Inpex Corp Ord

I'd like to start the FI2026 first half of the financial results investor meeting. Thank you very much for gathering despite the busy schedule today. My name is Shohei Yoshida, General Manager of the Corporate Communications Unit, and I'll be serving as the moderator for this session. Please allow me to introduce the attendees from INPEX. We have Mr. Togaki Ueda, Representative Director, President, CEO Mr. Toshihaki Takimoto, Director and Senior Executive Vice President Mr. Daisuke Yamada, Director and Executive Vice President For the program today, I will spend about 35 minutes for the explanation, about 25 minutes for Q&A, a total of 60 minutes. And today's session will be a hybrid session with online participation as well. And the session will be interpreted simultaneously. For those people participating through Zoom, please choose the language of your choice. And for the presentation material, please select your language using the button at the top of the slide or of the page. Mr. Weda will first explain the business overview and Mr. Amada then will talk about Deakin's holiday financial results for the six months ended June 30, 2016. and then Consolidated Financial Forecast for the full year. So Mr. Weta, please. This is Weta, the CEO. Thank you very much for coming despite your busy schedule and also despite the very hot weather. And I would like to explain the overview in regards to the business situation as well as the first half of the year. So please refer to the document. So to begin with, the impact of the Middle East conflict. What type of impact does this have on our company? And what is our view? And what is our expectation going forward? So please allow me to explain about that. The closure of the Strait of Hormuz has continued for some time. And so sales volume from the Abdadi has been a constraint to a certain extent. But so we feel that there is a significant positioning In regards to a middle if business that will continue to undertake a business there so of the big business There was the current situation as I described here Well, the production volume has both term fallen very much in Abu Dhabi, but the sales volume and in comparison to the same period last year our sales volume has come down by around 30% and why and So Abu Dhabi has a port called Fujairah which is outside the Strait of Homs and so majority of the oil has been exported from Fujairah for onshore bar production but for the offshore we need to go through the Strait of Homs and so we are impacted to an extent but with the effort of ADNOC and they have been preparing the ships So we have been able to maintain production volume, but the sales volume has come down by around 30%, particularly for Asia. And if we look at this from a long-term perspective, then from May last year, we have expected around 30% reduction. Now, the assumption is that the home substrate will actually normalize around October. And that was the basis upon which we have made the assumption of our 30% reduction in sales volume for the whole year. And from the revenue, well, we have been able to generate the revenue to offset the reduction from Abu Dhabi. And I call this the victory of our portfolio. And our portfolio, certainly Abu Dhabi accounts for a large portion, but we also have Australia, Asia, or Europe, and also domestic. And so, because of the diversified portfolio, the impact of the closure of Strait of Hormuz has not been all that significant. In fact, ICSIS, their project is operating very well, and the oil price has been at a higher level on a relative basis due to the Middle East situation right now. So overall, then the loss from the Abu Dhabi has been made up for elsewhere. and so the profit for the first half of the year highs on record and we're expecting also to achieve the record profit for the full year. So what will be the situation with the world going forward due to the Middle East? Previously, energy system has focused on efficiency and efficiency will remain to be very important, but energy security or resilience, those will be emphasized more. So the system is going to shift a little bit with a greater focus on them. So as you can see on the right, the dependence on the state of Palmyra. Now that's been considered more highly. So amongst the Middle East countries, UAE has the Fujairah port where they have one pipeline, but they intend to increase that to three pipelines to Fujairah in several years. and so if they achieve that they're able to export majority of their oil from outside the Strait of Hormuz and so dependence on the Strait of Hormuz will be reduced Saudi Arabia they have Yangbu which is a port that they have on the Red Sea side so that's one movement and also the other is diversification of procurement the crude oil from US, the crude oil from Mexico. So many entities are trying to import from those areas and exporting from those countries, of course, the cost will increase. And the oil from crude oil, they can use the LCC very large ship and they can actually reach Japan in 20 days, but they're from Africa. And then I'd have to go around the country the type of good hope, which will require a much longer period, and EV is attracting attention again, so not just gasoline. And so whether it be EVs or whether it be non-gasoline, so the ammonia or something like that, non-heavy oil fuel for the vessels, and renewable energy as well, but the clean energy has been revived. have received renewed attention from the perspective of security. So in totality, for energy overall, we are moving slightly towards more emphasis on security. But at the same time, there are also challenges as well. Say, for example, if a pipeline to be installed or elsewhere, they will all increase costs. So security doesn't come for free. And so to achieve security and resilience, some costs will be required. So over a medium to long term, or raw energy costs could potentially increase. And so users, they want energy with high security, but they want the price to remain at the current level. So many people are still saying that, but that would be the challenge overall for the medium to long-term perspective in regards to energy. So how is the impact on the oil? the competitiveness of Abu Dhabi will remain, and Abu Dhabi's competitiveness will remain, and so we'll continue to invest our product in Abu Dhabi. Gas, we have already achieved diversification, excess, and we're now working our body, and so we are not going through a choke point, the straight or home air, so our gas won't go through the choke