Well, I'd like to start the Analyst meeting of INPEX Corporation. Thank you very much for gathering today, despite your busy schedule. My name is Yoshida, from the Corporate Communications and IR unit, and I'll be serving as the emcee for the meeting today. Please allow me to introduce the speakers today. We have Mr. Takayuki Ueda, Representative Director, President, and CEO. We have Mr. Toshiaki Takimoto, Director, Senior Executive Vice President, Corporate Strategy Planning. We have Daisuke Yamada, Director, Managing Executive Officer, Senior Vice President, Financial Accounting. We'll spend about 35 minutes for the presentation, and we'll spend about 25 minutes for the Q&A session. 60 minutes in total. Today's meeting is going to be a hybrid meeting with our online participants as well, with simultaneous interpretation between Japanese and English. For those participating through Zoom, please choose the language of your choice.
For the presenting material, you can choose the preference using the button at the top of the screen. Mr. Ueda will talk about the business overview of this service, and Mr. Yamada will describe the consolidated financial results for the fiscal year ending December 2025, and the forecast for the year ending December 2026. Mr. Takimoto will give a progress update for the sustainable growth of the corporate value. Mr. Ueda will start now.
Thank you everyone for gathering despite the busy schedule today. For those people participating online as well, thank you very much. Today, I would like to explain about the financial results as well as the forecast for this fiscal year. To begin with, the results for fiscal year 2025. As you are well aware, our result for 2025 was a net profit of JPY 393.8 billion.
But if we adjust for the oil price and foreign exchange rate, what is the number? That is what we have announced. On an absolute basis, JPY 393.8 billion, which is the third highest on record. But in 2025, $68 in average the oil price, JPY 149 was the exchange rate on average. If we actually do the calculation, in terms of absolute number, we were third highest on history. But if we adjust for oil price and the foreign exchange rate, the number for 2025 is the best on record. Of course, we are affected by the external factors, and we don't intend to talk just based on those numbers. But I think we have developed ability to generate our earnings. The share price has continued to increase recently as well, your area. But we are often asked about our share price.
Now, for myself, the fact that the share price has increased, is probably the great understanding of investors in our company. I'm very appreciative of that to begin with. But the PBR is now nearing one as well. If we compare ourselves against many companies in Japan, say for example, the Prime Market in the Tokyo Stock Exchange, there are some 86 companies. PBR on average of 3.8, ExxonMobil, Shell, the peers on a global basis, the PBR ratio is around 2, it's 2.10, which I think is the average. The oil and gas companies in Japan, if you look at the P/B ratio, 1.3- 1.4 I think is the general level. If we take that into consideration, for myself, the share price has increased quite significantly. I'm very appreciative of that.
Our financial database, our growth, our strategy, our shareholder returns, if you look at the details, I think we certainly are not second to others. And despite the high level of increase, it's still not a very high level. We feel that we are, I suppose, discounted to peers in that regard. This is the highlight for this year. If we just pick up on the numbers, as I said, for the dividend, JPY 100 for the year, the total shareholder return ratio is 55.4%. We have now made somewhat of a conservative outlook for the oil price, and for the foreign exchange rate. We're expecting about JPY 330 billion in annual profit for this fiscal year. We'll talk about this in more detail later on.
You may think that this is somewhat low, but I will come back to explain about that later. For dividend, what we are assuming for now, annual dividend of JPY 108 per share, and total share return ratio of more than 50%, which is our commitment. We'll make sure that we will stick to that. Based on our forecast at this point in time, we are expecting to pay JPY 108 per share for the dividend. Let me just talk about the external environment a little, and I'll go to the next page. This page is a one-page description of the change in the external environment. Even before the Ukraine war, the oil gas- related external environment for us has changed. And I think we've gone through three different stages. So before the Ukraine war, many companies were really focusing on energy transition.
A rapid transition towards clean energy, including renewable energy. And there were growing concerns over stranded assets associated with fossil fuels. And when we were speaking with investors, they were saying, when are we going to leave from fossil fuel? What will happen if they become a stranded asset? We were saying that oil and gas will not disappear immediately, and renewable energy or clean energy, we will make challenges to all those areas as well. But we were still very much focused on doing the oil and gas business as well. So that was the era that we were in for a while. Then after the start of the Ukraine war, the energy security became more important and the stable supply became more important. So, a great emphasis on security and affordability. The appropriate volume at appropriate pricing was what people had wanted.
Not just all de-carbonization, but the balance need to be struck with energy security. And that was the new, I suppose, the viewpoint on a global basis after the start of the war. What is the situation more recently? Energy addition is the recent popular word. The demand for primary energy is expected to increase by about 30% from the current level to 2050. This is mainly due to electricity. AI or data center has generated greater demand for energy. In fact, energy consumption will increase going forward. So on a global basis, it will increase. In that regard, clean energy centered around renewable energy continue to be important. We're going to work on that, but that will not be enough. How are we going to address the energy addition? How are we going to accommodate that from the supply side?
