 31, 2018
Available-for-sale securities:
Equity securities
Debt securities:

Other
Total

—

—

—

¥1,350¥1,350¥0(3)	During the year ended March 31, 2018, the Group recorded losses on valuation of securities in the amountof ¥284 million (loss on valuation of available-for-sale securities whose fair value is extremely difficult to determine in the amount of ¥283 million and loss on valuation of available-for-sale securities with fair value in theamount of ¥1 million). However, for the ¥283 million of available-for-sale securities (unlisted equity securities)
whose fair value is extremely difficult to determine, allowance for overseas investment loss was recorded,
and there was no impact on profit and loss during the year ended March 31, 2018. During the year ended
March 31, 2019, the Group recorded losses on valuation of securities in the amount of ¥4 million ($36 thousand) (loss on valuation of available-for-sale securities whose fair value is extremely difficult to determine).
However, allowance for overseas investment loss was recorded, and there was no impact on profit and loss
during the year ended March 31, 2019. In addition, if the market value of the security declines by 50% ormore from its acquisition cost as of the end of the fiscal year, the Group recognizes the difference between
the market value and the acquisition cost as an impairment loss. If the decline ranges between about 30%
and 50%, the Group recognizes an impairment loss for the necessary amount considering its recoverability.
(4)	Investments in unconsolidated subsidiaries and associates at March 31, 2019 and 2018 were ¥20,297 million ($184,518 thousand) and ¥21,577 million, respectively.
(5)	As of March 31, 2019, investment securities of ¥503 million ($4,572 thousand) were pledged as collateral forloans payable of subsidiaries and associates.

5. Reduction Entry for Property, Plant and Equipment
The amount deducted from the acquisition costs of property, plant and equipment due to government subsidies
received, etc. as of March 31, 2019 and 2018 is as follows:

18

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Buildings and structures¥   73¥   31$   663

Machinery, equipment and vehicles

4,892

128

44,472

Construction in progress

—

5,000

—

Other

198

—

1,800

6. Long-term Loans Payable and Lease Obligations
Long-term loans payable at March 31, 2019 and 2018 consist of the following:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥134,115¥140,769$1,219,227

134,115140,769

1,219,227(6,399)(4,809)(58,172)¥127,715¥135,959$1,161,045

Loans from banks and others
UnsecuredLess —current portion

As of March 31, 2019, the weighted-average interest rate for the long-term loans payable balance was 3.29%.
The aggregate annual maturities of long-term loans payable subsequent to March 31, 2019 are as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars$  58,1722020¥  6,399

2021

6,920

62,9092022

12,947

117,700

2023

12,947

117,700

2024

12,947

117,700

2025 and thereafter

82,402

749,109¥134,562$1,223,290

Total

The Company and certain consolidated subsidiaries have entered into overdraft agreements and loan commitment
agreements amounting to ¥151,652 million ($1,378,654 thousand) with six banks and ¥134,061 million with sevenbanks at March 31, 2019 and 2018, respectively, to facilitate efficient procurement of working capital. The borrowings outstanding under the overdraft agreements and loan commitment agreements as of March 31, 2019 and2018 were ¥63,381 million ($576,190 thousand) and ¥69,497 million, respectively, and, therefore, the unused balance was ¥88,271 million ($802,463 thousand) and ¥64,563 million as of March 31, 2019 and 2018, respectively.
Lease obligations included in other in non-current liabilities at March 31, 2019 and 2018 consist of the following:

Lease obligations
Less—current portion

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥2,519¥2,877$22,900

(348)

(399)

(3,163)¥2,171¥2,477$19,736

The aggregate annual maturities of lease obligations subsequent to March 31, 2019 are as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars$ 3,1632020¥  348

2021

322

2,927

2022

241

2,190

2023

193

1,754

2024

180

1,636

2025 and thereafter

1,233

11,209Total¥2,519$22,900

19

7. Income Taxes
Income taxes imposed on the Company and its domestic consolidated subsidiaries comprise corporation,
inhabitants and enterprise taxes. The statutory tax rate applicable to the Company was approximately 28.0% for
the year ended March 31, 2019. Income taxes of six foreign consolidated subsidiaries (six in 2018) are based
principally on the tax rates applicable in their countries of incorporation.
The effective tax rates reflected in the consolidated statements of income for the years ended March 31, 2019and 2018 differ from the statutory tax rates for the following reasons:
2019

2018

Statutory tax rates

28.0 %—%

Effect of: Unrecognized tax effect accounting on net tax loss carried forward of
consolidated subsidiaries

25.4

—

Exploration expenses deducted for income tax purposes

(2.6)

—

Dividends income, etc. not taxable for income tax purposes

(3.3)

—

Utilization of tax loss carried forward(11.0)—

Expenses not deductible for income tax purposes

11.2

—

Consolidation adjustment for equity method(15.5)—

Change in valuation allowance

37.8

—

Foreign tax(20.3)—Tax rate difference with consolidated subsidiaries

(2.9)

—

Tax system differences for foreign consolidated subsidiaries

(2.5)

—

Consolidation adjustment

(9.0)

—

Tax credits(46.5)

Other, net

1.6—

Effective tax rates(9.6)%—%

Reconciliation of the effective tax rates reflected in the consolidated statements of income and the statutory
tax rates for the year ended March 31, 2018 is not disclosed because the Company recognized loss before
income taxes.

