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.

So this is 450 billion. This is the upside case. So in this case, around July is when Abu Dhabi will normalize. That's the time when we had assumed. And this time we have 55, 550. But this time Abu Dhabi's normalization will be around October, and that is the revised timing. So that's how we came up with this number. The left-hand side is the external factors. And mostly the Middle East, the conflict and the impact from that is affected. And for the foreign exchange, because of the Middle East, there is some yen depreciation. On the oil price, this is the only different area. In the past, in the full year forecast, when we announced the results, we talked about the sensitivity, oil price sensitivity. But this time, compared to the May forecast, oil prices dropped, but the oil impact is positive. That's because of premium LPG and those. There was a lot of premium. So that's why it's a reverie situation. But that's also coming from Middle East conflict. And then minus 17.5 is a project factor. But as mentioned before, Abu Dhabi cash is included. And also we have a profit booster. But these TA recycling is included. It's about 100 billion yen of TA recycling included this time. so the investment incentive and combined together a total of $100 billion or so with three included in total those are the external factors we thought it would be positive in the May forecast but this time it was slightly negative but more there were positive factors than negative so that's why there's about $10 billion of improvement and then with the Middle East it's a positive thing and it's not really a good news but that was the actual result and then for the others we have the ACES where the sales volume increased. There is a 10 cargo per month and the sales are doing well. And then we have 16.9 billion and then on the right-hand side we have one-off. There is some impairment in ARO as well as others so it's about 20 billion plus and in the end 510 billion yen. And we are starting from October we think you'll be normalized in October and it's hard to say for the street of whole news but let's say you will be normalized by end of the year what happens and we also have that calculation let's say it will not normalize in the year end if it happens still until if it's still not normalized until next year I think it's not 10 billion but maybe 7.7 to 8.8 billion of decline but the oil price will not change and that's the assumption so if this production will not change then maybe less than 10 billion will be the impact if it will not normalize by end of the year. Then next is the cash flow. The very top, you can see the operating cash flow, which is more than 1 trillion, and the investment cash flow, 859 billion yen, and from May forecast, about 60 billion of increase. However, as you can see in the bottom, the growth investment is declined. The reason is because in Abu Dhabi was not so much of a change for Abu Dhabi but there's a slight decline plus the other interest investment we had that was about 100 billion yen which went over the year fiscal year so the growth investment is mostly no problem and the reason why there's an increase in investment cash flow is the others it says 183 and that is Abu Abadi, the cash reserves for the development of Abadi, about 100 billion or 200 billion yen is what we have set aside. And in May, there's some increase in degree, so that's why we thought it will not be so much of an amount. We could not make these cash reserves. But this time we had additional 100 billion, so this is how we ended up. And the next is the investment cash flow, as you can see in the left-hand side. As mentioned, 800 is 859 billion today. The content is mostly the same, but just one thing is the cash reserves for Abadi. We did not factor this in the May forecast, but now we have this included, and we have 859 billion yen in total. 859 and also the 200 billion for Abadi. How to look at this? in 26, end of December, we will have an increase of $770 billion. So this will be a cash to be used for the upstream. So $770 billion will be used. And then in the midterm plan, we had about $600 to $800, but in a one-year prior timing, we were able to achieve that. And The $1.9 trillion is on track to what we stated in the initial plan and on the right-hand side, as mentioned, these are the disclosed projects we have and also the profit contribution. So Abadi, before the Abadi production startup will happen, we have these investments. And then this is the ROIC bisectment. So as you can see, this is the detail. So that's all for me. Thank you very much.

So we would now like to receive questions. We'll receive questions from the venue first, then after that from online participants. And I ask that you only ask two questions at a time. For those people participating through Zoom, there is a raise hand function, and so please use that. And so for those designated by the moderator, please state your name and your company name before asking your question. So anyone with a question, you have the person in the middle at the front.

Now, I have two questions.

