Japan Petroleum Exploration Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥168.14B
• Operating Income: ¥25.51B
• Net Income: ¥21.41B
• EPS: ¥105.72

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

石油資源開発株式会社 (JAPEX) FY2026 Q2 shows resilient profitability despite top-line softness and evident data disclosure gaps in cash flow and some line items. Revenue was ¥168.1bn, down 8.4% YoY, but gross profit of ¥46.5bn implies a solid gross margin of 27.7%, indicating maintained unit economics and cost discipline. Operating income declined 11.3% YoY to ¥25.5bn, translating to an operating margin of roughly 15.2%, demonstrating stable operating efficiency amid weaker price/volume conditions. Ordinary income of ¥32.9bn exceeded operating income, signaling sizable non-operating gains (e.g., FX, investment income, or equity-method contributions), which boosted bottom line quality this quarter. Net income rose 28.0% YoY to ¥27.1bn, with a net margin of 16.1%, underscoring the impact of non-operating drivers and likely a supportive effective tax burden. DuPont analysis indicates ROE of 4.74%, decomposed into net margin 16.09%, asset turnover 0.246x, and financial leverage 1.20x, pointing to modest asset intensity and conservative balance sheet leverage. Liquidity is very strong: current assets of ¥230.8bn against current liabilities of ¥49.2bn yield a current ratio of 469.6%, supported by low inventories of ¥3.4bn and a quick ratio of 462.8%. The balance sheet is robust with total liabilities of ¥124.3bn versus equity of ¥570.6bn (liabilities-to-equity 0.22x), implying substantial solvency headroom. Interest coverage is a comfortable 19.8x (operating income to interest expense), highlighting low financial risk. Notably, several items are unreported in XBRL: depreciation and amortization, all cash flow statements (OCF/ICF/FCF), cash balance, and share count; these zeros do not represent true zeros and limit cash flow and per-share analytics. The reported equity ratio of 0.0% is clearly a disclosure artifact; based on total equity and total assets, the implied equity ratio is approximately 83.3%, reinforcing the conservative capital structure. Effective tax rate shown as 0.0% is also an artifact; using reported tax expense (¥4.64bn) and net income suggests an implied tax rate in the mid-teens. EBITDA-based metrics are not interpretable due to unreported D&A, and the OCF/Net Income ratio and FCF are not meaningful as OCF and capex are undisclosed. Dividend-related metrics (DPS, payout, FCF coverage) are similarly non-informative given missing inputs, despite the company historically maintaining shareholder returns aligned with commodity cycles. Overall, JAPEX enters the second half with strong liquidity, low leverage, and healthy profitability, but earnings quality this quarter is supported by non-operating items amid revenue softness. Key forward drivers remain commodity prices, production volumes, FX, and capital allocation, with data limitations necessitating caution in cash flow and dividend sustainability assessments.

Profitability Analysis

ROE decomposition (DuPont): Net margin 16.09% × Asset turnover 0.246 × Financial leverage 1.20 = ROE 4.74%. Gross margin is 27.7% (¥46.5bn/¥168.1bn), evidencing decent cost control despite an 8.4% YoY revenue decline. Operating margin of ~15.2% (¥25.5bn/¥168.1bn) fell with operating income down 11.3% YoY, suggesting some operating deleverage as top line softened. Ordinary margin of ~19.6% (¥32.9bn/¥168.1bn) exceeds operating margin, indicating material non-operating contributions (e.g., FX gains, investment income, equity-method). Net margin of 16.1% benefitted from these non-operating gains and a supportive tax burden. Interest coverage is strong at ~19.8x (¥25.5bn/¥1.29bn), confirming limited drag from financing costs. EBITDA and EBITDA margin cannot be assessed due to unreported D&A (shown as zero in the data). Overall, profitability remains healthy with margins resilient, but quality is somewhat mixed given reliance on non-operating items this quarter.

Growth Assessment

Revenue contracted 8.4% YoY to ¥168.1bn, likely reflecting lower realized oil/gas prices and/or volume normalization. Operating income declined 11.3% YoY to ¥25.5bn, modestly outpacing the top-line decline, indicating mild operating deleverage. Net income increased 28.0% YoY to ¥27.1bn, driven by non-operating income that lifted ordinary income above operating income; sustainability depends on FX movements, investment/associate results, and one-offs. Gross margin at 27.7% suggests stable lifting cost dynamics and pricing relative to input costs. Without OCF or capex disclosure, we cannot corroborate earnings with cash conversion or growth investment levels. Near-term outlook hinges on crude and gas price trends, production volumes, FX (USD/JPY), and any hedging outcomes; absent guidance here, base-case assumes normalization of non-operating tailwinds. Structural growth will depend on reserves replacement, development progress, LNG/gas value chain initiatives, and potential domestic infrastructure earnings stability. Given the conservative balance sheet, the company has flexibility to pursue selective growth, but earnings volatility remains tied to commodity cycles.

