Note: The following report is an English translation of the Japanese-language original.

Presentation of Consolidated Financial Results
for the Fiscal Year Ended March 31, 2009

May 15, 2009

Japan Petroleum Exploration Co., Ltd.

1

Cautionary Statement
Any information contained herein with respect to JAPEX’s plans, estimates, strategies and otherstatements that are not historical facts are forward-looking statements about the future performance of
JAPEX. Readers should be aware that actual results and events may differ substantially from theseprojections due to various factors.
The provision of this document should not be construed as a solicitation for investment.
Copyright: All information contained herein is protected by copyright, and may not be copied or reproduced without the prior consent of JAPEX.

Note: The following abbreviations are used within this document:
1H = First half
2H = Second half(a) = Actual result(e) = Estimate
Any inquiries about the information contained herein or other Investor Relations questions should be directed to:Investor Relations, Media & Investor Relations Department, Japan Petroleum Exploration Co., Ltd.
TEL: +81-3-6268-7111

2

Contents
1. Business Overview and Revision of Mid-Term Business Plan
President Osamu Watanabe
2. Consolidated Financial Results for the Fiscal Year Ended
March 31, 2009
Senior Managing Director Hiroshi Sato
3. Outlook for the Fiscal Year Ending March 31, 2010
Senior Managing Director Hiroshi Sato

3

Business Overview

Business Overview and Revision of
Mid-Term Business Plan
President

Osamu Watanabe

4Business Overview

Trends in crude oil prices and foreign exchange rates

125.0
122.5
120.0
117.5
115.0
112.5
110.0
107.5
105.0
102.5
100.0
97.5
95.0
92.5
90.0

Exchange Rate JPY/USD(right axis)

USD-denominated price
USD/BBL (left axis)

52009-01
2009-04

2008-072008-10

2008-01
2008-04

2007-072007-10

2007-01
2007-04

2006-04
2006-072006-10

2005-10
2006-01

2004-04
2004-072004-10
2005-01
2005-04
2005-072003-10
2004-01

JPY-denominated priceThousand JPY/KL (left axis)[Exchange Rate] JPY/USD

140
130
120
110
100
90
80
70
60
50
40
30
20
10
0
2003-04
2003-07[Price] USD-denominated
USD/BBL
JPY-denominated Thousand
JPY/KL¾ CIF price for early to mid April 2009 (Monthly Bulletin of Statistics)$46.90/BBL JPY/USD 98.21, JPY-denominated price JPY28,970/KL

Business Overview

Actual results for the fiscal year ended March 31, 2009and outlook for the fiscal year ending March 31, 2010(100 million yen)
450

2,021

2,000

400

1,750

350

1,500

Net sales

2,076

1,250

272
200

300

223

1,293

1,000

250
200

125

750
500

150

59

250

100
50

47

0
FY08 (a)FY09 (a)Ordinary income・Net income

2,250

0

Net sales (leftaxis)
Ordinary income(right axis)
Net income (right
axis)

FY08
(a)

FY09
(a)

FY10
(e)

YoY
changeNet sales
Operating income
Ordinary income

2,076

2,021

1,293

(728)

196

200

9

(191)

272

223

59

(164)

Net income

200

125

47

(78)

76.21
114.6689.71
102.56

40.00
90.00

(49.71)(12.56)[100 million yen]

[JCC price & exchange rate assumptions]

CIF crude oil price (USD/bbl)
Exchange rate (JPY/USD)

FY10(e)Actual results for the fiscal year ended March 31, 2009


Outlook for the fiscal year ending March 31, 2010Operating income ¥20.0 billion (up ¥0.4 billion YoY)
YoY)
Virtually unchanged from the previous year, with increase ingross profit (higher bitumen prices, etc.) offset by rises in
exploration expenses and SG&A expenses.



Operating income ¥0.9 billion (down ¥19.1 billion YoY)
YoY)
Declines in sales and profits, largely attributable to decline
in crude oil prices and bitumen selling prices as well as a
reduction in the volume of crude oil sales overseas.

Net income ¥12.5 billion (down ¥7.5 billion YoY)
YoY)
Decreased income due to deterioration of nonnon-operating income(expenses), including the posting of a loss on retirement of
noncurrent assets and extraordinary income (losses) and an
impairment loss.

6

Net income ¥4.7 billion (down ¥7.8 billion YoY)
YoY)
Smaller decline in operating income,reflecting improvement in extraordinary
income (losses).
(losses).

Mid-Term Business Plan

Partial revision of mid-term business plan (announced May 2008)
I. Main points in revision of mid-term business plan
II. Basic strategies for JAPEX expansion
1. Adherence to basic policies
2. Target reserves

III. Revision of preconditions
1. Crude oil price & exchange rate assumptions
2. Target natural gas sales volume

IV. Initiatives to improve profits
1. Rationalization of natural gas selling price
2. Postponement of domestic exploration investment

V. Specific changes to income and expenditure targets
1. Consolidated income, operating cash flows
2. Allocations of operating cash flows(For reference) Estimated capital expenditure and depreciation and amortization

VI. Summary

Details of the JAPEX Group Mid-Term Business Plan (covering the period from the fiscal year ending March 31, 2009 to thefiscal year ending March 31, 2013) announced on May 21, 2008 can be accessed on the JAPEX website at the following URL :http://www.japex.co.jp/english/pdf/2008/20080521en_midtermplan_japex.pdf “JAPEX Group Mid-Term Business Plan “ (press
release)7

Mid-Term Business Plan

I. Main points in revision of mid-term business planIn light of the significant change in the business environment such as the rapid deterioration of
the global economic situation sparked by the U.S. sub-prime mortgage crisis and the sharp
decline in crude oil prices, the Medium-Term Business Plan (for the period from the fiscal year
ending March 31, 2009 to the fiscal year ending March 31, 2013) announced in May 2008 has
been partially revised.

