日時： 最終印刷日時：2/7/2007 7:59:00 PM

Consolidated Financial Results for the six months ended September 30, 2006
November 15, 2006

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

Company name

INPEX Holdings Inc.

Code number

1605

Stock Exchange on
which the Company
is listed
Location of the head
officeTokyo Stock
Exchange
Tokyo(URL http://www.inpexhd.co.jp/)
Naoki Kuroda, President
Representative
Contact person

Shuhei Miyamoto, General Manager, Corporate Communications Unit
TEL+81-3-5448-0205

Date of the meeting of theBoard of Directors for the six
months ended September 30,
2006 financial results
Prepared in accordance withaccounting principles generally
accepted in the United States ofAmericaNovember 15, 2006

No

1. Consolidated Financial Results for the six months ended September 30, 2006 (April 1, 2006-September 30, 2006)
Note: Amounts less than one million yen are rounded off.
(1) Consolidated operating results
Net sales

Operating income％

Million yen

For the six months
ended September
30, 2006―

500,847

298,457

Net income(Notes) 1.
2.
3.
4.

―

％

Million yen

294,029―

Net income per share—diluted

Net income per share—basic
Yen―

64,674％％

Million yen

For the six months
ended September
30, 2006

Ordinary income

Million yen

Yen―

27,647.74

Equity in earnings of affiliates: for the six months ended September 30, 2006, ¥ 778 million
Average number of shares issued and outstanding in this period (consolidated): for the six months ended September 30, 2006,
2,339,237 shares
Change in accounting policy: No
Since consolidated financial results are prepared for the first time for the six months ended September 30, 2006, percentage expressions
for the change from the corresponding period of the preceding year are not disclosed.

(2) Consolidated financial position
Total assets
Million yen

As of September
30, 2006
Note:

1,530,943

Net assets

Net assets excluding
minority interests as apercentage of total assets％

Million yen

947,949

Net assets excluding minority
interests per share

58.8

Number of shares issued and outstanding at the end of this period (consolidated): as of September 30, 2006, 2,346,637 shares

― 1 ―

Yen

383,912.77

日時： 最終印刷日時：2/7/2007 7:59:00 PM(3) Consolidated cash flows

Note: Amounts less than one million yen are rounded off.
Cash flows from operating Cash flows from investing Cash flows from financing Cash and cash equivalents
activities
activities
activities
at end of the period
Million yen

For the six months
ended September
30, 2006

Million yen

151,444

Million yen(77,290)

Million yen

8,843

235,335(4) Scope of consolidation and equity method
Number of consolidated subsidiaries
Number of unconsolidated subsidiaries accounted for by the equity method
Number of affiliated companies accounted for by the equity method

57 Companies
None
13 Companies(5) Changes in scope of consolidation and equity method
Increase
2 companies
None

Consolidated subsidiaries
Affiliated companies accounted for by the equity method

Decrease
None
None

Note: Since the Company was established on April 3, 2006 as the sole parent company of INPEX CORPORATION and Teikoku Oil Co., Ltd.,the above number of companies represents the changes in scope of consolidation and equity method since the establishment of theCompany.

2. Estimated Consolidated Operating Results for the year ended March 31, 2007
(April 1, 2006–March 31, 2007)
Net sales

Ordinary income
Million yen

For the year ended
March 31, 2007

Net income
Million yen

951,000

541,000

Million yen

124,000

Reference: The forecast of ¥52,841.57 of net income per share for the year ended March 31, 2007, is calculated based on the expected number ofshares issued and outstanding of 2,346,637 shares at March 31, 2007.
* The aforementioned forecasts are based on currently available information and contain many uncertainties. Changing businessconditions including oil and gas price levels, production and sales plans, projects development schedules, government regulations,financial conditions and regulationship with oil and gas producing countries may cause actual results to differ from the above
forecasts. Issues relating to the above forecasts are referred to on page 7 of the accompanying materials.

Average number of shares during this period (after deducting the number of treasury stock)
For the six months ended September 30, 2006
Common stock
2,339,236 shares
Common stock equivalent
1 shareshare; Special class share
Number of shares issued and outstanding at the end of this period (after deducting the number of treasury stock)
For the six months ended September 30, 2006
Common stock
2,346,636 shares
Common stock equivalent
1 shareshare; Special class share
Note:

Since shareholder of the special class share is entitled to the same rights as that for shareholders of common stock regarding dividends andthe distribution of residual property, the special class share is classified as common stock equivalent share.

― 2 ―I. Overview of the INPEX GroupThe INPEX Holdings Group consists of INPEX Holdings Inc., 62 subsidiaries (including 57
consolidated subsidiaries), 22 affiliates (including 13 equity method affiliates) and their two subsidiaries (asof September 30, 2006). The group primarily engages in the exploration, development, production andsales of crude oil and natural gas in Japan as well as in the Asia, Oceania, the Commonwealth of Australia,
Middle East, the coastal states around the Caspian Sea and South America. In addition, we provide loans
and investments to companies engaged in the aforementioned activities. Our business segments are crude
oil and natural-gas-related products and other business.
The following diagram shows our group’s business flow.

INPEX Holdings Inc.

INPEX CORPORATION

Crude oil and Natural-gas-related products business(54 consolidated subsidiaries, 13 equity method affiliates)＜Exploration, Development, Production＞
Japan Oil Development Co., Ltd.
INPEX Natuna, Ltd.
INPEX Sahul, Ltd.
INPEX Browse, Ltd.
INPEX Southwest Caspian Sea, Ltd.
INPEX Masela, Ltd.
INPEX North Caspian Sea, Ltd.
※MI Berau B.V.
And other 23 companies＜Gas liquefaction, Pipeline, Marketing＞
INPEX Trading, Ltd.
INPEX BTC Pipeline, Ltd.
INPEX DLNGPL Pty Ltd
And other 4 companies(Domestic)

Teikoku Oil Co., Ltd.

＜Refining, Pipeline, Marketing＞
Teiseki Pipeline Co., Ltd.
Teiseki Propane Co., Ltd.
Teiseki Topping Plant Co., Ltd.
And other 2 companies(Overseas)＜Exploration, Development, Production＞
Teikoku Oil(Venezuela) Co., Ltd.
Teikoku Oil(D.R. Congo) Co., Ltd.
The Egyptian Petroleum Development Co., Ltd.
※Japan Ohanet Oil & Gas Co., Ltd.
And other 16 companies＜Marketing＞
Teikoku Oil Company Panama, S.A.

Teiseki Drilling Co., Ltd.
Teiseki Real Estate Co., Ltd.
And other 1 company
Other business(3 consolidated subsidiaries）
Notes: 1. symbol “⇒” indicates products and service flow
2. symbol “※” indicates equity method― affiliates,
3 ― otherwise consolidated subsidiaries― 3 ―Customers＜Exploration, Development, Production＞
Offshore Iwaki Petroleum Co., Ltd.

II Management Policy
1.

Management Strategy
On April 3, 2006, INPEX CORPORATION and Teikoku Oil Co., Ltd. integrated their businesses, andestablished a joint holding company, INPEX Holdings Inc. (the Company). INPEX CORPORATION and
Teikoku Oil Co., Ltd. are wholly-owned subsidiaries of the Company. The transition to an operating holding
company through merger of the Company and INPEX CORPORATION and Teikoku Oil Co., Ltd. is planedin October 2010 and this will enable us to enhance our corporate management more efficient and agile.
In pursuit of development of petroleum and natural gas which is the fundamental business of theCompany, we seek to improve the productivity and profitability of our existing oil and gas fields in Japanand overseas. At the same time, we are working steadily and proactively to commercialize undeveloped oil
and gas projects, particularly our operator projects. Furthermore, to ensure sustainable growth from themedium- to long-term perspective, we are leveraging to the maximum our substantially strengthened ability
to obtain upstream interests as a consequence of the business integration by building a more balanced asset
portfolio, further strengthening our solid financial base, and mobilizing our practical operational andtechnical capabilities. By maintaining and increasing our reserves and production of petroleum and naturalgas, we will endeavor to secure stable profits over the medium to long term and to achieve enhanced
corporate value over time.

2.

Dividend Policy
In order to secure a stable supply of petroleum and natural gas resources efficiently, the Company aims to
expand its operating base. To this end, we are reinforcing investments in exploration and development inJapan and overseas, as well as in maintenance and expansion of the supply infrastructure. The robust
financial base of the Company is crucial for maintaining this level of investment. Therefore, our basic policy
is to maximize corporate value through ongoing maintenance and enlargement of our reserves andproduction of petroleum and natural gas, while paying out cash dividends as direct compensation toshareholders, in light of the medium- to long-term prospects for the Company.
With the enactment of the Corporation Law, restrictions on the number of times for paying dividends havebeen eliminated. However, currently, we do not plan to pay quarterly.

3.

Share Trading Unit
In order to improve the liquidity of our shares and to expand the diversity of shareholders participating in
the equity market, including individual investors, the Company deems it necessary to establish a fair andstable stock price on the equity market. Although we have no plans to lower our minimum share trading
unit for the time being, we carefully review it as necessary in the light of liquidity of shares, trends intransaction volume, and distribution of shareholders.

4.

Medium-to Long Term Management Key Initiatives
The key management initiatives for the Company in developing petroleum and natural gas resources isachieving sustainable growth by maintaining and expanding reserves through reinvesting the cash flow
obtained from existing oil and gas fields. By combining overseas projects that promise high growthpotential due to expansion of reserves with domestic projects without the attendant country risk and foreign
currency risk, we are seeking qualitative improvements in our asset portfolio. At the same time, byleveraging our business resources more effectively through an organic linkage of our overseas assets anddomestic infrastructure, we aim to further enhance corporate value.
With the tougher conditions associated with acquiring resources overseas, the Company must take theopportunity of business integration to become a more robust enterprise possessing an enhanced ability toacquire interests in promising projects. The foremost management task is to achieve smooth integration of
the two companies’ organizations, with transition to an operational holding company after two years. As― 4 ―international competition intensifies, this represents the surest path to ensuring long-term growth bybuilding a robust position for the Company.
We will continue to move forward with exploration and development in new and existing projects such as
the Masela Block(Abadi) gas project in Indonesia and the WA-285-P (Ichthys) gas and condensate projectin Australia, the Abu Dhabi offshore oil fields in the UAE, and the Azadegan field in Iran, Kashagan and
ACG fields in the Caspian Sea. Domestically, we are working to increase the scale of our natural gas
business by exploiting domestic reserves located close to a strong market and by expanding our natural gas
supply infrastructure. This involves plans to build a major pipeline as a substantial reinforcement of supply
capacity to the North Kanto region where demand is expected to substantially exceed previous estimates,
and where the Company already operates a network of pipelines. Since we anticipate continuous substantial
investment in order to achieve the growth strategy of the Company, we must take all possible measures toraise the capital required.

We will undertake operations according to the following policies in order to implement the businessstrategy of the Company.
(1) Achieve Well Balanced Asset Portfolio① Regional Diversification
Through business integration, the operating area of the Company has diversified to include Asia,
Oceania, the Middle East, the Caspian Sea, Central and South America, and Africa, besides Japan, andthe regional balance of our asset portfolio has improved significantly. However, we recognize the needto reduce our dependence on specific regions from the viewpoint of country and operating risks, and wewill continue to be proactive in considering investment in other new promising areas.
② Balance between Crude Oil and Gas
In terms of output by products, the share of crude oil is about 60% compared with about 40% fornatural gas as a result of business integration.
Since crude oil is a commodity highly sensitive to various factors, the selling price fluctuates in themarketplace. On the other hand, the term of sales contract with customers are for a short period(oneyear), the required investment for production and transportation facilities is relatively small and thedevelopment period is comparatively short compared with the natural gas projects. Accordingly,
profitability can be achieved comparatively soon after discovery in the case of oil fields.
Commercial production of natural gas requires substantial investments and a long lead time of
preparation for constructing liquefaction plants and pipelines. Because the buyer also must make large
investments in LNG receiving facilities, stable and long-term sales contracts are essential. With anassurance of long term LNG supply to the customers, profitability can be maintained.
Regarding a new project, we focus on a balance between crude oil and natural gas to ensure efficientinvestment with a view to long-term cash flow.
③ Balancing the Project Phases among Exploration, Development and Production
Because crude oil and gas reserves are limited, we continuously seek to acquire new reserves in orderto ensure stable profitability. Therefore, we reinvest in exploration to discover new reserves while
maintaining our cash flow from production. Projects must be carried out continuously in order toallocate and balance our assets among exploration, development and production stages. To achieve thisbalance, we invest in exploration and undeveloped oil and gas assets.
④ Enhance Activities and Capabilities as an Operator
In acting as an operator, we face managerial issues such as the difficulty in securing manpower and― 5 ―the heavy burden of financing. However, involvement as an operator also increases our opportunities toobtain new working interests by improving our technical capabilities and winning recognition from oil
and gas producing countries and international oil campaniles. The Company is pursuing opportunities toact as operator with the substantially enhanced technical capabilities resulting from business integration,
while addressing the effective utilization of management resources.
⑤ Balancing Contractual Arrangements
We intend to diversify the risk of oil price volatility by balancing contractual arrangements amongproduction sharing contracts, or concession contracts, for which profit is linked to the price of oil, withservice contracts, such as buyback or fixed margin contracts, for which profitability is less influenced byoil prices and amounts are fixed.
(2) Investments through Acquisition relative to the Expiration of Working Interests
The production sharing contract for the offshore Mahakam area, which is the Company’s major gas
production project, expires in 2017. Although we will negotiate to extend the contract, production is
expected to decline in the long term as the remaining reserves decline even if the contract is renewed. We
intend to maintain and increase production beyond 2017 by acquiring obtaining working interests fromother companies or participating in new projects or taking over companies that have substantial production
and stable cash flow.
(3) Enlarging the Company’s Business Domain through Organic Linkage of Domestic and Foreign Assets
The Company aims to expand operations in the domestic natural gas market, which represents a stablebase of earnings that is expected to grow. As well as building a natural gas pipeline network to supply thepromising market in the Kanto-Koshinetsu region, we plan to expand production in the key Minami
Nagaoka gas field. We also own promising undeveloped assets, primarily natural gas, in Indonesia andAustralia, and to ensure their long-term growth, we will consider the possibilities of gas businessintegration that organically links these overseas gas assets with our domestic infrastructure, in aggressive
pursuit of an enlarged business domain.
(4) Strengthening Relationships with Leading Domestic and International Oil and Gas Companies
Developing petroleum and gas involves considerable risks. Large-scale projects in particular requirehuge investments, presenting an insuperable obstacle for a single company. Typically, several companies
form a consortium to share the risk, and this is the case internationally too. The Company plans to expand
its business and diversify risk by increasing opportunities for participation in projects through enhanced
cooperation with the major international oil companies, the national oil companies of oil and gas
producing countries and leading private oil resource developers, trading companies and otherenergy-related companies.
(5) Promote an Efficient and Transparent Corporate Management
The Company bears the heavy responsibility of assuring a stable supply of energy to Japan in an
efficient manner. Consequently, we recognize not only that our corporate social responsibility is increasing
but also that it is essential that we exercise sensitivity in conducting business in communities in Japan andaround the world. Therefore, we intend to manage our business efficiently and transparently in line with
global standards.
(6) Environmental Efforts
Environmental issues, particularly global warming, are a matter of worldwide concern. We make every
effort to minimize the effects on surrounding areas when we explore, develop, produce and sell energy
resources. Also we are working to reduce our greenhouse gas emission reduction unit, reduce emissions of― 6 ―chemical substances, suppress emissions into the atmosphere and river systems, and to take measures toprevent soil pollution and reduce waste. Combustion of natural gas involves relatively small emissions of
CO2 and NOx compared with combustion of other fossil fuels. Positioning natural gas as our corebusiness, we intend to further promote the use of this clean fuel.
(7) Development of New Business
New technologies such as GTL (Gas to Liquids) and DME (Dimethyl Ether) produce synthesizing
liquid fuel as oil substitute form by reforming natural gas at normal temperature. Their environmental
benefits have attracted attention because the GTL products contain almost no pollutants. As the Company
has large reserves of natural gas, we are participating in R&D projects for GTL and DME. Introduction ofthese new technologies is considered in our plans to develop a new gas fields.
In order to supply energy in a stable and efficient manner and thereby contribute to the good of society,
the Company aims to maintain and expand its reserves and production by rapidly achieving synergy
through business integration between INPEX and Teikoku Oil. We will seek to allocate our businessresources optimally and maintain the soundness of our financial position with a view to securing steady
growth.
In addition, to fulfill our corporate social responsibility, we will strengthen corporate governance andcompliance, and carry out strict safety management throughout our operations. Recognizing our obligation
to protect the environment and to become an integral part of the communities where we operate, we aim to
improve our corporate value over the long term.
5.