And I was somewhat held back because of the strong message, but I will ask a question. Now, two questions from me. The first question is regarding the body. On page seven, you have shared with us the schedule and the progress on different paths and this was very easy to follow I think the situation has been clarified a lot through this information and as indicated in the text on this slide this project and equity IRR so we are going to aim for the mid-teen percentage for IRR equity IRR and this is something you have been explaining from the past and I understand that things are progressing quite steadily But in regards to marketing, and it seems that you have been able to kind of come to a kind of a consensus in terms of the terms at an early stage, which is quite a strong progress. But in order to secure equity mid-teens, in order to secure that, what would be the biggest hurdle? And what's the progress against that hurdle, if you like, at this point in time? So that's the first question. and I think it's really up to the negotiation with the Indonesian government in my view based on the presentation material so the taxation or the conditions with the Indonesian government is likely to be the key but equity IRR in order to achieve this number what would be the biggest hurdle so if you could kind of give some explanation about that that's the first question oh and together with that, you said 770 billion yen of the cash reserve, which is a year ahead of your original schedule. So with that, for the upstream portion, the expected amount of the fund, have you already secured the amount required? If you could also refer to that as well, that'd be helpful. So that's the first question. And the second question is on your slide, page 21. together with the investment data project. You've also provided information with us to the timing of profit contribution. This is very helpful, although it may be difficult for you to respond, but I want to ask anyway. And so is Abu Dhabi related where you are investing a lot in recent times. And so the profit contribution as well as the production increase the contribution Can you give some more color? And it may be aligned with the government initiative, but you said that there will be contribution prior to the body start. But if there is anything more that you're able to speak about, so prior to a body production start, Abu Dhabi is an important profit, the growth driver. And so could you give some more color in terms of the timing of our profit contribution and so forth? So these are my two questions. Thank you. First of all, in regards to our body, equity IRR, more than 10%. What is the biggest hurdle? Well, for me, I feel that there are two major factors. First is Indonesian government and for negotiation for incentive, whether this will go well or not. But more important is to what extent can we achieve a reduction in cost of the project and we are currently undergoing the fee process right now. But so cost is not something that comes up as a lump sum and that's it. So we can, you know, talk with the contractors. Can we reduce cost here? Can we actually change the schedule here and so forth? There are a lot of the negotiations. If we are able to reduce local content a little bit, then the cost will come down this much. So there are various ways we can work on cost reduction. And so for us to achieve success of the project, economics is important. But prior to incentive, we have to work on achieving cost reduction through various means. So in that regard, cost is not something that you can actually address in one go. I won't say it's a live-in thing, but it's like that. And so we need to continue to thoroughly and continuously work on achieving reduction in cost. This is one significant hurdle for us. in my view. But even after that, if the economics is not sufficient, then we need to engage in negotiation with the Indonesian government for incentives. So these would be the two hurdles. And your second question, Abadi, so we have cash reserve of 770 billion yen. Is it sufficient for the investment for upstream? Well, so it really depends on the capex, so the project cost. So It's difficult to say, but if we think about the past, the Abadi CapEx in 2018 when we did a POD, it was said that was about $20 billion. And so we're going to add CCF so that there's a 5% increase in terms of cost. This was the number back in 2018, but after that, and we need to change that to 2026 numbers and of course the cost has increased quite significantly due to inflation in the meantime so if we take all that into consideration then that becomes the total capex of the project now how much this will be well we need to think about the cost reduction initiatives that we are working on that will have a significant impact we don't know at this point in time so feed or DPC tender so we need to go through those processes and these the number will become more clear But so from the numbers in 2018, even if the cost increases by 30 or 40%, it's not going to be a significant surprise. Now, that's included, that is a capex for the entire project upstream and downstream. We have 56%, so that's equity portion and upstream and downstream, the LNG plant. So we need to actually allocate funds for that. That downstream, it will be a TVR trustee borrowing scheme. will be borrowing the money where we will provide the credit guarantee, that guarantee. So the cash is required for the upstream, and so 700 billion yen is what we have built up as a cash reserve. We don't know at this point in time whether this is sufficient or not, and I don't think this has reached 100%, and so we probably need additional effort. And your second question, the increase in production impact from the Abu Dhabi and we have the confidentiality agreement so we can't talk about the protection volume very much and I hope you'll forgive me for that but on that basis and on page 21 there are two projects related to Abu Dhabi and so one is the upper the further development now in 26 or 27 so we will reach about 5 million barrels per day from 4 million or so right now. So that is where there is going to be a large production increase in the upper Azakum oil field. And so we will be spending several hundred billion yen of investment over these years, and we expect a large contribution from that in several times. And so the BAB gas cap development, and this is to develop the gas which is on top of the oil. And we are currently doing a fee for this right now. And hopefully during 2026, we want to make the FID. And so the production start is likely to be at 2028, 2029. And so that will be the kind of timing where we can potentially expect a profit contribution. And so we are spending, well, we are expecting several billion yen of profit contribution from each of the project described on this slide.