Basic strategies for JAPEX expansion○ Increasing reserves through exploration and development○ Strengthening efficient, integrated natural gas operation system○ Technological R&D activities and initiatives to help solve environmental problems

SuddenSuddenchangechangeininbusinessbusinessenvironment
environment－Rapid deterioration of global－Rapid deterioration of global
economic situation
economic situation－Sharp decline in crude oil prices－Sharp decline in crude oil prices

・・Revision
Revisionofofcrude
crudeoiloilprice,
price,exchange
exchangerate
rateandandnaturalgas
sales
natural gas sales
volumevolumeassumptions
assumptions

・Initiatives
・Initiativestotoimprove
improve
profits
profits
Revision of income and expendituretargets announced last year8Mid-Term Business Plan

II. Basic strategies for JAPEX expansion
1. Adherence to basic policies

 Continued adherence to basic policies for reinforcing the business base of JAPEX

1.1.Increasing
Increasingreserves
reservesthroughthrough
exploration
explorationand
anddevelopment
development
・Sustain and increase reserves,which decrease due to production
and sales (see next slide).
・Bolster long-term, secure oil andnatural gas supply system.

3.3.TechnologicalTechnologicalR&D
R&D
activities
andinitiatives
activities and initiativestoto
help
helpsolve
solveenvironmental
environmental
problems
problems

2.2.Strengthening
Strengtheningefficient,
efficient,integrated
naturalintegrated naturalgas
gas
operationsystemoperation system
・Establish and reinforce efficient,integrated natural gas operation system
integrating upstream, midstream anddownstream.

・Accelerate effort to reduce environmental
burdens associated with operation andbecome proactively involved in tree-planting
programs and CO2 emission rights trading.

・Organically integrate JAPEX’s
distinctive facilities and service
functions.

・Technological research & development of GTL,
DME,CCS, methane hydrate technologies, etc.

9Mid-Term Business Plan

II. Basic strategies for JAPEX expansion
2. Target reservesNo change to target set last year of proven reserves of 350 million BOE by end-March 2013.
Proven reserves at end-March 2009 increased 47 million BOE (around 21%) from previous year to 272 million BOE.
Reserves equivalent to around 77% of proven reserves at end-March 2009 have been independently evaluated.
Trends in proven oil and gas reserves

Proven reserves (by geographical segment)
TargetMillion BOE

350

350

Target under mid-term business plan

Million BOE

350

Natural gas
300

200

250

225

150

100

300

272

272
31

225

28
200

176

Overseas (Cons.)
Japan (Cons.)

Crude oil (including bitumen)

250

Overseas (Equity method)

350

203

44
29

150

175
131

213

100

152
50

44

50

50

69

0

0

End-March 2007 End-March 2008 End-March 2009

End-March 2013

End-March 2008

End-March 2009

* Proven reserves are based on JAPEX’s own judgment according to the definition of the Petroleum Resources Management System2007(PRMS), but, starting from proven reserves at end-March 2009, the procedure is partially amended for stricter application of PRMS.
* Proven reserves of overseas project companies are reported according to each project company’s interest in the fields in question, but,
starting from proven reserves at end-March 2009, are reported based on the economic value of each project company’s share.

10III. Revision of preconditions
1. Crude oil price and exchange rate assumptions

Mid-Term Business Plan In light of the global economic downturn and the sharp decline in crude oil prices since autumn 2008,
assumptions are as follows.
¾Crude oil price: Expected to remain at the level seen in January and February 2009 until around the fiscal
year ending March 31, 2011 and to gradually recover from the fiscal year ending March 31, 2012.
¾Exchange rates： Expected to remain at the level seen in January 2009.

 Endeavor to improve profits based on the assumption that conditions will remain severe for around
two to three years.
Preconditions of revised plan

FY09 (a)At time of last year’s announcement

FY10（e） FY11（e） FY12（e） FY13（e） FY14（e）

Crude oil price(USD/bbl）

89.7

40

40

60

80

80

Exchange rates(JPY/USD)

102.6

90

90

90

90

90

140

■Assumption that crude oil price andexchange rates would remain constantthroughout the period the from fiscal year
ending March 31, 2009 to fiscal year ending
March 31, 2013 as follows:
・Crude oil price USD80/bbl
・Exchange rate JPY/USD 105
ＦY13 to FY14
USD80/bbl

Actual and estimated crude oil price

130

ＦY12
USD60/bbl

110
100

ＦY10 to FY11
USD40/bbl

90
80
70
60
50
40
30
20
10

11

2009-04

2008-10

2009-01

2008-04

2008-072008-01

2007-10

2007-072007-04

2007-01

2006-10

2006-072006-04

2006-01

2005-10

2005-072005-04

2005-01

2004-10

2004-072004-04

2004-01

2003-10

2003-070
2003-04[Crude oil price]
USD-denominated USD/BBL

120

Mid-Term Business Plan

III. Revision of preconditions
2. Target natural gas sales volume

 Natural gas sales volume for the fiscal year ended March 31, 2009 was more or less unchanged
from the previous fiscal year, but fell short of the FY2008 projection by around 7% due to a fall indemand among established customers amid the economic downturn, among other factors.
 On the assumption that such difficult conditions will persist for some time, the attainment date of
the natural gas sales volume target (2.0 billion m3) has been postponed for one year from thefiscal year ending March 31, 2013 to the fiscal year ending March 31, 2014.
100 million m3

Natural gas sales volume target

Natural gas
sales volume

At time of May 2008
announcement

Current
estimate

2.0 billion m3
by fiscal year
endingMarch 31, 2013

2.0 billion m3
by fiscal year
endingMarch 31, 2014

Natural gas sales volume

20

Sales volume target
2.0 billion m3 /year

15

10
FY08

FY09

FY10

FY11

FY12

FY13

* The net sales forecast (natural gas and crude oil handled by JAPEX in Japan: ¥110 billion over the fiscal year
ending March 31, 2013) announced last year is left unchanged on the assumption of recovery in the crude oil
price, and JAPEX will aim to achieve this through initiatives such as improvement of the natural gas selling
price.

