May 10, 2019 Note: The following report is a summary of the Japanese-language original. Company name:  Japan Petroleum Exploration Co., Ltd. Listing: Tokyo Stock Exchange, First Section 1662 Securities code: URL: https://ww.japex.co.jp/ Representative: Hideichi Okada, Representative Director and President Inquiries: Shigeyoshi Hasegawa, General Manager, Media and Investor Relations Department TEL: +81-3-6268-7110 (from overseas) Scheduled date of ordinary general shareholders' meeting: June 27, 2019 Scheduled date to commence dividend payments: June 28, 2019 June 27, 2019 Scheduled date to file Securities Report: Presentation of supplementary material on financial results: Yes Holding of financial results presentation meeting (for institutional investors and analysts):    Yes (Millions of yen with fractional amounts discarded, unless otherwise noted)
l. Consolidated financial results for the fiscal year ended March 31, 2019 (April 1, 2018 – March 31, 2019) (2) Consolidated financial position
Consolidated financial forecasts for the fiscal year ending March 31, 2020 (April 1, 2019 – March 31, 2020) 3.
* Notes Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting (1) in the change in scope of consolidation): None (2) a. b. c. d. Changes in accounting policies, changes in accounting estimates, and restatement Changes in accounting policies due to revisions to accounting standards and other regulations: Yes Changes in accounting policies due to other reasons: None Changes in accounting estimates: None Restatement: None (3) a. Number of issued shares (common shares) Total number of issued shares at the end of the period (including treasury shares) As of March 31, 2019 As of March 31, 2018 b. Number of treasury shares at the end of the period As of March 31, 2019 As of March 31, 2018 Average number of shares during the period C. Fiscal year ended March 31, 2019 Fiscal year ended March 31, 2018 57,154,776 shares 57,154,776 shares 2,207 shares 2,139 shares 57,152,632 shares 57,152,637 shares
Reference: Summary of non-consolidated results
Non-consolidated financial results for the fiscal year ended March 31, 2019 (April 1, 2018 – March 31, 2019)
* Financial results reports are not required to be audited by certified public accountants or an audit corporation. * Proper use of financial forecasts, and other special matters The forward-looking statements, including the financial forecasts shown in this document are based on information currently available to the Company and on certain assumptions deemed to be reasonable. As such, they do not constitute guarantees by the Company of future performance. Actual performance and other results may differ materially due to various factors. For the suppositions that form the assumptions for financial forecasts and cautions concerning the use thereof, please refer to the section of "(4) Future outlook" of "1. Overview of operating results and others" on pages 7 of the attached material to the financial results report.
1. Overview of operating results and others
(1)
Overview of operating results for the fiscal year under review
In the fiscal year ended March 31, 2019, the Japanese economy remained on a moderate recovery trend, continuing from the previous fiscal year, but weakness was seen in certain exports and production at the end of the fiscal year and concerns about the trade issue between the United States and China and uncertainty of the overseas economy increased. The Japan Crude Cocktail (JCC) price remained on a recovery path from the previous fiscal year, and rose from the high end of $60 territory per barrel at the beginning of the fiscal year to reach the low end of the $80 range by November 2018. However, it turned downward largely due to effects of the trade issue between the United States and China and declined to the mid-$60 level by the end of the fiscal year. In the currency exchange market, the yen was at the mid-¥100 level at the beginning of the fiscal year, but then a trend of yen depreciation grew. After weakening to the mid ¥ 1 1 0 range in December 2018, the yen remained at around ¥110 at the end of the fiscal year. As a result, the JAPEX Group's average oil sales price for the fiscal year rose compared to the previous fiscal year. On the other hand, amid rising prices of petroleum products, etc. and LNG brought about by rising JCC prices, the JAPEX Group continued to face a severe market environment with respect to natural gas due to intensifying