This is probably the global energy transitions that we have seen over the past year to year and a half. From energy transition to striking the balance between energy security and now energy addition. The last four or five years with the Ukraine war, the recognition regarding energy around the world has changed significantly. That was a point that I wanted to mention. That being the case, if we look at the various forecasts right now, this is International Energy Agency, and also IEEJ. How would things change towards 2050 in regards to the energy? Oil may reach a peak somewhere, but the plateau situation is likely to continue for some time. Natural gas, you can see the demand here. It will continue to increase towards 2040, 2050. Coal will come down, renewable energy will increase.
I think this is the expected situation. Natural gas is our main product. Let us focus on this a little bit more. Right now, the LNG demand on a global basis was about 400 million tons per year. Right now, this is going to reach 600 million tons in 2030, then 700 million tons in 2035, and even up to 800 million tons in the future. More than double the current level. Where would the demand come from? Please look at the map on the right, and it is quite evident, it is quite clear. It is Asia. We will see a significant growth in demand with a shortage of the supply. This is what is expected in 2035. In the United States or Europe, India, the Pacific Ocean, we will see increases in demand, but we will see greater growth in the supply.
If we look at the energy balance around the world, where we will see shortage is Asia. LNG demand until 2040, 2050, will continue to increase in a straight manner, and we will see shortage in Asia. How we are to supply natural gas in Asia? This is the main issue for the energy industry. This is the basis of our strategy at INPEX. This is the key point. Going to next page.
I have been talking about the total picture, but talking about this year for Ichthys. This year, we have 112 cargo shipment. The production, we had a shutdown in 2025, and there was some delay in the restart-up but overall, compared to the initial plan, it was close to the initial plan at 112 cargo. The profit contribution was about JPY 270 billion. For 2026, what are the views? It is kind of hard to understand, but because of the booster compressor start-up, talking about this product. In Ichthys, the more you produce, we will be extracting from the basement, and there will be less pressure under the ground. With the lower pressure, in order to have a long-term stability in the production, there are about 5,000 tons or booster compressor, where the compressor will be used to connect to the CPF, the offshore CPF.
That went well. In 2026, we do not have a shutdown maintenance, but this booster compressor will have a commissioning. In that process, there will be some stop of the facility. So the production will not be fully recovered. Therefore, it is not like we will have a large recovery in production. Compared to this year, there will be increase, but there are about 10 cargoes in a year. For the future backfill and the Train 3 expansion for the new asset acquisitions, we are working various activities today. At this moment, it is still hard to mention the details. However, at some point in time, we hope we can disclose. For Abadi, we had a large production last year. In August of 2025, we had moved to FEED. Today the FEED work, which is a basic design, is working steadily at this moment.
By end of this year, some cost estimate will be clear, and marketing as well as financing is the activity we have started. For marketing, from many potential customers, we already have discussions at this moment. As mentioned at the beginning, the Asian LNG is very precious. From America and from Qatar, there are many LNG. But from Asia, there is not so many LNG coming out of the region. So the Asia-bound or Asia-produced LNG will not have any home stretch issue. The distance of the ship transportation is short, therefore, there are a lot of popularity. When it comes to the final binding agreement, we are not able to sign those contracts yet. However, there is a lot of needs, and we are able to have good marketing activities.
Going forward, as we go into the FID, I would like to go into a more detailed condition and negotiations. For the financing, looking at the recent situation in the global market for the natural gas, the bank and the finance situation is welcoming more than in the past, and that is working well at the same time. For the permits, we are going to receive shortly the permits. For Abadi today, various challenges are still what we are facing, but we are having a steady progress in those activities. For Abu Dhabi, unfortunately, U.A.E., actually, a president passed away, and we cannot really communicate well. But the production increase in Abu Dhabi is what we are working on today.
Between us and Abu Dhabi, Abu Dhabi as a country, 4 million to 5 million BT or in some cases 6 million BT is going to be planned. We are going to make investments. 2026 investment is large, and the biggest reason is Abu Dhabi increase in the capacity. So these are the reasons where we will be increasing production, and profit will also be increased. Outside of that, we have Norway, Indonesia, and Malaysia. Various activities are in place today. Next page, please. The so-called clean energy, the blue hydrogen area. As you know, in Niigata last year in November, we had the demonstration project for the blue hydrogen in Niigata, Kashiwazaki. We had an opening ceremony in November last year.
The domestic natural gas will be used for the blue hydrogen production and also the CO2, which is the by-product in that process. The gas field in the Higashi-Kashiwazaki area, using the CCS technology, will be storing those gas. That is the CCS activities we are planning. We have methanation to methane. That facility, together with Osaka Gas, we have the construction in place in Nagaoka today. We also started the commissioning. For the renewable energy, as whole Japan is still in a difficult situation. However, we have the Potentia Energy, which is the European company called Enel, and it's a subsidiary of Enel, but we have a 50/50 joint venture in Australia. Through this, we have this renewable energy investment in Australia. This is 838 MW of production energy generation based on our stake in the project.
For Indonesia, we have the Muara Laboh geothermal project. For the expansion, we have the FID. Also in the Goto, offshore Goto of Nagasaki Prefecture, we have the first in kind in Japan, the floating offshore wind farm. We are also participating in that project. For the electricity side, we have the collaboration with the Hokuriku Electric Power Company that we signed the comprehensive contract last year, and we are working on those project as well. For 2026, for the profit, as mentioned, we are at JPY 330 billion, targeting that amount for this fiscal year. The Brent is $63, and JPY 151 to the dollar, both for the oil and the forex. There are a lot of discussions. Today, the oil price is at slightly less than $70 on the Brent. Compared to that, it's quite conservative.