Matters regarding the Parent Company
None applicable.

― 7 ―Ⅲ Results of Operations and Financial Position（1）Results for the Six Months Ended September 30, 2006
Effective April 3, 2006 the Company has been established as the joint holding company that owns INPEXCORPORATION and Teikoku Oil Co., Ltd., as wholly-owned subsidiaries. Financial results are not comparedwith the corresponding period of the previous year since the Company started to compile the consolidated
financial results from this period
During the six months ended September 30, 2006, the Japanese economy continued to benefit from a modest
recovery. Supported by the steady recovery of the world economy led by the economies of the United States andChina, exports and capital investment increased and corporate earnings improved. Although the labor market
remained tough, there were signs of improvement and personal consumption was on a moderate upward trend.
Crude oil prices and exchange rates have significant effects on the revenues and expenditures of the INPEXGroup. Crude oil prices were volatile during the early part of the six months ended September 30, 2006 due to thedecline of OPEC’s spare production capacity and the United States’ insufficient refining capacity, although thecrude oil inventory increased in the United States and the International Energy Agency (IEA) revised downward
its forecast of oil demand. Subsequently, affected by several hurricanes that struck the coast of the Gulf of Mexico
over the summer, and because these disasters revealed the United States’ insufficient refining capacity, oil prices
increased sharply and West Texas Intermediate (WTI) crude reached its highest level ever. As a consequence, theaverage price of our crude oil for the six months ended September 30, 2006 was US$54.00 per bbl, an increase of
US$16.83, or 45.3%, from the corresponding period of the previous year. The average gas sales price also
increased with the rise of crude oil price.
Meanwhile, the exchange rate of Japanese yen against the U.S. dollar appreciated rapidly from ¥117.47 at the
beginning of the six months ended September 30, 2006 to the ¥109 level temporarily after the adoption of a
special statement for correction of global imbalance (international income and expenditure disproportion and U.S.
current-account deficit) in Washington G7 in April. Thereafter, reflecting the widening gap in interest rates
between Japan and the United States being still significant, the Japanese yen against U.S. dollar fell gradually to¥117.89 as of September 30, 2006, or ¥0.42 lower than that at the beginning of the six months ended September
30, 2006. As a consequence, the average exchange rate for sales of the Company was ¥115.45 per US dollar.
In these business circumstances, for the six months ended September 30, 2006, we had net sales of ¥500,847
million mainly due to the increase of crude oil and natural gas prices and an increase in production volume ofcrude oil at ACG Oil Fields. Net sales of crude oil and natural gas amounted to ¥316,751 million and ¥170,279
million, respectively.
Cost of sales for the six months ended September 30, 2006 was ¥170,329 million. Exploration expenses were
¥9,366 million mainly due to the exploration activities in Asia-Oceania area. Selling, general and administrative
expenses were ¥22,693 million, and operating income was ¥298,457 million.
Other income was ¥11,892 million, and other expenses were ¥16,320 million. As a result, ordinary income for thesix months ended September 30, 2006 was ¥294,029 million.
Income taxes-current were ¥232,297 million. As a result, net income for the six months ended September 30,
2006 was ¥64,674 million
With respect to segment information, the oil and natural gas business combined accounts for more than 90% of
the aggregate sales and operating income of all segments. Therefore, the business segment information has been
omitted.
（2）Financial Position
Consolidated total assets as of September 30, 2006 were ¥1,530,943 million.
Current assets were ¥437,749 million, and fixed assets were ¥1,093,194 million. Total liabilities were ¥582,993
million, net assets were ¥947,949 million, and minority interests in net assets were ¥47,045 million.
As for cash flows during the six months ended September 30, 2006, net cash provided by operating activities was¥151,444 million. Meanwhile, net cash used in investing activities was ¥77,290 million mainly due to purchase ofinvestment securities and increase in development expenditure for ACG Oil Fields and Kashagan Oil Field. Net
cash provided by financing activities was ¥8,843 million. Cash and cash equivalents at the end of the six months
ended September 30, 2006 totaled ¥235,335 million reflecting above net increase of ¥84,192 million from¥151,143 million at the beginning of the six months ended September 30, 2006.
（3）Full-Year Outlook
On a full-year basis, consolidated net sales for the year ending March 31, 2007, are expected to be ¥9,510 billion,―8―

consolidated ordinary income is expected to be ¥5,410 billion, net income for the year ending March 31, 2007, is
expected to be ¥1,240 billion.
In these estimates, the crude oil price for the second-half period is assumed to be US$57.5 per barrel (for Brent
crude) with the exchange rate of the Japanese yen against the U.S. dollar at ¥110.
Difference from the forecast disclosed on August 9, 2006 is as follows :(Millions of yen)
Net Sales
Ordinary income
Net income
918,000
521,000
118,000
Previous Forecasts: A
Revised Forecasts: B
951,000
541,000
124,000
Increase (Decrease): B－A
33,00020,0006,000
Rate of increase (%)
3.6%
3.8%
5.1%

(4) Business Risk and others
The following is a discussion of principal items that can be considered potential risk factors relating to the INPEX
Holdings Group’s business. From the standpoint of information disclosure to investors and shareholders, we also
proactively disclose matters that do not necessarily fall within the scope of business risk but that can beconsidered to have an important bearing on the investment decisions of investors. The following discussion does
not completely cover all business risks relating to the INPEX Holdings Group’s business.
Unless stated otherwise, forward-looking statements in the discussion are the judgments of the INPEX HoldingsGroup as of the date of issuance of this document and are subject to change after such date due to various
circumstances, including socioeconomic circumstances.
1. Characteristics of and Risks Associated with the Oil and Natural Gas Development Business
1) Risk of Failure in Exploration, Development, or Production
Payment of compensation is ordinarily necessary to acquire concession interests. Also, surveying andexploratory drilling expenses (exploration expenses) become necessary at the time of exploration activities forthe purpose of discovering resources. When resources are discovered, it is necessary to further invest in
substantial development expenses according to various conditions, including the recoverable reserves,development costs, and details of agreements with oil-producing countries.
There is, however, no guarantee of discovering resources on a scale that makes possible development andproduction, the probability of such discoveries has considerably lessened despite various technologicaladvances in recent years, and even when resources are discovered the scale of deposits does not necessarily
make commercial production possible. For this reason, the INPEX Holdings Group conservatively recognizes
expenses related to exploration investment, maintaining financial soundness by booking 100% as expenses in
consolidated accounts in the case of concession agreements（including mining rights in Japan as well as permits,
license and lease in overseas）and by booking 100% of exploration project investment as reserves in the case of
production sharing agreements. In addition, if there are impossibilities of recovery of development investment
in a project, we also book corresponding amount of development expenses as reserves in view of thecircumstances in each project.
To increase owned recoverable reserves and production volume, the INPEX Holdings Group always showsinterest in promising properties and plans to continue to invest in properties. At the same time, we invest in
development, including the acquisition of interests in discovered undeveloped fields and producing fields, so as
to maintain overall balance of assets at the exploration, development, and production stages.
Although exploration investment and development investment are necessary to secure the owned reserves
essential to the INPEX Holdings Group’s future sustained business development, each type of investment
involves technological and economic risks, and failed exploration or development investment could have an
adverse affect on the INPEX Holdings Group’s results of operations.
2) Oil, Condensate, LPG and Natural Gas Reserves①Proved Reserves―9―The Company commissioned DeGolyer and MacNaughton, an independent oil engineering company of theUnited States, to assess the proved reserves of the INPEX Holdings Group (the Company and its consolidated
subsidiaries and equity-method affiliates). The definition of “proved reserves” evaluated by DeGolyer and
MacNaughton is in accordance with United States Securities and Exchange Commission (SEC) Regulation S-X
Rule 4-10, which is widely known among U.S. investors: Proved oil and gas reserves are the estimatedquantities of oil/gas which can be recovered with reasonable certainty in future years under current economic
and operational conditions based on geological and engineering data. The SEC rule separates proved reserves
into two categories: proved developed reserves which can be recovered by existing wells and infrastructure, andproved undeveloped reserves which require future development of wells and infrastructure to be recovered.
For reserves to be classified as proved reserves, the SEC rule requires a market and means of economical
production, processing, and shipping to exist already or to become available in the near future. Thus, among thevarious definitions of reserves used in the oil and gas industry, this definition is widely recognized to provide
conservative numerical values. However, it is necessary to bear in mind that even though such numerical values
are conservative values, and the reserves could vary according to not only production, but also factors including
oil and gas prices, invested capital, and the amounts of invested capital recovered and compensation according
to contract terms and conditions, and also the proved reserves are not concept guaranteeing that during the future
production period the production of all proved reserves is possible.
The proved reserves of crude oil, condensate, LPG and natural gas of the INPEX Holdings Group (the Company
and its consolidated subsidiaries and equity-method affiliates) as of March 31, 2006, were as follows.

Oil, Condensate andLPG(MMbbls)
1,054

Natural Gas(BCF)（Reference）
Oil Equivalent(MMBOE)
1,571

INPEX CORPORATION’s
3,103
Group
TEIKOKU Oil’s Group
36
1,006
204
INPEX Holdings’ Group
1,090
4,109
1,775
Total
Note :
1 Reserves that is under the process of government approval for interests transfer and assets
DeGolyer and MacNaughton did not evaluate are not included
2 INPEX Holdings’ Group Total is simple sum of the amounts of INPEX CORPORATION’s
Group and TEIKOKU Oil’s Group.
3 BOE means barrels of oil equivalent.
②Probable Reserves
In addition to the assessment of proved reserves on the basis of the SEC rule, the INPEX Holdings Group
commissioned DeGolyer and MacNaughton, an independent oil engineering company of the United States, toassess its probable reserves on the basis of guideline which was jointly established by two academic societies:
the Society of Petroleum Engineers (SPE) and the World Petroleum Congress (WPC). The definition of probablereserves is in accordance with the guideline of the SPE and WPC. Probable reserves are those unproved reserves
which analysis of geological and engineering data suggests are more likely than not to be recoverable. When
probabilistic methods are used to calculate probable reserves, it is necessary that there be at least a 50%
probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probablereserves. The reserves could vary according to not only production, but also factors including oil and gas prices,
invested capital, and the amounts of invested capital recovered and compensation according to contract terms
and conditions, and the reserves could increase or decrease as a result. The difference between probable reserves
and proved reserves based on the SEC rule is whether at the time of reserves assessment it is recognized that oilor gas can be recovered in the future with high certainty. Probable reserves will be upgraded to proved reserveswith the addition of new technical data, under different economic conditions, and with advances in operational
conditions. Accordingly, probable reserves are unproved reserves that do not fall under the category of proved
reserves, and there is no guarantee that the entire amount of probable reserves will actually be developed andproduced in the future.
The probable reserves of crude oil, condensate, and natural gas of the INPEX Holdings Group (the Company
and its consolidated subsidiaries and equity-method affiliates) as of March 31, 2006, were as follows.
― 10 ―

Although a gas and condensate structure has been discovered at the WA-285-P Block off the coast of Western
Australia and a gas structure has been discovered in the Masela Block in the Timor Sea off the coast of Indonesia,
both of which are properties in which the INPEX Holdings Group holds interest, plans to assess and develop
reserves for both properties are currently under consideration, and at this time reserves in these properties are notincluded in either proved reserves or probable reserves. It is possible that those reserves will be included inproved reserves or probable reserves in the future at the stage when specific development plans have been
decided and a gas sales plan is certain.
Oil, Condensate andLPG(MMbbls)
1,481

Natural Gas(BCF)（Reference）
Oil Equivalent(MMBOE)
1,827

INPEX CORPORATION’s
2,074
Group
TEIKOKU Oil’s Group
12
250
54
INPEX Holdings’ Group
1,493
2,324
1,881
Total
（注）1 Reserves that is under the process of government approval for interests transfer and assets DeGolyer
and MacNaughton did not evaluate are not included
2 INPEX Holdings’ Group Total is simple sum of the amounts of INPEX CORPORATION’s Groupand TEIKOKU Oil’s Group.
3 BOE means barrels of oil equivalent.
③Possibility of Change in Reserves
The assessment of reserves takes the form of numerical values assessed on the basis of geological andengineering data from oil and gas strata available at the time of the assessment, the maturity of development
plans, market conditions, and other factors. The assessment could be reviewed in the future on the basis of newly
obtained geological and engineering data as production and operation progresses, and the reserves could
increase or decrease as a result. Also, with regard to reserves based on production sharing agreements, quantities
calculated on the basis of economic interests in those agreements could vary not only according to production,
but also according to factors including oil and gas prices, invested capital, and the amounts of invested capital
recovered and compensation according to contract terms and conditions, and the reserves could increase or
decrease as a result. In this way, the assessed values of reserves could change greatly according to various data,assumptions, and other factors.
3) The period from exploration to sales is highly capital intensive and funds cannot be recouped for a long time
Considerable expenses and time are required for exploration activities. Even when promising resources are
discovered through exploration, substantial expenses including production facilities construction costs and an
extended period of time are necessary at the development stage leading up to production. For this reason, a long
period of ten years or more is required from the time of exploration and development investment until therecovery of funds through production and sales. Following the discovery of resources, in the development
process leading up to production and the commencement of sales the occurrence of events such as delay ofdevelopment schedule or the loss of the economic viability of the properties in question due to factors such as
unanticipated problems related to geological conditions or fluctuations in the price of oil or gas, fluctuations inforeign exchange rates, or other changes in the socioeconomic environment including escalating price ofequipment and materials could have an adverse affect on the INPEX Holdings Group’s results of operations.
4) Operatorship
In the oil and natural gas development business, companies frequently form business partnerships for the
purpose of distribution of risk and financial burden. In such partnerships, one of the companies becomes anoperator that performs the actual work and bears the responsibility for operation on behalf of the partners. The
companies other than the operator, in the capacity of non-operators, participate in the business by providing apredetermined amount of funds and either carefully examining the exploration and development plan devised
and implemented by the operator or participating in some operations.
INPEX Holdings Inc. is a joint holding company established by INPEX CORPORATION and Teikoku Oil Co.,Ltd on April 3, 2006 through stock transfer of. Owing to its historical experience of having done business as a
non-operator, primarily for the Offshore Mahakam Block off the coast of the Republic of Indonesia, the INPEX― 11 ―

CORPORATION Group currently entrusts the greater portion of the operation of the oil and gas fields in which
it currently has interests to international oil majors and other third-party operators. At the same time, however,
we have accumulated expertise as an operator and enhanced our technological capabilities by having
successfully engaged in exploration projects as an operator for the Masela Block in Indonesia and the WA-285-P
Block in the Commonwealth of Australia and by having absorbed Japan Oil Development Co., Ltd., which has
experience in operation. On the other hand, Teikoku Oil Co., Ltd. has a long experience as operator in domestic
fields and overseas fields such as Venezuela and other countries and has high technical capability and know-how
based on such operational experiences.
INPEX Holdings Group will plan to execute operator projects while taking into consideration our businessresources and the balance between operator and non-operator projects based on the technical capability
considerably enhanced by the business integration. We believe that by engaging the services of specialty
subcontractors and highly experienced external consultants, a practice similar to that engaged in by foreign oil
companies including the majors, it will be possible to execute business appropriately as an operator.
Engaging in project coordination as an operator will contribute to the expansion of concession interest
acquisition opportunities through enhancement of technological capabilities and greater presence inoil-producing countries and the industry. At the same time, however, risks such as constraints on the recruitmentof personnel who have specialized operations skills and a relative increase in financial burden exist. Inability tocope appropriately with such risks in the capacity of an operator could have an adverse affect on the INPEX
Holdings Group’s results of operations.
5) Partnership
In the oil and natural gas development business, Japanese and foreign companies compete to acquire concessioninterests in negotiations or tenders with oil producing countries. On the other hand, the previously mentioned
partnerships in which several companies engage in joint business for the purpose of diversification of risk andfinancial burden are increasing in number. In such cases, the partners generally enter into a joint operating
agreement among themselves to decide the decision-making procedure for execution of the partnership’s joint
business or to decide on an operator to conduct business on their behalf. As a company that is a partner in one
property in which the INPEX Holdings Group is engaged in joint business may become a competitor in theacquisition of other property rights, even though the relationship with the partner may be good.
At times joint operation agreements contain preemption rights provisions. When a joint operation agreement
contains such a provision, in the event that the owner of a working interest attempts to transfer its working
interest to a third party, the partners may claim the right to purchase the working interest on the same terms andconditions as those agreed with the third party. Furthermore, although preemption rights provisions customarily
apply not only to the direct transfer of working interests but also some joint operating agreements containpreemption rights provisions stipulating that in certain cases even the issuance or transfer of shares in the ownerof the working interest or its parent company (including parent company of the parent company, same meaning
below) triggers preemption rights. With respect to the joint operating agreements with preemption rights
provisions to which the INPEX Holdings Group is a party, we have determined that there are no transactions inwhich we are involved for which the preemption rights of partners are exercisable. It is possible, however, that incases where we acquire a partner’s working interest, shares of common stock of a project company that directly
holds a working interest, or shares of common stock of its parent company, or where shares of common stock ofsuch project company or shares of common stock of its parent company are transferred or issued to a third party,
or in cases company reorganization, other partners may claim that they are entitled to exercise preemption rights
with respect to that working interest. The raising of such a claim may have a material negative impact on theprice of our common shares. Furthermore, should partners prevail in such a claim, we may not be able to acquire
the working interest as planned or, in the case of a transfer or issue of shares of common stock of a projectcompany through which we hold a working interest or shares of common stock of its parent company, theproject company may be forced to transfer the working interest to those partners.
6) Disaster and Accident Risks
Oil and gas field operation entails the risk of operational accidents, disasters and others occurred in the process
of exploration, development production, transportation and others. Should such an accident, disaster and others
occur, risk is not limited to the occurrence of costs excluding compensation covered by insurance due tofacilities damage, but includes the risk of a major accident involving loss of life, and a cost burden for recovery
or opportunity loss from the interruption of operations could occur.
― 12 ―

With regard to environmental problems, soil contamination, air pollution, and freshwater and seawater pollution
are possible. The INPEX Holdings Group established “Health, Safety and Environment Policy”, and as a matterof course obeys the environmental laws, regulations, and standards of the countries in which we operate andexercises due consideration concerning the environment in the conduct of business based on our independent
guideline. Nevertheless, in the event of an operating accident or disaster that for some reason exerts a deleterious
impact on the environment, a cost burden for recovery or loss from the interruption of operations could occur.
Furthermore, in the event of changes to or the strengthening of the environmental laws, regulations, andstandards of the countries in which we operate, it may be necessary for the INPEX Holdings Group to devise
additional measures, and an associated cost burden could occur.
Although we maintain accident insurance covering the conduct of operations, in any event, should such accident
or disaster be attributable to intention or negligence on the part of the INPEX Holdings Group, the occurrence ofa cost burden could have an adverse affect on financial results. Also, such accident or trouble would result inreceiving administrative punishment or result in damage to the INPEX Holdings Group’s credibility andreputation as an oil and gas field development company and could have an adverse affect on future businessactivities.
2. The Affect of Fluctuations in Crude Oil Prices, Natural Gas Prices, Foreign Exchange, and Interest Rates on
Financial Results
1) The Affect of Fluctuations in Crude Oil Prices and Natural Gas Prices on Financial Results
Crude oil prices and large portion of natural gas prices in overseas businesses are determined according tointernational market conditions, and those prices fluctuate markedly in response to the influence of global or
local supply and demand. The INPEX Holdings Group’s sales and profits are subject to the effects of such pricefluctuations. Those effects are highly complex and are caused by the following factors.
①Although large portion of natural gas selling prices in overseas businesses are linked to crude oil pries, they
are not in direct proportion to crude oil prices.
②Because sales and profits are determined on the basis of crude oil prices and natural gas prices at the time sales
are booked, actual crude oil transaction prices and the average oil price during the accounting period do notnecessarily correspond. For the domestic natural gas businesses, large portion of sales prices are fixed prices
based on one-year contracts in our fiscal year. Decline of competitive energy prices such as LNG prices could
be pressure of price cutting on our natural gas prices and could have an adverse affect on the INPEX HoldingsGroup’s results of operations.
2) The Affect of Fluctuations in Exchange Rates on Financial Results
As the most of INPEX Holdings Group’s business is exploration and development operations conducted
overseas, associated revenues (sales) and expenditures (cost) are denominated in foreign currencies, and profit
and loss is subject to the effects of the foreign exchange market. At times of yen appreciation, yen-denominatedsales and profits decrease. Conversely, at times of yen depreciation, yen-denominated sales and profits increase.
On the other hand, when borrowing necessary funds, the Company borrows in foreign currencies. At times of
yen appreciation, a foreign exchange gain on foreign-currency denominated borrowings is realized as a result offiscal year-end conversion; at times of yen depreciation a foreign exchange loss is incurred. For this reason, theexchange risk associated with the above business is diminished and the impact of fluctuations in exchange rates
on profit and loss tends to be mitigated.
3) The Affect of Fluctuations in Interest Rates on Financial Results
The INPEX Holdings Group raises a portion of the funds necessary for exploration and development operations
by means of borrowings. Large portion of those borrowings are variable-rate, long-term borrowings based on
the U.S. dollar six months LIBOR rate. Accordingly, the Company’s profits are subject to the influence offluctuations in U.S. dollar interest rates.
3. Overseas Business Activities and Country Risk
The INPEX Holdings Group engages in large number of oil and natural gas development overseas. Because the
INPEX Holdings Group’s business activities, including the acquisition of property interests, is conducted on thebasis of agreements with the governments of oil-producing countries and other entities, change in the political,
economic, and social circumstances in those oil-producing countries or neighboring countries (including
government involvement, stage of economic development, economic growth rate, capital reinvestment, resource
allocation, government control of foreign exchange or foreign remittances, and the international balance of
payments), the application of OPEC production restrictions in OPEC member countries or change in the legal
systems of those countries (including the establishment or abolition of laws or regulations and changes in their― 13 ―

interpretation or enforcement) could have a significant impact on the INPEX Holdings Group’s business or
results of operations excluding compensation covered by insurance.
4. Reliance on Specific Geographical Areas or Properties
1) Production Volume
The INPEX Holdings Group engages in stable production of crude oil and natural gas in the Offshore Mahakam
Block (including the Attaka Unit) off the coast of Indonesia, the ADMA Block in the United Arab Emirates andMinami Nagaoka Gas Field in Japan. In the six month ended September 30, 2006, the Asia and Oceania regions
including Japan, the Group’s core geographical business area, accounted for about 51% of the INPEX HoldingsGroup’s production volume, and the Middle East accounts for about 35%.
Although heretofore the INPEX CORPORATION Group has done business with Indonesia and Australia ascore geographical business areas and targeted geographical areas including the Middle East and the Caspian Sea
coastal area. On the other hand, Teikoku Oil Group has done business domestic natural gas business centered on
Minami Nagaoka Gas Field and overseas business in Latin America and others. We made better balanced
portfolio possible through the business integration and plan to continue to strive to construct a moregeographically balanced global portfolio.
However, the current state of affairs is such that the INPEX Holdings Group relies heavily on specificgeographical areas and properties for its production volume, and the occurrence in these properties of an
operational problem or difficulty could have an adverse affect on the Group’s results of operations.
2) Principal Business Areas and Contract Expiration Dates
In the agreements that govern property interests, prerequisites for the INPEX Holdings Group’s overseas
business activities, expiration dates are customarily stipulated. Although March 30, 1997, was the initial
contract expiration date in the production sharing agreement for the Offshore Mahakam Block off the coast ofIndonesia, the INPEX Holdings Group’s principal geographical business area, an extension was approved in
1991, and the current expiration date is December 31, 2017. On the basis of the concession agreement for the
ADMA Block, the concession expiration date is March 8, 2018. Although the INPEX Holdings Group plans tomake efforts together with partners to further extend these agreements, inability to re-extend the agreements or
unfavorable contract terms and conditions at the time of re-extension could have an adverse affect on theGroup’s business or results of operations.
Even should the agreements be re-extended, we anticipate that remaining recoverable reserves will havedecreased at the time of re-extension. Although the INPEX Holdings Group is striving to acquire interests thatcan substitute for these properties, failure to acquire properties to fully substitute for these properties could havean adverse affect on the Group’s results of operations. Also, as a rule, when there has been a major breach ofcontract on the part of one party, it is customary for the other party to have the right to cancel the agreement
before the expiration date. The agreements for properties in these principal geographical business areas containsimilar provisions. The INPEX Holdings Group has never experienced early cancellation of an agreement due tobreach of contract and we do not anticipate such an occurrence in the future. Nevertheless, a major breach ofcontract on the part of a party to an agreement could result in cancellation of an agreement before the expiration
date. And in the overseas natural gas development and production activities, in many cases we are selling andsupplying natural gas based on long term sales and supply contracts in which expiration dates are stipulated. We
plan to make efforts to extend or re-extend with partners by the expiration date. Nevertheless, inability to extend
the contracts or in the cases that extension are made but its sales and supply volumes are reduced, could have an
adverse affect on the Group’s business or results of operations.
5. Production Sharing Agreements
1) Contents of Production Sharing Agreements
INPEX Holdings Group has entered into production sharing agreements with countries includes Indonesia andCaspian Sea coastal area. In the case of the Republic of Indonesia, where the INPEX Holdings Group hasentered into many agreements, by entering into production sharing agreements with Pertamina, a company that
holds mining rights, the INPEX Holdings Group has acquired rights to explore and develop oil and natural gas inthose properties. Owing to the enactment of a new law that went into effect on November 23, 2001, Pertamina’s
exclusive ownership of property interests was dissolved and it was decided that agreements would be concluded
with BPMIGAS (a government enforcement body that supervises and regulates oil and natural gas upstream
operations), a government organization directly under the control of the president of Indonesia. We are engaged
in procedures to convert existing agreements so as to make BPMIGA the Indonesian party to the agreements.
― 14 ―