competition amid efforts reinforced by other companies in JAPEX's market domain to promote natural gas infrastructure projects such as LNG receiving terminals and related pipelines, progress in expansion outside traditional supply areas in the entire energy industry using the full retail liberalization of electricity and gas as an opportunity, and other factors. Under such circumstances, the JAPEX Group has been promoting business based on "Long-Term Vision 2030 and Medium-Term Business Plan 2018-2022" announced in May, 2018. During the fiscal year, net sales was ¥267,980 million, an increase of ¥37,350 million (+16.2%) year on year. Gross profit was ¥34,846 million, a decrease of ¥4,416 million (-11.2%) year on year. The factors behind the year-on-year increase in net sales were rises in sales price of crude oil and natural gas as well as contribution from sales of bitumen in Japan Canada Oil Sands Limited (JACOS) Hangingstone leases where production operation was started in August 2017. On the other hand, gross profit decreased year on year due to decline in profit from diluted bitumen sales stemming from the widening heavy-light differential (*1) in the oil sands business, the increase in operating costs in association with full-year operation of the Soma LNG terminal (commenced operation in March 2018), and other factors. Exploration expenses was ¥788 million, a decrease of ¥535 million (-40.4%) year on year. Selling, general and administrative expenses was ¥31,743 million, an increase of ¥2,570 million (+8.8%) year on year. As a result, operating profit was ¥2,313 million, a decrease of ¥6,451 million (-73.6%) year on year. Ordinary profit was ¥12,523 million, an increase of ¥8,695 million (+227.1%) year on year, due to turning of share of loss of entities accounted for using equity method into profit of entities accounted for using equity method and a decrease in depreciation of inactive non-current assets compared to the previous fiscal year (*2), among other factors, despite negative factors stemming from a turnaround from foreign exchange gains to foreign exchange losses of 5,296 million. Profit before income taxes improved by ¥82,477 million year on year to ¥13,074 million from a loss before income taxes in the previous fiscal year due to a decrease in impairment loss compared to the previous fiscal year (*3). Profit attributable to owners of parent improved by ¥45,729 million year on year to ¥14,770 million from a loss attributable to owners of parent in the previous fiscal year. (*1) The differential between Western Canadian Select (WCS), which is the reference price for heavy crude oil from the oil sands, and the WTI, which is the reference price of light crude oil (*2) The property, plant and equipment relating to the 3.75 Section Area (the DEMO Area) at the Hangingstone leases was depreciated by the unit-of-production accounting method. This follows the exit from operations of bitumen production using SAGD method (One of the methods to extract ultra-heavy crude oil by injecting steam into the formation to increase fluidity of ultra-heavy crude oil and to use the gravity effect for extraction) in the area by JACOS. (*3) An impairment loss on the asset of JAPEX Montney Ltd. relating to the shale gas project (hereinafter "the Upstream Project") was posted in the previous fiscal year due to the development plan of the Upstream project being revised to a plan without the assumption of the Pacific NorthWest LNG Project (hereinafter "the PNW LNG Project") following the decision not to proceed the PNW LNG Project. Below is a breakdown of sales.
(i) Oil and Gas
Net sales from oil and gas (including liquefied natural gas (LNG) and diluted bitumen) came to ¥215,429 million, an increase of ¥39,377 million (+22.4%) year on year. This was mainly the result of rises in sales price of crude oil and natural gas, and sales of diluted bitumen by JACOS.
(ii) Contract Services
Net sales from contract services (drilling and geological surveys, etc.) came to ¥7,342 million, a decrease of ¥1,142 million (-13.5%) year on year.
(iii) Other Businesses
Net sales from other businesses, such as the sale of oil products, including liquefied petroleum gas (LPG), fuel oil and the like, the transportation of natural gas, etc., as well as other subcontracted tasks, came to ¥45,207 million, a decrease of ¥885 million (-1.9%) year on year. Below is a summary of performance by segment (before elimination of intersegment transactions).