Many consultants are saying that today or this year, there'll be some oversupply situation. Considering all of the situation, it's $63 in the assumption. I think it might be slightly conservative, and that's my view. If you look at the forex, it's JPY 151, so it's also difficult to explain. It's JPY 330 billion per year. If we are to make adjustments on forex and the oil price, JPY 151 and $63 of oil price, and if we exclude the one-offs, and then making adjustments on the oil price and forex, the core profit is, let's say, is JPY 315 billion for this year. The oil price may go down, so it will be JPY 312.3 billion. So it's mostly the same level as 2025.
The forecast of JPY 330 billion is not so high, so you might say it's too low. However, looking at the current oil price situation, we think we can have this level of profit, and that's the estimate today. For the dividend, we have JPY 108. Also, with the profit going down to JPY 330 billion, why we are still increasing dividend, that might be another question. O ur view is INPEX growth basically is still high. We still have a high level of growth with a sound financial situation, and we have a good, steady progress in the project, and we have Abadi. However, this year we have a lot of investment. Investment amount, I think you have seen. This year, so for 2025 overall, they were about JPY 400 billion in total.
Next fiscal year, we are going to have double to JPY 850 billion or so of investment. Part of that is pushed out from last year to this year. These investments will be long-term for Abadi. Before Abadi, in the mid to short-term, we have the existing assets or the acquisition of assets, production assets, and for the growth for the meantime, that is why we have JPY 850 billion. For these investments, we have a high accuracy in these investments. We think that with this investment, we can have a growth in INPEX. For the dividend, we are having the same view as before. We are going to have a growth, and then we will be rewarding our shareholders. For the profit, because of the oil price, we have JPY 330 billion of profit forecast.
In the mid to long-term perspective for the growth of our company, from that direction, there is no change in our views. Therefore, based on that, we will have cash flow and profit. Also, it depends on the external environment, but the mid to long-term growth is still going to happen, and we have that confidence. For the market, the JPY 330 billion is the forecast we have for this year. Just like mentioned, we have confidence, and we would like to reward our shareholders the outcome of those growth. That is why we have JPY 108 of dividend for this fiscal year as a forecast. That is all from me. Thank you.
Next, Mr. Yamada will provide the explanation.
Last fiscal year, for the year ending December 2025, a s the CEO has explained, net profit for last fiscal year was at JPY 393.8 billion or so. It is a decrease, but the oil price has come down, and we had the Ichthys shutdown maintenance, so there were significant factors to push down the profit level. We have the Profit Booster 500 or the balance sheet control, or we had significant return of the income tax, so we ended up with this number of JPY 393.8 billion. How are we going to assess this? At the oil price in the $60 level and almost JPY 312 billion of profit, this is a proof that we are now able to generate earnings.
As the CEO has explained, if we adjust for oil price and foreign exchange rate, this would be the highest record in history. We do consider this very positively. This is the analysis of the revenue and profit, so you can see crude oil at the top and the natural gas below. The crude oil sales volume increased mainly due to Abadi. In terms of unit price, it came down significantly because of the rate coming down. The profit did actually come down. For natural gas, the sales volume came down. This was due to the Ichthys shutdown. For the unit price, it is linked to Brent, so we saw a decrease here for the natural gas as well, the more than JPY 4,000. Last year was the JPY 393.8 billion.
This was the previous year was JPY 427.3 billion, a decrease of JPY 33.5 billion. The biggest is the decrease in the revenue. That was due to the oil price and exploration expenses. Last year, we did not have a successful exploration in Australia , that kind of came back. The divestment on the far right. Last year, in Southeast Asia, we had earnings from the divestiture. These are kind of the comparison against the previous fiscal year. For this fiscal year, the revenue came down and also Ichthys downstream. This also links to the oil price, this came down in terms of the share of profit and investments account of an equity method. But we saw the JPY 153.8 billion, the positive impact in terms of income tax expenses.
Here, it's actually included in the others as well, but the Profit Booster. This is the recycling or the investment, the benefit in Europe and the Middle East. The growth, JPY 80 billion, and delta is about JPY 60 billion. This is essentially balance sheet control. About JPY 80 billion of these earnings are accounted for by that, which is one of the key earning pillars for us. The forecast for this fiscal year, JPY 330 billion is what we have placed. $63 for the Brent price and JPY 151 to a dollar. You may think this is somewhat conservative, but some of you may be aware, last year too, we started with the forecast for the fiscal year at JPY 330 billion.
The oil price was $75 that we have assumed, but if we look at the end, it was $68. It was $7 less in terms of the oil price, but we still ended up with where we were. About JPY 40 billion, so decrease against the start of the last fiscal year, and essentially came up with this number of JPY 393.8 billion last fiscal year. It's not going to be parallel to what we did last year, but we have a greater ability to generate earnings right now. As you know, if you look at our balance sheet, we have quite a large amount of fixed asset, and we have the financial, the unrealized gains or losses included.
Things that we can do now and can't do now, we have those, the Profit Booster thing, but we can't include all of that at the budget at the start of the fiscal year. You go through the year to turn those into actual earnings. JPY 330 billion is a kind of starting point in that regard.