20

The significant components of deferred tax assets and liabilities at March 31, 2019 and 2018 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Deferred tax assets:¥    296¥    615$   2,690

Net tax loss carried forward (Note)

Allowance for overseas investment loss

11,563

10,562

105,118

Defined benefit liability

1,008

1,021

9,163

Depreciation

25,55927,307232,354

69

98

627

4,285

4,161

38,954

Payable for directors’ retirement benefit
Asset retirement obligations

894

947

8,127

Investment securities

Impairment loss on non-current assets

1,454

1,161

13,218

Tax credit carried forward

6,795

1,417

61,772

Other

8,832

10,82980,290Subtotal

60,76058,124552,363

Valuation allowance for net tax loss carried forward (Note)(5,184)—(47,127) Valuation allowance for total of deductible temporary differences(36,399)—(330,900)

Total valuation allowance(41,584)(39,215)(378,036)

Total deferred tax assets

19,176

18,908174,327

Deferred tax liabilities:
Reserve for exploration(5,752)(6,704)(52,290)

Valuation difference on available-for-sale securities(25,355)(33,275)(230,500)

Reserve for advanced depreciation of non-current assets

(230)

(271)

(2,090)

Undistributed earnings of foreign subsidiaries and associates(3,409)

(375)

(600)

Foreign tax—(2,659)—Reserve for special depreciation

(84)

(112)

(763)

Defined benefit asset

(369)

(406)

(3,354)(1,626)(1,883)(14,781)

Total deferred tax liabilities(33,793)(45,924)(307,209)

Net deferred tax liabilities¥(14,617)¥(27,015)$(132,881)

Other(Note) Net tax loss carried forward and breakdown of deferred tax assets thereof by expiration dates
Millions of yen

March 31, 2019

Expire in
one yearor less

Expire after
one year
Expire after
through five years throughfive years
ten years

Expire after
ten years

Total (*2)

¥11,563

Net tax loss carried forward (*1)

¥47

¥248

¥933

¥10,334

Valuation allowance

(47)

(248)

(809)

(4,079)(5,184)

Deferred tax assets

¥—

¥ —

¥124

¥ 6,254¥ 6,378

Thousands of U.S. dollars

March 31, 2019

Expire in
one yearor less

Expire after
one year
Expire after
through five years throughfive years
ten years

Expire after
ten years

Total (*2)$105,118

Net tax loss carried forward (*1)$427

$2,254$8,481$93,956

Valuation allowance(427)(2,254)(7,354)(37,092)(47,127)

Deferred tax assets

$ —

$   —

$1,127$56,854$ 57,981(*1) Net tax loss carried forward is calculated using the statutory tax rate.
(*2) Deferred tax assets of ¥6,378 million ($57,981 thousand) are recognized for net tax loss carried forward of ¥11,563 million($105,118 thousand) (calculated using statutory tax rate) for the year ended in March 31, 2019. Valuation allowance has notbeen recognized for the net tax loss carried forward which is expected to be recoverable judging from the estimated taxable
income in the future.

21

8. Retirement Benefit Plans(1) Overview of retirement benefit plans
The Company and its domestic consolidated subsidiaries have defined benefit plans, i.e., defined benefit corporate
pension plans and lump-sum payment plans. The plans cover substantially all employees, and the amounts to be
paid are determined by their respective basic rates of pay at retirement, length of service, and termination reasons.
Certain domestic consolidated subsidiaries participate in the Smaller Enterprise Retirement Allowance Mutual Aid
System and calculate defined benefit liability and retirement benefit expenses using the simplified method.
(2) Defined benefit plans(a) 	The reconciliation between retirement benefit obligations at the beginning of period and the end of period(excluding plans applying the simplified method shown in (c)) is as follows:
Millions of yen

Retirement benefit obligations at beginning of period

Thousands of
U.S. dollars

2019

2018

2019

¥16,226¥16,645$147,509

Service costs

949

985

8,627

Interest costs

141

145

1,281

Actuarial gains and losses arising during period
Retirement benefits paid
Retirement benefit obligations at end of period

(14)

(52)

(127)

(1,293)(1,497)(11,754)¥16,009¥16,226$145,536(b)	The reconciliation between plan assets at the beginning of period and the end of period (excluding plans
applying the simplified method shown in (c)) is as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Plan assets at beginning of period¥15,144¥15,008$137,672

Expected return on plan assets

151

150

1,372

Actuarial gains and losses arising during period

(27)

612

(245)

Contribution from employer

496

492

4,509

Retirement benefits paid

(903)

(1,119)(8,209)Plan assets at end of period¥14,861¥15,144$135,100(c)	The reconciliation between defined benefit liabilities of plans applying the simplified method at the beginningof period and the end of period is as follows:
Millions of yen

Defined benefit liability at beginning of period

2019

2018

2019

¥962

¥981

$8,745Retirement benefit expenses

229

223

2,081

Retirement benefits paid

(128)

(155)

(1,163)Contribution to plans
Defined benefit liability at end of period

22

Thousands of
U.S. dollars

(77)

(87)

(700)

¥986

¥962

$8,963

(d) 	The reconciliation between retirement benefit obligations and plan assets at the end of period and defined
benefit liability and defined benefit asset on the consolidated balance sheets is as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Funded retirement benefit obligations¥13,542¥13,693$123,109

Plan assets(14,861)(15,144)(135,100)(1,319)(1,451)(11,990)

Unfunded retirement benefit obligations

3,452

3,496

31,381

Net defined benefit liability (asset) on consolidated balance sheet

2,133

2,044

19,390Defined benefit liability

3,452

3,496

31,381

Defined benefit asset(1,319)(1,451)(11,990)¥ 2,133¥ 2,044$ 19,390

Millions of yen

Thousands of
U.S. dollars

Net defined benefit liability (asset) on consolidated balance sheet(e) The breakdown of retirement benefit expenses is as follows:

2019

2018

2019

Service costs¥  949¥  985$ 8,627

Interest costs

141

145

1,281

Expected return on plan assets

(151)

(150)

(1,372)

62

316

563

(103)

(103)

