We would now like to start the earnings briefing session of INPEX Corporation. Thank you, everyone, for gathering today, despite your busy schedules as well as despite the hot weather. My name is Wakita, General Manager of the Corporate Communications unit, and I have the pleasure of serving as the facilitator for this meeting. Please allow me to introduce the speakers. Takayuki Ueda, Representative Director, President and CEO. Daisuke Yamada, Director and Senior Managing Executive Officer. Toshiaki Takimoto, Director and Senior Managing Executive Officer. Thank you. As for the program for today, we will spend about 30 minutes for the presentations and scheduling 30 minutes for Q&A. The meeting today will be held in a hybrid manner with online participation, with simultaneous interpretation provided in Japanese and English. For those attending through Zoom, please select the language of your choice.
As for the presentation material, you can make a selection using the button at the top of the screen. Mr. Ueda will first explain about business overview and about the progress update for sustainable growth of corporate value. Yamada then will explain about the consolidated financial results and consolidated financial forecast. So over to you, Ueda.
My name is Ueda, President and CEO of INPEX Corporation. Thank you very much for gathering and attending the meeting today. Allow me to start by giving you the business overview. Most important message that I want to communicate to you today is shown on this page. Today, we are announcing the half-year results. From January to June, the six-month earnings result, we were blessed with a stable oil price and a weak yen. So significant progress in the depreciation of the yen.
We were able to register JPY 212.5 billion of the interim profit attributable owners of parent. You can see on the slide, the first half, the average Brent oil price was $83.4 per barrel. Exchange rate did actually reach JPY 160 at a time, but on average, it was JPY 152.4. In that regard, we did not experience any major problem, and so we saw quite a steady progress in the first half of the year. From July onwards, after the first half of the year, but particularly the last week or so, the significant decline in the stock market, or increase, or the FX fluctuations, the decrease in the oil price. Over the last several weeks, a significant change took place both in Japan and overseas. As a consequence, the share price of INPEX Corporation also came down quite significantly.
For the six months, January to June, we were able to achieve quite a stable operation, achieving earnings. But your concerns would be, given the volatile situation, oil price coming down with the exchange rate, the movement, how is INPEX? Is INPEX okay? That is probably what you are thinking. In that regard, when we give you the full-year forecast, we have decided to incorporate the like this situation. For the net income full year, the forecast is JPY 360 billion. I would like for you to look at the assumption shown below for Brent oil price, and $76.6 per barrel would be the average for the second half of the year. $83 was for the first half of the year, but for the second half of the year, $76. Today, came back to about $78, but it was about $76 just recently.
If we are assuming that the oil price of this level would continue. The next is the exchange rate, JPY 152 per dollar for the first half of the year, and just a few weeks ago, more than JPY 160 of the yen depreciation. But for the exchange rate, we decided to use an assumption of JPY 143.6 per dollar. Today, about JPY 146, so coming back a little bit, but that is the assumption that we made for the second half of the year. Given the significant changes in the environment, if we make that as the basis, how will we perform in the second half of the year? That is what we wanted to share with you. That is the objective of the full-year forecast. As you can see here, the JPY 360 billion of profit attributable to owners of parents.
Last year was about JPY 320 billion based on IFRS. About a week ago, low oil price or the FX situation. Even with that, we are still able to generate profit in excess of the level last year, and that is what we wanted to communicate to you. You may be thinking, "Is INPEX okay?" Well, of course, the oil price and FX, they do move up and down. So it's difficult to say, but the significant volatile situation over the last year or two, even if that situation continue for the entire second half of the year, our earnings will be still okay. In fact, we should be able to exceed the level from last year. That's the message that I wanted to communicate to you.
As for the returns based on these assumptions and towards the current share market, we wanted to communicate certain convincing message. For dividend, JPY 86 per share, and 50% each in the first and second half of the year, and JPY 86 for the full year. That's a JPY 12 increase year-on-year. As for buyback, in the first half of the year, we did JPY 50 billion, and JPY 80 billion additional, so a total of JPY 130 billion of share buyback. So, JPY 235 billion of the returns in total. We are able to make this level of returns based on the assumption, and that is what we have come up with in terms of numbers. That's the situation concerning our interim result as well as the forecast for the full year. In a word, INPEX is okay.
That is what I wanted to communicate today. That is the most important message. But I would like to give you some update regarding progress on a number of projects. If you go to the next page. For the oil and gas area, we have one unfortunate situation which we have explained at the press briefing. We did experience a little bit of a production loss. So one LNG train, we did experience some malfunction in the facility. So, we are continuing with the production using the train with a reduced production level. In October, there is a short-term shutdown scheduled. At that point in time, we will actually address this issue, and we'll return to a full production day post that shutdown. But we did have that type of trouble, and that is what I wanted to report to you.