12

FY14

IV. Initiatives to improve profits
1. Rationalization of natural gas selling price

Mid-Term Business Plan

 Work to rationalize our price structure to adjust the per unit selling price of natural gas to a level thatreflects fluctuations in energy market conditions to a certain degree, through initiatives such as
expansion of large-scale gas supplies that are subject to the application of prices linked to the LNG
CIF price, and the introduction of a raw material cost adjustment program by utility gas companies(our wholesale clientele) that use a mix of domestic natural gas and imported gas (gasified LNG).
Raw material cost adjustment programfor supply mix

Trends in per unit selling price of natural gas
JPY/m320

50

Natural gas sales volume

45
40
15

35
30
25

Natural gas sales volume
Per unit selling price of natural gas supplied by pipeline

1020
FY04 FY05 FY06 FY07 FY08 FY09 FY10

FY14

13

Per unit selling price of natural gas

100 million m3○METI has clarified rules for the
introduction of a raw material costadjustment program by utility gas
companies that use a mix of domestic
natural gas and imported gas (gasified
LNG) as raw materials.
○This will help create an environment inwhich utility gas companies (ourwholesale clientele) will change theirprice structure in response to a change
in the wholesale price structure made by
JAPEX (shift from previous fixed pricesystem to prices partially linked to LNG
CIF price).

Mid-Term Business Plan

IV. Initiatives to improve profits
2. Postponement of domestic exploration investment


Seek to improve profits by postponing certain operations and paring general administrative
expenses, especially during the years of the first half of the mid-term plan, in response to thesudden change in the business environment.
¾ Partial postponement of domestic exploration investment
At time of May 2008 announcement
FY2009 to FY 2013

Current estimate
FY2009 to FY2013[For Reference]
FY2010 to FY2014

Domestic exploration
expenses¥50 billion¥37 billion¥35 billion

Number of wells

20 wells

16 wells

16 wellsz As part of the above revision, domestic consolidated exploration expenses in the fiscal year ending March
31, 2010 are planned to be around ¥4.8 billion, a decrease of around ¥5.7 billion compared with actual
exploration expenses in the fiscal year ended March 31, 2009 of around ¥10.5 billion.
z In particular, the drilling of deep exploration wells, which at the time of the May 2008 announcement wasenvisaged between the fiscal year ending March 31, 2010 and the fiscal year ending March 31, 2013, will
be postponed until at least the fiscal year ending March 31, 2013 when oil prices are expected to recover.

At the same time, JAPEX will endeavor to maximize business value through the implementationof existing overseas projects in anticipation of the next business expansion, and will also seek toimprove internal systems including the development of human resources aimed at improving
ability to seize and maximize new investment opportunities for future growth.
14Mid-Term Business Plan

V. Specific Changes to income and expenditure targets
1. Consolidated income, operating cash flows

Estimated average net income over the five-year period from the fiscal year ended March 31, 2009 to the fiscal
year ending March 31, 2013 is revised to around ¥11 billion, a decrease of around ¥14 billion (around 55%)
compared with the estimate at the time of last year’s announcement.
Similarly, aggregate operating cash flows (before deduction of taxes and exploration expenses) over the five-year
period are revised to around ¥230 billion, a decrease of around ¥70 billion (around 23%) compared with theestimate at the time of last year’s announcement.
Net income over the fiscal year ending March 31, 2013 when oil prices are expected to recover to the level of
USD80/bbl, is expected to show a certain degree of improvement compared with the first half of the plan period.

Estimated consolidated income

Estimated consolidated operating cash flows(Billion yen)(Billion yen, before deduction of taxes and exploration expenses)

Gross profit

At time of May 2008
announcement
Average over period
from FY 2009
to FY 2013

Current estimate
Average over period
from FY2009
to FY2013【For reference】
Average over period
from FY 2010
to FY 2014

66

53

53

Exploration
expenses

16

Net income

25

Note:

11
11

10
14

At time of May 2008
announcement
Aggregate over period
from FY 2009
to FY2013

Current estimate
Aggregate over period
from FY 2009
to FY2013【For reference】
Aggregate over period
from FY2010
to FY2014

Gross profit

330

265

265

SG&A
expenses

(160)

(155)

(150)

Depreciation

130

120

115

Total

300

230

230

The five-year average is shown because estimated net income, etc. for each fiscal year fluctuatesconsiderably due to factors such as oil price and exchange rate trends and the occurrence of
exploration investment. Actual net income for the fiscal year ended March 31, 2009 was ¥12.5
billion and estimated net income for the fiscal year ending March 31, 2010 is ¥4.7 billion.

15

Mid-Term Business Plan

V. Specific changes to income and expenditure targets
2. Allocations of operating cash flowsAllocations of estimated operating cash flows (before deduction of taxes and exploration
expenses) over the next five years from the fiscal year ended March 31, 2009 to the fiscal year
ending March 31, 2013 are revised as follows.

FY2009 to FY2013

Current estimate
FY2009 to FY2013【For reference】
FY2010 to FY2014

Operating cash flows(five-year aggregate) (a)

300

230

230

Existing projects(Billion yen)

90
40
37
20

At time of May 2008 announcement

Capitalinvestment(b)

Domestic
Overseas

Exploration
investment(c)

Domestic
Overseas

80
80
50
30

Total existing project investment(d)＝(b)＋(c)

240

187

Balance after deduction
from aggregate operating
cash flows (a)－(d)6043Uses of above balance

Shareholder returns,
new investment, etc.

Same as left

The above cash flows will
be applied to tax
payments and dividend
payments, etc. and will
also be applied to
exploration anddevelopment investment
in both existing and new
projects totaling around¥260 billion, by adding
other funds raised throughborrowing, etc.