Production sharing agreements are agreements by which one or several oil and natural gas development
companies serve as contractors that undertake at their own expense exploration and development work from thegovernments of oil-producing companies or national oil companies and as cost recovery and compensation
receive production from the projects. That is to say, when exploration and development work results in the
production of oil or natural gas, the contractors recover the exploration and development costs they incurred bymeans of a share of the production. The remaining production (crude oil and gas) is allocated among theoil-producing country or national oil company and the contractors according to fixed allocation ratios. (Thecontactors’ share of production after cost recovery is called “profit crude oil and gas.” In the case of natural gas,
as sales are conducted by the Republic of Indonesia, the contractors receive cost recovery and profit gas in theform of cash.) On the other hand, in cases when exploration fails and production is not realized, the contractors
cannot recover their invested funds.
2) Accounting Treatment of Production Sharing Agreements
When the INPEX Holdings Group owns property interest under production sharing agreements, as mentioned
above, in the role of contractor it invests technology and funds in the exploration and development of theproperty, recovers the invested operation costs from the production produced, and as compensation receives ashare of the remaining production after recovery of operation costs. Operation costs invested on the basis ofproduction sharing agreements are recorded on the balance sheet as assets for which future recovery is
anticipated under the balance sheet item “Recoverable accounts under production sharing.” After the start ofproduction, operation cost amounts recovered on the basis of those agreements are deducted from this balance
sheet item.
As production received under production sharing agreements is divided into the operation cost recovery portionand the compensation portion, the method of calculating cost of sales is also distinctive. That is to say, the fullamount of production received is temporarily charged to cost of sales as the cost of received production,subsequently the amount of the compensation portion is calculated after the fact, and this amount is booked as an
adjustment item to cost of sales (“Free of charge production allocated”). Consequently, only the operation cost
recovery portion of production after deduction of the compensation portion is booked as cost of sales.
6. Natural Gas Business in Japan
1) Fluctuations in natural gas demand in Japan
Demand of natural gas in domestic market which is our main products in our domestic business could decrease
according to climate condition as for consumer use which is susceptible to air and water temperature, and by
weakness of price competitiveness accompanied by substantial drop of crude oil price as for industrial use, andcould have an adverse affect on the Group’s results of operations.
2) Change in natural gas market circumstances according to easing of regulation in Japan
Market competition has been intensive by competition beyond segments such as electricity, natural gas, oil andother energy according to easing of regulation in domestic energy market as well as entering into the market
from different industries. Our group’s Teikoku Oil Co., Ltd. has been obligated as “Gas Pipeline Career”
according to enforcement of “Revision to Gas Industry Law”, competitiveness become more intensive. For thisreason, price competition could be more intense, and other competition could be expected in maintaining
existing customers as well as new customers and such change of market circumstances could have an adverse
affect on the Group’s results of operations.
7. Azadegan Oil Field Development Project
1) Overview of the Azadegan Oil Field Development Project
On February 18, 2004, the Company signed a service contract with the National Iranian Oil Company and its
subsidiary Naftiran Intertrade Co. Ltd. (NICO) for the integrated appraisal and development operations of the
Azadegan Oil Field in the Islamic Republic of Iran. The Azadegan Oil Field, located about 80 kilometers southof Ahvaz, the capital of Khuzestan Province in Iran, was discovered in 1999. Although various preliminary work
preceding full-scale development investment such as mine clearance has been conducted by Iranian side, due to
unexpected delay of the demining operation and significant change in economical environment, we mutuallyagreed with Iran in principle on the following operating framework of appraisal and development operations of
the Azadegan Oil Field, and we continue discussions in details based on the agreement.
① Our subsidiary, Azadegan Petroleum Development, Ltd. will reduce its participating interest from 75%
to 10% and remains as a contractor under the service contract (Buy-buck Contract) and support
continuously development of the Azadegan Oil Field.
― 15 ―

② Operatorship will be transferred to NICO with the change of participating interest.
At the time of signing of the contract plan of the Azadegan Oil Field Development Project is divided into twostages. In the first development stage it was planned to begin test production of 50,000 barrels per day from 2008
or 2009 and to produce 150,000 barrels per day. In the event that the project shifts to the second development
stage, additional production of 110,000 barrels per day, and total production is expected to reach 260,000 barrels
per day. However, it is expected that the timing of production start of the first development phase will be delay
because of full-scale development investment has not been executed due to delay of preliminary work and thechange of operating framework. Although the basic agreement stated above could reduce investment burden andrisk, as is the case with other oil and natural gas development projects, there is no guarantee that this project will
be executed according to plan or that the investment can be recovered.
2) Impact of the Iran Sanctions Act 1996 of the United States
The Iran Sanctions Act 1996 (former The Iran and Libya Sanctions Act 1996) is a law of the United States
enacted for the purpose of deterring the acquisition of weapons of mass destruction and support for international
terrorism on the part of Iran. The law stipulates that two or more of the six sanctions below be applied to any
person, without distinction between U.S. and non-U.S. entities, who has made an investment of U.S.$20 million
or more in any twelve-month period and who the president of the United States determines has “directly andsignificantly contributed to the enhancement of Iran's ability to develop petroleum resources.”①The prohibition of export assistance to any sanctioned person from the Export-Import Bank of the UnitedStates②The prohibition of the issuance of export licenses to any sanctioned person by the U.S. government③The prohibition of loans of U.S.$10 million or more in any twelve-month period to any sanctioned person by
U.S. financial institutions④If a sanctioned person is a financial institution, the prohibition of designation as a primary dealer of U.S.
government bonds⑤The prohibition of procurement of goods or services from any sanctioned person on the part of the U.S.
government⑥The imposition of import restrictions with respect to any sanctioned person on the basis of the International
Emergency Economic Powers Act of the United States
Sanctions under this law have never been applied to any non-U.S. oil company that has investments in oil
resource development in Iran. Also, although extraterritorial application of the laws of a country on othercountries is not internationally recognized, it is not possible at this time to predict whether in the future the U.S.
government will apply the act to the Azadegan Oil Field Development Project. In the event that the U.S.
government decided to apply sanctions under the act to this project, this could have a direct adverse impact on
the project and the implementation of the Company’s other projects.
8. Japan Oil Development Co., Ltd. (JODCO)The preferential treatment in royalties, taxes, and other financial conditions that JODCO had in the past received
from Abu Dhabi Emirate of the United Arab Emirates with respect to the Upper Zakum Oil Field has been
discontinued in stages from 2004 to 2006 and was changed to a fixed margin scheme form January 1, 2006.
Although the Company believes that it can expect to record a certain level of profits each fiscal year from JODCO
according to the production volume even after the discontinuation of preferential treatment, JODCO’s profit will
decrease compared to before the discontinuation of preferential treatment.
9. Relationship with the Government of Japan
1) The Company’s Relationship with the Government of Japan
Although the government of Japan (the Minister of Economy, Trade and Industry) holds the common shares of
the Company’s stock (29.35% of common shares issued) and a special class share as of the date of issuance of
this document, the Company has autonomously exercised business judgment as a private corporation and there
is no control relationship by the dispatch of officers or other means between the Company and the governmentof Japan or JOGMEC. We believe that no such relationship will occur in the future.
Furthermore, there is no concurrent posting or secondment to the Company of officers or employees of thegovernment of Japan.
3) Ownership and Sale of the Company’s Shares by the Minister of Economy, Trade and Industry
The Minister of Economy, Trade and Industry holds about 29.35% of the shares of the common stock issued by― 16 ―

the Company. For this reason, it is possible that in the future the Minister of Economy, Trade and Industry, in
accordance with the purport of the above Report, may sell off the Company’s shares in Japan or overseas in an
additional offering after listing or by other means. This could have an impact on the market price of theCompany’s shares.
The Minister of Economy, Trade and Industry holds one share of the Company’s special class share. The
Minister of Economy, Trade and Industry, the holder of the special class share, has veto rights over certain
resolutions of the Company’s general shareholders’ meetings and meetings of the Board of Directors. For details
on the special class share, refer to the section “11 Special-Class Share” below.
10. Treatment of share of the Group’ project company owned by Japanese government and JOGMEC
1) Treatment of share of the Group’ project company owned by JNOCWith regard to the liquidation and disposition of the oil resource development-related assets owned by JNOC,
which was dissolved on April 1, 2005, the Policies Regarding the Disposal of Development-Related Assets Heldby Japan National Oil Corporation (hereinafter the “Report”) was announced on March 18, 2003 by the Japan
National Oil Corporation Asset Evaluation and Liquidation Deliberation Subcommittee of the Advisory
Committee on Energy and Natural Resources, an advisory body of the Ministry of Economy and Industry.
In the Report, our group company, INPEX CORPORATION, was identified as a company that should comprisepart of a core enterprise and is expected to play a role in the efficient realization of a stable supply of energy forJapan through involvement in a national flag company. In response to the Report, through involvement in anational flag company INPEX CORPORATION has sought to promote the efficient realization of a stablesupply of energy for Japan while taking advantage of synergy with active resource diplomacy on the part of thegovernment of Japan and obtaining strategic support from JOGMEC and has aimed to maximize shareholder
value by engaging in highly transparent and efficient business operations.
As a result, with regard to integration by means of transfer of shares held by JNOC proposed in the Report,
INPEX CORPORATION and JNOC reached agreement on details including the project companies subject tothe integration and shareholding ratios by way of the Basic Agreement Concerning the Integration of Assets
Held by Japan National Oil Corporation into INPEX CORPORATION of February 5, 2004 (hereinafter the“Basic Agreement”). On March 29, 2004, the Company and JNOC entered into related contracts including the
Basic Contract Concerning the Integration of Assets Held by Japan National Oil Corporation into INPEXCORPORATION (hereinafter the “Basic Contract”).
INPEX CORPORATION accomplished integrations of Japan Oil Development Co., Ltd. (JODCO), INPEXJava Ltd. (hereinafter “INPEX Java”) and INPEX ABK, Ltd. (hereinafter “INPEX ABK”) which is three of four
companies covered by the Basic Agreement. INPEX Southwest Caspian Sea Ltd. (hereinafter “INPEXSouthwest Caspian”) would become a wholly-owned subsidiary of the Company by means of a exchange ofstock and procedures were undertaken, the share exchange contract was invalidated owing to failure toaccomplish the terms and conditions of the share exchange contract and the planned share exchange wascancelled and, attendant on the dissolution of JNOC on April 1, 2005, the Minister of Economy, Trade andIndustry succeeded to the INPEX Southwest Caspian shares held by JNOC. The future treatment of these sharesis undecided and acquisition of INPEX Southwest Caspian shares could be unavailable.
The treatment of Sakhalin Oil and Gas Development Co., Ltd., INPEX Offshore North Campos, Ltd., INPEX
North Makassar, Ltd., INPEX Masela, Ltd., and INPEX North Caspian Sea, Ltd. was agreed between INPEXCORPORATION and JNOC in the Basic Agreement of February 5, 2004. Regarding the treatment of shares of
Sakhalin Oil and Gas Development, refer to the section “2) Treatment of shares of Sakhalin Oil and Gas
Development owned by Japanese Government” below. With regard to the transfer to INPEX CORPORATIONof the shares in the above project companies other than SODECO, it was decided that the shares are to betransferred for cash compensation as soon as prerequisites such as the consents of the oil-producing country andjoint venture partners and the possibility of appropriate asset evaluations are in place. However, the transfer ofshares in the above companies has not been decided and the shares in the above project companies weresucceeded to the Japan Oil Gas and Metals National Corporation (hereinafter “JOGMEC”) on the dissolution of― 17 ―JNOC on April 1, 2005, except shares related to INPEX North Makassar, Ltd. to which the Minister of Economy,
Trade and Industry succeeded. JOGMEC states on their “the medium-term objective” and “the medium-termplan” that the shares succeeded by JNOC will be disposed through the appropriate manner, however, the timing
and manners of the disposal has not been decided and it is possible that INPEX CORPORATION will be unable
to acquire the shares.
2) Treatment of the shares of Sakhalin Oil and Gas Development owned by Japanese Government
The Minister of Economy, Trade and Industry owns 50% shares of Sakhalin Oil and Gas Development(SODECO). SODECO was established in 1995 to engage in an oil and natural gas exploration anddevelopment project located at the northeast continental shelf off Sakhalin Island. SODECO owns a 30.0%
interest in the Sakhalin-1 Project, of which ExxonMobil of the Unites States is the operator. This project iscurrently in Phase 1 development operations for the purpose of pre-production of crude oil and natural gas, andthe production was started on October, 2005. Furthermore, there is a plan for additional development
operations (Phase 2) for the purpose of the full-scale production of natural gas. INPEX CORPORATION holds
about 4.3% and TEIKOKU Oil holds about 1.44%of SODECO shares issued and outstanding respectively.
In the previously mentioned Report, SODECO, along with INPEX CORPORATION and JODCO, has been
identified as a company that should comprise part of a core enterprise for Japan’s oil and natural gas
development industry. In accordance with the Report, it is assumed that private-sector shareholders, including
INPEX CORPORATION will acquire shares of SODECO issued and outstanding to which the Minister of
Economy, Trade and Industry succeeded that were previously held by JNOC (50.0%). INPEXCORPORATION plans to hold a maximum of 33% of the SODECO shares issued and outstanding of common
stock. In the event that the consent of SODECO’s joint-venture partners, the relevant Russian government
entity, or other parties is necessary for the acquisition of the shares, obtaining the consent is a prerequisite foracquisition. In addition, it will be necessary to reach agreement on the shareholder composition for SODECO,
the share transfer price, and other matters.
In the event that the additional acquisition of the SODECO shares is realized, the INPEX Holdings Group willhold a substantial ownership interest in oil and natural gas assets in Russia, as well as in Asia and Oceania, theMiddle East, Caspian Sea coastal area and other regions, and we expect the acquisition to contribute to theachievement of a more balanced overseas asset portfolio for the INPEX Holdings Group.
However, at this time it is undecided whether agreement concerning acquisition of the shares with the Ministerof Economy, Trade and Industry will be reached as anticipated and whether the acquisition of the shares from
the Minister of Economy, Trade and Industry will be realized. Also, even in the event that the acquisition isrealized, the specifics and time of acquisition are undecided and the acquisition by INPEX CORPORATION
could be unavailable.
11. Special-Class Share
1) Overview of the Special-Class Share① Reason for the Introduction
The Company was established as the holding company through the stock transfer between INPEXCORPORATION and Teikoku Oil Co., Ltd. on April 3, 2006. Along with this, classified share originally issued
by INPEX CORPORATION was transferred and at the same time the Company issued same contents of aclassified share (hereinafter the “special-class share”) to the Minister of Economy, Trade and Industry. The
classified share originally issued by INPEX CORPORATION was minimally required measure to eliminate thepossibility of the management of the core enterprise being subject to control by foreign capital while notunreasonably impeding the efficiency and flexibility of management of the core enterprise based on the concept
in the Report discussed in the section “Treatment of share of the Group’ project company owned by Japanese
government and JOGMEC” above that INPEX CORPORATION is identified as a company that should
comprise part of a core enterprise for Japan’s oil and natural gas development industry and is expected to play arole in the efficient realization of a stable supply of energy for Japan through involvement in a national flag
company. From this perspective and on the basis of the Report, the Company issued the special class sharebecause it can be considered an effective means of preventing risks such as a speculative hostile takeover.
② Shareholders’ Meeting Resolutions, Dividends, Distribution of Residual Assets, and Redemption
Unless otherwise provided by laws or ordinances, the special class share does not have any voting rights at theCompany’s general shareholders’ meetings. The special class share will receive the same amount of dividends,
interim dividends, and distributions of residual assets as common stock. The special-class share will be
redeemed by resolution of the Board of Directors of the Company if the holder of special class share requests
redemption or the special-class share is transferred to a party other than the government of Japan or an
independent administrative body that is fully funded by the government of Japan.
― 18 ―

③ Relationship between Veto Rights in the Articles of Incorporation and the Guidelines
As mentioned below, as provided in the Company’s Articles of Incorporation, the special-class share is vested
with veto rights over resolutions of the Company’s general shareholders’ meetings and other matters. The
Minister of Economy, Trade and Industry, holder of the special-class share, has established guidelines to serve as
criteria for the exercise of the veto rights. For contents the guidelines, refer to the section “2) Veto Rights of theHolder of Special-Class Share and Guidelines for the Exercise of the Veto Rights ② Criteria for the Exercise of
Veto Rights Provided in the Guidelines” below.
2) Veto Rights of the Holder of Special-Class Share and Guidelines for the Exercise of the Veto Rights① Details of Veto Rights in the Articles of Incorporation
The Articles of Incorporation of the Company provide that an approval resolution of the meeting of the holder of
special-class share is necessary in addition to resolutions of the Company’s general shareholders’ meetings andresolutions of meetings of the Board of Directors for the decision on certain important matters in connection
with management of the Company. Accordingly, the Minister of Economy, Trade and Industry, the holder of thespecial class share, has veto rights over these important matters as the holder of the special-class share. Mattersover which the holder of the special class share could exercise veto rights are as follows.
(a) Appointment and Removal of Directors
A resolution of a meeting of the holder of the special class share is required for the appointment or removal ofa director of the Company if, at the time of a resolution of a meeting of the common shareholders of theCompany for the election or removal of such director, 20% or more of the voting rights of such shareholdersof common shares is held by a single shareholder other than the government of Japan, JNOC, or an
independent administrative body that is fully funded by the government of Japan (hereinafter “Public Entity”)
or jointly held by such single shareholder and a “joint shareholder” as defined in the Articles of Incorporationof the Company (such independent shareholder or joint shareholder shall hereinafter be referred to as a“Non-Public Entity”) (provided, however, that, in accordance with (d) below, this does not apply to any
appointment or removal of a director stipulated in a contract concerning a merger, share exchange or sharetransfer set out in (d) below).
The Articles of Incorporation of the Company contains provisions that stipulate whether, in a given instance,a Non-Public Entity is deemed to hold or not hold 20% or more of the voting rights of the shareholders ofcommon stock of the Company.
(b) Disposition of Material Assets
A resolution of a meeting of the holder of the special class share is required for the disposition of any material
assets of the Company or the Company’s subsidiaries. (The term “disposition of material assets” means any
disposition comprising 20% or more of the total assets set out in the most recent audited consolidated
financial statements of the Company or where a sale of such assets is 20% or more of the total consolidated
sales set out in the most recent consolidated financial statements of the Company).
(c) Amendments to the Articles of Incorporation
A resolution of a meeting of the holder of the special class share is required for any amendment to the Articles
of Incorporation concerning (i) change in the objectives of the Company or (ii) granting voting rights to any
shares other than the common shares of the Company (except for the voting rights at meetings of the holder ofthe special class share already granted to the special class share).
(d) Integration
A resolution of a meeting of the holder of the special class share is required for (i) any merger where theCompany becomes the dissolved company, or any merger where the Company becomes the surviving
company and 20% or more of the voting rights of all the shareholders of common shares of the Company areheld by a Non-Public Entity at the time such merger is complete, (ii) any share exchange where the Company
becomes a wholly-owned subsidiary, or any share exchange where the Company becomes a parent company
owning 100% of the shares of and 20% or more of the voting rights of all the shareholders of common stock of
the Company are held by a Non-Public Entity at the time such share exchange is complete, or (iii) any sharetransfer where classified stock of the new holding company with the same rights as those held by the holder ofthe special class share of the Company under the Articles of Incorporation of the Company are not granted tothe holder of the special class share of the Company, or any share transfer approved and resolved by a meetingof the common shareholders of the Company where classified stock of the new holding company with the― 19 ―

same rights as those held by the holder of the special class share of the Company under the Articles ofIncorporation of the Company is granted to the holder of special class share of the Company but 20% or moreof the voting rights of all the shareholders of common shares of such new holding company are held by a
Non-Public Entity at the time such share transfer is complete.
With respect to (i) through (iii) above, the Articles of Incorporation of the Company contains provisions that
stipulate whether, in a given instance, a Non-Public Entity is deemed to hold or not hold 20% or more of thevoting rights of all the shareholders of common stock of the Company or the new holding company.
(e) Capital Reduction
A resolution of a meeting of the holder of the special class share is required for any reduction of theCompany’s capital in order to repay funds to shareholders of the Company.
(f) Dissolution
A resolution of a meeting of the holder of the special class share is required for dissolution of the Company byresolution of a meeting of the common shareholders.
② Criteria for the Exercise of Veto Rights Provided in the Guidelines
Guidelines concerning the exercise of the said veto rights have been established in a Ministry of Economy,
Trade and Industry Notice (No. 74, 2006) (hereinafter the “Notice”). The guidelines stipulate the exercise ofveto rights only in the following specific cases.
z When resolutions pertaining to ① (a) Appointment or Removal of Directors and (d) Integration above are notvoted down and it is judged that the probability is high that the Company will engage in managementinconsistent with the role that a core company should perform in the efficient realization of a stable supply ofenergy for Japan.
z When resolutions pertaining to ① (b) Disposition of Material Assets above, in the case that the intended
disposition is that of oil or combustible natural gas exploration or extraction rights or rights similar thereto or ofshares or ownership interest in an INPEX subsidiary whose principal assets are the said rights are not voted
down and it is judged that the probability is high that the Company will engage in management inconsistent
with the role that a core company should perform in the efficient realization of a stable supply of energy forJapan.
z When resolutions pertaining to ① (c) Amendments to the Articles of Incorporation (i) change in theobjectives of the Company, (e) Capital Reduction, or (f) Dissolution above are not voted down and it is judgedthat the probability is high that the Company will engage in management inconsistent with the role that a corecompany should perform in the efficient realization of a stable supply of energy for Japan.
z When resolutions pertaining to① (c) Amendments to the Articles of Incorporation (ii) granting voting rights
to any shares other than the common shares of the Company above are not voted down and could have an effecton the exercise of the voting rights of the special class share.
It is provided that the above guidelines shall not apply in the event that the Ministry of Economy, Trade andIndustry changes the Notice in the light of energy policy.
3) Risk in Connection with the Special Class Share
Although the special class share was issued as a highly transparent, minimally required measure to eliminate thepossibility of management being subject to control by foreign capital while not unreasonably impeding theefficiency and flexibility of management, anticipated risks in connection with the special class share include thefollowing.
① Possibility of Conflict of Interest between National Policy and the Company and Its Common Shareholders
It is conceivable that the Minister of Economy, Trade and Industry could exercise the veto rights in accordancewith the above guidelines provided in the Notice. As the guidelines have been provided from the standpoint of
the efficient realization of a stable supply of energy for Japan, it is possible that the exercise of the veto rights by
the Minister of Economy, Trade and Industry could conflict with the interest of other shareholders who hold theCompany’s common shares. Also, it is possible that the above guidelines could be changed in the light of energy
policy.
② Impact of the Exercise of Veto Rights on the Price of Shares of Common Stock
As mentioned above, as the special class share has the veto rights over certain important matters in connection
with the management of the Company, the actual exercise of the veto rights over a certain matter could have an
impact on the price of the Company’s shares of common stock.
― 20 ―

③ Impact on the Company’s Degree of Freedom in Management and Business Judgment
As the Minister of Economy, Trade and Industry holds the special class share having the previously mentioned
veto rights, the Company needs a resolution of the meeting of the holder of the special class share concerning theabove matters. For this reason, the Company’s degree of freedom in management in those matters is restrictedby the judgment of the Minister of Economy, Trade and Industry. Also, attendant on the need for a resolution of
the meeting of the holder of the special class share concerning the above matters, a certain period of time isrequired for procedures such as the convening and holding of meetings and resolutions and for the processing offormal objections, if necessary.
12. Concurrently Serving Outside Directors
The Company's Board is made up of 16 directors, 4 of whom are outside directors.
As business experts with extensive knowledge and experience in the Company’s business fields, these four
outside directors are asked to express opinions on management of essential the Company’s businesses that
contribute to its development from both specialist and objective perspectives.
Each of these four outside directors serve concurrently as directors of Japan Petroleum Exploration Co., Ltd.,
Mitsubishi Corporation, Mitsui Oil Exploration Co. and Nippon Oil Corporation, which are corporateshareholders of the Company. The business fields of the previously mentioned corporate shareholders include
overseas upstream businesses. Therefore they might compete against the INPEX Holdings Group occasionally.
For this reason, the Company recognizes the need to abide by special corporate governance measures with respect
to the possibility of conflicts of interest. To this end the Company received from each of the Company’s directors,
including outside directors a written undertaking relating to such matters as non-competition practices, proper
treatment for transactions giving rise to a conflict of interest and unauthorized information disclosure. This
reflects the importance of precisely carrying out their duties as directors with a high level of awareness of suchmatters.

― 21 ―

22ファイル名:1115_E_④a連結BS（枠）

更新日時:2/5/2007 7:36:00 PM

Ⅳ Consolidated financial statements(1) Consolidated financial statements
1) Consolidated balance sheet

印刷日時:07/02/05 19:36(Millions of yen)
As of September 30, 2006

Accounts

Amounts

Ratio％(Assets)
ⅠCurrent assets
1 Cash and deposits*22 Accounts receivable-trade
3 Marketable securities
4 Inventories
5 OtherLess allowance for doubtful accounts
Total current assets
Ⅱ Fixed assets
1Tangible fixed assets*1,2(1) Buildings and structures(2) Other
Total tangible fixed assets
2 Intangible assets(1) Goodwill(2) Exploration and development rights(3) Other
Total intangible assets
3 Investments and other assets(1) Investment securities*2(2) Recoverable accounts under production sharing(3) OtherLess allowance for doubtful accounts
Less allowance for recoverable accounts under
production sharing
Less allowance for investments in exploration
Total investments and other assets
Total fixed assets
Total assets

191,414
79,291
84,778
11,93670,333(5)
437,749

28.6

82,422
131,722
214,14414.0

135,582
129,407
6,683
271,67417.7

314,814
308,434
42,346(2,347)(47,611)(8,260)607,375
1,093,194
1,530,943

―22―

39.7
71.4
100.0

23ファイル名:1115_E_④a連結BS（枠）

更新日時:2/5/2007 7:36:00 PM

印刷日時:07/02/05 19:36(Millions of yen)
As of September 30, 2006

Accounts

Amounts

Ratio％(Liabilities)
ⅠCurrent liabilities
1 Accounts payable-trade
2 Short-term loans*23 Income taxes payable
4 Provision for exploration projects
5 Accrued bonuses to officers
6 Other*2
Total current liabilities
ⅡLong-term liabilities
1 Long-term debt
*22 Accrued retirement benefits to employees
3 Accrued retirement benefits to officers
4 Liabilities for site restoration anddecommissioning costs
5 Liabilities for losses on development activities
6 Accrued special repair and maintenance
7 Other*2
Total long-term liabilities
Total liabilities

26,96428,737110,145
7,337
51
86,213
259,449

17.0

237,845
8,651
1,545
11,749(Net assets)
ⅠShareholders’ equity
1 Common stock
2 Capital surplus
3 Retained earnings
4 Treasury stock
Total shareholders’ equity
ⅡValuation, translation adjustments and others
1 Unrealized holding loss on securities
2 Unrealized gain from hedging instruments
3 Translation adjustments
Total valuation, translation adjustments and others
ⅢMinority interests
Total net assets
Total liabilities and net assets

―23―

1,962
169
61,619323,544582,99321.1
38.1

30,000417,514469,703(10,625)
906,592

1.9
27.3
30.7
(0.7)
59.2

(6,125)28
408(5,688)47,045947,949
1,530,943

(0.4)
0.0
0.0
(0.4)
3.1
61.9
100.0

2) Consolidated statement of income(Millions of yen)Accounts

For the six months ended September 30, 2006
Amounts

ⅠNet sales
ⅡCost of sales
Gross profit
ⅢExploration expenses
1 Exploration expenses
2 Exploration subsidies*1
ⅣSelling, general and administrative expenses
Operating income
ⅤOther income
1 Interest income
2 Dividend income
3 Equity in earnings of affiliates
4 Foreign exchange gain
5 Other
Ⅵ Other expenses
1 Interest expense
2 Provision for allowance for recoverable
accounts under production sharing
3 Provision for exploration projects
4 OtherOrdinary income
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Minority interests
Net income

Ratio
500,847
170,329
330,517
9,366
9,429
(63)
22,693
298,457
11,892
6,079
1,191
778
1,473
2,369
16,320
5,906

％
100.0
34.0
66.0
1.9

4.5
59.6
2.4

3.3

1,799
2,672
5,942
294,029
294,029
232,297(8,778)
5,835
64,674

―24―

58.7
58.7

1.2
12.9

更新日時:11/15/2006 6:28:00 PM

ファイル名:1115_E_④c2連結変動計算書（枠）

印刷日時:07/02/05 19:38

3）Consolidated statement of changes in net assets
For the six months ended September 30, 2006
（Millions of yen）
Shareholders’ equity

Balance as of March 31, 2006
Changes during the period
Increase (decrease) due to joint
stock transfer
Cash dividends paid
Bonuses to officers
Net income
Purchase of treasury stock
Disposal of treasury stock
Other changes in items otherthan those in shareholders’equity (net)Total changes during the period
Balance as of September 30, 2006

Common stock

Capital surplus

Retained earnings

Treasury stock

―

―

―

―

Total
shareholders’equity―30,000415,892

415,734(19,641)

841,985(1,338)10,354(10,559)(146)
64,674(1,338)
11,976(10,625)(10,625)

906,592
906,592(10,559)(146)
64,674
1,622

30,00030,000417,514417,514469,703469,703

Valuation, translation adjustments and others

Unrealized
holding loss
on securities
Balance as of March 31, 2006
Changes during the period
Increase (decrease) due to joint
stock transfer
Cash dividends paid
Bonuses to officers
Net income
Purchase of treasury stock
Disposal of treasury stock
Other changes in items otherthan those in shareholders’equity (net)Total changes during the period
Balance as of September 30, 2006

―

Total
Unrealized
valuation, Minority interests Total net assets
gain from Translationtranslation
hedging
adjustments
adjustments
instruments
and others―(5,723)

―

―

―

―

1,117

(4,605)39,921

877,300(10,559)(146)
64,674(1,338)
11,976

(402)

28

(709)

(1,083)

7,124

6,041

(6,125)(6,125)

28
28

408
408

(5,688)(5,688)47,04547,045947,949
947,949―25―4) Consolidated statement of cash flows(Millions of yen)Accounts

For the six months ended
September 30, 2006
Amounts

ⅠCash flows from operating activities
Income before income taxes and minority
interests
Depreciation and amortization

294,029
12,546

Amortization of goodwill
Provision for allowance for recoverable
accounts under production sharing
Provision for exploration projects
Provision for accrued retirement benefits toemployee
Provision for site restoration anddecommissioning costs
Other provisions