These are the factors analysis. The biggest is the oil price. In the middle, we have the Ichthys. Please have a look at this. Ichthys, JPY 4.9 billion of increase. There are some up and down in this number. Last year, shutdown impact occurred. We had a drop about JPY 60 billion or so in the sales volume, but that has recovered. That is an increase of JPY 60 billion. On the other hand, as explained by our CEO, we have the booster compressor module connection. By having this, there will be some drop in the utilization. Then we also have the oil tax. Last year, it was only a six-month effect, but this year it will be a full-year impact. About JPY 60 billion of decline in profits, and including that, it is JPY +4.9 billion.
For the Profit Booster next year, for this year, P&L recycling, about JPY 90 billion. In delta, these are the numbers. That profit in total will be JPY 330 billion. I might be repeating myself, but these are just a kind of a number we have for this interim. For the sensitivity of the oil and forex, it is JPY 5.5 billion for the oil price and then JPY 3 billion for the forex. Next is the investment. The cash flow before investment or exploration as shown. This year, for the growth investment, JPY 850 billion is a large investment we are expecting this year. Last year was JPY 386 billion. We have about JPY 463 billion of increase, which is for the pillar number one, which is mainly around oil and gas for the investment.
Before going to Abadi, how we are going to generate profit is the question. I think there were some questions. Having this investment from the late 2020s to early 2030s, we will have the outcome from this investment. We will be focusing on the investment this year. However, this JPY 850 billion is a large amount, but if you look at the bottom left, in the midterm, we had the intermittent plan, and 2025 was JPY 380 billion, but this year is this amount, so it might be a large amount, but it is 25% over the two-year period. It is based on the run rate. As you can see, this is the overall breakdown of the JPY 850 billion. The dark blue is the Abadi investments, and then the exploration as well as the increase in capacity.
For the Abadi as an investment. The new investment, we cannot mention the detail here yet, but the acquisition of interests and the core area mainly, Australia, Indonesia, Asia, Norway, Japan, will be making these investments overall. ROIC, unfortunately, will be some decline this year. It was 7.3% last year, but it is going to go down to 6% or so. ROE, although it is not stated here, we have about 7% this year. I am sure there are various views, but in terms of the total equity being so large, if you work on that, it might increase the ROE. We are not going to lower the equity by lowering the total amount by buyback. We are not thinking of that at this moment. We have a trustee borrowing, the corporate finance.
Depending on the credibility of our company, we have to do financing. Considering that, we have to have a certain amount of equity. There might be different views from the creditors compared to the investors. From the creditor's standpoint, we should have a certain amount of equity, or else it would be difficult to finance. We have to maintain a certain amount for the financing standpoint. That's all from me. Thank you very much.
Please allow me to explain about sustainable growth of our corporate value. In March 2023, the Tokyo Stock Exchange has made a request that we need to work on realizing the management of the company in view of the share price as well as the efficiency. We've been working on that. I'd like to talk about what we've done last year, as well what we will be doing this fiscal year. Next slide, please. What you can see on this slide is looking at the transition in the share price and the P/B ratio. Dark blue is the P/B ratio, green is the share price. At the end of 2022, share price was JPY 1,396, and 0.48 was the P/B ratio. At the end of last fiscal year, our share price was at JPY 3,127 and a P/B ratio of 0.77.
Based on the share price, we were at JPY 3,998. 0.98 was where we were at as of today. As you can see here, the reason behind why P/B ratio increased, we have some ongoing initiatives as well as changes in external environment. First of all, we have been strengthening shareholder returns and the dialogue with investors. We have also worked on enhancing capital efficiency. Above all, there's been significant change in external environment, particularly the natural gas and LNG importance has been revisited, and that has now been recognized by the market. Our core business, the natural gas, LNG business, the importance thereof, has led the share price to increase, which has led to improvement in the P/B ratio. Next slide, please.
Here we're talking about enhancement of capital efficiency as well as building confidence in our future growth. As we have been explaining so far, in the early 2030s, the start of Abadi, that is the significant expectation for our next large growth. From August last year, as you can see on the slide, we have entered into the FEED phase for Abadi. Now, we are nearing the start of development for Abadi. I think the market has recognized that i n the early 2030s, when we start the Abadi production. In the meantime, what type of growth story can we paint? That is the more immediate issue for us. When we speak with investors, then of course, performance is not bad. Shareholder returns is not bad as well. That is a comment that we receive from investors.
Then for IR meeting, the investors have expressed their satisfaction. But the growth story until we start production from Abadi, how are we going to come up with that? That may be the only the issue that we need to address. Acquiring new assets by working on this in a concrete manner, we want to be able to build that confidence in the market in regards to our future growth. We need to also enhance the earnings base. We will continue, or are continuing steady production increases in regards to our project in Europe and the Middle East, and also enhancing our profit base through Profit Booster 500. We intend to lift our ROE by some 1% over the next decade. I think we have the ability to do that.
If we look at the graph on the right, Abadi investment is likely to increase earnestly from 2028 into the early 2030s. Even in that period, we still are able to invest for growth as well as make returns to the shareholders. Of course, our debt will increase somewhat, but the net debt-to-equity ratio should be controlled within 0.3- 0.8, and are able to do both the investment for growth as well as making returns to the shareholders. That is what the graph on the right shows.