First half of the year, everything was quite steady, and we ended up with production volume in excess of our initial assumptions. But we did experience the trouble, and that is what we wanted to report to you. For Abadi, we are continuing to increase capacity. For others here, we have separated the domestic business. The Australian Abadi is conducted by a subsidiary, but we wanted to improve the efficiency of domestic business, so we split out the domestic business, and we created a subsidiary called INPEX JAPAN, LTD. as of 1st of October, will enable us to engage in a more flexible operation. As for Abadi, we are just continuing to make a steady progress on this project. At the end of this year or start of the next year, we are making preparation to start the FEED at those timing.
We are doing the various initiatives like geophysical and geotechnical survey, both onshore and offshore. We are going to execute a FEED, the SURF, the FPSO, the pipeline, and also onshore the equipment. For these four areas, we are going to hold a tender, and we are making preparation for assessing qualification and so forth. We are in preparation for conducting the tender for a FEED. In the net zero area, which is on the next page, the five net zero businesses. Right now, in Kashiwazaki, Niigata Prefecture, we are currently engaged in the blue hydrogen and ammonia production and utilization integration demonstration. We are currently constructing the surface facility, which is progressing quite steadily. From August next year, we are expecting to see the start of operation.
Also, in the United States, in Houston, we have commenced the pre-FEED for the large-scale low-carbon ammonia production and export project. CCS, there was the progress. First, overseas, there are two major projects. One is Bonaparte, the CCS, and this is to sequester the CO2 from Ichthys. For this project, for this year, we have been doing a 3D seismic survey, and we will actually drill a well to confirm as to whether we are able to inject a sufficient amount of CO2. That is what we are doing, and will do for the rest of the year. The other is Abadi. Abadi is a project with the CCS. As for Japan domestically, there are two major CCS projects that we will engage in. First is the Tokyo Metropolitan area CCS project. The other is called the Tōhoku Region West Coast CCS project or initiative.
These projects have been selected by the government as a Japanese advanced CCS project related to design work towards implementation. For the next two years, we will engage into detail design.
Outside of that, we have the renewable energy with Enel. The first time we are coming up with the Quorn Park storage battery business. When it comes to renewable energy, this Quorn Park solar power generation and also the storage battery combination, we are working on the renewable energy project. At the same time, for carbon recycling, methanation or e-methane is what we are trying to experiment, and we are doing the construction at this moment. That's all for the progress around the project. The next page and beyond, we have our progress update for sustainable growth of corporate value. Briefly, we announced this last year in August. Once a year, we like to do a follow-up based on the request from our investors. I would like to briefly explain about the current progress.
To increase the corporate value, what we are doing in particular, there are three areas we are working all together comprehensively. The top three on the right-hand side, number one is the improving capital efficiency. Second, growth initiatives to gain market confidence. The third is the stronger shareholder returns and deeper dialogue with investors. We are working on all of these three together, and we have mentioned this in the past as well. As you can see, these are the numbers we have achieved. With these three initiatives, we have each of the initiative explained using one page. First, for the improving capital efficiency on page nine, the ROIC is what we are going to introduce, and that's what we have announced. In investors day, yes, last year, we have started to disclose the ROIC by segment.
In 2023, we have been able to achieve ROIC to be above WACC, and based on that it was 7.5%, and the forecast for this year is 7.5%. ROE was less than 8.8%. However, we are trying to achieve ROIC, to be above WACC. The next page, for the growth initiatives to gain market confidence in the oil and gas field as well as the net zero business, we are going to work on these projects. As explained earlier in the project progress, we have already covered the details. I would like to skip this page. The next is the stronger shareholder returns and deeper dialogue with investors for this initiative. As you can see in the slide, over the past three years, you can see what was the return to our shareholders.
As mentioned in 2024 for the forecast in this fiscal year, including that, we have a three-year plan, which is about JPY 200 billion of a total shareholder return that we planned. The current estimate is a total of JPY 630 billion, is what we're expecting in total. Three times or more is the level that we are returning to our shareholders. As mentioned before, for dividends. We're able to have a steady progress in this amount. For the share buyback, we had JPY 120 billion, which is an all-time high before. But now we are achieving more than that this time with JPY 530. The total payout ratio, 65%, is the level that we are expecting. Other than that, the investors dialogue, we have conducted investors day, and for the retail investors, we also have online briefing.
So in various ways with the shareholders, we are increasing our dialogue as a company. The last page is the shareholder returns. As you might repeat the meeting, what I mentioned, but these are all from me. Thank you very much.