Financial Health

Liquidity is very strong: current assets ¥230.8bn vs current liabilities ¥49.2bn yield a current ratio of 469.6% and quick ratio of 462.8% given low inventories (¥3.4bn). Working capital stands at ¥181.7bn, providing ample buffer for operations and capex. Solvency is robust: total liabilities ¥124.3bn versus equity ¥570.6bn implies liabilities-to-equity of 0.22x and an implied equity ratio near 83.3% (the reported 0.0% equity ratio is a disclosure artifact). Interest expense is modest at ¥1.29bn with coverage of ~19.8x from operating income, indicating low refinancing risk. Asset base totals ¥684.7bn with asset turnover of 0.246x, typical of capital-intensive E&P profiles. Overall, the balance sheet is conservatively financed, affording resilience against commodity volatility.

Cash Flow Quality

Cash flow statements (operating, investing, financing) and cash balances are unreported in this dataset (zeros indicate non-disclosure), preventing direct assessment of earnings-to-cash conversion. Consequently, OCF/Net Income and Free Cash Flow metrics shown as zero are not meaningful. Without D&A disclosure, we cannot triangulate non-cash charges to infer OCF. Working capital appears ample (¥181.7bn), but period-to-period movements are unknown, limiting analysis of cash tie-ups or releases. Given the reliance on non-operating gains in earnings this quarter, validating the persistence of cash generation would require actual OCF and capex data. In absence of these, earnings quality is viewed as mixed: core operating profitability is solid, but cash corroboration cannot be established.

Dividend Sustainability

Dividend data (DPS, payout, and FCF coverage) are shown as zero due to non-disclosure; therefore, we cannot compute a meaningful payout ratio or FCF coverage. Balance sheet strength (liabilities/equity 0.22x, implied equity ratio ~83%) suggests capacity to sustain shareholder returns through cycles, but sustainability ultimately depends on OCF after sustaining capex, which is unreported. Net income of ¥27.1bn provides earnings capacity, yet the contribution from non-operating items this quarter raises uncertainty about repeatability. Policy outlook likely remains responsive to commodity conditions and cash flow availability; clearer assessment requires disclosed OCF and capex guidance.

Risk Assessment

Business Risks:

• Commodity price volatility (oil, gas, LNG) impacting revenues and margins
• Production volume variability and natural field decline rates
• Reserve replacement risk and exploration/drilling success uncertainty
• Operational risks in E&P, including outages, accidents, and cost overruns
• Geopolitical and country risk in overseas assets
• FX fluctuations (USD/JPY) affecting ordinary income and valuations
• Environmental and regulatory tightening, including carbon pricing and emissions targets
• Decommissioning and asset retirement obligations
• Impairment risk from price downturns or project delays
• Counterparty and market risks in LNG and gas contracts

Financial Risks:

• Earnings volatility from non-operating items (FX, investment income) impacting ordinary and net income
• Potential capex upcycles stressing cash if commodity prices weaken
• Limited cash flow visibility due to non-disclosure of OCF and capex
• Interest rate shifts, though current interest burden is modest
• Working capital swings from price/volume changes

Key Concerns:

• Top-line decline (-8.4% YoY) and operating income contraction (-11.3% YoY)
• Dependence on non-operating gains to support net income growth
• Absence of cash flow disclosures, hindering validation of earnings quality and dividends
• Reported zeros for D&A and cash metrics limit EBITDA/FCF analysis

Investment Implications

Key Takeaways:

• Healthy margins with operating margin ~15.2% despite revenue softness
• Net income up 28.0% YoY due to sizable non-operating contributions
• Strong liquidity (current ratio 469.6%, quick ratio 462.8%) and low leverage (liabilities/equity 0.22x)
• Interest coverage robust at ~19.8x, indicating low financing risk
• ROE 4.74% driven by high net margin but muted by low asset turnover and modest leverage
• Cash flow data (OCF, capex, FCF) not disclosed, constraining assessment of earnings quality and dividends
• Implied equity ratio ~83% (reported 0% is a data artifact), underscoring balance sheet strength

Metrics to Watch:

• Realized oil/gas prices and hedging outcomes
• Production volumes and lifting costs
• Operating cash flow and sustaining vs. growth capex
• FX (USD/JPY) impacts on ordinary income
• Reserve replacement ratio and project execution milestones
• Tax rate normalization and non-operating income volatility
• Dividend policy updates and capital allocation framework

Relative Positioning: Versus domestic E&P peers, JAPEX operates with a conservative balance sheet and strong liquidity, but smaller scale implies greater earnings variability; profitability is solid, yet more reliant on non-operating items this quarter compared with larger peers that may exhibit steadier operating contributions.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis