INPEX CORPORATION

Oil prices and natural gas prices in overseas businesses fluctuate significantly due to international supply and demand conditions, the global economy, and the policies of oil-producing countries, materially affecting the Group's revenue and profit. It is estimated that a fluctuation of US$1 per barrel in oil prices would change profit or loss by ¥5.5 billion annually in FY2026 (ending December 2026), with additional downward pressure on demand from progress toward net-zero transition. While certain hedging measures have been implemented, they do not cover all risks, and the impact of price fluctuations cannot be completely eliminated.

Income and expenditures associated with the Group's overseas businesses are mainly denominated in US dollars, and yen appreciation reduces yen-based revenue and profit. It is estimated that a ¥1 fluctuation in the USD/JPY exchange rate would change profit or loss by ¥3.0 billion annually in FY2026 (ending December 2026). While certain hedging measures have been implemented, they do not cover all foreign exchange risk.

In fiscal 2025, the regional composition ratio of production volume was approximately 40% for the Australia/Southeast Asia region and approximately 54% for the Abu Dhabi/Eurasia and other regions, with these two regions accounting for the majority, indicating a high degree of dependence on specific regions and concessions. If operational difficulties or other problems arise at major concessions such as the Ichthys Gas-Condensate Field or the Abu Dhabi offshore/onshore oil fields, this could have a significant adverse impact on the Group's business performance. Although geographic diversification across five core areas is being pursued to spread risk, concentration risk currently remains.

The Group conducts numerous oil and natural gas development businesses outside Japan, and its business and performance may be significantly affected by changes in the political, economic, and social conditions of oil-producing countries, changes in legal systems and tax regimes, production restrictions by OPEC+ member countries, international conflicts, and other factors. Oil-producing country governments may also seek to change the economic terms of petroleum contracts citing increased development costs, among other reasons. The Group has established country risk management guidelines and manages risk by, among other measures, setting cumulative investment balance limits for high-risk countries.

Concession interest contracts underlying overseas businesses are in many cases subject to fixed terms, and if they are not extended or renewed, or are renewed on unfavorable terms (such as a reduced interest ratio), this could adversely affect business performance. Long-term natural gas sales and supply contracts similarly have fixed terms, and risks exist if they are not extended or if sales volumes decline. While the Group, together with its partners, intends to make efforts toward extension and renewal, existing contracts could lapse depending on the outcome of negotiations with national oil companies and other counterparties in oil-producing countries.

There is a risk of operational accidents or disasters occurring at each stage of exploration, development, production, and transportation, and natural disasters or cyberattacks causing information system failures could lead to suspension of operations. If an environmental incident occurs (such as soil, air, or marine pollution), restoration costs, civil/criminal/administrative procedure costs, and damages may be incurred. Although emergency response plans and BCPs have been formulated, an information security committee is operated, and management is conducted through an HSE management system, it is possible that insurance may not cover all damages.

Exploration activities do not always result in the discovery of resources on a commercially producible scale, and even with recent technological advances, the probability of discovery remains quite low. When a well is judged to be a dry hole, exploration costs are recorded, and when the prospect of securing commercial viability is impaired, impairment losses are recorded, which could adversely affect business performance. While the Group pursues investment activities within a comprehensive balance of assets across the exploration, development, and production stages, technical and economic risks are always present.

As efforts to reduce greenhouse gas emissions in pursuit of the Paris Agreement goals advance globally, if the transition to net zero proceeds faster than the Company anticipates, demand for oil and natural gas could be suppressed, potentially reducing reserves. Changes to or strengthening of environment-related laws and regulations could result in additional response measures and cost burdens, and impairment losses may arise from a decline in the profitability of held business assets. Although risks are identified, assessed, and managed in line with TCFD recommendations, the impact of transition risk cannot be completely eliminated.

Due to the Class A shares held by the Minister of Economy, Trade and Industry, approval by resolution of the Class A shareholders' meeting is required for important matters such as the appointment/dismissal of directors, disposal of significant assets, amendment of the articles of incorporation, mergers, and dissolution, and depending on the Minister's judgment, management flexibility may be constrained. National policy considerations may conflict with the interests of the Company and general shareholders, and if the veto right is actually exercised, this could affect the market price of common shares. In addition, the sale on the market of common shares held by the Minister of Economy, Trade and Industry (approximately 23.74% of issued common shares) could also affect the share price.

Development of large-scale LNG projects requires enormous investment, and it takes more than ten years from exploration and development investment to fund recovery. Delays in government approvals and permits, unexpected geological issues, fluctuations in oil and gas prices and exchange rates, surges in the cost of materials and equipment, and delays in final investment decisions due to failure to reach agreement on long-term sales contracts, among other factors, could cause delays in the development schedule or impair economic viability. Changes in the economic and financial environment could also affect the terms of fund procurement, and the Group addresses these issues by conducting economic and risk assessments through the IVAS review committee.