Next will be Mr. Yamada.
Allow me to explain about the half-year result as well as some forecast for the full year. These are the highlights for the half-year period. As the CEO has explained, as for the oil price, JPY 83.42 for the half-year period, which is $3.50 more than last year. FX JPY 152.36 per dollar, which is about JPY 17 off-year depreciation. In other words, external environment was very favorable for us. You can see the revenue to the net income numbers, and JPY 111.8 billion of increase in the revenue. Why? The Brent went up, but the gas price came down because of the latency effect. It was made up for by weak yen, and so the revenue increased by JPY 111.8 billion.
For the profit attributable to owners of parent, was a decline of JPY 35.9 billion year on year to JPY 212.5 billion. There was an increase in revenue for oil because of the increase in the oil price, but the income tax increased, and the excess related exploration expenses also increased. We ended up with JPY 212.5 billion. For interim result, it was not bad, and we feel that it was a pretty good result. On the next page, you can see the oil as well as the natural gas, and you can see there the analysis of the revenue. For JPY 765.5 billion to JPY 892.1 billion of revenue this fiscal year. FX had JPY 100 billion impact. The lower graph is natural gas from JPY 296.5 billion to JPY 281.3 billion. This is a decrease in revenue.
This is due to the unit price coming down. This was the latency effect, and FX was unable to make up for that, and so the revenue came down. The next page is at JPY 248.4 billion to JPY 212.5 billion. You can see the waterfall chart of the details. The decrease is JPY 35.9 billion, and we can explain this based on business activity factors, JPY 44.3 billion, and one of the factors, positive JPY 8.4 billion. If you actually look at the details in terms of revenue, JPY 111.8 billion of positive revenue impact and the selling price come down mainly for natural gas, but the strong FX contribution. So pushed up the revenue by JPY 111.8 billion. Cost of sales increased, but about JPY 60 billion of the gross profit increase, but the increase in the exploration expenses.
There was an increase in exploration expenses for Australia, which had contributed negatively by JPY 45.4 billion. R&D expenditure, JPY 9.5 billion of negative factor. The share profit of investment accounted for using the equity method, JPY 10.8 billion due to excess downstream and income tax. This was quite significant because we saw an increase in revenue for oil. Income tax increased by some JPY 68.1 billion. The two on the right are one of the factors in the second quarter. We did actually sell a certain stake in renewable energy, and there was also an incorporation of foreign exchange gains from absorption-type merger and 4 billion positive, ended up at JPY 212.5 billion. In the appendix section, I cannot remember the page, but if you could refer to the appendix section, and there is a slide on the statement of financial position.
Total asset is increased from JPY 6.7 trillion to JPY 7.7 trillion, increasing by JPY 1 trillion. This is essentially FX. In June, at the interim period, we closed the book at JPY 161 billion. Because of FX's impact, the balance sheet increased. If you could look at the equity of the total liabilities and equity, JPY 4.499 trillion increase to JPY 5.243 trillion, increasing by about JPY 750 billion. If you look at the exchange differences on translation of foreign operation, this is essentially a translation adjustment, and translation in December was slightly less than JPY 700 billion. At the end of June, it went up to JPY 1.275 trillion, increasing by about JPY 600 billion. One-year movement in FX, the translation adjustment increases by JPY 30 billion. The translation adjustments account for 25% of the shareholders' equity. The translation adjustment increase is a mixed blessing, and it improves financial stability.
The capital efficiency, ROE or PBR, these end up in the denominator. Irrespective of how much profit we make, ROE and the PBR does not increase or that it increases easily. That is the financial structure that we have.
For December 2024, I would like to move on to the forecast for this fiscal year. The next page, please. For the full-year forecast, as our president mentioned earlier, the oil price, $80 and JPY 148 to dollar assumption. On Monday this week, I was surprised there was suddenly the fluctuation in the Forex as well as the oil price. Until last week, it was about $83 assumption for the oil, and we thought JPY 153 to dollar, and that is how we expected. On Monday, suddenly there was a fluctuation and we changed the forecast. $80 and JPY 148. As a result, the profit attributable to owners of parents, we had JPY 360 billion as announced before. As our president mentioned, within the volatility, JPY 360 billion in the volatility is the number that we can achieve, and that means our financial soundness is quite strong.
For the ROIC, 7.5. The WACC is 6.4 in the calculation, and ROE 8.4. Our capital cost is 8.8 as a calculation. We won't be able to achieve that. Unfortunately, it will be undershooting. Net debt ratio 0.33, and 0.3 to 0.5 is the number that we gave before. It's in between. Page 19, this is the difference analysis. We have kept the guidance. For the Forex and the oil price. For the Forex, it's about a slight increase of JPY 7 billion. For the other factors, the excess, the production loss impact on profit is JPY -4 billion. The increase of expenditure around exploration in Australia is about JPY -14.2 billion. The other attacks related impact and also the absorption-type merger of the subsidiary, including all of those factors, is about JPY 360 billion.
Which is the same guidance as what we mentioned back in May. Next, page 20 is the breakdown of the investment, and there are a couple of items, but the second from the right, the second row in 2024 December, this is the announcement forecast. At the very top is 9060, which is less than JPY 1 trillion, so JPY 900 billion. We're expecting this operating cash flow. The third line is the growth investment, which is JPY -555 billion. That is the amount we are investing. The fifth line from the bottom is the others, which is JPY 167 billion, which is positive. Because of the expiration of the interest-bearing debt and also maturity, we have a cash return.
Therefore, growth investment is JPY 500 billion, and if you net that with the other, it's about JPY 380 billion for the free cash flow for the investment. The investment development as well as the net zero business, JPY 15 billion, and the exploration, JPY 84 billion. For the shareholder return, as explained before, we are expecting JPY 230 billion and 65% payout ratio. The next page is ROIC, the domestic oil and gas, overseas oil and gas excess, and the others overseas oil and gas. On the consolidation, 7.5% is the ROIC, which is above the WACC. As explained in terms of the rule, mostly it's driven by Ichthys, and that's the structure. Ichthys is 7.1, so it is impacted by Ichthys, and we have 7.5.
If you look at the reference material later on, we have the ROIC calculation and the injected capital based on that calculation as well as the NOPAT type of calculation. We have those details in the reference. Please have a look at them in your spare time. That's all from me. Thank you very much.
We will now like to receive questions. The first question is that, you have been expanding the shareholder return, and you have explained about the track record. But if we look towards the future and from FY 2025, you enter into the next midterm management plan period. With that in mind, what is the dividend policy, inclusive of the capital allocation and so forth? Your thoughts about the shareholder returns going forward. The next three years of the midterm management plan, this is prior to a large investment starting for Abadi, but you are nearing the large investment. Inclusive of the financial operation, what are your thoughts? If you could give an explanation on that. That is the first question. The second question is, again, similar. Prior to Abadi, the medium-term span, maybe three years, organic performance.
In other words, irrespective of the market condition, any changes that could potentially occur. Recently, in regards to Ichthys, the PRRT, and because you are making profit, that you will be starting to pay the PRRT. There is an impact on the P&L. I think cash flow-wise, it is a little bit more in the future, but there is that. Also condensate, you are producing condensate quite well, but this is a liquid portion, and so you will not be able to maintain peak production for a long time. Inclusive of the exploration work nearby the Ichthys. For Ichthys, mainly any changes in the organic performance, what is the type of view that we need to have over the next three years or so?
By the way, in regards to the first question and in regards to the finance, the net debt ratio, I think you are thinking about the KPI there has changed slightly. If I look at the change in the definition, I think the level is likely to increase vis-a-vis the form of the definition. The three months of you may be able to retain some funding based on the investment securities as this is not included, and so particularly in readying for the investment for the Abadi. Inclusive of the cash allocation, this was a matter that caught my mind. If you could also include that in your response, please.
Allow me to respond to your question. In regards to the first question, the FY 2025 onwards, the returns policy to provide an explanation on that is what you have asked.
For the return this year is, as already explained, but in thinking about the returns for this year, of course, the cash flow situation and our share price positioning within the current share market, and also the situation regarding others, these were all taken into consideration in coming up with the message today. What we will do next year onwards is essentially what we are currently studying internally, unfortunately, and probably February timing next year. When we actually explain our new midterm management plan, we are likely to announce the returns policy. I am not expecting to see a significant change in the thinking regarding returns from now. It will just be an extension of the kind of policy that we have adopted now. That would be my response in that regard.
In regards to the D/E ratio, a change in definition. Yamada-san probably will explain about this after me, but now we are based on IFRS. How to handle cash and how to consider the securities or loans, we are trying to match our position to those of others. That is what we have been doing. There is no intent in regards to what to do with the funding there. But in regards to Abadi, given the changes in environment, how are we going to prepare funds going forward? That is a separate matter that we recognize, and that is what we will think of for that. The organic growth, your second question, centered around Ichthys, the payment of PRRT. This has started on the P&L, but the cash payment will likely start in FY 2026. But it is true that P&L is hit.
Well, this may be some more detail. But for Ichthys, we are continuing to drill wells through exploration work. In that process, a certain layer, we call this a Brewster, the layer, what we are drilling right now, and we feel that there is sufficient reserve there. We expect the liquids to be produced at quite a large volume as well. Plateau, and if we continue to drill sufficient production wells, but until 2030 to 2035, we should be able to maintain plateau. The challenge with Ichthys is to what extent can we expand, to what extent can we extend the plateau? That is more the challenge for Ichthys. With that in mind, we have been working on exploration activities near Ichthys. Unfortunately, one exploration activity was not a success, but we will continue with this type of activity going forward.
The challenge for Ichthys, as you know, on a global basis, we are seeing various costs increase. Of course, Ichthys is also subject to the inflation of various costs. For us to secure profit for Ichthys, what are we going to do in regards to controlling cost is going to be certainly an issue. Yamada-san.
In regards to net debt ratio, I think your interest there, so let me explain briefly. Now, this is quite obvious, but the net debt ratio to the year-end, the equity is the denominator, and so forth. But when we were using JGAAP, what we have done traditionally, the net debt ratio calculation method, this was used all the way through. Cash and cash equivalents, and was a cash deposit, and all the securities minus read.
Net debt was subtracted from gross debt to come up with net debt to calculate the net debt ratio. That was what we have done. But for this year, we have introduced IFRS, and so we have investigated example from others. But the IOCs from around the world, and those, the trading house using IFRS, the cash and cash equivalents, how they calculate that was somewhat different. More specifically, denominator is the same, but the numerator, gross debt, plus lease, the liabilities are added, and the cash and cash equivalents are actually subtracted. But three months more or longer, securities for those doing IFRS, the closing, we wanted to match our positions, so we decided to calculate without the subtracting that.
For the first half of the year and for the full year forecast, we came up with 0.33 or 0.34, and this is based on the IFRS basis, where we calculated the net debt ratio. Of course, net debt ratio is reflecting the result of our financing activities. So what to do with the future there, the funds, as you have indicated in your question. It is not the case that we changed in consideration of that. What we have done was to make it easier for us to be compared against others. So for net debt ratio, we aligned our definition to those of others, if you could understand it in this way. That is all from me. Thank you very much.
First, both of my questions are related to the next midterm plan and also the management views towards the stock market, as well as the request from TSE last year. From that standpoint, I would like to ask my question. The first question is the ROE, level of ROE that you want to target. So what kind of views you have? On page 9 of the slide, you talked about the PDCA cycle once a year, and we appreciate that. Also the shareholder return expansion, the speed of that, and the faster speed from the past historical speed, we think it will be more than expectation, and that was the explanation. But on page 9, ROE, for example, for this year, the expectation for this year is 8.4% for this fiscal year's forecast. Compared to the oil price and the Forex, I think you are in a favorable situation.
That is a tailwind. With ROIC 8.4 because of the tailwind and also the cost of capital 8.8. Although it is a tailwind, you have erosion from the stock market standpoint. As a result, there is an erosion. But instead of saying that from this market standpoint, instead of saying that we have an erosion as an end, as a result, but instead of that, because of the favorable situation and having this kind of erosion is something you want to overcome. So what are you going to do to overcome that situation? I think you are in a favorable external environment.
So when you are not in that environment, in a normal situation, for example, if the oil price is at $70 per barrel, or even in a normal situation, you want to have the ROIC above the WACC, or what are you going to do to have these kind of numbers? Perhaps in the next midterm plan, I think that kind of viewpoint is necessary for the message to the stock market. I think that will be appreciated. From the stock market, that is the usual discussion, and also whether it will be related to D/E or whether you will be working on ROIC improvements, it will be up to your decision as a company. But first, regarding the capital cost of 8.8%, while you have that awareness, and ROE 8.4%, and even though in a favorable environment, you can only achieve 8.4.
What are you going to do in the next midterm plan? If Abadi is added, what you are going to do? These are things we want you to show the market as number one. The second point is for the foreign investors or the overseas upstream company, if you compare with those companies, I have not studied this well yet, but if you look at the U.S. upstream companies, the stock price, if you calculate all these indicators, ROE is more than double-digit. Of course, with the oil price of $80. In that situation, this is the second question, but from your standpoint, your competitors are, let's say, the overseas upstream company. For those overseas upstream companies, I won't mention about particular company, but what kind of company will you be benchmarking, and what are you trying to achieve looking at which company?