point, and so we want to expand our portfolio with higher security, so that's one direction that we want to proceed towards. That's the recent overall situation. So these are the highlights from the first half of the year. Mr. Yamada will talk about the detailed numbers. But for the first half of the year, highest profit on record at 263.1 billion yen for full year. So we didn't use the range, and we have come up with a number. But for the net profit, we are expecting 510 billion yen of profit record level. Operating cash flow, about trillion yen. and Abadi. So we want to reach FID next year. And so we have been building up on the cash reserve for the development. And we expect to accumulate about 770 billion yen by the end of fiscal year. Investment cash flow. for the whole year. We are expecting 859 billion yen. And there are various, the investment for growth. Abadi and Ikses, I'll talk about that later on. But even prior to Abadi, the production, there are things that will contribute to production. So the interest acquisition in Malaysian. So AGP. And so this is the Caspian Sea. or Indonesia. So we have been working to acquire the interest. Those that are already producing or about to start producing soon. So we intend to pick up on those assets. For these assets, we're expecting several billion yen of profit contribution per annum. And so through these, even prior to Abadi and even after Abadi, we intend to continue to realize their growth. And the shoulder return, I will come back to this later on, but we are going to be paying 112 yen per share for the full year, which is 12 yen higher than last year, and about 140 billion of share buyback. And total payout ratio is expected to be about 53%. And so then on the next page, so I wanted to kind of, you know, describe Inpex as a company. So what we have worked on for the past 10 years have been described in this graph on the left. and these are the operating cash flow and the net production volume CAGR they're converted into USD and these are the numbers from 2015 to 2025 operating cash flow on the vertical axis and the production volume on the horizontal axis and the major and the independent EMPs and so you can see index is located here and so operating cash flow the average and the growth rate over the last 10 years higher than the majors in the EMPs. The horizontal access production volume, we're not at the top, but we're in the middle, but we are at quite a high level in terms of growth rate against the majors as well. So last 10 years, INPEX has continued to achieve a steady growth. Going forward, as shown on the right, and this is showing the production volume and the 330,000 BOD and after by the production start we expect to reach 800,000 BOD and operating cash flow will grow from 1 trillion into 1.5 trillion and so last 10 years until 2035 we intend to continue to achieve our steady growth so this is the assumption that we have made.

Next page please. So the progress of each project, Abadi, exists. I would like to explain more in detail. First, regarding Abadi, we have a steady progress, a very steady progress today. The fee, FEED, has been continued for the last year, and we have seen a steady progress, and mostly 80% of progress is what we have achieved. In fall, we'll be completing. And in fact, already, simultaneously, we have the OTC, which is the actual tender, of the construction, which is starting from July this year. The tendering, in the end, will go, as you know, for the feed, there is a dual feed where the two consortiums are competing, and we are doing the feed together. So from these two consortiums, in the end, we will have one consortium that will be selected, and that consortium will be in charge of the construction, and that selection is the EPC feed. After the EPC, we will have the tender. And that has already started. For the marketing, we also are seeing good progress. As we announced at the end of May this year, for the Abadi project, the total production of LNG is 9.5 million tons of expectation. Out of that, we would like to have buffer. So it's not based on long-term contract. But out of that, long-term contract is around 8 million tons or so. And out of that 8 million tons of long-term contract, we already have a certain amount, which is where we have signed the key term sheet agreement, which is where we signed the price and the volume as a basic contract. This is what we have signed with the buyers in May. In particular, BP Shell, the super major, and also the Indonesian national gas company, we have had this basic key term sheet agreement, which is the base of the long-term contract. And for the Japanese, it's going to happen going forward, and also others. Because of the Middle East conflict, there is a lot of free interest in the Asian market, and that is where there's a high interest and there's a good reputation today. So for the marketing, we think it will go well. In fact, for the actual work, we have to start the actual work from this year. For the case of Indonesia, the Abadi LNG is on the Samrak, a very rural area. That's where the LNG facility will be constructed. And the LNG plant in the surrounding area, we have the fencing. and also Divergent Road, which is you need to have the road to diverge. So those construction have to start. And then we need to have the local agreement. So we have contacted the Indonesian government and we had the groundbreaking ceremony to have the local corporations. For about one month ago, on the Sembrak Island, we visited and it's actually with a charter. It's a four-hour flight one way and eight-hour runways. So this is a picture taken at that time. It was a really wonderful ceremony. And from Indonesia, we have the energy minister and three, four other ministers visited as well. And President Bravo also wanted to participate. So in the end, as shown on the right, it was very far. So in an online manner, he participated. in the ceremony. And from the start to the end, Mr. Prevost, President Prevost also participated. So this is where he was doing a speech and that was a picture. But there was a huge interest and also support from the Indonesian government. And today we are in the feedback and marketing is going well. And also the strong interest and also support from the Indonesian government And after the feed, what happens with the economics? That is still the question. However, from my perspective, Abadi, sometime in the middle of next year, we will come to FID, the final investment decision, and we think that is quite a higher possibility at this