3,501

Interest and dividend income(7,271)

Interest expense

5,906

Foreign exchange gain

(670)

Equity in earnings of affiliates

(778)

2,518
3,504
1,124
1,041
(483)

Loss on the sale of investment securities

1,604

Accounts receivable
Recovery of recoverable accounts under
production sharing (capital expenditure)
Recoverable accounts under production
sharing (operating expenditures)
Inventories(7,698)55,848(13,616)(2,489)Accounts payable

4,296

Other

3,468

Subtotal

356,382

Interest and dividends received

7,352

Interest paid
Income taxes paid

(5,446)(206,843)

Net cash provided by operating activities

151,444― 26 ―

(Millions of yen)Accounts

For the six months ended
September 30, 2006
Amounts

ⅡCash flows from investing activities
Increase in time deposits(279)

Decrease in time deposits

1,278

Purchase of marketable securities(149)

Proceeds from sales of marketable securities

13,643Purchase of tangible fixed assets(17,591)

Proceeds from sales of tangible fixed assets

137

Purchase of intangible assets(975)

Purchase of investment securities(47,211)

Proceeds from sales of investment securities
Investment in recoverable accounts under
production sharing (capital expenditures)
Decrease in short-term loans receivable

26,283(55,660)
2,134

Long-term loans made(524)

Collection of long-term loans receivable

529

Other

1,095

Net cash used in investing activities(77,290)

ⅢCash flows from financing activities
Decrease in short-term loans(115)

Proceeds from long-term debt

16,909

Repayment of long-term debt
Proceeds from minority interests for
additional shares
Purchase of treasury stock(7,281)
1,615
(857)

Proceeds from sales of treasury stock

11,549Cash dividends paid

(10,787)

Dividends paid to minority shareholders(81)

Stock transfer payment(867)

Restricted cash deposit(1,240)Net cash provided by financing activities
ⅣEffect of exchange rate changes on cash andcash equivalents
ⅤNet increase in cash and cash equivalents

8,843
1,194
84,192

ⅥCash and cash equivalents at beginning of theperiodⅦCash and cash equivalents at end of the period

151,143
235,335― 27 ―

更新日時:12/5/2006 10:07:00 AM

ファイル名:1115_E_④d連結会計方針(枠）

印刷日時:07/02/05 19:41

Basic of Presenting Consolidated Financial Statements
For the six months ended
September 30, 2006
1.Scope of consolidation
Number of consolidated subsidiaries: 57
Names of major subsidiaries;
INPEX CORPORATION, Teikoku Oil Co., Ltd., Japan Oil Development Co., Ltd., INPEXNatuna, Ltd., INPEX Sahul, Ltd., Teikoku Oil D.R. Congo, Co., Ltd., INPEX Southwest
Caspian Sea, Ltd., INPEX North Caspian Sea, Ltd., INPEX Browse, Ltd., INPEX Masela, Ltd.
During this period:
Number of new companies included in consolidated subsidiaries:

2

Details for the above changes:
INPEX Offshore Northeast Java, Ltd., and Teikoku Oil and Gas Venezuela, C. A. have been
included due to establishment of the companies.

Names of major unconsolidated subsidiaries:
Sakata Natural Gas, Co., Ltd., Teikoku Oil de Burgos, S.A. de C. V.
(Reason for exclusion from consolidation)
Those companies are not consolidated because their total assets, total net sales, total net income(the equity portion) and total retained earnings (the equity portion) do not have significant
impact on the consolidated financial statements.
2. Application of equity method
Unconsolidated subsidiary accounted for by the equity method:
None
Number of affiliates accounted for by the equity method:

13

Names of major affiliates:
MI Berau B.V., Angola Japan Oil Co., Ltd., Japan Ohanet Oil & Gas Co., Ltd., ALBACORAJAPAO PETROLEO LTDA, INPEX Offshore North Campos, Ltd.
Names of major affiliates not accounted for by the equity method:
Sakata Natural Gas, Co., Ltd., Teikoku Oil de Burgos, S.A. de C.V., Telnite Co., Ltd., Tangguh
project management Co., Ltd.
(Reason for not applying the equity method)
Subsidiaries and affiliates are not accounted for by the equity method because their total net
income (the equity portion) and total retained earnings (the equity portion) do not havesignificant impact on the consolidated financial statements.
Procedures for application of the equity method:
Regarding affiliates accounted for by the equity method having a different closing date from theconsolidated closing date, the Company used the financial statements of each company prepared
as of their closing date. For certain companies, however, the Company used financial statements
prepared for consolidation purposes as of the consolidated closing date.

―28―

更新日時:12/5/2006 10:07:00 AM

ファイル名:1115_E_④d連結会計方針(枠）

印刷日時:07/02/05 19:41

For the six months ended
September 30, 2006
3. Closing dates for the fiscal year of consolidated subsidiaries
For the 36 companies for which the closing date differed from the consolidated closing date,including, but not limited to, INPEX Sahul, Ltd., INPEX Browse, Ltd., and INPEX Masela, Ltd.
we used the financial statements for the six months ended June 30. However, the necessary
adjustment have been made to the financial statements of those companies to reflect any
significant transactions made between the Company’s closing date and those of the consolidated
subsidiaries.
For the 11 companies including, but not limited, Japan Oil Development, Co., Ltd., Teikoku Oil
D.R. Congo, Co., Ltd., INPEX Southwest Caspian Sea, Ltd., and INPEX North Caspian Sea,
Ltd., we used financial statements for the six months ended the consolidated closing date eventhough their closing date is June 30.
4. Accounting policies
1) Valuation method for significant assets(a) Securities
Other securities
With a determinable market value
Other securities with a determinable market value are stated at fair value with any changes in
unrealized holding gain or loss, net of the applicable income taxes, primarily included
directly in net assets. Cost of securities sold is determined by the moving-average method.
Without a determinable market value
Other securities without a determinable market value are stated at cost determined by themoving-average method.
(b) Inventories
Products
Carried mainly at the lower of cost or market, cost being determined by the movingaverage method
Supplies
Carried mainly at cost, determined by the moving-average method
Work in process
Carried at cost, determined by the individual cost basis2) Depreciation method of significant depreciable assets(a) Tangible fixed assets
Depreciation of mining facilities is mainly computed by the unit-of-production method. For
other tangible fixed assets, straight-line method of depreciation is applied.
Useful life and residual value are determined as prescribed in the corporate tax law, while
wells and certain machinery (offshore platform and related facilities) are depreciated to the
expected residual value (zero).

―29―

更新日時:12/5/2006 10:07:00 AM

ファイル名:1115_E_④d連結会計方針(枠）

印刷日時:07/02/05 19:41

For the six months ended
September 30, 2006(b) Intangible assets
Exploration and development rights
Exploration and development rights at the exploration stage are fully amortized in the
consolidated fiscal year. Such rights which are at the production stage are amortized by theunit-of-production method.
Mining rights
Mining rights are mainly amortized by the unit-of-production method.
Other
Other intangible assets are mainly amortized by the straight-line method using the useful lives
and residual value of the respective assets as prescribed by the corporate tax law.
Software for internal use is being amortized over five years.
3) Basis for significant allowances(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided at an amount determined based on thehistorical experience of bad 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.
(b) Allowance for recoverable accounts under production sharing
The allowance for recoverable accounts under production sharing is provided for probablelosses on specific investments made under production sharing contracts.

―30―

更新日時:12/5/2006 10:07:00 AM

ファイル名:1115_E_④d連結会計方針(枠）

印刷日時:07/02/05 19:41

For the six months ended
September 30, 2006(c) Allowance for investments in exploration
The allowance for investments in exploration is provided for future potential losses oninvestments in exploration companies at an estimated amount based on the net assets of theinvestees.
(d) Provision for exploration projects
The provision for exploration projects is provided for future expenditures of consolidated
subsidiaries at exploration stage based on schedule of investments in exploration.
(e) Accrued bonuses to officers
Accrued bonuses to officers are provided at expected payment amount.
(f) Accrued retirement benefits to employees
Accrued retirement benefits to employees are provided at the amount calculated based on the
expected retirement benefit obligation and the estimated value of pension plan assets at the endof this period. Because certain subsidiaries are classified as small enterprises, we employ asimplified method (at the amount which would be required to be paid if all active employees
voluntarily terminated their employment as of the balance sheet date) for the calculation of theretirement benefit obligation of the subsidiaries.
(g) Accrued retirement benefits to officers
Accrued retirement benefits to officers are stated at the amount which would be required tobe paid if all officers voluntarily terminated their services as of the balance sheet date basedon their respective internal rules.
(h) Liabilities for site restoration and decommissioning costs
Liabilities for site restoration and decommissioning costs are provided for expected future
costs for site restoration and decommissioning.
(i) Liabilities for losses on development activities
Liabilities for losses on development activities are provided for provable losses on oil andnatural gas development activities individually estimated for each project.
(j) Accrued special repair and maintenanceAccrued special repair and maintenance are provided for planned major repair andmaintenance activities on tanks in certain subsidiaries at the amount being accumulated
through the next activity.
4) Translation of consolidated subsidiaries’ significant assets and liabilities denominated in foreign
currencies into yen in preparation of the consolidated financial statements
Monetary assets and liabilities denominated in foreign currencies are translated into yen at theexchange rates prevailing at the balance sheet date. The resulting exchange gain or loss iscredited or charged to income.
The revenue and expense accounts of the overseas subsidiaries are translated into yen at the
average rates of exchange during the period. The balance sheet accounts are translated into yen
at the rates of exchange in effect at the balance sheet date. Translation adjustments arepresented as a component of net assets and minority interests.
5) Accounting for important leases
Non-cancelable finance leases are primarily accounted for as operating leases except thatlease agreements which stipulate the transfer of ownership of the leased assets to the lessee
are accounted for as finance leases.

―31―

更新日時:12/5/2006 10:07:00 AM

ファイル名:1115_E_④d連結会計方針(枠）

印刷日時:07/02/05 19:41

6) Accounting for major hedge transactions(a) Hedge accounting
Simplified accounting method is applied to interest rate swaps. For certain equity
accounted companies, deferred hedge accounting is adopted.
(b) Hedging instruments and hedged items
Hedge instruments: Interest rate swap transactions
Hedged items: Interest payments on borrowings(c) Hedging policy
The nominal amount of the derivative transaction is limited to within the scope of actual
demand, and the Company does not engage in speculative derivative transactions.
(d) Hedge effectiveness assessment method
Since simplified accounting method is applied, the Company does not perform hedge
effectiveness assessment.
7) Other items important to the preparation of the consolidated financial statements(a) Consumption tax
Transactions subject to the consumption tax are recorded at amounts exclusive of theconsumption tax.
(b) Recoverable accounts under production sharing
Cash investments made by the Company during exploration, development andproduction phases under a production sharing contract are recorded as “Recoverable
accounts under production sharing” so long as they are recoverable under the terms of
the relevant contract. When the Company receives the natural gas and crude oil inaccordance with the contract, an amount corresponding to the purchase costs of the
products (i.e., a cost recovery portion of the investments) is released from thisaccount.
5 Scope of cash and cash equivalents in consolidated statement of cash flow
Cash (cash and cash equivalents) in the consolidated statement of cash flow consisted of
cash on hand, cash in banks which can be withdrawn on demand, and short-term
investments with a maturity of three months or less when purchased which can easily beconverted to cash and are subject to little risk of change in value.

―32―

更新日時:12/20/2006 11:33:00 AM

ファイル名:1115_E_④e連結BSPLCF注記（枠）

印刷日時:07/02/05 19:42

Notes(Consolidated balance sheet)
As of September 30, 2006
*1 Accumulated depreciation
Accumulated depreciation of tangible fixed assets is ¥441,328 million.
*2. Assets provided as collateral and collateral-backed debt are as follows(Collateralized Assets)
Cash and deposit
Buildings and structures
Others (tangible fixed assets)
Investment securities
Total

Millions of yen
10,640
2,038
6,753
9,068

(―)
(1,490)(5,587)(―)

28,500(7,078)80
5,606
111,724
16
19,688(―)(5,277)(15,460)(―)(―)(Debt Guarantees)
Short-term loans
Others (current liabilities)
Long-term debt
Others (long-term liabilities)
Guarantee obligations

Total
137,115(20,737)* Amounts in parenthesis () above represent foundation collateral and liabilities.
In addition, investment securities of ¥6,959 million are pledged as collateral for the BTC pipeline
project financing.
3 Contingent liabilities
The Company and its consolidated subsidiaries are contingently liable as guarantors of indebtedness ofthe following companies:

Sakhalin Oil and Gas Development Co., Ltd.
Tangguh Trustee*
Japan Ohanet Oil & Gas Co., Ltd.
ALBACORA JAPAO PETROLEO LIMITADA
Nippon Oil Exploration (Malaysia) Limited.
Sakata Natural Gas Co., Ltd.
Nippon Oil Exploration (Sarawak) Limited.
Employees (housing loans)

Millions of yen
11,247
10,755
2,108
1,959
828
738
381
559

Total
*Debt for investment funds of Tangguh LNG project through MI Berau B. V.

28,577

In addition, INPEX BTC Pipeline, Ltd., a consolidated subsidiary, is contingently liable as guarantor ofindebtedness of BTC Pipeline Project Finance in the amount of ¥7,053 million until BTC Pipeline
project completion (guarantee for completion).

―33―

更新日時:12/20/2006 11:33:00 AM

ファイル名:1115_E_④e連結BSPLCF注記（枠）

印刷日時:07/02/05 19:42(Consolidated statement of income)For the six months ended September 30, 2006
*1. Major accounts included in selling, general and administrative expenses are as follows;

Personnel expenses(Including provision for accrued retirement benefits to officers(Including provision for accrued retirement benefits to employees(Including provision for accrued bonuses to officers
Freight expenses
Depreciation expenses
Amortization of goodwill―34―

Millions of yen
5,510
181)
260)
51)
3,146
5,769
3,501

更新日時:12/20/2006 11:33:00 AM

ファイル名:1115_E_④e連結BSPLCF注記（枠）

印刷日時:07/02/05 19:42(Consolidated statement of changes in net assets)
For the six months ended September 30, 2006
1.

Type and number of shares issued and outstanding and treasury stock
Balance as ofMarch 31, 2006

Increase(Shares)

Decrease

Balance as of
September 30, 2006

Number of shares
Common stock
2,358,409
2,358,409――
Special class share
1
1
―
―
Total
2,358,410
2,358,410――
Treasury stock
Common stock
23,274
11,502
11,772―
Total
23,274
11,502
11,772―Notes
1: Increase in common stock by 2,358,409 shares and special class by share 1 share are due to the establishment of
the Company through stock transfers.
2: Increase in treasury stock of common stock by 23,274 shares is due to increase in consolidated subsidiarys’
stock through stock transfer by 22,001 shares and purchase of 1,272 shares of odd lot stock.
3: Decrease in treasury stock of common stock by 11,502 shares is due to decrease in sales of consolidated
subsidiary’s common stocks 11,000 shares and decrease in sales odd lot stocks 502 shares.