(936)

Amortization of actuarial gains and losses
Amortization of prior service costs
Retirement benefit expenses calculated by simplified method
Retirement benefit expenses on defined benefit plans

229

223

2,081

¥1,127¥1,417$10,245(f) Remeasurements of defined benefit plans recorded under other comprehensive income
The breakdown of items recorded in remeasurements of defined benefit plans, before tax, recorded under othercomprehensive income is as follows:
Millions of yen

Prior service costs
Actuarial gains and losses
Total

Thousands of
U.S. dollars

2019

2018

2019

¥(103)¥(103)$(936)

50

981

454

¥ (53)¥ 878$(481)(g) 	Remeasurements of defined benefit plans recorded under accumulated other comprehensive income
The breakdown of items recorded in remeasurements of defined benefit plans, before tax, recorded under accumulated other comprehensive income is as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Unrecognized prior service costs¥  185¥  289$ 1,681

Unrecognized actuarial gains and losses

1,361

1,311

12,372

Total¥1,547¥1,600$14,06323

(h) Plan assets(i) Breakdown of plan assets
The percentage of various assets to total plan assets by main category is as follows:
2019

2018

Debt securities

55%

54%

Equity securities

33%

34%

Cash and deposits

3%

  3%

Other

9%

  9%

Total

100%

100%

(ii) Determination of long-term expected rate of return
In order to determine the long-term expected rate of return on plan assets, the Group considers the current andexpected allocation of plan assets and the current and expected long-term rate of return from various assets
constituting plan assets.
(i) Actuarial assumptions
The main actuarial assumptions for the years ended March 31, 2019 and 2018 (weighted averages) are as follows:
2019

2018

Discount rate

0.9%

0.9%

Long-term expected rate of return

1.0%

1.0%

9. Shareholders’ Equity
The Companies Act of Japan provides that an amount equal to at least 10% of the amount to be disbursed as
distributions of capital surplus (other than capital reserve) and retained earnings (other than legal reserve) betransferred to the capital reserve and the legal reserve, respectively, until the total of capital reserve and the legal
reserve equals 25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders’ meeting or the Board of
Directors if certain conditions are met.

10. Leases
Operating leases
Future minimum lease payments under non-cancelable operating leases subsequent to March 31, 2019 are as follows:(Lessee)Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2020

¥108

$ 981

2021 and thereafter

255

2,318

Total

¥364

$3,309

11. Financial Instruments(1) Overview(a) Policy for measures relating to financial instruments
The Group’s policy is to obtain operating funds ensuring funding liquidity and controlling risks. The Group raises
necessary funds through funds on hand and bank loans. Domestic capital investment is financed by
Development Bank of Japan Inc. and other commercial banks, and overseas business investment is financed by
Japan Bank for International Cooperation and other commercial banks. The Group does not enter into derivativetransactions for trading or speculative purposes but uses them to hedge the undermentioned risks.

24

(b) Descriptions of financial instruments and related risk and risk management
Operating receivables such as notes and accounts receivable - trade are exposed to credit risk. The Group
works to prevent bad debts by monitoring credit conditions, etc. of customers on a timely basis in accordancewith internal credit management rules.
Securities and investment securities mainly consist of equity securities of partner companies, and for those
exposed to market fluctuation risk, fair value evaluation is reported to the directors on a regular basis in accordance with the internal regulations. Investment securities mainly consist of equity securities of INPEXCORPORATION recorded at ¥112,825 million ($1,025,681 thousand) and ¥140,671 million as of March 31,
2019 and 2018, the proportions of which to investment securities are 81.9% and 84.1%, respectively.
Loans receivable are mainly loans to our subsidiaries and associates for their operating capital and are
exposed to credit risk and foreign currency fluctuation risk. The Group manages the credit risk appropriately bymonitoring the collection status of the loans receivable. The Group reduces the foreign currency fluctuation risk
mainly by being financed for the loans receivable by bank loans denominated in the same foreign currency.
Notes and accounts payable – trade and accounts payable – other are due within one year. Accounts payable- trade and others relating to LNG are exposed to foreign currency fluctuation risk, and the risk is hedged mainly
by foreign exchange forward contracts.
Loans payable are mainly for domestic capital investment and overseas business investment. Floating interest
rate loans are exposed to interest rate and foreign currency fluctuation risks, and the Group reduces the risks byproviding the funds from the loans to our subsidiaries and associates as loans with the corresponding floating
rate and in the same currency.
In addition, foreign currencies to provide for overseas business investment are exposed to foreign currency
fluctuation risk. The Group reduces such risk by utilizing foreign exchange forward contracts.
The Group utilizes foreign exchange forward contracts as mentioned above. Implementation and management of derivative transactions are based on the internal regulations which prescribe the authorization and maximum upper limit of the transactions, and the department responsible for derivative transactions executes
transactions after obtaining approval from the person responsible for authorization. The Group enters into transactions only with creditworthy financial institutions to reduce the counterparty risk.
Liquidity risk associated with financing is managed mainly by preparing monthly financial plans.
(c) Supplemental information on fair value of financial instruments
As well as the values based on market prices, fair values of financial instruments include values which are reasonably calculated when market prices do not exist. As the calculation of those values includes variable factors,
those values may vary if different assumptions are applied.
Also, for the contract amount, etc. regarding derivative transactions described in Note 12. Derivative
Transactions, the contract amount itself does not indicate market risk related to derivative transactions.
(2) Fair value of financial instruments
Carrying value in the consolidated balance sheets, fair value and the difference as of March 31, 2019 and 2018
are as follows. The financial instruments whose fair value is extremely difficult to determine are not included below.
Millions of yen