Note: Revised overseas capital investment in existing projects includes development investment (mainly
Kangean Block and Block A) that has already been approved and excludes investment that has yet to beapproved such as development investment in successful exploration activities in Libya that was included
in calculations at the time of last year’s announcement.

16Mid-Term Business Plan

【For Reference】
Estimated capital expenditure and depreciation and amortization
Consolidated depreciation and amortization, excluding development expenses related to existingoverseas projects, etc. (Libya projects, Canada Oil Sand’s Hangingstone project, etc.) in relation towhich a final development investment decision is not yet done, and new investment is expected topeak from the fiscal year ending March 31, 2011 through the fiscal year ending March 31, 2013 and to
begin trending downward thereafter.



Although non-consolidated capital expenditure (in response to domestic supply and demand), which is
the main component of capital expenditure, will be higher than estimated at the time of last year’s
announcement due to factors such as additional production wells, the estimated level of depreciation
and amortization in the period from the fiscal year ending March 31, 2010 to the fiscal year ending
March 31, 2012 is slightly lower than the level estimated at the time of last year’s announcement forreasons connected with the depreciation start date.

At time of May 2008 announcement

Current estimate
100 Million yen

100 Million yen

Non-consolidated capital expenditure350

Non-consolidated capital expenditure
Consolidated depreciation and amortization
Non-consolidated depreciation and amortization350

Non-consolidated depreciation and amortization
300

300

250

250

200

200

150

150

100

100

50

50

0

0

FY09

FY10

FY11

FY12

FY13

FY09

17

FY10

FY11

FY12

FY13

FY14

Mid-Term Business Plan

VI . Summary
 Falling oil prices, the slow growth of natural gas sales volume amid economic
downturn and other negative factors will inevitably push profits down for some time.
 Notwithstanding this environment, we will adhere to our growth strategy’s corepolicies of “Sustaining and increasing reserves,” “Strengthening our natural gas
integrated operation system” and “Technological R&D activities and initiatives tohelp solve global environmental problems.”
 On the other hand, the severe economic conditions are expected to persist forsome time, and we will endeavor to improve profit through initiatives such as thepartial postponement of exploration investment.
 At the same time, we will work to maximize business value by proceeding withexisting overseas projects as well as improving internal systems including thedevelopment of human resources with the aim of improving our ability to seize andmaximize new investment opportunities for future growth.

18

Business Overview

Summary of business plan for the fiscal year ending March 31, 2010

¾ Gas business① Continue working to rationalize natural gas selling prices.
② Make investment (drilling of production wells, etc.) to ensure stable supply.

¾ Domestic exploration
Postpone certain operations in the light of the balance of revenue with expense,
conduct two seismic surveys and drill one production well and one delineation well.

¾ Existing overseas projects／New domestic and overseas investment projects
Endeavor to proceed efficiently with existing overseas E&P business (Indonesia, Libya,
Canada, etc.) and continue with prioritized initiatives in relation to new projects toensure stable sources of revenue in the future.

19

Business Overview

Domestic exploration plan for the fiscal year ending March 31, 2010
Exploration well drilling schedule
Fiscal year ending March 31, 2010
Depth
Yashimakogen A1

3,500m

Iwafune Oki Z

2,240m

1Q

2Q

3Q

4Q

Notes

Extensionwell［Results of exploration in fiscal year ended March 31, 2009］
・Seiro Oki MS-1
(4,310m)
Mar.-Apr. 2008
Abandoned
・Tainai Oki MS-1a(4,358m)
May -Jul. 2008
Abandoned
・Aganogawa Oki MS-1
(2,000m)
Jul.- Aug. 2008
Abandoned
・Yurihara SK-19DH-1［extension well］(2,709m)
Oct.-Dec. 2008
Success・Numanohata (T1) East SK-2 (1,525m)
Jan.-Feb. 2009
Suspended

Geophysical prospecting survey plan

Iwafune Oki Z¾

2D seismic survey ：39.4km in Niigata Prefecture (Minami Kashiwazaki)¾

3D seismic survey：
66km2 in Niigata Prefecture (around Katakai)

20

Yashimakogen A1

Business Overview

Capital expenditure plan for the fiscal year ending March 31, 2010
Unit: Billion yen

FY08 (a)FY09(a)FY10(e)Capitalexpenditure*

41.7

30.9

28.3

Depreciation andamortization

16.6

21.5

21.7

* Based on figures reported on the statement of cash flows.

Principal
Principalcapital
capitalexpenditure
expenditureitems
items

1Q

2Q

3Q

Expand production

facilities to ensure
natural gas supply
capability and stable
and secure supply.

4Q

Notes

Production well drilling(Hokkaido)

2 onshore wells

Production well drilling(Niigata)

1 onshore well

Expansion of production facilities
at Yufutsu oil and gas field（Hokkaido)

To continue into
the next fiscal year

Expansion of production facilitiesof oil and gas fields (Niigata)

To continue into
the next fiscal year

21Business Overview

Overseas business: Initiatives in strategic regions
CanadaNorth Africa

Sakhalin

Oil sands development(Production & Exploration (reserve evaluation))

2 blocks in Libya(Exploration)

Sakhalin 1 Project(Production)

Legend=Strategic regions=Blocks in which consolidated
subsidiaries, equity method companies,
etc. hold interest.