(1) Japan
Net sales in the Japan segment are mainly composed of crude oil and natural gas (including LNG), contract services, oil products and the like. In the fiscal year under review, net sales were at ¥232,107 million, an increase of ¥12,540 million (+5.7%) year on year, due mainly to an increase in sales prices of crude oil and natural gas, despite a decrease in sales volume of crude oil and natural gas. Segment profit decreased by ¥3,188 million (-14.2%) year on year to ¥19,308 million, due to the increase in operating costs in association with full-year operation of the Soma LNG terminal (commenced operation in March 2018), and other factors.
(2) North America
Net sales in the North America segment are mainly composed of crude oil and natural gas (including diluted bitumen). In the fiscal year under review, net sales came to ¥34,270 million, an increase of ¥25,019 million (+270.5%) year on year due mainly to sales of diluted bitumen with respect to JACOS. There was a segment loss of ¥9,751 million (compared to segment loss of ¥6,615 million in the previous fiscal year) largely due to the decline in profit from diluted bitumen sales stemming from the increasing heavy-light differential in the oil sands business, and an increase in selling, general and administrative expenses.
(3) Europe
In the Europe segment, exploration activities have been conducted in the UK North Sea block located offshore Aberdeen. In the fiscal year under review, there was segment loss of ¥157 million (compared to segment loss of ¥74 million in the previous fiscal year).
(4) Middle East
Net sales from the Middle East segment are mainly composed of crude oil. In the fiscal year under review, net sales came to ¥14,816 million, a decrease of ¥17,372 million (-54.0%) year on year, due to a decrease in sales volume, despite an increase in sales price. Segment profit came to ¥955 million, a decrease of ¥410 million year on year. This was mainly due to the above-mentioned decrease in net sales, despite a decrease in cost of sales.
(2)   Overview of financial position for the fiscal year under review
Total assets at the end of this fiscal year decreased by ¥44,248 million from the previous fiscal year-end to ¥655,288 million. Current assets decreased by ¥3,063 million from the previous fiscal year-end, mainly due to a decrease in notes and accounts receivable - trade. Non-current assets decreased by ¥41,184 million from the previous fiscal year-end. This was mainly due to the decrease in market values of securities held in investment securities and the decline in property, plant and equipment resulting from the impact of fluctuation in foreign exchange rates and depreciation. Total liabilities decreased by ¥35,150 million from the previous fiscal year-end to ¥205,131 million. Current liabilities decreased by ¥11,236 million from the previous fiscal year-end, mainly due to decreases in notes and accounts payable - trade and short-term loans payable included in other in current liabilities. Non- current liabilities decreased by ¥23,913 million from the previous fiscal year-end. This was mainly due to a decrease in deferred tax liabilities resulting from the above-mentioned mark-to-market valuation of securities held and the reclassification of loans payable with repayments due in one year or less to current liabilities in long-term loans payable. Total net assets decreased by ¥9,098 million from the previous fiscal year-end to ¥450,156 million. The main factor was an increase in retained earnings, despite a decrease in valuation difference on available-for-sale securities. Please note that the "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018) and relevant Guidances have been applied from the beginning of the first quarter ended June 30, 2018. Accordingly, the figures presented for the financial position for the fiscal year ended March 31, 2018 have been retrospectively adjusted to reflect the application of the standard, etc. in order to facilitate comparison and analysis against the previous fiscal year.
(3)   Overview of cash flows for the fiscal year under review
As of March 31, 2019, cash and cash equivalents (hereinafter "net cash") increased by ¥740 million compared to the end of the previous fiscal year to ¥100,633 million. Below is a summary of cash flows for each activity. (Cash flows from operating activities) Net cash provided by operating activities amounted to ¥30,970 million. The main factors were profit before income taxes of ¥13,074 million and ¥23,296 million in depreciation. (Cash flows from investing activities) Net cash used in investing activities amounted to ¥13,969 million. Net cash was mainly used in payments of recoverable accounts of ¥25,107 million and purchase of property, plant and equipment of ¥12,955 million, while net cash was mainly provided by interest and dividend income received of ¥16,126 million and collection of loans receivable of ¥6,912 million. (Cash flows from financing activities) Net cash used in financing activities was ¥15,493 million. Net cash was mainly used in decrease in short-term loans payable of ¥7,877 million, repayments of long-term loans payable of ¥4,990 million and interest expenses paid of ¥3,865 million.