The growth investment we talked earlier for a single year of investment from Yamada-san , but the midterm vision that we announced last year, we have a three-year investment plan, which is JPY 1.9 trillion. Growth P illar 1 , we have the natural gas and LNG investment especially, and the amount JPY 855 billion over a three-year period. Then we have the Abadi exploration expansion, new asset acquisition, JPY 938 billion for Growth Pillar 1 as well. Then for Growth Pillar 1 investment, JPY 1,793 billion. Growth Pillar 2 and 3 are shown. These are the amount for investment for Growth Pillar 2 and 3 .
In the vision, as we set the target, the operating cash flow, a 60% increase, or the X increase of the business is what we would like to achieve going forward. Next slide, please. You have the shareholder return and also increase in our dialogue with our shareholders. On the left-hand side, the blue line is the share price trend from 2020 and onwards. The gray line is the Brent oil price trends over the five or six years. As you can see, in 2024, from the latter half of that year to the early 2025, since then, it is just like an increase in the alligator's face. The oil price is going down, but the stock price is going up. One of the factor is in 2022 onwards, we have started to do a shareholder return of more than JPY 200 billion.
As mentioned before about the business environment change, practically reducing GHG, and furthermore, having energy security, as well as affordability of energy. Those are coming from natural gas and LNG, and there is more importance of these resources. Therefore, that is the main reason why we have been accepted, we believe. Of course, we do not think that is the only factor, but for the retail investors as well, compared to 2019, there is an increase by 17 times. We think that it might be a difference in credibility and also the fact that we are able to have frequent dialogue with our investors and explain about the business versus the expectation from the market. We think there is more deepened understanding towards our business and operations. With PBR, one time, we cannot be satisfied, and that was explained from our President, CEO.
With that in mind, we would like to have awareness of these capital costs going forward. The right-hand side, the increase in the dialogue with our investors. Last year, we had 495 dialogues or interviews with our investors and analysts. By this, as you can see on the bottom right, the various initiative. As an example, from our dialogue, there are about seven items. These are the initiatives that we have also been evaluating for our investors. As explained, we have a JPY 3,900 or so share price today. With this, we have been evaluated, and we think that our understanding of our business as well as the support to our business has increased. We would like to have this initiative continued so that the stock price and also the capital cost will be in our mind through our operation. That is all for my presentation.
We will now like to receive questions. We will receive questions from this venue first, then after that, we will receive questions from Zoom. For those participating in the Zoom, please use the Raise Hand function. If one is designated to ask your question, please state your name and affiliation before asking your questions. If I could ask that you only ask two questions at a time. I would like to invite questions from the floor.
I have two questions. The first question is to do with the core earnings, JPY 330 billion. The analysis that you have explained, this was something that we have learned for the very first time. Based on JPY 330 billion, and on page 16 today, ROE is 7%. The ROIC of 6%.
Your ROE medium-term target, I do not think you have the quantitative number, but to be more than the equity cost, then to be in excess of WACC. I think that is how you have explained. On page 16, you actually did show WACC and the shareholders' equity cost, the 8% and 6%, respectively. Based on the core earnings, the shareholders' capital, the cost, this is lower. For ROIC as well, unfortunately, 6%, then the conclusion is that you have not generated corporate value. Based on core earnings, ROE to be more than 8%. We are right through the midterm data plan right now. Can that be realized before our money starts generating earnings? That is the first question. The second question is in regards to the free cash flow.
Now, last fiscal year, you explained about the investment amount, but in terms of investment cash flow, our free cash flow was more or less neutral. The fiscal year, the free cash flow, because you are going to be increasing investment, so likely to be slightly positive or even negative. If we define the investment cash flow as being a free cash flow, last year to this year, what are the changes? That is my second question.
The CEO has explained about the core earnings, and let me explain the logic behind that, and I think that was described on page 10. The core earnings is something that we have shared with you for the very first time, and JPY 330 billion for this fiscal year. We want to say that this is not a bad number.
We ended up with JPY 393.8 billion last year, but the oil price and the exchange rate for this fiscal year, $63 and JPY 151. If we actually modify to that, and if we exclude for the one-off earnings last year , then we end up with JPY 312.3 billion. The JPY 330 billion this fiscal year. The oil price and exchange is the same. If you exclude for the one-off number, we end up with JPY 315.2 billion. It may look as though the earnings has come down, but the core earnings itself has not really changed. That is what we wanted to communicate through this number, ROE and the ROIC. We are not using the core earnings as a basis. We are using net profit for that.
Of course, one-off earnings, so that it would be positive or negative from year to year. The ROE and the ROIC is calculated based on that. As you have indicated, the JPY 330 billion for this fiscal year, our ROE is 7%. What we are calculating, 8% for the equity cost will fall short of that. ROIC too, we now disclose this number for this fiscal year, based on JPY 330 billion, we will be at 6%, which is more or less the WACC level. Based on these numbers, we are not responding to your expectations. But JPY 330 billion is budget at the fiscal year. That is the performance at the start of the year.