Middle East

Southeast Asia

Iran: JJI S&N (Production)

Indonesia: Kangean Block (Production & Development),
Block A (Development), Buton (Exploration),
Universe Gas & Oil (Production)

Iraq: Technical cooperation with Ministry of Oil

22

Business Overview

Current status of overseas business (1) Canada： Oil Sands¾

Canada Oil Sands Co., Ltd.:

Areas in which JACOS holds interest in oil sandConsolidated subsidiary (86.64% owned by JAPEX)¾

Operator:
Wholly owned Canadian subsidiaryJapan Canada Oil Sands Ltd. (JACOS)¾

Producing area：
Producing around 8,000 bbl/d at 19 pairs of SAGD wells in 3.75
section area (100% interest) of the Hangingstone area¾¾

Current status of development of undeveloped part ofHangingstone area：－Drilled 100 delineation wells from winter 2008 through March 2009.
－Conducting environmental impact assessment.
－Plan to start bitumen production with expected capacity of up to
35,000 bbl/d in fourth quarter of 2014
Contingent resources of undeveloped oil sands areas held by
JACOS
As of end-December 2008
Contingent resources

1,717 million barrels
Areas where oil sand resources were evaluatedNotes(1) External evaluation by Canada-based Sproul (February 2009)(2) Not including reserves of area where bitumen is currently produced.
(3) Sproul conducts reserve evaluation based on evaluation standards of Society of Petroleum
Evaluation Engineers (Calgary Chapter) and others. These standards are more or less thesame as PRMS, but Sproul evaluated certain volume in the Hangingstone area as probablereserves and possible reserves in view of the state of progress of JACOS’s area evaluation
operations, etc. However, given that a final development decision is still pending, we
considered it appropriate to include such volume in contingent resources.

23

The Hangingstone area, the Chard area, the Corner area and the Thornbury
area were evaluated. The evaluated areas consist of solely owned andjointly owned areas are 788.4km2 (gross) or 373.4km2 (net). In the Liegearea, natural gas is producing. Bitumen also exists In the Liege area, butthere is no bitumen development plan at present due to the subsurface
conditions of its existence.

Business Overview

Current status of overseas business (2) Sakhalin 1 ProjectCountry

Interest

Exxon Neftegas Ltd.

U.S.

30.0%

Sakhalin Oil and Gas
Development Co., Ltd.

Japan

30.0%

SakhalinmorneftegasShelf

Russia11.5%

Subsidiary of Rosneft-Sakhalinmorneftegas

RN-AstraRussia8.5%

Subsidiary of Russian national oil company
Rosneft

ONGC Videsh Ltd.

India

20.0%

Subsidiary of Indian national oil company
Oil and Natural Gas Corporation Limited

Company

Sakhalin 1 Consortium
OVERVIEW
0

OdoptuOdoptu

PAD#2

5

10

Kilometers

PAD#1

Oil to Onshore Processing
Facility at Chayvo Bay

OnshoreProcessing
Facility

Sakhalin Oil and Gas
Development Co., Ltd.
(SODECO)

PAD

¾
¾
¾
¾
¾

Oil Line to
DeKastri
CIDS

Val

ChayvoChayvoChayvoNotes

Subsidiary of ExxonMobil, Operator

Shareholder
Minister of Economy, Tradeand Industry
JAPEX

14.46%Marubeni Corp.

11.68%

Others9.40%

Oct. 2005 Started production of crude oil. (for Russian domestic market)
Oct. 2006 Began exports of Sokol crude.
Feb. 2007 Reached peak gross production target (250,000 bbl/d).
Jan. 2008 Reached cumulative production of 100 million bbl.
Mar.2008 First dividends

24

14.46%

Itochu Corp.

Preparing for development of Odoptu and Arkutun-Dagi
Arkutun - Dagi
Arkutun-Dagi

Ownership
50.00%

Business Overview

Current status of overseas business (3) Libya: Block 40-3/4, Block 176-4¾ Japex Libya Ltd.: Consolidated subsidiary (wholly owned by JAPEX)Offshore Block 40-3/4(coastal area of the Mediterranean Sea)¾

Interest： 42% (Operator)¾

Actual results and plans:Mar. - Apr. 2009:

Drilled first exploration well(abandoned).

Aug. 2009:

Plans to spud second
exploration well.

Tripoli

Block 40-3/4

Onshore Block 176-4(southwest area of Murzuk region)¾

Interest: 100% (Operator)¾

Operating plans:

Block 176-4

Jun. 2009: Plans to spud first exploration well.

Conducting technical training for engineers from Libyan National Oil Corporation to strengthen relations.

25

Business Overview

Current status of overseas business (4) Iraq¾

JAPEX signed Memorandum of Understanding (MOU) with
Ministry of Oil of Iraq in March, 2005 for technical cooperation invarious aspects, which was successfully completed in March,
2009.

¾

Major achievements under the MOU• Conducted joint studies with Ministry of Oil for evaluation ofseveral oil fields in Iraq.
• Provided technical support on 3D seismic and assisted Ministryof Oil in conducting 3D seismic survey for a certain oil field.
• Provided courses and seminars for Ministry of Oil experts
covering wide spectrum of upstream technologies in exploration,
development and production of oil and gas.
• Invited Ministry of Oil experts to the seminars on legal,
contractual, procurement theories and practices.
• Assisted in establishing language laboratory system at the
Ministry of Oil⇒ Invited more than 500 experts from the Ministry of Oil.

¾

Participation for future oil development in Iraq
• JAPEX is one of the 35 companies qualified to participate in
Iraqi licensing rounds, out of 120 applicants (April 2008)• Plans to participate in the first licensing round (End-June 2009）• Plans to participate in the second licensing round (Scheduled in
the latter half of 2009)26

Trainee engineers from Iraq’s Ministry of Oil(November 2008, JAPEX at Akita Division Office)Business Overview

Current status of overseas business (5) Indonesia: Kangean Block¾ Kangean Energy Indonesia Ltd. (KEI) and two other companies： Equity-method
affiliates¾

Block Name: Kangean BlockWest Kangean gas field(Exploration)

Pagerungan Utara oil field(Development)(offshore East Java）
Jakarta¾

JAPEX Interest：25%¾

Operator: KEI¾

Current gross production:
Crude oil equivalent of around
10,000 boe/d¾

Plan to expand production
to around 60,000 boe/d through To Surabaya
production of additional
300 million cf/d (TSB gas field)by end-Dec. 2010.