moment. And perhaps that is also the market recognition. And then that is for one. And then next is ICSIS for the cargoes. For this year, we have seen a very steady progress. Operation is doing very well. And we had a strike, and a lot of concerns were around the strike. But this actually happens once every four years. We have the enterprise agreement where we have a review of the labor contracts. And based on the labor party, we had a lot of strong labor parties. position in the past, and we had this revision under that environment, so it's been a very strong environment, and we had some strike, but it was not really a big impact. It was a minimal impact to the cargo arrangement, so that was the case, and that is where we are able to sign the four-year contract with the labor union. And with this, so far, the operation is doing relatively well at this moment. For ICTIV, one of the big things is in this year in summer, in spring. The Bitaloo basin, sub basin is where a huge shale gas reserve is expected and that interest we bought in three blocks from Daily Water. and as you can see in the picture this is a huge area in a jungle and there's a pilot production which is underway today from June we have the pilot project which commenced and we like to partly sell to the north northern territory and then how much reserve are there is something we like to understand so the exploration work is continuing at this moment but there's a huge expectation from the Australian government as well it's a huge Expectation as a project. And going forward, this will be a new train 3 gas. It will be a base for the new train 3 gas where it exists. So that is also doing very well at this moment. Outside of that, we have Abu Dhabi. We have a good production, but the sales are not going well. However, Abu Dhabi is a still important country. So the upper second investment is what we would like to continue. And the other day, the onshore cat gas, gas cap development where the gas layer which is on the top which on the topic which is called a gas cap so those development is what we have to come to an agreement just the other day and also we have the azerbaijans agc oil fields which are part of the interest we bought from the government In Malaysia, we have the Sarawak Block 2E interest that we bought, and also Indonesia. So before and after, we also have these projects. We would like to conduct these projects, which will lead to profits. And then next, we have the CCS, Blue Hydrogen and Power Resources. For CCS, the CCS plant has started operation last year, and in a full scale, we are going into the execution. The destination plant has already started and the Clean Nothing has already been serving the pipeline. And also the metropolitan area CCS is to be done in Shiba to bring the CO2 in the Tokyo area and to have that captured storage. And we have this exit. On the right-hand side, you can see the drilling rig picture. taken as a picture from the onshore. And all the people in the beach might have a look at this and then wonder what this is. But it's about 2,000 meters of rig is being explored, and we have the CCS projectability, which is confirmed through these projects. And as we don't have time, we also have power resources, but we'd like to go on to the next page. And next is the shareholder returns. Of course, the way of thinking about the return, I'd like to mention one thing. As mentioned, we have the 112 yen of DPS, which is record high, and the share buyback of 140 billion, and 53% approximately, 53% of total payout ratio. And for 24 years, 5 times or less is how much we have increased the dividend for the dividend there are times when it's high or low but this is an all time high record today and when we discuss internally when we look at the stock price today there are a lot of discussions and as a result I would like to explain but today we believe that Our growth potential is not evaluated. We have some discounted value. So for this fiscal year, we would like to have a share buyback. And, of course, there are people who expect dividends. But for the dividend, 100 and 12 yen is the dividend. And for this time, considering the stock price today, we have decided to focus more on the share buyback. So that is the shareholder policy, the return policy. And as you can see, Y in this graph at the bottom, this is the oil price. The top is the stock price. And as you can see, until the Iranian war, it's oil price, I used to be told it's linked to oil. But before the Iranian war, it was because of the growth strategy. So there were higher stock price than the oil price. But after the Iranian war started, it was getting close to the oil price, and the stock price increased. Or if the oil price increased, there was an increase in stock price and also vice versa. So there was a lot of volatility. What happened in the end is when the oil price and share price were about the same, or before the war, end of February, the oil price was $73, and the stock price was 3,800 yen. At the end of June, with the same oil price, with $73, it was 3,265 yen per share. And if you look at today, it's slightly above. So $83 is the oil price. So compared to $73, today $83 per share. and there's a $10 of increase, but 3,500 yen is today's stock price. So we wonder why. And in the meantime, our company's growth strategy, if that did not work well, then we understand. However, as mentioned, we have steadily executed the growth strategy, and ABAD is one example, but also for ICDIS. We have been doing steady progress against the growth. and the oil price increased by $10 per barrel but the stock price maybe is 3,500 yen today so it's a drop and it's not really a welcoming situation and there's nothing we can say for what happens in the market but for our company although we're not trying to give dreams we are doing this business steadily and returning to our shoulders steadily as well that is the policy so the 3,500 yen and $83 per barrel of oil is something that we think is kind of a mismatch or just a discount. Therefore, as we are going to execute the growth strategy, even compared with the pre-war, we think that the price should be higher. From that standpoint, we think internally, we think we are undervalued, and that is, as a company, the understanding we have today. Therefore, when the stock price is low, we should do a buyback. So that's why we have focused a lot on the share buyback this time for the shareholder return, and that's the policy. So that was a long explanation, but that's all for me. Thank you very much.