2. Share subscription rights
None

3. Dividends
Cash dividends paid
Resolution

Type ofshare

Cash dividends paid
(Millions of yen)

Dividends per
share
(Yen)

Cut off date

Effective dateCommon10,5595,500
March 31, 2006
June 27, 2006
stock
Special class
05,500
March 31, 2006
June 27, 2006
share
Note: Since the Company was established on April 3, 2006 through the stock transfer, cash dividends paid above
represent amounts which were resolved on June 27, 2006 at general shareholders’ meeting of INPEXCORPORATION which became a wholly-owned subsidiary of the Company.

General meeting ofshareholders heldon June 27, 2006―35―

更新日時:12/20/2006 11:33:00 AM

ファイル名:1115_E_④e連結BSPLCF注記（枠）(Consolidated statement of cash flows)

For the six months ended
September 30, 2006
Cash and cash equivalents at the end of the period are reconciled to the account reported in the
consolidated balance sheet as follows:
Millions of yen
Cash and deposits

191,414

Time deposits pledged
Time deposits for more than three months and others
Marketable securities (commercial paper, others)
Other current assets (short-term bonds with repurchase agreements,
others)Cash and cash equivalents(10,640)(575)
53,136―36―

1,999
235,335

印刷日時:07/02/05 19:42

更新日時:12/5/2006 2:58:00 PM

ファイル名:1115_E_④fセグメント（枠）

印刷日時:07/02/06 9:08

(Segment information)
1. Business segment information
For the six months ended September 30, 2006
Segment information by business has been omitted because the crude oil and natural gas business accounts for more than 90% of
total sales and operating income.

2. Geographical segment information
For the six months ended September 30, 2006

(Millions of yen)Japan

Asia Oceania

NIS

33,559196,63162,496208,158

—

―

—

—

—

33,559196,63162,496

Operating expenses

25,72573,239Operating income (loss)

7,834

123,391

Net sales and operating income
Net sales(1) Sales to third parties(2) Intercompany sales andtransfers
betweensegments
Total

Notes:

Middle East Africa

Eliminations
and other

Consolidated

500,847—

500,847

—

—

—

—

208,158—

500,847—

500,847

38,85361,045274

199,1383,251

202,390

23,643

147,113(274)

301,708(3,251)

298,457

AmericasTotal

1. Countries and areas are segmented based on their geographic proximity and their mutual operational relationships.
2. Major countries and areas that belong to segments are as follows:(1) Asia - Oceania････････Indonesia, Australia, East Timor, Vietnam(2) NIS････････････････Azerbaijan, Kazakhstan(3) Middle East - Africa･･･UAE, D.R. Congo, Iran, Libya, Egypt, Algeria(4) Americas････････････Venezuela, Ecuador, USA
3. Unallocated operating expenses included in “Eliminations and other” of ¥4,776 million under the operating expenses aremainly amortization of goodwill and general administrative expenses.

3. Overseas sales
For the six months ended September 30, 2006
Asia - Oceania
I.

Overseas sales (Millions of yen)

163,939

Other

Total

22,783

II. Consolidated sales (Millions of yen)

500,847

III. Overseas sales as a percentage of consolidated sales (%)
Notes:

186,722

32.7

4.6

37.3

1. Countries and areas are segmented based on their geographic proximity.
2. Major countries and areas that belong to segments other than Japan are as follows:(1) Asia-Oceania･････････Korea, Taiwan, Indonesia, Singapore, Thailand, China, Malaysia,
Philippines(2) Other･･･････････････USA, Italy
3. Overseas sales consist of export sales of the Company and its domestic consolidated companies and sales (other thanexports to Japan) of its foreign consolidated subsidiaries.

―37―更新日時:12/5/2006 9:14:00 AM

ファイル名:1115_E_④gリース（枠）

印刷日時:07/02/06 9:10

(Leases)
For the six months ended September 30, 2006
Financing leases except for these which stipulate the transfer of ownership of the leased assets tothe lessees.
1.Equivalent acquisition value of the leased assets, equivalent accumulated depreciation, and theend of period equivalent amounts outstanding.
(Millions of yen)
EquivalentAcquisitionPrice

Equivalent
End of Period
Accumulated Equivalent Amounts
Depreciation
Outstanding

Buildings and structures

46

37

8

Other tangible fixed assets

956

458

497

Total

1,002

496

505

(Note) Calculation method used for equivalent acquisition price is interest paid method, as theoutstanding amount of unexpired lease payments is low compared to the outstanding
amount of tangible fixed assets at the end of the period.
2. Equivalent outstanding unexpired lease payments（Millions of yen）
Within one year
Over one year
Total

171
333
505

(Note) Calculation method used for equivalent outstanding unexpired lease payments is interest
paid method, as the outstanding amount of unexpired lease payments is low compared tothe outstanding amount of tangible fixed assets at the end of the period.
3. Equivalent lease payment and depreciation expenses（Millions of yen）
Lease payment
Equivalent depreciation expense

9090

4. Calculation method for equivalent depreciation amount.
Straight line depreciation method is used assuming the lease period as the useful years oflife, with a residual value of zero.

―38―

更新日時:12/4/2006 6:53:00 PM 印刷日時:07/02/06 9:10

ファイル名:1115_E_④h有価証券（枠）(Securities)
1 Other securities with determinable market value(Millions of yen)Type of securities
Other
securities(1) Stocks(2) Bonds
National and local government
bonds
Corporate bonds
Other(3) Other
Total

As of September 30, 2006
Acquisition cost

Carrying value

Unrealized gain (loss)

100,993

95,602(5,390)175,287

172,283(3,004)2,324
50,927
4,319
333,852

2,340
50,925
4,547
325,700

16(2)
228(8,152)2 Other securities without a determinable market value(Millions of yen)
As of September 30, 2006
Carrying value
2,216
38,551

Classification
Other securities
Trust beneficiary certificates
Unlisted stocks(Note): An allowance for investments is provided for investments in exploration companies included in unlisted stocks above at an estimatedamount based on the financial conditions of the investees.

(Derivatives)
As of September 30, 2006
Derivatives has been omitted because a hedge accounting is applied to all derivative transactions.

―39―

更新日時:12/4/2006 6:53:00 PM 印刷日時:07/02/06 9:10

ファイル名:1115_E_④h有価証券（枠）(Business integration through purchase accounting method)
For the six months ended September 30, 2006
The Company has been established as the joint holding company that owns INPEX CORPORATION (hereafter “INPEX”) and
Teikoku Oil Co., Ltd., (hereafter “Teikoku”) as wholly-owned subsidiaries, according to business integration by stock transfer on
April 3, 2006. The purchase accounting method was applied for this transaction. INPEX was treated as an acquiring company and
Teikoku as acquired company based on ratio of voting rights.
1. Name and main business of acquired company(1) Name of acquired company
Teikoku Oil Co., Ltd.
(2) Main business of acquired company
Exploration, development, production and distribution of crude oil and natural gas(3) Major purpose of integration
To establish a firm position in the global market, by establishing a well-balanced asset portfolio, reinforcing a solid
financial base, and concentrating technological capabilities for resource development(4) Date of integration
April 3, 2006
(5) Legal formalities of business integration
Establishment of the joint holding company through a stock transfer(6) Name after integration
INPEX Holdings Inc.
(7) Acquired ratio of the voting rights
100%
2. Period of acquired company’s financial results included in the consolidated financial statements
From April 1, 2006 to September 30, 2006
3. Acquisition cost and details of acquired company
Acquisition cost of acquired company is ¥355,756 million. Details of acquisition cost consists of the fair value of acquiring
company’s stock in amount of ¥354,897 million that deemed to be issued to acquired company’s shareholders and expenses of
the acquisition in amount of ¥859 million.
4. Stock transfer ratio for the acquisition and other related information(1) Stock transfer ratio
INPEX
Teikoku
Stock transfer ratio
10.00144(2) Calculation of the stock transfer ratio
INPEX appointed J.P. Morgan Securities Asia Pte. Limited and Teikoku appointed Goldman Sachs (Japan) Ltd. as theirfinancial advisors in relation to this transaction. The financial advisors analyzed the share price movements of the bothcompanies, discounted cash flow (DCF) / net asset value (NAV) analysis and contribution analysis etc. in considering thestock transfer ratio. The stock transfer ratio was determined through discussion and negotiation by both companies taking
into consideration the analysis and advice of their financial advisors and other various factors.
(3) Share allocation and estimated value
Based on the above stock transfer ratio, 438,577.82 shares were allotted to Teikoku’s shareholders since 0.00144 share of
the Company’s common share was allotted in exchange for 1 share of Teikoku’s common share. Because the Company’s
stock did not exist on the date of public announcement on the stock transfer agreement, the Company’s stock was valuatedat ¥809,200 which represents average stock price of acquiring company for the 5 days commencing on 5 days before main
terms and conditions of business integration were agreed with and announced to public.

―40―

更新日時:12/4/2006 6:53:00 PM 印刷日時:07/02/06 9:10

ファイル名:1115_E_④h有価証券（枠）5. Goodwill(1)Amount of goodwill¥139,058 million(2)Reason for goodwill revealed
The investment balance between acquisition cost of acquired company and amount distributed to identifiable assets andliabilities revealed by overall value that was valuated mining rights, production assets, development and operating
technology, sales-use assets such as pipelines network, buyers, suppliers, and other factors totally.
(3)Method and period of amortization
Straight-line method over 20 years
6. Acquired assets and liabilities on the date of integration(Millions of yen)
65,864
397,885
463,750
28,156
77,519105,675
2,318

Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities(Reference); Minority interests―41―更新日時:2/6/2007 9:12:00 AM

ファイル名:1115_E_④i連結一株後発（枠）

印刷日時:07/02/06 9:30

(Per share information)
For the six months ended September 30, 2006

Net assets per share¥383,912.77

Net income per share¥27,647.74

Notes:

1. Diluted net income per share is not presented because there are no dilutive potential of shares of common stock.
2. Net income per share is calculated based on the following:
For the six months ended September 30, 2006

Net income (Millions of yen)

64,674

Amount not attributable to common stockholders (Millions of yen)―

Net income attributable to common stockholders (Millions of yen)

64,674

Average number of shares (shares)
Common stock
Common stock equivalent share; Special class share

2,339,237
2,339,2361―42―

更新日時:2/6/2007 9:12:00 AM

ファイル名:1115_E_④i連結一株後発（枠）

印刷日時:07/02/06 9:30

(Significant subsequent events)
For the six months ended September 30, 2006
1. Transfer of interest by INPEX Browse, Ltd.
INPEX Browse, Ltd., a consolidated subsidiary of the Company, has agreed on August 28, 2006 to transfer its 24% ofparticipating interest in WA-285-P in the State of Western Australia in the Commonwealth of Australia in which INPEX
Browse, Ltd. is pursuing exploration activities (100% participating interest), to TOTAL E&P Australia. This transfer ofthe participating interest will become effective 5 days after the approval by the Australian government.
2. Basic agreement on Azadegan oil field in the Islamic Republic of Iran
Azadegan Petroleum Development, Ltd., a consolidated subsidiary of the Company, which holds 75% participatinginterest in Azadegan oil field has agreed with National Iranian Oil Company (NIOC, oil company run by the Iranian
government) on the following basic terms and conditions and in process of discussion for further details:(1) Azadegan Petroleum Development, Ltd. and Naftiran Intertrade Co. Ltd. (NICO, subsidiary of NIOC) continue tocontribute to the development of the Azadegan oil field as contractors based on the service contract (buyback
contract).
(2) Azadegan Petroleum Development, Ltd. will hold 10% of participating interest, and transfer the rest of its
participating interest (65%) to NICO.
(3) NICO becomes a operator based on the change of the participating interest share.

―43―

1ファイル名:1115_E_⑤A生産等（枠）

更新日時:11/27/2006 4:17:00 PM

印刷日時:07/02/06 9:14

Ⅴ Actual production, orders received and actual sales(1) Actual production
The following table shows actual production by business segment in each period.
For the six months
Business segment
Category
ended September 30, 2006
Crude oil

43 millions barrels(237 thousands barrels per day)Natural gas

182 billions CF(997 millions CF per day)

Crude oil and natural gas
Sub total
Petroleum Products
Notes:

74 millions BOE(403 thousands BOE per day)
133 thousands kl

Iodine257 tons
1. The amount of LPG produced abroad is included in ‘Crude oil’. On the other hand, the amount of LPG
produced in the domestic refinery is included in ‘Petroleum Products’.
2. A portion of crude oil production volume is consumed as fuel for petroleum products.
3. The production by the Company’s affiliates accounted for by the equity method is included in the figures above.
Also, the production is a result for the six months ended 30 September regardless of a closing date on the basisof fiscal periods of its subsidiaries or affiliates.
4. The production volume of crude oil and natural gas under the production sharing contracts entered by INPEX
Holdings Group corresponds to the net economic take of our group.
Figures calculated by multiplying the gross production volume by our company’s interest share are 53 millions
barrels (289 thousands barrels per day) of crude oil, 328 billions CF (1,795 millions CF per day) of natural gas,
and in total 108 millions BOE (588 thousands BOE per day).
5. BOE means barrels of oil equivalent.
6. Iodine is refined on consignment by another company.
7. Figures are rounded to nearest whole number.

(2) Orders received
This information is not disclosed since the amount of orders received accounted for a minor portion of total sales. In
addition, there is no production for orders received in crude oil and natural gas business.