Equity ratio on mark-to-market basis: Total market capitalization/Total assets Interest-bearing debt to cash flow ratio: Interest-bearing debt/Cash flows Interest coverage ratio: Cash flow/Interest paid Notes: *1. The "Partial Amendments to Accounting Standard for Tax Effect Accounting" (ASBJ Statement No. 28, February 16, 2018) and relevant Guidances have been applied from the beginning of the fiscal year under review. Accordingly, with regard to "Reference: Trend of cash flow indicators" for the previous fiscal year, the indicators represent those after this accounting standard, etc. was applied retrospectively. *2. The above indicators are calculated based on consolidated financial figures. *3. Total market capitalization is calculated based on the number of shares outstanding (excluding treasury shares). *4. Cash flow here is cash flows from operating activities. *5. Interest-bearing debt is all debt subject to interest payments within liabilities (excluding lease obligations) shown on the consolidated balance sheet.
(4)
Future outlook
The latest financial forecasts are based on a JCC price of $65 per barrel for the whole fiscal year, and an exchange rate of ¥110/$ for the whole fiscal year. Actual non-consolidated results for the fiscal year under review came to $71.94 per barrel and ¥110.35/$. Net sales for the fiscal year ending March 31, 2020 is expected to increase by ¥40,670 million (+15.2%) from the fiscal year under review to ¥308,650 million. This is due to an expected increase in sales mainly reflecting growth in sales volumes for overseas crude oil and diluted bitumen. Operating profit is expected to increase by ¥3,289 million (+142.2%) from the fiscal year under review to ¥5,603 million. This is primarily due to the above-mentioned expected growth in sales volumes for diluted bitumen and increase in profit from sales resulting from a narrowing of the heavy-light differential. Ordinary profit is expected to increase by ¥147 million (+1.2%) from the fiscal year under review to ¥12,670 million. This mainly reflects expectations such as that ordinary profit will no longer be impacted by the reversal of asset retirement obligations associated with the transfer of the interest, etc., in JACOS' DEMO Area, recorded in the fiscal year under review. Profit attributable to owners of parent is expected to decrease by ¥3,357 million (-22.7%) from the fiscal year under review to ¥11,413 million. This is primarily due to an expectation that profit attributable to owners of parent will no longer be impacted by the decrease in taxes resulting from the application of credits for foreign taxes in the Garraf project in Iraq, which was recorded in the fiscal year under review.
2. Basic rationale for selecting the accounting standard
The JAPEX Group currently has a policy to prepare the consolidated financial statements based on the generally accepted accounting standards in Japan (Japanese GAAP), giving consideration to the possibility of comparing the consolidated financial statements between terms. Concerning the adoption of International Financial Reporting Standards (IFRS), the Group intends to respond appropriately giving due consideration to the situation in Japan and overseas.

(2) Consolidated statement of income and Consolidated statement of comprehensive income
Consolidated statement of income
Consolidated statement of comprehensive income

(3) Consolidated statement of changes in equity

4. Others
Status of production and sales

2. Part of the natural gas production volume is used as a feedstock for LNG. 3. Bitumen is a type of extra-heavy oil extracted from oil sands.
includes the transportation of natural gas and oil products as well as other subcontracted tasks. 2. Diluted bitumen is bitumen diluted by ultra-light crude oil for pipeline transportation. 3. Monetary amounts in the table do not include consumption taxes.