But like with last fiscal year, throughout the fiscal year, there are a number of things we have in mind, but not something that we can share with you at this point in time. But we started with JPY 150 billion. We will give a full year forecast in May, or worse, then later in the year as well. We will hope to be able to increase that for ROE and ROIC at those stages. We are hopeful of those numbers increasing. We need to give it a go, but that is the reasoning behind this number. For the free cash flow, maybe we should go to the investment page . December 2025, this is cash flow before exploration and the investment cash flow, if there is a difference, this is more than JPY 130 billion, so positive.
We have that much of a free cash flow, which was quite a steady number, but we were making profit. Based on this budget, investment is JPY 150 billion. That is the investment. Free cash flow will be negative. In other words, we are investing more than the operating cash flow, unless we raise money, we will not be able to fund the investment. Free cash flow is negative for the first time since March 2019. We have been making returns to shareholders based on our own cash. This year we are going to make a large investment. 50% of return, that means that we need to do JPY 156 billion. We need to raise some money. Free cash flow becoming negative.
As to whether this is going to be a major issue for our management, not really. We will raise funds for the investment. We raise debt, and I think that is quite healthy. The key is the financial discipline in doing so. I didn't touch this before, but we want to invest this year. Even if we actually raise some debt, the net debt ratio will still be at 0.39 and we are saying that the financial discipline is between 0.3 and 0.5. We are going to raise debt to the investment, and we feel that this is not going to be a financial issue. Looking forward to the additions to the core earnings.
I would like to ask two questions. Number one is this time the investment plan compared to last year, there will be a significant increase compared to last year. As shown on page 20, looking at these investment, the existing project investment to increase capacity, Abu Dhabi and the Middle East, you mentioned about the increase in the production capacity. If you can talk more in detail about the content of those investments and also the profit contribution, I think this is for the growth before Abadi.
I think for these existing projects investment, if you can talk about the timeframe as well as the— maybe not so much in size, it might be difficult—e quity IRR in the mid-10% range, whether that is still the case and in terms of the timeline and also what kind of content of investment and how much contribution from the profit side will be made in the timeframe. It is a Middle East project, so I am sure it is difficult, but if you can maybe give us more details on that. That is number one. The second question is regarding that Abadi project, the FEED started from summer last year in a full scale. By end of this year, is there any expected milestone for this project in this fiscal year? In 2027, that is the target year.
But in 2026, between the year 2026, with the Indonesian government, is there any timing for negotiations or any milestone of such? Or with the lender, if there's any agreement, or any timing for agreement? So in 2026, is there any milestone related to Abadi? If you can explain what is the expected milestone for this fiscal year.
So I'd like to explain first. For that investment question, JPY 850 billion of investment. So these are quite a significant number in the past fiscal years. But Abadi exploration and increase in capacity as well as the new investment. So Abadi is the investment for Abadi, and then exploration is as you can see. But expansion of existing assets, these are the investment for the increase in capacity of existing assets.
So for example, Abu Dhabi increase in the production, we have investment there. And when it comes to new asset acquisition, these are acquiring new interests or M&A might also be included. But these are the type of investments. So for the increase or expansion of the existing assets, we have JPY 282 billion, and the new asset acquisition, JPY 106 billion. So in terms of the area, we have the Australia, or Perth or Ichthys, the connection or tie-in investment. And then the growth area, which is Asia and Abu Dhabi or Japan. The oil and gas mainly, where we have quite a diversified investment. And when it comes to exploration, it will take some time for these investments.
We cannot give details around the number of projects, but quite a quick area of investment we also are expecting this year and next year, where we can generate profit quickly from such investment. Those are expected as well. And for these investments, cash flow actually tends to go up and down, but in 2030s, early 2030s, with JPY 850 billion times 10%, there'll be up and down of course. But that's the amount that we can expect of profit or cash flow contribution. And that's the expectation. Of course, depends on the project. There might be investment upfront and that might be the case. But basically, we have the operating cash flow.
And as our CEO mentioned earlier, until we go to Abadi, we have the bridge, and that is the imminent challenge we are faced today. So last year to this year, we have accelerated activities. The environment is not bad, $60 or above with oil price and the acquisition of interest and those, and new investments are a certain amount we can expect to make investments in, and those are the target. Free cash flow will be negative and with the financing, even, we have to finance, we like to try to make these investments for the future outcome.
So the milestone for Abadi, I'd like to answer that question. So basically this year we will do FEED. So whether we can call it milestone, we don't know, but the biggest is the environmental permits.
AMDAL is what we call, but that's one of the biggest milestones. From the nation government, if we can obtain that from the government, various activities can start. So that's one milestone we're expecting. After receiving AMDAL permit, this project is in the rural area of Indonesia, so we have to have engagement with the community and increase that engagement. So those are the milestones we're expecting. More than that, we have the marketing activities where LOI, we have already received many agreements. But having that in detail agreements, so that kind of interim activities. The key term sheet is how we call it, but the kind of a term sheet is something we have to work in a more detailed manner, and those are things we are expecting as one of the milestones.
With the Indonesian government, the negotiation on the conditions should come after the FEED outcome, and we cannot go without the outcome. But we also have preliminary activities. What kind of project cost and how much we have to pay. That kind of brainstorming activities already started. So this year, these are the discussions that will go in a more full scale. As for the investment, as Yamada-san said, in the short term to midterm profit, we have to secure those profit, and those important as well. There's still many things or some things we cannot mention today. But when we say exploration, we have six blocks of exploration in Malaysia that we have already acquired. There, we will have about nine drilling this year.