(3) Actual salesa)

We take back the full amount of crude oil produced under production sharing contracts, and primarily sell it toJapanese refineries. We sell natural gas produced in Indonesia in the form of LNG to Japanese power companies andcity gas companies through PERTAMINA and also sell a part to customers in South Korea, Taiwan and othercountries. In addition, we sell natural gas produced in Japan to customers using our pipeline.
b) Sales by classification during each period were as follows:Business segment
Category
For the six months ended September 30, 2006
Net sales
Sales volume ofSales volume ofoversea production
domestic production(Millions of yen)
41 millions barrels
5,976 kl
Crude oil
316,751
Crude oil and natural gas
160 billions CF
530 millions m3
businesses
Natural gas
170,279
LPG: 624 thousands
barrels

OthersSubtotal

Notes:

LPG: 6,438 tons

12,389499,420
1,426
500,847

Other businesses
Total
1. The above amounts do not include the related consumption tax.
2. The Company’s subsidiaries of which closing date for fiscal year is December 31 are principally consolidated
their operating result for the six months ended June 30 except those subsidiaries prepared their financial
statement for consolidation purpose as of the consolidation closing date. However, the significant effects of thedifference in fiscal periods were properly adjusted in consolidation.
3. Sales volumes are rounded to nearest whole number.
4. Sales for major customer are as follows:
For the six months ended September 30, 2006
CustomerAmountRatio（％）（Millions of yen）
PERTAMINA
146,695
29.3― 44 ―

更新日時:12/5/2006 10:30:00 AM

ファイル名:1115_E_⑤B補足データBSサブ比較

印刷日時:07/02/06 9:16

[Supplemental materials]
1. Condensed Consolidated Balance Sheets of INPEX CORPORATION and Teikoku Oil Co., Ltd.
(Millions of yen)Accounts

INPEX CORPORATION（Consolidated）
As of September 30, 2006
Amounts(Assets)
ⅠCurrent assets
1 Cash and deposits
2 Accounts receivable-trade
3 Marketable securities
4 Other
Total current assets
ⅡFixed assets
1 Tangible fixed assets
2 Intangible assets
3 Investments and other assets(1) Investment securities(2) Recoverable accounts
under production sharing(3) Other

Teikoku Oil Co., Ltd.
（Consolidated）
As of September 30, 2006
Amounts

169,272
67,874
71,47274,442
383,061

21,69013,05013,30518,933
66,98062,370134,199

135,832
1,892

215,153

99,661

307,339

1,094

26,90913,393

Less allowance forrecoverable accounts
under production sharing(46,758)(853)

Less allowance forinvestments in exploration(5,326)(2,804)497,316

110,491

693,886
1,076,948

248,217315,197

23,3194,472

22,761

5,975

105,578
73,046
224,706

4,523
19,60834,579207,051
39,717
246,768
471,475

30,794
41,29472,089106,669

29,46062,402
470,166
562,029

19,57911,222
136,627
167,429(1,867)38,504

―

28

473

358

(1,394)38,891

44,837605,472
1,076,948

2,208
208,528
315,197

Total investments and otherassetsTotal fixed assets
Total assets(Liabilities)
ⅠCurrent liabilities
1 Accounts payable
2 Short-term loans and current
portion of long-term debt
3 Income taxes payable
4 Other
Total current liabilities
ⅡLong-term liabilities
1 Long-term debt
2 Other
Total long-term liabilities
Total liabilities(Net assets)
ⅠShareholders’ equity
1 Common stock
2 Additional paid-in capital
3 Retained earnings
Total Shareholders’ equity
ⅡValuation, translation adjustments
and others
1 Unrealized holding gain (loss)
on securities
2 Unrealized gain from hedging
instruments
3 Translation adjustments
Total valuation, translation
adjustments and others
ⅢMinority interests
Total net assets
Total liabilities and net assets―45―

更新日時:12/5/2006 10:30:00 AM

ファイル名:1115_E_⑤C補足データ_PLサブ比較

印刷日時:07/02/06 9:18

2. Condensed Consolidated Statements of Income of INPEX CORPORATION and Teikoku Oil Co., Ltd.

Accounts

INPEX CORPORATION(Consolidated)
For the six months ended
September 30, 2006
Amounts

ⅠNet sales
ⅡCost of sales
Gross profit
ⅢExploration expenses
ⅣSelling, general andadministrative expenses
Operating income
ⅤOther income
1 Interest income
2 Dividend income
3 Equity in earnings ofaffiliates
4 Foreign exchange gain
5 Other
ⅥOther expenses
1 Interest expense
2 Provision for allowance forrecoverable accounts under
production sharing
3 Provision for exploration
projects
4 OtherOrdinary income
Income before income taxes
and minority interests
Income taxes-current
Income taxes-deferred
Minority interests
Net income- 46 -(Millions of yen)
Teikoku Oil Co., Ltd.
(Consolidated)
For the six months ended
September 30, 2006
Amounts

457,769
152,490
305,279
9,126

53,43528,17625,259239

9,047

10,456287,106
11,3705,847

14,563
2,497
234

365

871

603

174

1,418
3,135
12,691
5,485

54
1,160
3,378
420

1,510

289

1,430

1,241

4,265
285,784

1,426
13,681

285,784

13,681

223,442(8,467)
5,673
65,137

8,868
(231)
162
4,882

更新日時:11/15/2006 6:57:00 PM

ファイル名:1115_E_⑥a個別ハイライト（枠）

印刷日時:07/02/06 9:19

Non-Consolidated Financial Results for the six months ended September 30, 2006
November 15, 2006

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

INPEX Holdings Inc.

Code number

1605

Stock Exchange on
which the Company
is listed
Location of the head
officeTokyo Stock
Exchange
Tokyo(URL http://www.inpexhd.co.jp/)
Representative
Naoki Kuroda, President
Contact person
Syuhei Miyamoto, General Manager, Corporate Communications Unit.
TEL +81-3-5448-0205
November 15, 2006
Starting date for the—Date of the meeting of theBoard of Directors for the six
interim dividend
months ended September 30,
payment
2006 financial results
Shares constituting one unit
No
1. Financial Results for the six months ended September 30, 2006 (April 3, 2006–September 30, 2006)
Note: Amounts less than million yen are rounded off.
(1) Operating results
Operating revenues

Operating income％

Millions of yen

For the six months
ended September
30, 2006

1,194

―

(18)

―

％

Millions of yen(5)―

Net income per share％

Millions of yen

For the six months
ended September
30, 2006％

Millions of yen

249

Net income

Ordinary income

Yen―(7.67)

Notes: 1. Average number of shares issued and outstanding for the six months ended September 30, 2006, 2,358,096 shares.
2. Change in accounting policy: No.
3. Since non-consolidated financial results are prepared for the first time for the six months ended September 30, 2006, percentage
expressions for the change from the corresponding period of the preceding year are not disclosed.

―47―

更新日時:11/15/2006 6:57:00 PM

ファイル名:1115_E_⑥a個別ハイライト（枠）(2) Financial position

Note: Amounts less than million yen are rounded off

Total assets
Millions of yen

As of September
30, 2006

印刷日時:07/02/06 9:19

794,855

Net assets as a percentage
of total assets

Net assets

Net assets per share％

Millions of yen

792,11799.7

Yen

335,978.92

Notes: 1. Number of shares issued and outstanding at the end of the period: as of September 30, 2006, 2,357,639 shares
2 Number of treasury stock at the end of the period: as of September 30, 2006, 770 shares

2. Estimated Operating Results for the year ended March 31, 2007 (April 3, 2006–March 31, 2007)
Net sales
For the year ended
March 31, 2007
Reference:

Ordinary income

Net income

Millions of yen

Millions of yen

Millions of yen

32,50030,00030,000The forecast of ¥12,724.59 of net income per share for the year ended March 31, 2007, is calculated based on the expected
number of shares issued and outstanding of 2,357,639 at March 31, 2007.

(2) Dividends
Cash dividends

Cash dividends per share

For the year ended
March 31, 2007
(actual)InterimYear-end

0.00―

March 31, 2007
(estimated)―

6,250.00*(Yen)

Annual6,250.00

The aforementioned forecasts are based on currently available information and contain many uncertainties. Actual results may
differ from the above forecasts due to changes in business conditions.

Average number of shares during this period (after deducting the number of treasury stock)
For the six months ended
September 30, 2006
Common stock
2,358,095 shares
Common stock equivalent
1 shareshare; Special class share
Number of shares issued and outstanding at the end of this period (after deducting the number of treasury stock)
For the six months ended
September 30, 2006
Common stock
2,357,638 shares
Common stock equivalent
1 shareshare; Special class share
Note:

Since shareholder of the special class share is entitled to the same rights as that for shareholders of common stock regarding dividends andthe distribution of residual property, the special class share is classified as common stock equivalent share.

―48―

更新日時:11/15/2006 1:08:00 PM 印刷日時:07/02/06 9:20

ファイル名:1115_E_⑥b個別BS

Ⅵ Non-consolidated financial statements(1) Financial statements
1) Non-consolidated balance sheet(Millions of yen)
As of September 30, 2006
Accounts
Amounts

Ratio％(Assets)
ⅠCurrent assets
1 Cash and deposits

452

2 Other5

Total current assets

458

0.1

ⅡFixed assets
1 Investments and other assets(1) Investments in stock of subsidiaries
and affiliates(2) Other
Total investments and other assets
Total fixed assets
Total assets

793,906
491
794,397
794,397
794,855

―49―

99.9
99.9
100.0

更新日時:11/15/2006 1:08:00 PM 印刷日時:07/02/06 9:20

ファイル名:1115_E_⑥b個別BS(Millions of yen)
As of September 30, 2006

Accounts

Amounts

Ratio％(Liabilities)
ⅠCurrent liabilities
1 Short-term loans
2 Accrued bonuses to officers
3 Other*1

Total current liabilities
ⅡLong-term liabilities
1 Accrued retirement benefits toofficers
Total long-term liabilities
Total liabilities

2,400
27
251
2,679

0.3

59
59

0.0

2,738

0.3

30,000

3.8(Net assets)
ⅠShareholders’ equity
1 Common stock
2 Capital surplus(1) Capital reserve
Total capital surplus

762,992
762,992

96.0

3 Retained earnings(1)Other retained earnings
Unappropriated retained earnings
Total retained earnings

(71)
(71)

(0.0)

(803)

(0.1)

Total shareholders’ equity

792,117

99.7

Total net assets

792,117

99.7

Total liabilities and net assets

794,855

100.0

4 Treasury stock―50―

更新日時:11/15/2006 4:24:00 PM 印刷日時:07/02/06 9:21

ファイル名:1115_E_⑥c個別PL

2) Non-consolidated statement of income(Millions of yen)Accounts

For the six months ended September 30, 2006
Amounts

ⅠOperating revenues
ⅡGeneral and administrative expenses
Operating income
ⅢOther income*1
ⅣOther expenses
Ordinary loss
Loss before income taxes
Income taxes—current
Income taxes—deferred
Net loss

Ratio
1,194
944
249
0
255
5
5
40
(28)
18

- 51 -

％
100.0
79.1
20.9
0.0
21.4
(0.5)
(0.5)

(1.5)

更新日時:11/15/2006 6:51:00 PM

ファイル名:1115_E_⑥d2個別変動計算書

印刷日時:07/02/06 9:21

3) Non-consolidated statement of changes in net assets
For the six months ended September 30, 2006
（Millions of yen）
Shareholders’ equity
Capital surplus
Common stock

Balance at end of priorfiscal year

Capital reserve

Retained earnings
Other retained
earnings
Unappropriatedretained earnings

Total
shareholders’equityTotal net assets

Treasury stock

―

―

―

―

―

―

30,000762,992――

792,992

792,992

―

―

(18)

―

(18)

(18)

―

―

―

(1,338)(1,338)(1,338)

―

―

(53)

534

481

481

30,000762,992

(71)

(803)

792,117792,11730,000762,992

(71)

(803)

792,117792,117

Changes during the period
Establishment of theCompany through thestock transfer
Net loss
Purchase of treasury
stock
Disposal of treasury
stock
Total changes during theperiodBalance at September 30,
2006

―52―

ファイル名:1115_E_⑥d個別会計方針

更新日

Basic of presenting financial statements
For the six months ended
September 30, 2006
1. Valuation method for significant assets
Securities
Investments in subsidiaries and affiliates
Securities of investments in subsidiaries and affiliates are stated at cost determined by
the moving average method.

2. Basis for significant allowances(a) Accrued bonuses to officers
Accrued bonuses to officers are provided at expected payment amounts.
(b) Accrued retirement benefits to officers
Accrued retirement benefits to officers are stated at the amount which would be
required to be paid if all officers voluntarily terminated their services as of thebalance sheet date based on their respective internal rules.
3. Other items important to the preparation of consolidated financial statements
Consumption tax
Transactions subject to the consumption tax are recorded at amounts exclusive of theconsumption tax.

- 53 -

更新日時:11/15/2006 1:55:00 PM

ファイル名:1115_E_⑥e個別BSPL注記

印刷日時:07/02/06 9:24

Notes
(Non-consolidated balance sheet)
As of September 30, 2006
*1. Consumption tax
The suspense payments and the suspense receipts for the consumption tax are offset each other. The net
amount, not deemed to be significant, is included in “Other” in current liabilities.

(Non-consolidated statement of income)For the six months ended September 30, 2006
*1. Operating expenses of:Amortization of start-up costs¥249 million(Non-consolidated statement of changes in net assets)
For the six months ended September 30, 2006
Type and number of shares issued and outstanding and treasury stock(Shares)
Balance as ofMarch 31, 2006
Treasury stock
Common stock
Total

Increase
―
―

1,272
1,272

Balance as of
September 30, 2006

Decrease
502
502

770
770

(notes)1: Increase in treasury common stocks by 1,272 shares is due to acceptance of purchasing odd lot stocks from odd lot stockholders.
2: Decrease in common stocks by 502 shares is due to acceptance of selling odd lot stocks to odd lot stockholders.

―54―

更新日時:12/4/2006 7:36:00 PM 印刷日時:07/02/06 9:25

ファイル名:1115_E_⑥f個別リース(Leases)
For the six months ended September 30, 2006
Not applicable(Securities)
As of September 30, 2006
No investments in subsidiaries and affiliates with determinable fair market values(Business integration)
For the six months ended September 30, 2006
The Company has been established as the joint holding company that owns INPEX CORPORATION (hereafter “INPEX”) and
Teikoku Oil Co., Ltd., (hereafter “Teikoku”) as wholly-owned subsidiaries, according to business integration by stock transfer on
April 3, 2006. The purchase accounting method was applied for this transaction. INPEX was treated as an acquiring company and Teikoku as acquired company based on ratio of voting rights.
(1) Name of acquired company
Note has been omitted since this information is disclosed in notes to the consolidated financial statements.
(2) Acquisition cost and details of acquired company
Acquisition cost of acquired company is ¥354,897 million. Detail of acquisition cost consists of the fair value ofacquiring company’s stock that deemed to be issued to acquired company’s shareholders.
(3) Stock transfer ratio for the acquisition
Note has been omitted since this information is disclosed in notes to the consolidated financial statements.

―55―

更新日時:12/5/2006 3:09:00 PM

ファイル名:1115_E_⑥g個別一株後発

印刷日時:07/02/06 9:26

(Per share information)
For the six months ended September 30, 2006
Net assets per share¥335,978.92

Net loss per share¥7.67(Notes) 1. Diluted net income per share is not presented because there are no dilutive potential of shares of common
stock.
2. Net loss per share information is calculated based on the following:
For the six months ended September 30, 2006
Net loss for the period (Millions of yen)

18

Amount not attributable to common stockholders (Millions of yen)―

Net loss attributable to common stockholders (Millions of yen)

18

Average number of shares (shares)
Common stock
Common stock equivalent share; Special class share(Significant subsequent events)
None

―56―

2,358,096
2,358,0951