Annual Report 2008 Securing the Future Energy Supply Annual Report 2008 INPEX Holdings Inc. Toward New Frontiers In October 2008, following the completion of a two-and-a-half-year integration process, we made a new start as the newly founded INPEX CORPORATION. The substantial improvement in international competitiveness resulting from the merger of INPEX CORPORATION, a leading Japanese E&P company, and Teikoku Oil Co., Ltd., a pioneer of E&P in Japan, will enable us to strive to become an energy company that continues to meet expanding energy demand. Masatoshi Sugioka Kunihiko Matsuo Naoki Kuroda Representative Director Representative Director, Representative Director, Chairman President Contents INPEX Summary ........................................................................... 2 Our Performance ............................................................ 2 Our Operations ............................................................... 4 Our Supply Basis ............................................................. 6 To Our Stakeholders .................................................................... 8 An Interview with the President ................................................ 9 Global Business Activities ............................................................16 c Asia & Oceania (Indonesia) .................................................16 c Asia & Oceania (Australia & JPDA) ......................................20 c Eurasia (Europe & NIS) ........................................................24 c Middle East & Africa ..........................................................27 c Americas ............................................................................30 c Japan .................................................................................33 Mission, Corporate Social Responsibility Policy & Health, Safety and Environment Policy .................................................35 Corporate Social Responsibility .................................................36 Corporate Governance ................................................................38 Management Team .....................................................................42 Financial Section ..........................................................................43 Operating Data and Corporate Information .............................77 Stock Information .......................................................................86 Corporate Data ............................................................................87 FORWARD-LOOKING STATEMENTS This annual report includes forward-looking information that reflects the Company’s plans and expectations. Such forward-looking information is based on the current assumptions and beliefs of the Company in light of the information currently available to it, and involves known and unknown risks, uncertainties, and other factors. Such risks, uncertainties and other factors may cause the Company’s actual results, performance, achievements or financial position to be materially different from any future results, performance, achievements or financial position expressed or implied by such forward-looking information. Such risks and uncertainties include, without limitations, fluctuations in the following: • the price of and demand for crude oil and natural gas; • exchange rates; and • the costs associated with exploration, development, production and other related expenses. The Company undertakes no obligation to publicly update or revise any information in this annual report (including forward-looking information). NOTES REGARDING FIGURES Financial figures in this annual report have been rounded to the nearest unit (millions, billions, etc.) for purposes of convenience. INPEX CORpoRation 1 INPEX Summary Our Performance Thousands of INPEX CORPORATION and Consolidated Subsidiaries Millions of yen U.S. dollars*7 Years ended March 31 2007 2008 2008 Net sales ............................................................................................................. ¥ 969,713 ¥1,202,965 $12,005,639 Japan .............................................................................................................. 77,322 93,882 936,946 Asia & Oceania ................................................................................................ 387,543 452,542 4,516,387 Eurasia (Europe & NIS) ..................................................................................... 118,618 183,879 1,835,120 Middle East & Africa ........................................................................................ 386,009 464,523 4,635,958 Americas ......................................................................................................... 221 8,139 81,228 Operating income ............................................................................................... 559,077 714,211 7,127,854 Net income ......................................................................................................... 165,092 173,246 1,729,002 Cash flows from operating activities .................................................................... 231,982 363,995 3,632,684 ROE*1 (%) ........................................................................................................... 17.7 15.8 — Net ROACE*2 (%) ............................................................................................... 20.4 21.4 — Payout ratio (%) .................................................................................................. 9.9 10.2 — Total assets ......................................................................................................... 1,608,107 1,807,901 18,042,924 Net debt (at period end)*3,6 .................................................................................. (169,667) (328,353) (3,276,976) Equity ratio*4 (%) ............................................................................................... 64.0 64.0 — Net debt/Total capital employed*5,6 (%) ............................................................... (18.6) (36.1) — Yen U.S. dollars*7 Per share data: Net income ...................................................................................................... 70,423.45 73,510.14 733.63 Cash dividends ................................................................................................ 7,000.00 7,500.00 74.85 Yen Share price .......................................................................................................... 1,020,000 1,110,000 — Millions of Billions of yen U.S. dollars*7 Market Capitalization .......................................................................................... 2,405.6 2,617.8 26,126 Notes: *1 ROE = Net income / Average of net assets excluding minority interests at the beginning and end of the fiscal year *2 Net ROACE = (Net income + Minority interests + (Interest expense – Interest income) × (1 – Tax rate)) / (Average of sum of net assets and net debt at the beginning and end of the fiscal year) *3 Net debt = Interest-bearing debt – Cash and deposits – Public bonds and corporate bonds and other debt securities with determinable value – MMF, short-term bonds with repurchase agreements and certificate of deposit *4 Equity ratio = (Net assets – Minority interests) / Total assets *5 Net debt / Total capital employed = (Interest-bearing debt – Cash and deposits – Public bonds and corporate bonds and other debt securities with determinable value – MMF, short-term bonds with repurchase agreement and certificates of deposit) / (Net assets + Interest-bearing debt – Cash and deposits – Public bonds and corporate bonds and other debt securities with determinable value – MMF, short-term bonds with repurchase agreement and certificates of deposit) *6 Figures in parentheses denote negative amounts. *7 The translation of yen amounts into U.S. dollar amounts is included solely for convenience, as a matter of arithmetic computation only, at ¥100.20 = US$1.00, the approximate rate of exchange in effect on March 31, 2008. 2 INPEX CORpoRation c Higher sales and profits in the year c Return on equity (ROE) was c The Company’s ratio of net debt to ended March 31, 2008 were the slightly lower due to greater total capital employed improved result of increased sales volume for growth in shareholders’ equity significantly year on year to oil and natural gas, coupled with relative to growth in net income. –36.1% due to an increase in cash support from high oil prices and a However, net return on average and deposits, government bonds weaker yen. capital employed (ROACE), which and other funds on hand for use in takes net interest-bearing debt future large-scale projects. This into account, rose by roughly 1%. ratio indicates INPEX’s continuing financial soundness. Net sales Net income (Billions of yen) (Billions of yen) ■ Japan ■ Asia & Oceania ■ Eurasia (Europe & NIS) ■ Middle East & Africa ■ Americas 2008 452.5 183.9 464.5 1,203.0 2008 173.2 93.9 8.1 2007 387.5 118.6 386.0 969.7 2007 165.1 77.3 0.2 0 200 400 600 800 1,000 1,200 0 40 80 120 160 200 ROE Net debt/Total capital employed (%) (%) 15.8 -36.1 2008 2008 2007 2007 17.7 -18.6 10 15 20 -40 -20 0 30 Share price performance—TOPIX (%) 20 INPEX ■TOPIX 10 0 -10 -20 -30 April 3, 2006 October 2, 2006 April 2, 2007 October 1, 2007 June 30, 2008 INPEX CORpoRation 3 Our Operations Years ended March 31 2007 2008 Net proved reserves (End of period)*1: Crude oil, condensate and LPG (MMbbls) .....................................................................................