Within the global upstream companies, whether you are going to be selected as one of those company, if there's any strength that you can talk about. ROE is not the strength. I think shareholder return is about breakeven or about the same. For the growth investment, you have to see Abadi, so it's hard to say today. I'm not trying to receive your answer today, but among the upstream companies globally or those exclusive upstream companies, what do you think is your strength that you can boast to other companies? If you can show that in the next midterm plan, that's what we're waiting for. What kind of companies in overseas upstream are you going to keep in mind when you try to benchmark your business? Thank you.
Both are a quite difficult question. In the next midterm plan, of course, we will announce that next year, so we'd like to talk more in detail then. First about ROE, the level of ROE with a capital cost of 8.8, we have 8.4 today, so it might be low, and that is what you mentioned, and I think that's true. As you know, in order to increase ROE, one of the factor for our company is the Forex, the Forex adjustment. For the Forex adjustment, if it's a yen depreciation, largely, then sensitivity is a large change, because if a JPY 1 depreciation, there is about JPY 30 billion of increase in the denominator. When it comes to R, the profit, about JPY 2 billion, that is the structure.
What happens is with the yen depreciation, of course, there's an increase in profit with the yen depreciation, but that increase in profit and also the increase in the capital, if you compare the two from ROE standpoint, it's not necessarily positive, or as of today, it's quite negative, and that is the real picture. If you look at the first half, JPY 1.2 trillion of Forex is what we had in the first half. If you have continued yen depreciation, I think numbers will change. Those are also one factor we have in our business, and we hope you understand that. If you look at ROE itself, to increase that as one other mean is to increase R or reduce the E. It's either one of those two.
But for increasing R, it is the question on how we can increase the profit each year, including Abadi, how much profit increase we can achieve. So that is something we cannot solve in a short term. Working on reducing the E is something we have to think of as a company. If we are to reduce E, for example, largely divest the participating interest or doing share buyback, there are various methods. But this time we had JPY 80 billion or JPY 130 billion of buyback we announced this time. These are things we have in mind as well. However, going forward over long term, what are we going to do is some challenge we have in the next midterm plan. So we'd like to study this more carefully.
For the second point about benchmarking with other companies overseas, what we are looking at, as you mentioned, the overseas upstream ROE, the super major, is a double-digit or more ROE. Today, we don't have the details, but if you analyze them, the overseas super major and our company, the difference between the two is for the overseas. They have acquired these large assets in 1970s or so, and they have finished all the depreciation and amortization. For us, the biggest asset is Ichthys, and we started the production in 2018. It's a work in progress. So that difference between the overseas and us is in terms of ROE and looking at each individual project, I think it's difficult in detail to compare.
But if you look at the legacy asset where the depreciation is over, I think the fact that you have those and the contribution to ROE is quite large for those overseas companies. For new projects, various companies, if you compare with various companies, our profit is not necessarily inferior. So from that regard, in order to become a company with ROE level as the same as overseas, I think with the end of the depreciation and working on more profitable project, and then over time, we will solve that issue. So once we analyze, I think that is how we should take initiatives going forward. If you look at major, there are various companies, Exxon and those super major, or there are more companies like [inaudible], Woodside Energy, closer to our company's size.
So I think comparing with those companies, how we're going to look about these forecasts going forward is also another challenge we'd like to take back as a company.
So regarding the Forex explanation, I think that was good. But with that JPY 10 strengthening, you had to make a downward revision. When ROE goes down, the yen appreciation, I think, will be negative to ROE. I think that will be the excuse you will give. With the yen depreciation, it's a negative, and then yen appreciation is also negative. So that is the business model. Is that correct? So from ROE's perspective, the Forex, we understand about the Forex situation, but when yen appreciates, it will be negative. For example, JPY 10, JPY 20 appreciation, the profit will go down dramatically. With the yen appreciation, I think you will explain the reason. With the yen depreciation, it does not pick up, and with the yen appreciation, it does not pick up either. I understand your business model to be such. Is that correct?
Your question, we also look at the Forex sensitivity, and that is a huge impact on ROE. We do a lot of analysis. I cannot give you the number today, but if you look at the outlook in August today, JPY 360 billion and then capital of JPY 4.4 trillion, ROE 8.4%. With the yen appreciation and depreciation, if you calculate what will be the case, we do have that analysis. If there is a yen appreciation with the yen strengthening in IFRS, when we convert to IFRS, the Forex is JPY 115, JPY 115. When there is a JPY 115 yen, the net profit and ROE, what will happen?