If there's a lot of pipelines in Malaysia, so if we are able to have a success, we can have a mid- to long- term increase. We also have Norway, with a company called Pandion. We are able to acquire the stakes or interests. Those are things that will increase the profit over the short term to midterm, to the increase of production as well as profit. Then we also have the assets, and we have some considerations of these assets. So once these become more specific, then we have this midterm profit securing until Abadi. So this year, we have a certain amount of assets, or budget. But Abadi obviously have one of the largest, but we have these various investments in plan.
I also would like to ask you a question. The first question is related to investment, and I talk about the interest acquisition. In terms of interest acquisition, you said the environment is favorable right now, but at the same time, buyers or, sorry, sellers, if my memory serves me correct, they are always, I suppose, taking quite an aggressive stance. So there is always the fear of ending up buying something that is not profitable. In regards to the new investment, could you give more description in regards to the environment? The second question is regards to the Profit Booster. I wanted to confirm for December 2025, I think, the level was about JPY 80 billion. Is that correct? For the December 2026, so you said the Profit Booster 500.
I think, you were saying a starting point. The base is JPY 50 billion, so the JPY 50 billion is already included, and then there may be others that you may be able to add on top. I don't know how much, but you expect a further addition to that. Is that the kind of thinking that you have? That's my second question.
First question, in regards to investment, as to whether the environment is favorable or not. The buyers may be quite aggressive, but as to whether the environment right now is favorable for buying things or not, I don't know for sure. As I said before, we need to place the natural gas as the core. There are many, I suppose the players wanting to sell or wanting to buy the natural gas assets.
Probably right, the timing to consider right now. Of course, we set hurdle rate for the oil and gas business. The country list does differ from country to country, so we look at the details. Generally speaking, we are looking at the mid-teens as a hurdle rate. For this fiscal year, that would be the type of project that we seek to invest in. This is an issue of investment discipline, so we are very much mindful of that.
Please allow me to respond to your second question. Profit Booster 500, and we've discussed this with you for the first time last year, and one is TA recycling. What is included as a part of the foreign exchange translation adjustment, and this is put through P&L, and the other is the investment incentive effect.
Last year, if I mentioned two numbers, JPY 80 billion and JPY 60 billion. What they are is that, from the accounting, these two have contributed to profit by JPY 80 billion. But when we speak with you, we need to define them. This is something we started from 2025. In 2024, we did have the investment incentive effect. When we speak about the Profit Booster on a growth basis, it's JPY 80 billion or so. But in terms of the delta, we need to subtract for the number from the previous fiscal year, which was about JPY 20 billion. That's the reason we end up with JPY 60 billion. We actually shared with you two numbers. From the settlement account perspective, you've been hearing JPY 80 billion.
But the number that we have speaking with you, we've removed the delta portion, so it's JPY 60 billion. Against the Profit Booster 500 last year, we were able to do JPY 60 billion. That was the accurate situation, and that number is JPY 90 billion this fiscal year. JPY 10 billion more than last year in terms of TA recycling. Through the LTA to generate additional earnings, of course, many things. It's not just based on the balance sheet control, but the reduction in OpEx or other factors generating earnings. One thing that we can think about is that in our case, the tax expenses. As you know, JPY 800 billion or JPY 900 billion, that's the kind of level of tax that we are paying.
To generate a great tax benefit, of course, we need to pay tax properly, but we shouldn't pay tax that we shouldn't be paying. Paying tax properly means that they're generating proper tax benefits. We need to target for that. In that regard, we have a significant balance sheet. Our balance sheet is in excess of JPY 7 trillion. For example, our currency translation or fixed assets. Given the fact that the oil price and FX are changing on a daily basis, the financial profit or loss or taxation, profit or loss or taxation based on unrealized gains and losses. We have all of these generating at all the times. How can we combine them? We need to control the balance sheet to generate earnings.
This is something that we intend to do, of course. They report based on the IFRS, and so our balance sheet is accurate. We do have the balance sheet to reflect the actual situation. Also emphasis then, and so we have the P&L, the profit and loss. Balance sheet is correct. We need to come up with a P&L, which is accurately reflecting the difference of what's realized on the balance sheet, unrealized profit and loss. The financial profit and losses and taxation profit and loss, we need to combine them well. That is one way of improving our financial position and starting point, and the expectations to see additions to that. Inclusive all of that, we are hopeful of generating earnings in that way. I hope I answered your question.
I'd like to ask two questions. Number one is about Ichthys. The low pressure, BCM. With the connection, there'll be an increase in profit. Maybe I didn't recognize this before, but I think we never heard this, or we haven't heard this before. This BCM, with this utilization, we won't have so much production this year. Was that planned from the past, or started from 2026, or something that you have started to look at this year or recently? Whether that will be fully recognized next year, or whether there'll be some shutdown in maintenance at some point. If you can give some update about the production profile of Ichthys. The second question is on page 17, about the forecast for this year, the impact of oil price. JPY 556 billion of minus impact.