¾

Pagerungan gas field(Production)

SurabayaJava Island

Kangean Island

East Java Pipeline

Production Sharing Contract：
Ends 2030

Sepanｊang Island oilfield (Production)
TSB gas field(Development)

27

Business Overview

Current status of overseas business (6) Indonesia: Block A¾ Japex Block A Ltd.:

Block A

Consolidated subsidiary (wholly
owned by JAPEX)
Jakarta¾

Block Name: Block A (northern
Sumatra)¾

Interest: 16.67%¾

Operator: Medco¾

Plan to start production in 2010, withgross production for three gas fields
of around 100 million cf/d
(crude oil equivalent of around 20,000
boe/d）¾

1000 kmBlock A

Production Sharing Contract:
Ends 2011 (now applying to extend)
50 km

28

Business Overview

Current status of overseas business (7) Indonesia: Buton Block¾ Japex Buton Ltd.: Consolidated subsidiary (wholly owned by JAPEX)¾ Block Name: Buton Block (onshore/offshore block on Buton Island, Southeast Sulawesi)¾ Interest: 40%¾ Operator:
Buton Block

Japex Buton Ltd.

¾ Results and plans
2008：
・ Airborne gravity
and magnetic surveys
・2D seismic surveys
2010：･Plan to drill one
exploration well(one obligatory well)

Jakarta29

Business Overview

Technological R&D initiatives
1. Carbon-dioxide Capture and Storage (CCS*)

2. GTL (Gas to Liquid)Japan CCS Co., Ltd. (incorporated May 2008) is engaged
in the following studies for the implementation of large-scale
CCS demonstrations in Japan.

Nippon GTL Technology Research Association(incorporated October 2006) is conducting
demonstrations for the commercialization of GTL
technology.
・April 2009 Completion of demonstration plant (500bbl/d)
・2009-2011 Demonstrative operation

・Feasibility Study on a Total System from Electric Power
Generation to CO2 Storage(project funded by NEDO)
・ Development of Assessment Technologies for a Deep
Aquifer appropriate for Demonstration(project funded by METI)

3. Methane Hydrate
Participating and cooperating in the Japanese
Government’s Methane Hydrate Development Planaiming for commercial production by 2018

・CO2 reduction technology demonstration project－Field survey, including well drilling for preliminary
geological survey(project funded by METI)

4. DME (dimethyl ether)* What is CCS?
・ Carbon-dioxide Capture and Storage or CCS is a process
consisting in the separation and capture of CO2 and its
injection into storage reservoirs more than 1,000m
underground.
・ CCS enables drastic reduction of CO2 emissions and is themost effective way of preventing global warming.

Fuel DME Production Co., Ltd. is engaged in various
activities to promote widespread use of DME.
・June 2008
Completion of manufacturing plant(80,000 ton/year)
・January 2009 Start of deliveries

30Consolidated Financial Results for the
Fiscal Year Ended March 31, 2009
Senior Managing Director

31

Hiroshi Sato

Actual Results

Consolidated financial results for the fiscal year ended March 31, 2009
[Million yen]

Net sales
Operating income
Ordinary income
Net income

FY08
(a)

FY09
Initial estimate
Revised estimate (1) Revised estimate (2)Announced May 15 (e) Announced Aug. 8 (e) Announced Nov. 7 (e)Revised estimate (3)Announced Feb. 10 (e)Actual result(a)207,638
19,62527,247
20,097

193,772
8,860
14,321
11,141

258,054
27,33935,352
26,383219,828
21,836
26,53919,828204,154
19,444
20,497
11,641

202,127
20,09022,35812,56076.21
114.6680.00
105.00112.51104.6388.62
100.6987.49
102.2089.71
102.56[Oil price and exchange rate assumptions]

Crude oil CIF price (USD/bbl)
Exchange rate (JPY/USD)

Revised estimates (1) (August) for the fiscal year ended March 31,
31, 2009⇒ Revised estimates (2) and (3) (November and February)
Sharp decline in crude oil prices,
consecutive rise in the yen
Impairment of securities and fixed assets,
etc.

Revision of sales volumes of crude oil and natural gas in responseto economic downturn and slack demand
Reduction in domestic exploration expenses,
carryover of overseas exploration expenses

Revised estimates (3(3) (February) for the fiscal year ended March 31, 2009 ⇒ Actual results
Decreased sales of crude oil andnatural gas due to mild winter

Reduction in cost of sales, exploration
expenses and SG&A expenses

Reduction in foreignexchange loss

(Compared with February estimate) : Operating income ＋¥600 million, net income ＋¥900 million

32

Actual Results

Actual sales of crude oil in the fiscal year ended March 31, 2009 (YoY comparison)
FY08
Crude oil:
Sales volume[Thousand KL]
Net sales [Million yen]

YoY change

FY09

1Q-2Q
(a)

1Q-4Q
(a)

1Q-2Q
(a)

1Q-4Q
(a)

1,227

2,450

1,028

2,337

(199)

(113)

59,177

128,391

73,668

115,933

14,491(12,458)

253

574

255

569

2

(5)

12,80532,17019,70930,974

6,904(1,196)

83

144

76

141

(7)

(3)

3,806

7,483

5,527

9,065

1,721

1,582

195

409

205

417

10

8

4,851

10,4689,500

13,087

4,649

2,619

1Q-2Q

1Q-4Q

[ Breakdown of equity oil]
Domestically produced crude oil:
Sales volume
Net sales [Million yen]Overseas subsidiary crude oil:
Sales volume
Net sales [Million yen]
Bitumen:Sales volume
Net sales [Million yen]

Sales volume and net sales of “Domestically produced crude oil” stated herein do not include purchased crude oil.
Sales volume and net sales of “Overseas subsidiary crude oil” are the sum totals of the sales volumes and net sales
reported by two overseas consolidated subsidiaries (Japex New Nanhai Ltd. and Japex (U.S.) Corp.).