If I were to calculate mechanically, the net profit will be at JPY 280 billion, and then oil price will be the same. What happens for the equity? Because of the Forex not impacting, it will be about JPY 3.4 trillion. When that happens, ROE will go up. JPY 3.4 trillion is the denominator, and then JPY 280 billion is the numerator. It is about 9% or above. With the yen appreciation, like our president mentioned, with a JPY 1 change, JPY 30 billion of increase, and then profit will also increase by 20. 6.6% or 6.7% will be the number. With the yen appreciation, it will be positive to us. On the other hand, if it is yen depreciation, what happens? JPY 148 is moved to JPY 150, and then let us say it is about yen depreciation to JPY 180. Then the profit will be JPY 440 billion.
The equity will be JPY 6 trillion. Just a simple calculation means 7 point some percentage ROE. In the current structure of our business, if we follow the same structure, the yen depreciation is unfavorable to ROE. Yen appreciation is favorable to ROE. However, for the net profit itself or the cash flow itself, with the yen appreciation, it will be negative, and the ROE-oriented manner, it will be favorable with the yen appreciation. When the yen appreciates, it depends on other factors like the oil price and the one-off profit and loss and also production level. It is hard to say. Basically, that is going to be the trend, and that is the analysis we have on our finance.
Thank you very much. In the next midterm plan, please do let us know about those details. Thank you.
In regards to the shareholder returns, on this occasion for FY 2024, the shareholder returns in total I think JPY 235 billion, quite a significant amount of total returns, and it is something that we can consider quite highly. How that is divided between share buyback and dividend for JPY 76 to JPY 86, a JPY 10 increase. Based on your policy, basically, I do not think you will not decrease the dividend. I think that is your fundamental thinking in regards to dividend level. JPY 86 is quite a high level as a kind of a standard. Share buyback and dividend, the allocation between the two, what was your thought in that regard? That is the first question. The second question is the exploration expenses in Australia. There was an increase in the exploration expense, and I think you did increase that in first quarter as well.
Of course, there are various factors like inflation, but exploration expense level, what is the level that we should expect in the future? Do we expect this to continue to increase going forward? Of course, there are one-time factors, but if we exclude that, should we think that this will settle down somewhat going forward? If you could explain about the level of exploration expenses going forward.
First of all, in regards to returns, the JPY 235 billion on this occasion, and what is the kind of allocation between the dividend buybacks. Our basic focus for shareholder return is based on dividends, and so we want to increase dividends as much as possible together with the growth in our profit. That is the policy that we are adopting. A share buyback is to supplement that.
That is the kind of role or that is the kind of positioning of our buybacks. That is the fundamental policy. We will look at the market condition at that time and the share price at that time. We will look at various factors like that. We will make improvements as required based on the situation at that point in time. In that regard, if we look at the market situation recently, our share price is quite discounted. Against the market, what is the appropriate message that we can communicate? When we consider that, one thing is that for dividend, to show the appropriate position, and so we will be increasing the dividend level by more than JPY 10 on this occasion. For share buyback, it is similar.
We are looking at the cash flow situation, and when the share price is low, there is a greater benefit from doing a buyback. That was also taken into consideration as part of the total under consideration and came up with these numbers on this occasion. A dividend and the buyback. The basic policy is as I have explained, but we will take into consideration the situation at that point in time, and that could potentially change. In regards to the exploration expenses level, it does depend on the exploration project and how to disperse the funding. Up to that point in time. When we require number of exploration, if we do exploration onshore, that costs us several tens of billion yen, onshore several billion yen. Depending on the situation, exploration expenses level change.
Organic growth, particularly growth in the natural gas area, is considered to be important for us. Peripheral exploration to access or in Japan domestically or Abadi, those will be areas where we intend to continue with exploration activities over the long term. The level is likely to be somewhat more settled, but of course, there is some ups and downs. On this occasion, we had the Australian exploration activity, and when we have a project like that, it tends to really push up the numbers, if you could understand it in that way.
Understood. Thank you.
Two questions. Number one, it's a small, some detailed numbers, but as Yamada-san explained earlier, until recently, you had a higher expectation or assumption for the Forex and the oil price. Initially, how much net profit were you planning? I think it's difficult, but if you have any numbers. Also, in terms of how you look at those figures, the sensitivity that you announced at the beginning of the year and also the difference in the oil price and this Forex, is that how much we can calculate? Or by progressing towards the middle of the year, maybe there are some different assumption on these numbers because of the changing environment. Is that the case? That is the first question. The second is the INPEX JAPAN being set up as a split company.
What is the target or what is the purpose behind that, once again? From President Ueda-san, you mentioned about each businesses in overseas are also the same structure, so you want to do the same in Japan. What you have done already is what you have changed the organization to align with that situation. Is that the case? It's not going to change so much. Or is it by having this split in Japan, including the net five zero businesses and the management itself, is there any change that you're trying to do intentionally? The split in Japan is, can you please elaborate on that as well in more detail? Thank you.