My question is, as you explained, the long-term contract out of $8 million, $5.9 million is the base contract that you completed, and you have a good inquiry today. So over the long-term profit, to have a stabilized profit, long-term contract as you can see or as you mentioned there are a lot of inquiries you'll be increasing more of these long-term contract is that a possibility so these long-term stable contract or a fixed volume contract is something that you're planning to increase is that is that what you're thinking so that's number one and second is regarding the shoulder return There is a strong message today. And, of course, that strong message in this fiscal year is where you have more weight on share buyback. I think that's one point. On the other hand, the total payout will be 53%, so within the range. But it's actually just a part of the 50 billion and above, 50% and above of the total payout that you mentioned. So just... Corp Ord Is there maybe a stronger message that you can communicate? I just wanted to purely think whether that is possible or not, not thinking that you would increase as you understand yourself. But once again, I just wanted to ask your opinion or what your views are. Thank you. Thank you very much. So the first question was Abadi. And the fifth contract, or the long-term contract, I think the question is whether we should increase that or not. And basically, we think it is possible completely. However, we're not trying to do that as a company. That's the answer. Because, as mentioned, by the LNG, we have 9.5 million tons of LNG plus 150 MMP. gas pipeline. So that's the business. And then out of that 9.5 million of LNG. For ICSIS, it's 90-some percentage of long-term contract. So it was a good finance situation. But just because of ICSIS, when we had a lot of troubles, if we have too much tight contract, then we may not have any room. So for Abadi, we wanted to have some buffer. That was the policy. So, as mentioned, 9.5 million tons out of that. 1.5 is something like to have a buffer. So, that means the 8.7 million will be the long-term contract. So, we thought 8.7 million can be the long-term contract, as mentioned. And so far from the overseas buyers, we have a strong inquiry today. So, we can assign this right away or we can increase further. But as mentioned, because of the reasons, We are not trying to increase more of the long-term contract than what we have today. And then the second is regarding the shareholder return. Why don't we do a more stronger message of increasing this reward? I think that would be a strong request, but I would like to use that as a good reference in our company's policy, however. Instead of doing a forceful reward, we are a growth-growing company, and while growing, we would like to reward our shoulders along the way. Therefore, the total payout this time is 53% as a forecast, but by maintaining that level, we would like to make sure we have a growth and then a good return to our shoulders, and that's the policy that we want to implement, and if that happens, then it will be around 53%. So as you mentioned, the feedback, we would like to take back your feedback going forward. Thank you very much.