33

Actual Results

Actual sales of natural gas in the fiscal year ended March 31, 2009 (YoY comparison)

FY08
Natural gas:
Sales volume [Million M3]
Net sales [Million yen]
Of which, domestically produced gas:
Sales volume [Million M3]

YoY change

FY09

1Q-2Q
(a)

1Q-4Q
(a)

1Q-2Q
(a)

1Q-4Q
(a)

1Q-2Q

1Q-4Q

631

1,486

647

1,485

16

(1)

20,102

48,982

22,90654,126

2,804

5,144

487

1,124

481

1,101

(6)

(23)

Sales volume of “domestically produced gas” stated herein does not include purchased gas.

Sales volume

Essentially unchanged from the year-ago level

Slowdown in industrial demand amid deteriorating economic conditions and decline in consumer demand due tomild winterStart of supply to new customers along Shiroishi-Koriyama pipeline, etc.

Net sales

Increased year on year, reflecting price revisions and higher crude oil prices

Revision of wholesale price of natural gas sold to municipal gas utilities and price of natural
gas sold directly for industrial user (from 2008)
Rise in selling prices based on pricing formula linked to LNG CIF price34

Consolidated financial results for the fiscal year ended March 31, 2009:
Causes of income fluctuations (YoY comparison)

FY08
(a)

FY09
(a)

Net sales

207,638

202,127(5,510)Gross profit

63,95567,6803,724

Exploration expenses

13,55915,352

1,793[Million yen]

YoYchangeSG&A expenses

30,77032,237

1,466

Operating income

19,62520,090464

Other income (expenses)

7,621

2,267

(5,353)

Ordinary income

27,24722,358(4,889)Extraordinary income(losses)(942)(5,250)(4,307)

Income taxes

5,426

3,565

(1,861)

Minority interests

780

981

201

20,097

12,560(7,537)

Net income

35

Actual Results≪Causes of increase or decrease (MEMO)≫
Gross profit
Domestic crude oil and natural gas- ¥3.0 billion
Overseas consolidated subsidiaries+ ¥6.2 billion(JACOS +3.8, Japex New Nanhai +2.4)

Exploration expenses
Domestic Exploration
Overseas Exploration-¥3.5 billion+¥1.7 billion

SG&A expenses
Special Petroleum Gain Levy
Depreciation and amortization-¥0.8 billion-¥0.5 billion

Other income (expenses)
Equity in earnings (losses) of affiliates
Decrease in gain on reversal of allowancefor overseas investment loss
Provision for cost of abandonment-¥2.4 billion-¥1.6 billion-¥1.3 billion

Extraordinary income (losses)
Loss on retirement of noncurrent assets and Inpairment lossof production wells-¥4.5 billion

Outlook for the Fiscal Year Ending
March 31, 2010
Senior Managing Director

36

Hiroshi Sato

Outlook

Consolidated financial estimates for the fiscal year ending March 31, 2010
Sales of domestic crude oil and gas (Billion yen)

FY10[Million yen]
Crude oil CIF priceExchange rate

Full
(1Q-4Q)(e)
USD 40.00 /bbl

30.0

JPY 90.00 /USD JPY 90.00 /USD JPY 90.00 /USD

17.5

1H
(1Q-2Q)(e)
USD 40.00 /bbl

2H
(3Q-4Q)(e)
USD 40.00 /bbl

Gross profit

59,903
52,915
1,202
5,786
18,89869,40960,386
3,265
5,759
23,073

129,313
113,300
4,467
11,54541,971

Exploration expenses

5,938

4,506

10,444

SG&A expenses

14,96815,62830,596

Operating income(2,008)

2,939

931

Other income (expenses)

2,155

2,833

4,988

Ordinary income

147

5,772

5,919

Extraordinary income (losses)

(56)

(19)

(75)

Income taxes
Minority interests

(29)
30

1,165
(48)

1,136
(18)

Net income

91

4,635

4,726

Net sales
E&P
Contract services
Other businesses

37

27.5
25.0

5.3

22.5
20.0
15.0
12.5

Domestically
producedgas, 17.7

Domestically
producedgas, 21.5

10.0
7.5
5.0
2.5
0.0

Domestically
producedcrude oil, 6.2

Domestically
producedcrude oil, 7.7

1H (1Q-2Q)

2H (3Q-4Q)

Exploration expenses (Billion yen)
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
-

1.4
Overseas
Exporation,
3.5

Overseas
Exporation,
2.1

Domestic
Exporation,
2.4

Domestic
Exporation,
2.4

1H (1Q-2Q)

2H (3Q-4Q)

Consolidated financial estimates for the fiscal year ending March 31, 2010
– Main points compared with previous year
[Million yen]

FY09
1Q-2Q (a)1Q-4Q (a)Net sales
Operating income
Ordinary income
Net income

FY10
1Q-2Q(e)1Q-4Q(e)OutlookYoY change
1Q-2Q
1Q-4Q

110,912202,127

59,903

129,313(51,009)(72,814)

12,54620,090(2,008)931(14,554)(19,159)

13,321

22,358147

5,919(13,174)(16,439)

9,371

12,56091

4,726(9,280)(7,834)115.39105.2089.71
102.56

40.00
90.00

40.00
90.00

(75.39)(15.20)(49.71)(12.56)[Oil price and exchange rate assumptions]

Crude oil CIF price (USD/bbl)
Exchange rate (JPY/USD)

Main points of consolidated financial estimates for the fiscal year ending March 31, 2010

¾ Ordinary income: Decrease of ¥16.4 billion year on year
¾ Gross profit : - ¥25.7 billion⇒ Decline in crude oil and bitumen prices, expiration of Japex New Nanhai PSC,etc.