So Mr. Yamada will continue. So please allow me to explain about the results of the first half of the year and the forecast for the four years. So as our CEO, Mr. Weller, has explained, and so we ended up with 26.3 billion yen for the half-year period, highest. And for the four year, 510 billion in this forecast we have, which is highest on record, and shareholder returns highest on the level. So, you know, the triple victories, if you like, And so that's the kind of numbers we're referring to. So the highlight for the first half of the year, oil price was between $70 to $87. The FX, the yen has weakened. As a consequence, revenue has come down slightly. But the net profit or profit attributable to all no parents reached the highest level, 263.1 billion yens. So the impact of the Middle East was quite evident. As you can see, the sales volume did come down significantly, but the oil price has come up. And the FX, again, has weakened due to the Middle East situation when the oil price goes up. And the LNG price also increased. And so towards the end of the year, particularly with the strong performance of the excess production. And so the production volume and cash flow of the excess has increased. And so the recycling revenue also increased. That's for Abu Dhabi. and taxable income come down. And so we also see significant decrease in the income tax. And so because of that, there were both negative and positive from the Middle East sector, but a stronger impact to the positive sector. And when we talked about the May, the forecast in May, we said that the Middle East is likely to act positive for us. And that was reflected in the numbers on this occasion. and this is revenue by major product crude oil on top and natural gas on the bottom and so the crude oil revenue 780 billion yen last fiscal year it came down to 694.9 billion yen came down by about 85 billion yen but this is a reduction because we weren't able to sell all of the body and so there was this time that decreased But in terms of the average unit price that came up, the FX is a weaker yen. And for the natural gas, the 251.4 billion yen to 271.9 billion yen increased even by about 20.5 billion yen. The sales volume equals the strong performance excess. And it increased by about 8.5 billion yen for the unit price. and it has come down a unit price but it's essentially flat. So average unit price of the overseas like this but domestic come down and the FX impact. So I winded up with 171.9 billion yen. And this is the waterfall chart. So on the left is 123.5 billion yen. and this is the second quarter of FY25. On the right is first half of 2026, an increase of about 40 billion yen, so the revenue and because of the significant decrease in crude oil, we ended up with 48.3 billion yen negative. The share of profit and investment accounted for using equity method and the other income is essentially excess related which have performed well and towards the end of the year and the oil price will also increase and so about $10 billion will pick up in the downstream and also tier recycling and the cash flow of excess has increased and so we were able to achieve significant paid in capital reduction of excess. and on the right, we have the income tax, the benefit because of our lower tax. And so the revenue came down by about 50 billion yen, by about 50 billion positive for mixers and the tax 50 billion and hence 40 billion. So Abu Dhabi with the Middle East situation had both positive and negative, but the positive factor were larger. So that was essentially the result. the full year the Brent oil price and about 80 for the quarter three and about 70 for quarter four that is the assumption so we expect the oil price to come down slightly two dollars or so of a decrease for FX quarter three and quarter four we are expecting 160 yen and so slight decreasing yen and similar type of trend to the first half of the year but So the revenue came down, but the profit came up. And so that's 510 billion yen. So 500 billion yen is like a dream number for us, but we will finally exceed that level. And ROE too, more than 10% on this occasion. Sorry. The net fee ratio has come up slightly, but like Mr. Weta was saying, So we have the cash reserve for bodies. So it's not to be netted. But if you actually net this, there was 0.2% impact. So there is no issue from the financial position perspective. That's the result. So this is the waterfall chart.