March 31, 2019

Carrying value

Fair value

Difference

Cash and deposits¥117,468¥117,469¥ 1

Notes and accounts receivable—trade20,82520,825—

Short-term loans receivable

4,575

4,575

—

117,997

118,005

8

42

42

—

Total assets¥260,908¥260,918¥10¥—Securities and investment securities
Long-term loans receivable
Notes and accounts payable—trade¥  7,666¥  7,666

Long-term loans payable

127,715

127,7150Total liabilities¥135,382¥135,382¥ 0

Derivative transactions (*)¥     (3)¥     (3)¥—25Millions of yen

March 31, 2018

Carrying value

Fair value

Difference

Cash and deposits¥115,313¥115,314¥     1

Notes and accounts receivable—trade

26,07326,073—

Short-term loans receivable

6,449

6,449

—

145,652

156,858

11,205

4,547

4,547

—

Total assets¥298,036¥309,243¥11,206

Securities and investment securities
Long-term loans receivable
Notes and accounts payable—trade¥ 13,544¥ 13,544¥    —

Long-term loans payable

135,959

135,967(7)

Total liabilities¥149,504¥149,511¥    (7)

Derivative transactions (*)¥      4¥      4¥    —

Thousands of U.S. dollars

March 31, 2019

Carrying value

Fair value

Difference

Cash and deposits$1,067,890$1,067,900$ 9Notes and accounts receivable—trade

189,318

189,318—

Short-term loans receivable

41,59041,590—1,072,700

1,072,772

72

Securities and investment securities
Long-term loans receivable
Total assets
Notes and accounts payable—trade

381

381

—

$2,371,890$2,371,981$90$—$69,690$69,690

Long-term loans payable

1,161,045

1,161,0450

Total liabilities$1,230,745$1,230,745$ 0Derivative transactions (*)$       (27)$       (27)$—(*) Net assets and liabilities arising from derivative transactions are presented on a net basis, and the liability position is shown in parenthesis.
Note 1.

Calculation method for fair value of financial instruments and information on securities and derivative transactions

Assets• Cash and deposits	As for deposits without maturities, the fair value is based on the carrying value since the fair value is considered to be the equivalent of the carrying value. As for deposits with maturities, the present value is calculated by discounting future cash flows foreach segment based on the term, using a deposit interest rate which is assumed to be applied to a new deposit.
• Notes and accounts receivable—trade
The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
• Short-term loans receivable
The carrying value is deemed as the fair value since these are scheduled to be settled in a short period of time.
• Securities and investment securities
	The fair value of equity securities is based on the price on stock exchanges, and that of debt securities is based on the price onbond markets or provided by counterparty financial institutions. The fair value of investment trusts is based on the constantvalue or price provided by counterparty financial institutions. Please refer to Note 4. Securities and Investment Securities, formatters relating to securities by holding purpose.
• Long-term loans receivable
	The carrying value is deemed as the fair value for long-term loans receivable with floating interest rates since these loans reflect
the market interest rates in a short period of time and the carrying value approximates the fair value unless the credit condition
has changed dramatically since the loans were executed.
Liabilities• Notes and accounts payable—trade
The carrying value is deemed as the fair value since they are scheduled to be settled in a short period of time.
• Long-term loans payable	With regard to floating rate loans, the carrying value is deemed as the fair value since these loans reflect the market interest
rates in a short period of time and the credit condition of the Company has not changed dramatically since the loans were executed. For fixed rate loans, the present value is calculated by discounting the total amount of principal and interest for each segment based on the term, using a loan interest rate which is assumed to be applied to a similar loan.

26

Derivative transactions
Please refer to Note 12. Derivative Transactions.
Note 2.

Financial instruments whose fair value is extremely difficult to determine

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥22,127¥23,889$201,154

Carrying value:
Unlisted equity securities

The above securities are not included in securities and investment securities in the tables above, as there were no market prices
available and it is extremely difficult to determine the fair value.

(3)

Redemption schedule for monetary claims and securities with maturities
Millions of yen

March 31, 2019

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits¥117,467

¥ —

¥—

¥—

Notes and accounts receivable—trade20,825———

Short-term loans receivable

4,575

—

—

—

  Equity securities

—

—

—

—
—

Securities and investment securities:
Available-for-sale securities with maturities:   Debt securities (Corporate bonds)

30

—

—

  Other

—

—

—

—

Long-term loans receivable

—

38

3

—

Total

¥142,897

¥38

¥3

¥—

March 31, 2018

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits

Millions of yen¥115,312

¥   —

¥—

¥—

Notes and accounts receivable—trade

26,073———

Short-term loans receivable

6,449

—

—

—

Securities and investment securities:
Available-for-sale securities with maturities:  Equity securities

500

—

—

—

   Debt securities (Corporate bonds)

—

—

—

—

  Other

—

—

—

—

Long-term loans receivable

—

4,542

5

—

Total

¥148,335¥4,542¥5¥—

March 31, 2019

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Cash and deposits

Thousands of U.S. dollars$1,067,881

$ —

$—

$—

Notes and accounts receivable—trade

189,318———

Short-term loans receivable

41,590————

Securities and investment securities:
Available-for-sale securities with maturities:  Equity securities

—

—

—

   Debt securities (Corporate bonds)

272

—

—

—

  Other

—

—

—

—

Long-term loans receivable

—

345

27

—

$1,299,063

$345

$27

$—

Total

27

(4)

Scheduled maturities of long-term loans payable
Millions of yen
Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

