The changes in accounting policies have been made from the year ended December 31, 2023, and the figures after retrospective application are used in the comparative analysis with the year ended December 31, 2022.

In addition, the change in reportable segments has been made from the year ended December 31, 2023, and the figures reflect the revision of the method of calculation for a portion of the sales volume and average sales price in the comparative analysis with the year ended December 31, 2022.

（１）Summary of Consolidated Operating Results

During the year ended December 31, 2023, the Japanese economy has recovered moderately from the impact of the novel coronavirus (COVID-19). With improvements in the employment and income environments, further recovery is expected to continue. However, the downturn of overseas economies, such as the impact of global monetary tightening and concerns about the future of China’s economy, creates a risk of downward pressure on Japan’s economy. In addition, there are continuing concerns about the impacts of rising prices, the Russia-Ukraine situation and the Israel-Palestine conflict, and fluctuations in financial and capital markets.

Of the international crude oil price indices, which significantly influence the financial performance of the Group, Brent crude (on a near-term closing price basis), considered a benchmark index for crude oil, started the current fiscal year at US$82.10 per barrel, and in January, crude oil prices continued to rise against the backdrop of expectations for recovery in crude oil demand due to the end of China’s zero-COVID policy, and other factors. Thereafter, crude oil prices generally remained at around US$70 to US$75 per barrel in early spring due to concerns that financial difficulties of several financial institutions in the U.S. and Europe would exert downward pressure on the global economy, but crude oil prices trended upward and temporarily reached a high of over US$95 per barrel in late September. In October, with the Israel-Palestine conflict, there was an unstable period of temporary volatile fluctuation in crude oil prices. As a result of the decision at the December OPEC+ meeting to postpone the reduction of crude oil production targets (strengthening production cuts) by oil-producing countries, coupled with increased market uncertainty regarding these cuts, crude oil prices remained weak, ending the fiscal year at US$77.04. The Group’s average crude oil sales price for the year ended December 31, 2023 reflected this shift and fell to US$82.83 per barrel, down US$14.88 from the previous fiscal year.

The foreign exchange market, another important factor that affects the business of the Group, began to trade at ¥131 level against the U.S. dollar. During the first half of the year, there was heightened speculation about policy adjustments by the Bank of Japan, leading to a narrowing of the Japan-U.S. interest rate gap, temporarily strengthening the yen to the ¥127 level. However, the Bank of Japan’s decision to maintain its policy interest rate coupled with favorable U.S. economic indicators resulted in increased interest in the dollar and a consistent depreciation of the yen. During the second half of the year, concerns about a slowdown in inflation in the U.S. and speculation about corrective measures in the Bank of Japan’s monetary policy led to a temporary weakening of the dollar to the ¥138 level, but due to robust economic indicators in the U.S. and prolonged monetary easing by the Bank of Japan, the yen depreciated again, rising to the upper ¥151 level in November. Toward the end of the fiscal year, the yen appreciated slightly due to hints at rate cuts by the U.S. Federal Reserve Board and downward revisions of U.S. economic indicators, resulting in TTM closing at ¥141.82 against the U.S. dollar, ¥9.12 less than that of the end of the previous fiscal year. Reflecting these situations, the average exchange rate of the Japanese yen against the U.S. dollar on consolidated net sales depreciated by ¥8.87 to ¥140.62 per U.S. dollar from the previous fiscal year.

Consolidated net sales for the year ended December 31, 2023 decreased by ¥158.9 billion, or 6.8%, to ¥2,165.7 billion from the previous fiscal year due to a decrease in sales price of crude oil. Net sales of crude oil decreased by ¥169.4 billion, or 9.5%, to ¥1,609.2 billion, and net sales of natural gas increased by ¥10.6 billion, or 2.0%, to ¥535.7 billion. Sales volume of crude oil decreased by 92 thousand barrels, or 0.1%, to 138,024 thousand barrels, and sales volume of natural gas increased by 37,398 million cf, or 8.5%, to 479,814 million cf. Sales volume of overseas natural gas increased by 36,825 million cf, or 10.5%, to 387,974 million cf, and sales volume of domestic natural gas increased by 16 million m3, or 0.6%, to 2,452 million m3 (91,502 million cf). The average sales price of overseas crude oil decreased by US$14.88, or 15.2%, to US$82.83 per barrel. The average sales price of overseas natural gas decreased by US$1.27, or 18.4%, to US$5.62 per thousand cf, and the average sales price of domestic natural gas increased by ¥8.10, or 9.9%, to ¥90.08 per m3. The average exchange rate of the Japanese yen against the U.S. dollar on consolidated net sales depreciated by ¥8.87, or 6.7%, to ¥140.62 per U.S. dollar.