I would like to ask two questions. Before asking my question, and your share price or ROE and also profitability improvement, and in comparison to five years ago, there's been significant improvement. And personally, I'm very happy and I hope that you will continue with this momentum. And going forward, to what extent can we trust the profitability of Buddy? That's not going to be easy, but I hope that you will continue to engage in proactive disclosure like this and outside the stock market. and so the inflation and the investment may potentially go up or there could potentially be delay. These are inevitable in one sense but I hope that we'll continue to disclose and work on improving profitability in a much shorter term basis as well. Now, two questions and more than 10% are for Abadi. I don't know whether you can talk about this at this point in time but what would be your kind of assumption for the crude oil price? I understand you may not be able to refer to a price But if you could give some idea there, that would be helpful. And my skin may be too much, but at $50 rent, can you still target meetings, IRR? If you're able to make a comment like that, that will help in terms of discussion. You may not be able to talk about it right now. It's okay. But if you could potentially refer to this when you make the FID, that would be helpful. And the second question is regarding ROE. The mid-term management plan, one graph that I like, the ROE and the growth rate graph, and the graph that you show today, the growth rate, is also a great graph, so I'd like for you to continue to use that, but ROE 10%, and the shareholders' equity was 5 billion yen, and so 500 billion yen loss on net profit for this fiscal year. This is a very encouraging number, which I'm happy to see, but what I wanted to say is that in the mid-term, the materials, in the growth. ROE was slightly lower than the majors from US or Europe, and you mentioned that, and so it was great that you've recognized that in trying to work on that. But ROE, and more than 10% is a target for 2035 onwards. I think that's the kind of level that you're working with, but making investment for a body, and crude oil price remaining where we are right now. and the profit boost at the second stage and third stage. Can we expect that? And so that's kind of my second question. So I will respond to the first question. In regards to Abadi, equity IRR at 10% and what's the oil price assumption? And this will be up to the discussion with the Indonesian government going forward, so I can't say anything too clear. But when we discussed in 2018, we were thinking, you know, $55 a barrel. And that was a kind of the number we had in mind when we engaged in discussion. But back then, and so it was $65, and we had placed $65 to remain flat superficially, but that's not really aligned with the real situation. So I think it's after discussion. So ROE, the second-year question. So let me talk about the ROEs. RROE 10% and slightly lower than the majors which you are fully aware of of course but for us if you look at our portfolio and the core is Australia, Abu Dhabi and Japan and these are countries of very low country risk where we have our portfolio in that regard Chevron, Exxon they have similar portfolio in India but the European majors They do have assets in countries where country risk is higher. So when we make a comparison against them, the risk-adjusted ROE, if there is such a concept, then ROE in comparison to that is not inferior. And so the portfolio rating is higher. In other words, we have assets in a low-risk area. So it's not a bad level. So this fiscal year, more than 500 billion and more than 10%. But we don't, you know, intend to, you know, stop at that. We want to continue to work on it. And profit booster. And so now that the recycling can be done now. and so 7, 8, 10 years this level can be maintained providing that FX the fees we can continue but we have the second stage it's not going to be easy but what we are looking at always is so our balance sheet is more than 8 trillion yen in size and we settle our numbers based on IFRS and so the difference to balance sheet is recognized as a profit or loss And so when the balance sheet is sold out, there's more movement in the FX, more movement in the oil price, more movement in interest rate. And so we end up with a significant fluctuation in realized gains or loss. And so the balance sheet, the previous year to this fiscal year, the difference is registered in PL. That's the IFRM. And so with that and also tax included, and when you look at the financial, and in Well, not everything will work out as a profit booster, but depending on how we look at it, whether it be related to tax, whether it be profit or to profit, we may be able to have improved contribution to profit. We're always looking at it. It's unfortunate that I can't say this concretely, but there are some possibilities because it's 8 trillion yen and we have portfolio globally. and the oil price in FX moves quite significantly and so the unrealized gains or loss on a balance sheet is quite significant and so that could potentially you know contribute to the profit so we will certainly look at the finance attack situation from that perspective thank you two questions number one is about excess in Australia the country risk of Australia what is your view on that and if you can give us the color