Due after
ten years

Long-term loans payable¥—¥45,762¥63,687¥18,715

Total¥—¥45,762¥63,687¥18,715

Due in one
year or lessDue after one year
through five years

Due after five years
through ten years

March 31, 2019

Thousands of U.S. dollars

March 31, 2019

Due after
ten years

Long-term loans payable$—$416,018$578,972$170,136

Total

$—

$416,018$578,972$170,136

12. Derivative Transactions
The Group utilizes derivative transactions for the purpose of hedging its risks to adverse fluctuations in foreign
currency exchange rates but does not enter into such transactions for trading or speculative purposes.
The Group is exposed to credit risk in the event of nonperformance by the counterparties to the derivativetransactions, but any such risk would not be material because the Group enters into transactions only with creditworthy financial institutions.
(1)

Derivative transactions for which hedge accounting is not applied	  Currency related
	  No currency related derivative contract was outstanding as of March 31, 2019 and 2018.
(2)

Derivative transactions for which hedge accounting is applied	  Currency related
Millions of yen

March 31, 2019
Deferral hedge accounting Foreign exchange
forward contracts  U.S. dollars (Buying)- Accounts payable—trade  U.S. dollars (Buying)- Accounts payable—other  U.S. dollars (Selling)- Accounts receivable—trade
Allocation method Foreign exchange
forward contracts  British pound (Buying)- Accounts payable—other
Total

28

Thousands of U.S. dollars

Contract
amount, etc.

Due after
one year

Fair value(*)

Contract
amount, etc.

Due after
one year

Fair value(*)¥3,303¥—¥(34)$30,027$—$(309)

20

—

0

181

—

0

2,197

—

33

19,972

—

300

1

—

(0)

9

—

(0)

¥5,523¥—¥ (1)$50,209$—$  (9)

Millions of yen

March 31, 2018

Contract
amount, etc.

Due after
one year

Fair value(*)¥1,903

¥—

¥5

10

—

(0)

14

—

(0)

Deferral hedge accounting Foreign exchange
forward contracts  U.S. dollars (Buying)- Accounts payable—trade  U.S. dollars (Buying)- Accounts payable—other  British pound (Buying)- Accounts payable—other
Allocation method Foreign exchange
forward contracts  U.S. dollars (Buying)- Accounts payable—other
Total

14

—

(0)

¥1,942¥—¥3(*) Fair value is measured based on quotes, etc. provided by financial institutions, etc.

13. Asset Retirement Obligations(1) Asset retirement obligations recognized in the consolidated balance sheets
Asset retirement obligations recognized by the Group are determined based on the estimated costs of decommissioning oil and natural gas wells and production facilities in accordance with laws, land lease contracts, etc.
for wells and production facilities in Japan and overseas, and the appropriate discount rates.
The Group estimates the periods in which the obligations are paid out to be approximately 2 to 44 years (2 to35 years in 2018) from acquisition of assets. This estimate is reasonably made based on the plans for decommissioning wells and facilities or the producing lives of fields that the Group reasonably estimates by field if nosuch plan exists. Discount rates applied are (0.217) to 2.287% ((0.217) to 2.287% in 2018) for domestic obligations and 2.09 to 7% (2.26 to 7% in 2018) for overseas.
Although the future costs to be incurred upon decommissioning and timing when the obligations are incurred
are based on the Group’s best estimate, uncertainty exists regarding both the amount and timing of incurring
these costs.
Changes in the balance of asset retirement obligations for the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

Balance at beginning of period

Thousands of
U.S. dollars

2019

2018

2019

¥18,887¥19,160$171,700

Increase due to acquisition of new assets

55

1

500

Accretion

361

485

3,281

Settlement

(252)

(753)

(2,290)Foreign currency translation adjustment

(410)

217

(3,727)

Other changes, net (*)(3,047)(223)(27,700)

Balance at end of period¥15,593¥18,887$141,754(*) Other changes, net, are mainly related to the reversal of asset retirement obligations as a result of completion of transfer of oil and natural gas wells and production facilities in the year ended March 31, 2019.

(2) Asset retirement obligations other than those recognized in the consolidated balance sheets
The Group has obligations to restore sites to their original condition in accordance with laws, land lease contracts,
etc. regarding oil and natural gas production facilities. However, in the natural gas supply business, which is theGroup’s primary business operation, maintaining and ensuring the stable supply of natural gas is of high public
interest; therefore, even after completion of production activities, the Group plans to continue to use some of theassets held for the purpose of producing and selling oil and gas on a permanent basis in order to fulfill the
responsibilities as a supplier for users of natural gas by holistically integrating these assets. Thus, the Group does
not recognize the relevant asset retirement obligations since it is impossible to determine the timing of decommissioning and estimate asset retirement obligations on a reasonable basis as of March 31, 2019 and 2018.
29

The following table summarizes the details of balance of asset retirement obligations for the year ended March
31, 2019.
Millions of yen

March 31, 2019
Under provisions of Petroleum and Inflammable Natural
Gas Resources Development Law
Under provisions of Environmental Protection and Enhancement Act, etc. enforced in Canada
Under provisions of Act on Prevention of Marine Pollution
and Maritime Disaster
Under provisions of land lease contracts and other
Total

At beginningof period

Increase

Decrease

At end ofperiod¥ 8,399¥123¥    2¥ 8,520

5,860

286

3,947

2,198

2,245

49

—

2,294

2,382

444

247

2,579

¥18,887¥902¥4,197¥15,593

Thousands of U.S. dollars

March 31, 2019
Under provisions of Petroleum and Inflammable Natural
Gas Resources Development Law
Under provisions of Environmental Protection and Enhancement Act, etc. enforced in Canada
Under provisions of Act on Prevention of Marine Pollution
and Maritime Disaster
Under provisions of land lease contracts and other
Total

At beginningof period

Increase

Decrease

At end ofperiod$ 76,354$1,118$    18$ 77,454

53,2722,600

35,881

19,981

20,409445–

20,854

21,654

4,036

2,245

23,445$171,700$8,200$38,154$141,754

14. Contingent Liabilities
At March 31, 2019 and 2018, the Group had the following contingent liabilities:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥ 9,090¥ 9,580$ 82,636

Guarantee obligation for loans payable fromfinancial institutions, etc.:
INPEX North Caspian Sea, Ltd.
Employees (Housing loans)

97

136

881

Kumamoto Mirai LNG Co., Ltd.