Based on the oil price assumption and the past assumptions, I think there are a lot of large impact. Maybe it's a timing issue, or as you mentioned, the JPY 330 billion is the number you have. Whether there'll be some conservatism in this number as well. I would like to ask whether that's the case or not. Thank you.
The Ichthys production profile of this over the BCM connection. Of course, this is something that we have been expected as a company. Talking about the low pressure module, even though the pressure in the well will go down over the future, we will still have a production secured. For that, we have a booster compressor, which is to the CPF, the offshore facility, and we have this installed. At the beginning of last year, we started that installation.
This year, we have started the commissioning. After installation, we have to connect the lines. There are huge lines and pipelines and a huge amount of workload. To do the commissioning, that was the plan before. With the actual commissioning, how much time will require, and how much drop in production we will have. Those forecasts is something that we were able to come up recently. We have not mentioned those details in the past. Those work is something that we have been expecting from the past. This is a sort of a one-off factor. Of course, the production amount or if the commissioning will be delayed, then that would also impact the schedule. That is a one-off. For 2027, we are going to start planning for this.
However, some sort of a maintenance will be required. How those will be unfolded is something we have to discuss and decide, and we have to put that together. The second question, the initial budget with the oil price, JPY 52 billion impact. This is including the natural gas, LNG, the lagging factor is included. If you look in detail, there are about JPY 30 billion on the oil price. Based on the dropped oil price, there are four months delay. That's the LNG marketing or sales. Spread is also being adjusted. That's about JPY 20 billion of impact. In that sense, JPY 50 billion breakdown is the breakdown as mentioned.
From the beginning of this year, if you look at from the beginning of this year, the sensitivity multiplied by these 6.8 times, 6.3 times , that's not the case. Initially, we have the oil price, looking at the lagging factor. In total, we have the oil price sensitivity and JPY 52 billion or so. This is different from the earlier factors. Just plainly looking at the oil price, that is the number we have.
Thank you very much for the answer. Thank you.
I also have two questions. I wanted to ask a little more about the low-pressure production facility, the impact of this is likely to come in the first half of the year, as I wanted to understand the scheduling aspect. The second question is in regard to cost. Production cost forecast as shown on page 31, if you could give some background information to that. Not including royalty, we expect some increase. If you include royalty, it will come down slightly. Could you explain the background to that to the extent possible?
In regards to the low pressure production facility or the booster compressor module, BCM, it's not like a shutdown maintenance, just stopping everything to link the equipment. We are actually doing a link up while being in operation.
When you are linking pipeline, we need to stop the related facilities, and once they are linked up, you start the operation again. It's not the case that you shut down for a period, we will connect, and restart. It's a little bit different from that type of shutdown maintenance in that regard. Where we are going to do this, rather than it being first half of year or the second half of year, we are going to do this work gradually throughout the year. In terms of our cargo number, we are expecting about 10 cargoes per month. That is the assumption that we have for this fiscal year. Reflective of this impact, that's the kind of level of production we are expecting for the year.
In terms of the production cost per barrel, $ 5.30 was the expectation last year, and the production volume in Europe and the Middle East, the Ichthys production volume and OpEx related to that, the balance that will have the impact on this number. Those including royalty or not, the royalty will have more impact in terms of the European and the Middle East impact. How much contribution from that business will have that impact. Last year, those that include royalty coming down and those increasing that does not include royalty, that's the Australian or the associated production volume, that is having the impact. The cost increase overall is not what you are expecting. It's just a change in balance, where the increase in the production or where the cost is higher.
Yes, for cost reduction, Ichthys project that we are the operators, we are working on further cost reduction. The Ichthys portion, we will aim for further the cost reduction. But we have already made a significant progress on this, and we are currently nearing the lowest level. To what extent can we still do? Also overall, the production volume. It's the balance of these two that is reflected in these numbers.
Thank you.
One question. This time about the increase of dividend against the growth in the business and the cash flow is returned, and I think that's really welcomed. But JPY 108, the level of this dividend, what kind of discussion was made and how did you come to this decision? I think it was overall comprehensive discussion, but in the past, 30% of payout ratio was the typical case. But this time, from that, it will be 40% or less of increase of payout ratio. What kind of discussions were in place, and then how did you come to the JPY 108? It's not really a clear number. It's not so clear. Maybe it's kind of a halfway, but how did you come up with that number?
There are a lot of discussions, and one thing is the EPS or the profit. I guess the profit this year, how we are going to return to our shareholders. This time, JPY 330 billion, let us say with that, it will be 50% total payout and then JPY 156 billion or so. If it is JPY 108 per share of dividend, it is JPY 120 billion of cash required, and there is a difference between those numbers. Therefore, of course, the JPY 330 billion is just an outlook, so we do not know whether that will be the exact number. But with the certain visibility, if we have JPY 108 per share of dividend, then in order to achieve that 50% total payout in the interim, we might have an increase in dividend or have a change. But we wanted to have that kind of room in the dividend. That is one idea.
The other side is, as we are not increasing so much profit, we can set the same level of dividend as this year. But because of the inflation, or in the past it was a deflation, the dividend yield in the deflation, let us say if it was at 3%, that would lead to returning to our shareholders. But with the inflationary environment, there will be a decline in real, so it is not a welcome situation. That is why we came up with the number JPY 108 of share this time.
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