Corp Ord Corp will make a difference of that 510 billion of net profit on the full year. But different from Yamazaki-san, the total payout ratio at this time mentioning about going above, is it because even though the oil price may move, you already have confidence in the net price and net profit for this fiscal year? Is that the reason? or the net profit might move or fluctuate, however, against the top price because it's discounted, you are thinking that the dividend payout can still be achieved. So including the old price fluctuations, how much confidence do you have in these forecasts? That's the second question. Thank you. So I'd like to answer the first question. So we kind of exist for the Australian country risk, how to look at that as a company, and the domestic supply responsibility, nationalism. So we do have concern, and that is honestly what we feel. About one month ago, I went to Canberra, Australia, and there is some financial ministry and there is some people in it. And the challenge in Australia, there are a couple of holes. Like you mentioned, there is a domestic gas reservation policy in Australia, and that is a direction that there is a discussion at this moment to introduce that. So what this is, is to the LNG export, 20% of the export should be used for internal supply to internal market. So that is the new discussion, and whether that will be executed or not. The reason why this is happening is because there's a lack of gas in the east coast of Australia. And for that, they want not to be used for export, but for internal use. And that's why the internal or the domestic supply responsibility is the discussion. And from our standpoint, If that happens, then if 20% of export will be used domestically, the domestic market will have oversupply situation. So the gas price domestically will go down or plummet. And in the end, Australian energy business, domestic energy business will have difficulty. So if 20% of export will be used for domestic use, depends on what kind of contract, but we think there's a lot of challenge and that's the concern we have. So from our standpoint, it's not the export that's an issue, but it's underinvestment. There are so many gas in Australia, so they should make more investment and they should produce them. But without doing that, you're just saying the export should be diverted to the domestic market. But that business environment is actually there, but they're missing opportunity, and they're just discouraging the investor mindset. And in the future course, it might be underinvestment. So rather than that, I believe that they should make investments in a good way, and then they should solve the issue. But those are discussions we're having with Australian government. Within the government, they're still having a lot of discussions. They're still domestic issues. And the cost of living is the biggest challenge where the inflation is happening. So if that's the case, why don't we get more money from the overseas company? And then those are discussions. And then we talk with the government. They say gas is important. and they want to make sure they will be able to secure those. On the other hand, also there's various reasons that has to be discussed for domestic reasons. And so domestic gas reservation policy, outside of that, there are also other discussions saying the foreign company should have more tax, paying more tax and various discussions of such. So that kind of business environment deterioration. is something that we honestly have in Australia, and we have communicated that honestly to the government as well. So the second question, I'd like to answer that question. For these numbers, there are a lot of discussions internally, and as Mr. Reda explained today, this time we have more focus on the share buyback as a shareholder return. So 53% of total payout. is what we have announced as of Q2. And by end of the year, what happens if there's a fluctuation in the market? I think that was your question. But as you know, and as you know and understand, for XIS, the net profit of that 70% of the properties coming from XIS, then that LNG price is five or six months beforehand. The old price is used five or six months before, and that's how it's calculated. So by end of July, the old price is already set. Therefore, the fixed price in the long-term contract is how we sell. So by end of December, a certain amount of profit is already how much visibility they have today. And then if we have extra cargo, we can sell this on the spot. So that's also another up-shooting possibility. And as Yamada-san explained today, Thank you very much.

please allow me to ask a few questions. It's related to the Australia issue. So excess strain three, as of now, how much volume have you have visibility? And you said that has quite a large potential, but unfortunately it couldn't invest in the browse. And so how much kind of visibility do you have? Second question, may be a little bit early but for next fiscal year this fiscal year so Abu Dhabi tax burden has been reduced and there was some benefit from the premium and so the impact from the middle east has functioned somewhat positively but next fiscal year will you have a kind of a rebound a negative but is there a potential increase in volume or if some of the negative factors, if you don't need to consider that, if you could also refer to that. So I'll respond to your first question then. For excess train 3, how much visibility do we have? Well, and it's not the case that we have a lot of visibility in terms of volume without in train 3. and various gas fieldings that develop right now near ICFES, that is to extend the plateau of ICFES. So we do have certain visibility in that regard, but for train 3, we need to identify sizable gas source. And we need to secure gas source of certain size. and some people say that it has gas reserve equivalent of Permian in US. Some people say no. We can kind of expect a large reserve there but it's only likely at this point in time so we don't know for sure. So over the next couple of years then we're going to do exploration and to identify the amount of reserve. So that's the kind of thing that we want to do to demonstrate the situation and if there is that much reserve, then from there to access, we want to install a pipeline and potentially build a train three. So we are studying that. But in terms of visibility, it's really up to the result or plant exploration, the activities that we will undertake. And next year, well, at this point in time, I can't say anything certain. and you know what will happen to oil price what will happen to exchange rate that will have significant impact but if the oil price or the FX remains at around the level that we have now right now so 160 yen for example then excess well so there could potentially be a better shutdown but we're not expecting much that reduction from the excess but we don't know what will happen in the future but still So we may be able to target similar level. So we expect the earnings level to kind of pick up. So if we are able to achieve, you know, 500 billion yen, and we have been able to, you know, control the shareholders' equity, and we may be able to, you know, maintain 10% ROE if nothing really happens.

So that's the kind of situation.

So we're over time, but this is the end for today's event. And for the questions that we could not answer today, please contact our IR group today. So thank you very much for all your participation out of your busy schedule. Thank you very much.