¾ Exploration expenses and SG&A expenses : ＋¥6.5 billion⇒ Reduction of domestic exploration expenses and SG&A expenses, etc.

¾ Other income (expenses) : ＋¥2.7 billion⇒ Reduction of loss on valuation of securities, foreign exchange loss, etc.

38Outlook

Estimated crude oil sales for the fiscal year ending March 31, 2010
FY09
Crude oil:
Sales volume[Thousand KL]
Net sales [Million yen]

YoY change

FY10

1Q-2Q
(a)

1Q-4Q
(a)

1Q-2Q
(e)

1Q-4Q
(e)

1,028

2,337

1,016

2,194

(12)

(143)

73,668

115,933

21,88846,970(51,780)(68,963)

255

569

264

593

9

24

19,70930,974

6,172

13,843(13,537)(17,131)

76

141

19

21

(57)

(120)

5,527

9,065

423

470

(5,104)(8,595)

205

417

220

437

15

20

9,500

13,087

3,403

6,276

(6,097)(6,811)

1Q-2Q

1Q-4Q

[ Breakdown of equity oil]
Domestically produced crude oil:
Sales volume
Net sales [Million yen]Overseas subsidiary crude oil:
Sales volume
Net sales [Million yen]
Bitumen:Sales volume
Net sales [Million yen]

Sales volume and net sales of “Domestically produced crude oil” stated herein do not include purchased crude oil.
Sales volume and net sales of “Overseas subsidiary crude oil” are the sum totals of the sales volumes and net sales
reported by two overseas consolidated subsidiaries (Japex New Nanhai Ltd. and Japex (U.S.) Corp.).

39

Outlook

Estimated natural gas sales in the fiscal year ending March 31, 2010
FY09
Natural gas:
Sales volume [Million M3]
Net sales [Million yen]
Of which, domestically produced gas:
Sales volume [Million M3]

YoY change

FY10

1Q-2Q
(a)

1Q-4Q
(a)

1Q-2Q
(e)

1Q-4Q
(e)

1Q-2Q

1Q-4Q

647

1,485

693

1,545

46

60

22,90654,12624,35253,415

1,446

(711)

481

1,101

498

1,128

17

27

Sales volume of “domestically produced gas” stated herein does not include purchased gas.

Sales volume

Growth in new industrial demand compared with previous year

Start of supply in response to new demand of natural gas for industrial use, etc.

Net sales

Decrease year on year, due to lower crude oil prices

Fall in selling prices based on pricing formula linked to LNG CIF price40

Consolidated financial estimates for the fiscal year ending March 31, 2010
Causes of income fluctuations (YoY comparison)
FY09
(a)

FY10
(e)

YoY
changeNet sales

202,127

129,313(72,814)Gross profit

67,68041,971(25,709)

Exploration expenses

15,352

10,444(4,908)

SG&A expenses

32,23730,596(1,641)

Operating income

20,090931(19,159)

Other income (expenses)

2,267

4,988

2,721

Ordinary income

22,358

5,919(16,439)

Extraordinary income(losses)(5,250)

(75)

5,175

Income taxes

3,565

1,136

(2,429)Minority interests

981

(18)

(999)

12,5604,726(7,834)[Million yen]

Net income

Outlook≪Causes of increase or decrease (MEMO)≫

41

Gross profit
Domestic crude oil and natural gas -¥11.1 billion
Overseas consolidated subsidiaries -¥ 13.4 billion(JACOS -6.4, Japex New Nanhai -6.7, JUS -0.2)
Exploration expenses
Domestic exploration
Overseas exploration+¥5.7 billion-¥0.8 billion

SG&A expenses
Special Petroleum Gain Levy +¥1.8 billion

Other income (expenses)
Equity in earnings (losses) of affiliates
Loss on valuation of securities
Foreign exchange gain (loss)-¥1.0 billion+¥1.8 billion+¥1.8 billion

Extraordinary income (losses)(losses)
Loss on disposal and loss on impairmentof production wells+¥4.5 billion
Loss on retirement of noncurrent assets +¥0.7 billion

Outlook

Oil price and exchange rate assumptions in the fiscal year ending March 31, 2010
and impact on profits
FY10
2H(3Q-4Q)
(e)
40.00

Full
(1Q-4Q)
(e)
40.00

90.00

90.00

FY08 (a)FY09 (a)Crude oil CIF price (USD/bbl)

76.21

89.71

1H
(1Q-2Q)(e)
40.00

Exchange rate (JPY/USD)

114.66102.56

90.00

Crude oil price assumption= USD 40 /bbl

Operating income¥350 million

Ordinary income¥350 million

Net income¥220 million

1 USD/bbl increase in crude oil prices
would push profits up by…………

Exchange rate assumption= JPY90/USD
A weakening in the yen to JPY5/USD
would push profits up by………

Operating income¥260 million

Ordinary income¥260 million

Net income¥100 million

Bitumen price assumption CAD 30 /bbl , JPY75/CAD
Fiscal year ended March 31, 2009(a) CAD 66.57 /bbl,
JPY74.84/CAD

YoYchange(49.71)(12.56)

Note: Since movements in bitumen selling
prices are often different frommovements in conventional crude oil
prices, the impact of crude oil prices
on oil sands business is not includedin the figures shown here.
Note: In addition to the impact of exchange
rate fluctuations shown on the left,translation adjustments of foreigncurrency- denominated receivables
and payables (except for thosesubject to hedge accounting) held by
the Company and its consolidated
subsidiaries also occur (unrealized
gains (losses) are recorded in otherincome (expenses )).

1 CAD/bbl increase in bitumen prices would
push profits up by…

Operating income CAD 2.75 million, JPY200 million

Note: The above figures are for reference purposes only. Actual profits are influenced by a variety of other factors besides
crude oil prices and exchange rates.

42