The decrease of ¥158.9 billion in net sales was mainly derived from the following factors: regarding net sales of crude oil and natural gas, an increase in sales volume contributing ¥36.6 billion to the increase, a decrease in unit sales price pushing sales down of ¥320.0 billion, the depreciation of the Japanese yen against the U.S. dollar contributing ¥124.5 billion to the increase, and a decrease in net sales excluding crude oil and natural gas of ¥0.1 billion.

Meanwhile, cost of sales decreased by ¥49.4 billion, or 5.2%, to ¥893.9 billion. Exploration expenses increased by ¥12.2 billion, or 42.0% to ¥41.4 billion. Selling, general and administrative expenses increased by ¥2.8 billion, or 2.7%, to ¥108.4 billion. As a result, operating income decreased by ¥124.5 billion, or 10.0%, to ¥1,121.8 billion. Other income decreased by ¥24.6 billion, or 7.3%, to ¥311.0 billion. Other expenses decreased by ¥57.6 billion, or 41.1%, to ¥82.4 billion mainly due to the absence of the modification loss on financial assets and others. As a result, ordinary income decreased by ¥91.5 billion, or 6.3%, to ¥1,350.4 billion.

Extraordinary loss was ¥89.0 billion as a result of posting impairment loss for certain projects due to changes in the external environment, including a tightening of environmental regulations in Australia, and others. Total amount of current income taxes and deferred income taxes decreased by ¥71.4 billion, or 7.5%, to ¥880.0 billion, and net profit attributable to non-controlling interests was ¥9.8 billion. As a result of the above effects, net income attributable to owners of parent decreased by ¥89.5 billion, or 19.4%, to ¥371.5 billion.

Financial results by segment are as follows:
　

The changes in segment income and reportable segments have been made from the year ended December 31, 2023, and the figures based on the changed segment income and reportable segments are used in the comparative analysis with the year ended December 31, 2022.

1) Oil & Gas Japan
Net sales increased by ¥18.2 billion, or 8.5%, to ¥232.8 billion due to an increase in sales price of natural gas. Net income attributable to owners of parent increased by ¥6.1 billion, or 17.2%, to ¥41.9 billion.

2) Oil & Gas Overseas - Ichthys Project
Net sales increased by ¥4.6 billion, or 1.3%, to ¥373.1 billion due to an increase in sales volume. Net income attributable to owners of parent increased by ¥9.7 billion, or 3.3%, to ¥302.6 billion mainly due to the absence of modification loss on financial assets and others.

3) Oil & Gas Overseas - Other Projects
Net sales decreased by ¥192.3 billion, or 11.2%, to ¥1,529.5 billion due to a decrease in sales price of crude oil. Net income attributable to owners of parent decreased by ¥74.7 billion, or 63.2%, to ¥43.5 billion mainly due to an increase in impairment loss.

（２）Summary of Consolidated Financial Position

Total assets as of December 31, 2023 increased by ¥263.3 billion to ¥6,523.1 billion from ¥6,259.8 billion as of December 31, 2022. Current assets increased by ¥88.8 billion to ¥818.2 billion due to an increase in securities and others. Fixed assets increased by ¥174.4 billion to ¥5,704.9 billion due to an increase in investments and other assets, and others.
Meanwhile, total liabilities decreased by ¥133.4 billion to ¥2,104.0 billion from ¥2,237.4 billion as of December 31, 2022. Current liabilities increased by ¥39.0 billion to ¥565.8 billion and long-term liabilities decreased by ¥172.5 billion to ¥1,538.1 billion. Net assets increased by ¥396.8 billion, to ¥4,419.1 billion from ¥4,022.3 billion as of December 31, 2022. Total shareholders’ equity increased by ¥190.0 billion, to ¥3,098.3 billion. Total accumulated other comprehensive income increased by ¥188.4 billion to ¥1,040.9 billion and non-controlling interests in net assets increased by ¥18.3 billion to ¥279.8 billion.