Last week, until last week, the Forex that we came up with this number was JPY 153. We thought it would be JPY 153 or oil price of $83 per barrel.
We thought about that level. But at the time, the net profit and ROE, from the sensitivity standpoint, from left to right, between JPY 390 billion to JPY 400 billion, we thought net profit will be about that level. As a result, the equity will be increasing as well, and ROE 8.8% or above, that was the level that we were assuming. More than 8.8%. So 8.8% is our company's cost ratio. We thought it would be above that, and that was the assumption we wanted to come up with. We were preparing for that. However, on Monday, the number changed. That is what happened. If you can understand that background, that'd be great.
Regarding the second point, regarding INPEX JAPAN, why we have set up the subsidiary for the domestic operation. There are a couple of reasons behind that.
First, for domestic business, we have change in environment. For our company in Niigata and renewable energies, we have exploration and we sell that in Niigata business. But as you know, recently there's a new hydrogen project and methanation project, and those were added. For CCS, we have Akita Prefecture and also in the metropolitan area or Chiba Prefecture mainly. We have various business activities which are becoming more activated and brisk. In the past, just talking about our internal situation, we have two business, a domestic E&P business unit, and we also had domestic sales energy departments. Mainly the sales department. We had those two divisions. But internally, we wanted to integrate these two so that domestic business will be comprehensively tackled. In various areas, various regions, we can do business more flexibly.
We will also have more rights, so that we can be more flexible in dealing with these domestic operation. On top of that, what I mentioned earlier is also having a balance with overseas business. We thought this would be a good opportunity to have this split in Japan so that we can be more flexible in operation. That is the basic idea. There are various reasons as well outside of that. This is the main reason. From management standpoint, the split of domestic operation is to meet with various needs in domestic market and to meet them in a more flexible way. This is a realignment of domestic operations. That is how we take this latest change. Thank you very much.
The first question is the one-time trouble regarding Ichthys. You have explained that the production has recovered, but you are producing at a slightly lower, the suppressed level. The target for this year is 11 cargoes per month. In the first half of year, I think that was the pace. For the second half of the year, how will this pace change? That is the first question. Next is changes in cash flow from investing activities. In terms of the presentation material, I think it was around page 20, where you have shared the cash flow from investing activities comparing the revised forecast to the former forecast. JPY 100 billion for the oil and gas area. The cash spend is being reduced, but for others, obtaining the purchase of the and disposal of investment securities, they decrease by JPY 12 billion or so.
Could you explain in some more detail there?
I will answer the first question, the second question, I will leave it up to you, Yamada-san. First, the Ichthys, the cargo numbers or the trouble there. To explain this in more detail, on the 20th of July, I think, Ichthys LNG production facility, the onshore facility, we experienced technical trouble. After that, we resumed production after a week. Right now, we are operating the facility, but LNG production level is suppressed by about 15%. Production level is being reduced by about 15% right now for the operation. In October, we will have a week short shutdown, which has been pre-planned, and we will rectify the situation then and we will go back to the normal production level. That is what we are thinking of right now. The impact was the cargo number.
In comparison to original plan, probably there will be a reduction of few cargoes. For the second half of the year, probably 10 cargoes per month for the LNG is what we are assuming for the second half of the year.
For the second part of your question, investment for growth. Of the JPY 555 billion, the oil and gas, the development expenditure, it has come down to JPY 468 billion vis-a-vis the forecast in May. For us, there were a number of M&A potentials, and there were those that was feasible or not feasible. We made that judgment. We allocated certain amount for M&A. As we proceeded, things did not happen and so forth. In comparison to what we were originally thinking, about JPY 100 billion or so of lesser M&A are being realized.
We became more realistic in terms of changing the investment earmarked for that. The M&A, the earmarked amount, has been corrected to be more realistic at this point in time. For other investment, so at JPY 230 to whatever. This is essentially what to do with regards to investment securities. About JPY 230 billion was what we intended to sell. From overall situation, about JPY 160 billion of divestiture was what we felt was appropriate. At the end of the fiscal year, cash and securities, the JPY 350, JPY 360 billion would be the level that we will end up at. For us, retaining the fund should be appropriate level. As for investment, the divestiture of the investment security is essentially balanced to the funding position for us.
We are at close to the end of the hour. We would like to have one more person asking questions, if there are any. If there are none, as we are at the hour, we would like to end today's meeting. That is all for today's financial results announcement for the six months ended June 30, 2024. We really appreciate all of your participation today out of the busy schedule. Thank you very much.