51

57

463

Greenland Petroleum Exploration Co., Ltd.

16

Sakhalin Oil and Gas Development Co., Ltd.

—

4,871

—

2,382

3,429

21,654¥11,638¥18,076$105,800

145

Guarantee obligation relating to production facilities:
Kangean Energy Indonesia Ltd.
Total

30

15. Information Related to Consolidated Statement of Changes in Equity(1)

Dividends paid to shareholders

2019
Resolution
Date of approval approved byJune 28,
2018
November 9,
2018Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

Amount(Millions of yen)Amount(Thousandsof U.S. dollars)

Amountper share(Yen)

Amount per
share(U.S. dollars)¥571$5,190¥10$0.09$5,190¥10$0.09

Board ofDirectors

Commonstock¥571

Resolution
Date of approval approved byType ofsharesAmount(Millions of yen)Amount per
share
(Yen)

¥571

¥10

¥571

¥10

Shareholders’
cut-off date

Effective date

March 31,2018

June 29,2018

September 30, December 13,
2018
2018

2018

June 28,
2017
November 10,
2017

AnnualGeneral Common
Meeting ofstock
Shareholders
Board ofDirectors

Commonstock

Shareholders’
cut-off date

Effective date

March 31,2017

June 29,2017

September 30, December 13,
2017
2017

(2)	Dividends with a shareholders’ cut-off date during the fiscal year but an effective date subsequent
to the fiscal year
2019

Resolution
Date of approval approved byJune 27,2019Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

AmountAmount per
Amount(Thousands ofshare(Millions of yen) U.S. dollars) Paid from(Yen)

¥1,714$15,581

Retainedearnings¥30

Amount per
share
(U.S.
Shareholders’dollars)
cut-off date Effective date

$0.27

March 31,2019

June 29,20192018
Resolution
Date of approval approved byJune 28,2018Type ofsharesAnnualGeneral Common
Meeting ofstock
Shareholders

Amount(Millions of yen)  ¥571

Amount per
share
Paid from(Yen)

Shareholders’
cut-off date Effective date

Retainedearnings

March 31,
2018

¥10

June 29,201831

16. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2019 and2018 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥10,789¥11,073$98,081
5,790

Selling, general and administrative expenses:
Personnel expenses
Significant components of personnel expenses:
Retirement benefit expenses

637

797

Provision for directors’ bonuses

22

17

200

Provision for directors’ retirement benefits

24

21

218

Freightage expenses

7,517

4,121

68,336

Depreciation

4,705

4,396

42,772

Research and development expenses included in general and administrative expenses for the years ended
March 31, 2019 and 2018 were ¥173 million ($1,572 thousand) and ¥192 million, respectively.

17. Impairment Loss
For the purpose of recognition and measurement of impairment loss, business-use assets of the Group such as
oil and gas fields are principally grouped into minimum cash generating units. However, idle assets are individually considered.
For the year ended March 31, 2018, the Group recorded an impairment loss on the following asset groups:
Millions of yen
2018

Business-use assets related to shale gas development and production project:
British Columbia, Canada   Buildings and structures¥ 4,351  Wells

12,141   Mineral resource (Property, plant and equipment - Other)

50,987

Total¥67,480

For the business-use assets related to shale gas development and production project (upper stream business),the carrying value of the business-use assets was reduced to the recoverable amount as a result of the reexamination of the development plan as an upper stream business alone, separately from Pacific NorthWest
LNG project (“PNW business”) in which LNG production was considered using the shale gas to be produced
from this project as a result of decision made to abandon commercialization of PNW business, and the reduction was recorded as impairment loss in other expenses.
The recoverable amount of the asset group was measured at value in use and calculated by discounting
future cash flows at 8.9%.

32

18. Information on Related Party Transactions(1) Related party transactions
Principal transactions between the Company and Sakhalin Oil and Gas Development Co., Ltd., the associateaccounted for using the equity method, for the years ended March 31, 2019 and 2018 and related balances are
as follows.

Transactions:Purchase of crude oil (*1)

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥62,550¥40,861$568,636

Millions of yen

Thousands of
U.S. dollars

Balances:

2019

2018

2019

Accounts payable—trade¥—¥5,050$—Principal transactions between the Company and Fukushima Gas Power Co., Ltd. (FGP), the associateaccounted for using the equity method, for the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

Transactions:
Pledge of collateral (*2)

Thousands of
U.S. dollars

2019

2018

2019

¥31,102¥16,916$282,745(*1) Prices for purchase of crude oil from Sakhalin Oil and Gas Development Co., Ltd. are determined based on the market price.
(*2) The Company provides FGP with certificates of FGP shares held by the Company as collateral for its borrowings from financial institutions. The amount of the transactions indicates the balance of borrowings corresponding to assets pledged as collateral as of theyear-end.