（３） Summary of Cash Flows

Regarding consolidated cash flows for the year ended December 31, 2023 net cash provided by operating activities amounted to ¥786.3 billion, up ¥35.0 billion from the previous fiscal year, mainly due to a decrease in trade receivables and a decrease in equity in earnings of affiliates, which is a non-cash item, despite a decrease in income before income taxes due to a decline in crude oil selling prices and the posting of modification gain on financial assets and others, which is a non-cash item. Net cash used in investing activities amounted to ¥324.3 billion, down ¥201.2 billion from the previous fiscal year, mainly due to the posting of proceeds from sales and redemptions of securities and a decrease in long-term loans made despite an increase in payments for purchases of securities. Net cash used in financing activities amounted to ¥480.3 billion, up ¥238.4 billion from the previous fiscal year, mainly due to an increase in repayments of long-term debt. The effect of exchange rate changes on cash and cash equivalents was an increase of ¥7.5 billion, and with this effect, net cash decreased ¥10.7 billion during the year ended December 31, 2023. The balance of cash and cash equivalents as of December 31, 2023 totaled ¥200.8 billion, reflecting a net decrease of ¥10.7 billion from ¥211.6 billion at the beginning of the period.

（4）Outlook for the Next Period

The Group will voluntarily adopt the International Financial Reporting Standards (IFRS) in place of the existing accounting principles generally accepted in Japan, starting with the consolidated financial statements in the Annual Securities Report for the year ended December 31, 2023. Therefore, the forecasted consolidated operating results for the year ending December 31, 2024 will be prepared in accordance with IFRS.

The above forecasts are based on an average crude oil price assumption of US$78.0 per barrel (Brent crude oil) for the first quarter of 2024, an average of US$73.0 per barrel (Brent crude oil) for the second quarter of 2024, an average of US$73.0 per barrel (Brent crude oil) for the third quarter of 2024, an average of US$68.0 per barrel (Brent crude oil) for the fourth quarter of 2024, and consequently an average of US$73.0 per barrel (Brent crude oil) for the year ending December 31, 2024. The average exchange rate assumption for the year ending December 31, 2024 is ¥138 to the U.S. dollar.

（5）Dividend policy and Dividends for the year ended December 31, 2023 and for the year ending December 31, 2024

Based on the shareholder return policy outlined in the Long-term Strategy and Medium-term Business Plan (INPEX Vision@2022) announced in February 2022, the Company will, in principle, maintain stable dividend payouts during the period covered by the medium-term business plan from fiscal year 2022 to fiscal year 2024 with a total payout ratio of around 40% or greater, and a minimum annual dividend per share of ¥30. During this period, the Company will also strive to strengthen shareholder returns through means including the acquisition of own shares based on the Company’s business environment, financial base and management conditions, etc. 　

Moreover, in “Sustainable Growth of Corporate Value,” announced in August 2023, the Company decided on an annual dividend per share of ¥74 for the year ended December 31, 2023, and will strive to make best efforts to ensure that the amount for the year ending December 31, 2024 is equal to or greater than the previous fiscal year.

In accordance with the policy stated above, the Company has set the year-end dividend at ¥37 per common stock for the year ended December 31, 2023. Combined with the mid-term dividend of ¥37 per common stock, the planned total dividends for the year ended December 31, 2023 are ¥74 per common stock. The Company has also set the year-end dividend at ¥14,800 per Class A stock for the year ended December 31, 2023. Combined with the mid-term dividend of ¥14,800 per Class A stock (unlisted), the planned total dividends for the year ended December 31, 2023 are ¥29,600 per Class A stock.

For the year ending December 31, 2024, the Company expects mid-term dividend of ¥38, year-end dividend of ¥38, bringing the total dividends to ¥76 per common stock. The Company expects mid-term and year-end dividends of ¥15,200 each, bringing the total dividend to ¥30,400 per Class A stock.

The Company conducted a stock split at a ratio of 1:400 of common stock effective October 1, 2013. However, for Class A stock, no stock split was implemented. The article specifying that dividends of Class A stock are equivalent to dividends of common stock prior to the stock split is included in the Articles of Incorporation.