Uncertainty over Development Costs, Schedules, Demand and Production Volumes

「Recovery of previous investments delayed by the suspension of Garraf shipments (lower revenue and delayed recovery of the production receivables account in operating cash flow)」

「During the current consolidated fiscal year, with respect to future costs for removing offshore platforms and abandoning wells at domestic oil and gas fields, we revised the estimates of the costs required at the end of the business following the receipt of new information concerning removal and related costs. The increase of ¥2,966 million resulting from the change in estimates was added to the asset retirement obligation balance before the change.」

「In addition, in response to heightened tensions surrounding Ukraine, ExxonMobil of the United States, the operator of the business, announced on 1 March 2022 its policy of withdrawing from the business. If economic sanctions against Russia result in prolonged restrictions on business activities, they may adversely affect the operating results of our Group.」

「The quarterly net loss before income taxes and other adjustments was ¥72,604 million, a decrease in profit of ¥69,634 million from the same period of the previous year. This was mainly due to recognising a loss on the sale of shares in JACOS, a consolidated subsidiary promoting the Canadian oil sands project, following the transfer of all JACOS shares, and a loss on the transfer of interests held by JAPEX Montney Ltd. (JML) in shale gas properties in the North Montney region of British Columbia, Canada. The quarterly net loss attributable to owners of the parent was ¥85,057 million, a decrease in profit of ¥81,280 million from the same period of the previous year.」

「In the Seagull field in the UK North Sea, following a review of the development plan in light of the impact of the infectious disease and other factors, the start of production, which had been scheduled for the end of this year, is now expected to be delayed until the first half of 2023.」

「In connection with the transfer of these interests and other assets, we plan to recognise an approximately C$497 million loss on the transfer of interests as an extraordinary loss in the second quarter of the fiscal year ending March 2022.」

「This was due in part to recognising impairment losses of ¥11.1 billion on operating assets relating to the Yufutsu Oil and Gas Field and ¥4.6 billion on operating assets relating to the offshore Iwafune-Oki Oil and Gas Field.」

「At the Garraf Oil Field in southern Iraq, we temporarily suspended development and production operations due to the impact of the infectious disease and resumed production operations in July last year. However, delays in additional development work caused the planned increase in production to 230,000 barrels per day by the end of last year to be pushed back to this year or later.」

「At the Garraf Oil Field in southern Iraq, we temporarily suspended development and production operations due to the impact of the infectious disease and resumed production operations in July this year. However, additional development work has been delayed by restrictions on movement and other factors, and the planned increase in production to 230,000 barrels per day by the end of 2020 is expected to be pushed back to the following year or later. The schedule for the Seagull field in the UK North Sea, where development work is under way with production targeted to begin by the end of 2021, may also change.」

「For operating assets relating to the Amarume Oil Field, following an estimate of future cash flows in light of the decline in crude oil prices and other factors, we reduced the carrying amount of operating assets relating to production operations to their recoverable amount and recognised the reduction as an impairment loss included in extraordinary losses.」

「In addition, these investments involve various geological uncertainties, including unexpected declines in reserves and production volumes, as well as various technical risks specific to mining, such as contamination by impurities. If these risks materialise, they may adversely affect the performance of our Group.」

「In connection with this decision, during the nine-month period of the current third quarter of the consolidated fiscal year, we recognised C$60 million in cancellation costs for the pipeline construction plan related to the PNW business as an extraordinary loss and C$36 million in equity-method investment losses relating to PNWL as a non-operating expense. In addition, after revising the upstream development plan so that it no longer assumed the PNW business, we reduced the carrying amount of operating assets recorded by JML to their recoverable amount and recognised C$750 million in impairment losses as an extraordinary loss.」

「In connection with this decision, during the current consolidated fiscal year we plan to recognise approximately C$60 million in cancellation costs for the pipeline construction plan related to the PNW business as an extraordinary loss, and approximately C$36 million in equity-method investment losses relating to PNWL as a non-operating expense. We are also examining in detail the impact of this matter on the upstream business.」

「The outlook for the business environment, including oil prices, remains challenging. In addition, given the current situation in which the technical risk of resuming SAGD production operations at existing facilities is increasing as temperatures and pressure in the oil sands reservoir decline, we reached this decision.」

「Accordingly, it is generally necessary to allow a long lead time from commencing a project until the investment is recovered and contributes to earnings. During this period, changes in the business environment may result in increased investment, including increases caused by delays in the development schedule, lower demand, lower selling prices, higher operating costs and foreign exchange fluctuations, creating a risk that the intended investment objectives will not be achieved.」

「Following a review of the total investment required for the initial development of the Hangingstone project expansion in Alberta, Canada, the expected total investment was changed from approximately C$1.67 billion, including approximately C$1.25 billion attributable to JACOS※, to approximately C$2.0 billion, including approximately C$1.5 billion attributable to JACOS.」

「Following a review of the total investment required for the initial development of the Hangingstone project expansion in Alberta, Canada, the expected total investment was changed from approximately C$1.67 billion, including approximately C$1.25 billion attributable to JACOS※, to approximately C$2.0 billion, including approximately C$1.5 billion attributable to JACOS.」

「It is generally necessary to allow a long lead time from commencing a project until the investment is recovered and contributes to earnings. During this period, changes in the business environment may result in increased investment, including increases caused by delays in the development schedule, lower demand, lower selling prices, higher operating costs and foreign exchange fluctuations, creating a risk that the intended investment objectives will not be achieved.」