(2) Note to significant associates
For the years ended March 31, 2019 and 2018, the summarized consolidated financial information of all associates accounted for using the equity method (11 companies in 2019 and 12 in 2018), including a significant
associate, Energi Mega Pratama Inc. is as follows:
Millions of yen

Total current assets
Total non-current assets

Thousands of
U.S. dollars

2019

2018

2019

¥110,341¥164,968$1,003,100

54,701

86,374497,281

Total current liabilities

77,137

112,673701,245

Total non-current liabilities

27,951

95,196254,100

Total net assets

59,95343,472545,027

Net sales

285,533

228,955

2,595,754

Profit (loss) before income taxes

132,092(2,001)

1,200,836

Profit (loss)

82,707(28,691)

751,88133

19. Amounts per Share
Basic earnings (loss) per share is computed based on the profit (loss) attributable to common shareholders ofparent and the average number of shares of common stock outstanding during the period, which is 57,152
thousand shares during the years ended March 31, 2019 and 2018.
Net assets per share is computed based on net assets available to common shareholders and the number ofshares of common stock outstanding at the year-end.
Yen

U.S. dollars

2019

2018

2019

Basic earnings (loss) per share¥  258.44¥ (541.70)$ 2.34

Net assets per share

7,287.32

7,438.23

66.24

Diluted earnings (loss) per share is not disclosed due to the absence of dilutive shares for the years ended
March 31, 2019 and 2018.
As stated in Note 2. Significant Accounting Policies (21) Application of the Implementation Guidance on Tax
Effect Accounting, the change in the accounting policy has been retroactively applied and the consolidated
financial statements for the year ended March 31, 2018 are restated to reflect the retroactive adjustments. As aresult, net assets per share as of March 31, 2018 and basic loss per share for the year ended March 31, 2018
increased by ¥35.82 and ¥(0.01), respectively.

20. Cash Flow Information
Reconciliations between cash and cash equivalents in the consolidated statements of cash flows for the years
ended March 31, 2019 and 2018 and cash and deposits in the consolidated balance sheets as of March 31,
2019 and 2018 are as follows:
Millions of yen

Cash and deposits
Time deposits with maturities in excess of three months

Thousands of
U.S. dollars

2019

2018

2019

¥117,468¥115,313$1,067,890(19,134)(17,120)(173,945)

Short-term investments with maturities of three months or less, etc.:
Money management fund and otherCash and cash equivalents

34

2,300

1,700

20,909¥100,633¥ 99,892$  914,845

21. Other Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income
for the years ended March 31, 2019 and 2018 are as follows:
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥(28,286)¥23,321$(257,145)

Valuation difference on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments  Pre-tax amount   Income tax benefit (expense)

—

—

—

(28,286)

23,321(257,145)

7,919(6,530)71,990(20,366)

16,791(185,145)

Gains (losses) arising during the year

(8)

162

(72)

Reclassification adjustments

—

81

—

(8)

244

(72)

   Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:  Pre-tax amount   Income tax benefit (expense)

2

(1)

18

   Deferred gains or losses on hedges

(5)

242

(45)

(1,705)32(15,500)

Foreign currency translation adjustment:
Gains (losses) arising during the year
Remeasurements of defined benefit plans:
Gains (losses) arising during the year

(12)

665

(109)

Reclassification adjustments

(40)

212

(363)

(53)

878

(481)

   Income tax benefit (expense)

14

(245)

127

   Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted forusing equity method:

(38)

632

(345)

(16)

11

(145)

—

(838)

—

(16)

(826)

(145)

  Pre-tax amount

Gains (losses) arising during the year
Reclassification adjustments  Share of other comprehensive income ofentities accounted for using equity method
Changes in equity interest:
Gains (losses) arising during the year
Total other comprehensive income

—

2,040

—

¥(22,132)¥18,912$(201,200)35

22. Segment Information(1) Overview of reporting segments
Reporting segments are defined as components of the Group for which separate financial information is available and whose operating results are regularly evaluated by the Board of Directors to make decisions about how
resources are allocated among the Group and assess its performance.
The Group is involved primarily in oil and natural gas related business. In addition to our domestic operations,
the Group develops its overseas operations through project companies established at each operational site.
Therefore, the Group consists of segments based on the operational site, and identifies “Japan,” “North
America,” “Europe” and “Middle East” as its reporting segments.
“Japan” is engaged in exploration, development, production, purchasing, sales and transportation of crude oiland natural gas, manufacture, purchasing, sales and transportation of petroleum products, and well drilling contracts, etc. in Japan.
“North America” is engaged in exploration, development, production, purchasing, sales, etc. of crude oil, natural gas and bitumen (extra-heavy oil extracted from oil sands) in North America.
“Europe” is engaged in exploration of crude oil and natural gas in Europe.
“Middle East” is engaged in development, production, sales, etc. of crude oil and natural gas in the Middle East.
(2)	Basis of measurement for the amounts of net sales, profit (loss), assets and other items for eachreporting segment
The accounting policies of each reporting segment are basically consistent with those disclosed in Note 2.
Significant Accounting Policies. Segment profit is measured on a basis of operating profit. Intersegment sales
and transfers are accounted for based on actual market prices.
(3)

Information about net sales, profit (loss), assets and other items
Millions of yen
Reporting segment

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)

Japan

North
America

EuropeMiddle
East

Total

Other
(Note 1)

Total

Sales to third parties Intersegment sales
and transfers¥232,089¥34,270¥ —¥1,620¥267,980¥    —¥267,980¥     —

18——

13,195

13,213—

13,213(13,213)—

Total sales

232,10734,270—14,816281,194—

281,194(13,213)

267,980

Segment profit (loss)

19,308(9,751)

(157)

955

10,355(7)

10,348(8,034)2,313

Segment assets

106,848

199,522

4,230

24,736335,337—

335,337

319,950

655,288

12,095

10,3480293

22,738—22,738557

23,296

165

(10)

—

2

157

12,392

12,550—12,550

347

—

—

286

634

22,784

23,419—23,419

8,958

1,619

129

—

10,707—

10,707

195

10,903

March 31, 2019
Net sales:

Other items: Depreciation andamortization Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets

36¥267,980

Millions of yen
Reporting segment

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)

Japan

North
America

EuropeMiddle
East

Total

Other
(Note 1)

Total

Sales to third parties Intersegment sales
and transfers¥219,566¥9,250¥    —¥ 1,812¥230,629¥     —

¥230,629¥      —

0——30,37630,376—30,376(30,376)—

Total sales

219,566

9,250—

32,189261,006—

261,006(30,376)

230,629

March 31, 2018
Net sales:¥230,629

Segment profit (loss)

22,497(6,615)

(74)

1,366

17,173(9)

17,163(8,399)8,764

Segment assets

109,943

216,914

4,437

11,040342,334—

342,334

357,204

699,539

9,362

13,2852

293

22,943—

22,943426

23,370(7,783)(3,330)—(5)(11,118)

8,505(2,613)11(2,601)

771

11

—

286

1,069

24,39925,468—25,46830,772

11,08180—

41,934—

41,934(132)

41,802Other items: Depreciation andamortization (Note 4) Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets

Millions of yen
Reporting segment

MiddleEast

Other(Note 1)

Japan

North
America

EuropeSales to third parties Intersegment sales
and transfers$2,109,900$311,545

$   —

163

—

—

119,954

120,118—

120,118

Total sales

2,110,063

311,545—

134,690 2,556,309—

2,556,309

Segment profit (loss)

175,527(88,645)(1,427)

Segment assets

971,345 1,813,836

38,454

March 31, 2019

Total

Total

Amounts on
Adjustments consolidated
andfinancialeliminations
statements(Note 2)
(Note 3)

Net sales:

Other items: Depreciation andamortization Share of profit (loss) of entities accounted forusing equity method Investments in entities accounted for using
the equity method Increase in property, plant and equipment
and intangible assets$14,727 $2,436,181

8,681$     — $2,436,181 $       — $2,436,181(120,118)—(120,118) 2,436,181

94,136(63)

94,072(73,036)

21,027

224,872 3,048,518—

3,048,518

2,908,636

5,957,163

109,954

94,0720

2,663

206,709—206,709

5,063

211,781

1,500

(90)

—

18

1,427

112,654

114,090—

114,090

3,154

—

—

2,600

5,763

207,127

212,900—

212,900

81,436

14,718

1,172—

97,336—

97,336

1,772

99,118Note 1: “Other” which does not belong to reporting segments includes the Southeast Asia, etc.

37

Note 2: “Adjustments and eliminations” includes the following:(a) Segment profit (loss)

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Intersegment elimination¥   15¥     3$   136

Corporate expense (*)(8,050)(8,402)(73,181)

Total(8,034)¥(8,399)(73,036)(*) “Corporate expense” represents mainly general and administrative expenses and experiment and research expense that are notallocated to reporting segments.
(b) Segment assets

Millions of yen

Intersegment elimination
Corporate assets (*1)

Thousands of
U.S. dollars

2019

2018

2019

¥   (616)¥   (631)$   (5,600)

3,387

3,619

30,790

Other assets (*2)

317,179

354,216

2,883,445

Total¥319,950¥357,204$2,908,636(*1) “Corporate assets” represents mainly the assets administrated by the head office that are not allocated to reporting segments.
(*2) Assets allocated to reporting segments consist of property, plant and equipment, intangible assets and recoverable accounts
included in investments and other assets. “Other assets” consists of property, plant and equipment, intangible assets andassets other than recoverable accounts, which are not allocated to reporting segments.
Note 3: Segment profit (loss) is reconciled to operating profit in the consolidated statements of income.
Note 4: Depreciation and amortization in “Other items” of North America segment for the year ended March 31, 2018 includes depreciation of inactive non-current assets of ¥7,797 million, which is recorded in other income (expenses).

(4) Related information(a) Information by product and service
Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥ 94,579¥ 89,173$  859,809

Sales to third parties:
Crude oil
Natural gas

67,82060,431

616,545

LNG

22,913

21,935

208,300
273,781

Diluted bitumen

30,116

4,512

Contract services

7,342

8,484

66,745

Oil products/merchandise

39,82040,162362,000

Other
Total

5,387

5,930

48,972¥267,980¥230,629$2,436,181

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

¥156,043¥147,303$1,418,572(b) Information by geographical area

Net sales:Japan
Canada33,5558,762

305,045

Russia62,61240,905569,200

Iraq

14,82932,226

134,809

Other

938

1,431

8,527

¥267,980¥230,629$2,436,181

Total

Note: Net sales are accounted for by country or geographical area on the basis of the location in which products have been delivered orservices have been rendered.

38

Millions of yen

Thousands of
U.S. dollars

2019

2018

2019

Japan

¥108,657¥111,673$  987,790

Canada194,263

211,236

1,766,027

Property, plant and equipment:

Other
Total

6,193

6,579

56,300¥309,114¥329,490$2,810,127(c) Information by major customer
Information by major customer is omitted since there were no sales to single external customer accounting for
10% or more of net sales in the consolidated statements of income for the years ended March 31, 2019 and 2018.
(5)

Information about impairment loss on non-current assets by reporting segment
Millions of yen
Reporting segment

March 31, 2019

Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

¥30

¥—

¥—

¥—

¥—

¥—

¥30
Millions of yen

Reporting segment

March 31, 2018

Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

¥241 ¥67,480

¥—

¥—

¥—

¥—

¥67,721

Thousands of U.S. dollars
Reporting segment

March 31, 2019

Japan

North
America

EuropeMiddleEast

Other

Corporate/eliminations

Total

Impairment loss

$272

$—

$—

$—

$—

$—

$272

39

40

Japan Petroleum Exploration Co., Ltd.

Inquiries:
Japan Petroleum Exploration Co., Ltd.
Investor Relations Group,Media and Investor Relations Dept.
TEL: +81-3-6268-7111
FAX: +81-3-6268- 7302