Earnings Call: Q4 2020

Feb 12, 2021

Thank you for attending our Investor Meeting despite your busy schedules. I am Takayuki Ueda, President and CEO of ImpEx Corporation. I will begin with corporate overview, and then I will explain our business development strategy towards a net zero carbon society and then update you on the progress made against our medium term business plan. Will be followed by Mr. Amada, who will explain our financial results as well as financial forecasts. Let me start with the corporate overview for the fiscal year ended December 2020. First is financial results for the full year. I will leave it to Mr. Yamato to explain the details in his part, and I will just give you the key numbers. ImpEx posted consolidated net sales of 7 71,000,000,000 yen and net loss attributable to owners of parent of 111,600,000,000 yen for the fiscal year. Our income before one off profits and losses came to a positive 54,600,000,000 yen However, the significant drop in the oil price caused us to reevaluate our assets, and as a consequence, we had to recognize One off losses, including an impairment charge of €189,900,000,000 for the year. Accordingly, We ended up with a better result of 1,111,600,000,000 yen in net loss. Regarding the fiscal year ending December 2021, We are forecasting consolidated net sales of JPY 883,000,000,000 and net profit attributable to owners or parent of JPY 100,000,000,000 supported by the recent recovery in oil prices to a certain extent. As for dividend, Despite the significant deterioration in our results due to one off items in the fiscal year ended December 2020, We are still planning to pay a total of JPY 24 per share made up of interim dividend of JPY 12 and year end dividend of JPY 12 for the fiscal year ended December 2020. Regarding dividends for this fiscal year, we are projecting to pay 27 yen per share, up 3 yen from the level of previous fiscal year at 24 yen per share based on the assumption that our performance will recover to a certain level. Having said that, we will determine the actual amount of dividends to be paid at the interim and year end Timing after closely reviewing business environment at the time such as oil prices. On the topic of corporate highlights, we declared our business development strategy towards a net Carbon Society announced the change to our Japanese corporate name, which is now also impacts on the 27th January 2021. I'll cover this topic in more detail later in my presentation. During last year, we strived to reduce investments and costs and to secure liquidity and free cash flow in order to quickly respond to the low oil price environment. These efforts will be continued in 2021 and beyond With the intent of raising the level of our financial performance, we will do our utmost to ensure stable supply of energy by continuing to implement thorough measures against the COVID-nineteen pandemic. I will give you the updates concerning individual projects starting from the next page. First, please allow me to update you on the IFS LNG project. Operation continued quite steadily during the fiscal year, and we shipped a total of 122 LNG cargoes during the year. The average production volume from the IXYS project was approximately 357,000 barrels per day between October December of 2020. As for maintenance during the current fiscal year, we are planning to shut down the facility for about a 1 month period during the first half of 2021 for some maintenance work needed to ensure safe and stable operation. We will also continue wells in 2021 to ensure that the plateau level of production can be maintained for the long term. Next, I would like to talk about the exploration blocks in the vicinity of the IFS field. IMpex has so far proactively acquired participating interests and carried out exploration in the blocks located around the Ipthys field In due consideration of its high potentiality, currently, we have participating interests in 18 exploration blocks in the vicinity of the IFS LNG project, And so far, we have found a number of gas structures and confirmed that they spread across at least 9 of our exploration blocks. From a medium- to long term perspective, we will continue to study these peripheral gas structures proactively with the intent of leveraging existing This facility is towards realizing competitive development and production. Next, I'd like to talk about the Abadi LNG project. Abadi LNG project is a large scale project that will produce approximately 9,500,000 tonnes of LNG per year, up to 100 and 50,000,000 cubic feet of natural gas per day to be supplied by pipeline to meet the local gas demand and up to 35,000 barrels of condensate per day. In 2019, the Indonesian authorities approved the revised plan of development. The government authority also approved our application for a 7 year additional time allocation and a 20 year extension to the production sharing Contract PSC. Accordingly, the term of the PSC for the Marcella block was extended to 2,055. Furthermore, we signed MOUs last year with a national electricity company, a national fertilizer company and a national Gas company, each concerning long term domestic LNG and pipeline natural gas supply in Indonesia. Although COVID-nineteen is expected to cause some delays, we are continuing to prepare for FEED with the intent of commencing the work as early as possible. Our intent is to start production from the Abadi LNG project in the latter half of the twenty twenty, and we will continue to advance our efforts towards the realization of this goal. Next, I would like to talk about the projects that serve as our business foundation, namely the projects in Abu Dhabi, Kazakhstan and Azerbaijan. As you can see on the slide, the projects are continuing to operate stably with some projects heading towards production enhancements. In production and under development in Abu Dhabi, we also have an exploration project in the country, Block 4. As the operator, we are now engaged in the assessment of the block and preparations for drilling, and we are scheduled to commence the drilling work around April this year. Please allow me to give you an update regarding projects that are not on this slide. In Vietnam, we have been working on the development of the Dhar Sarvang and Dainue gas fields. Of these, we were able to start gas sales from the Sarvang gas field in November 2020. In January this year, we were awarded 2 licenses in Norway, namely for PL1130 and PL1129. We consider the Norwegian Sea to be one of our promising areas, and we are hopeful of discovering new oil and gas fields there in the future. Furthermore, in February this year, we acquired an additional portion, 2.35 percent, of the participating interest in Lucius and Hadrian North Fields in the United States, as a consequence, our participating interest rose from around 7.75% to around 10.11%. Next, I would like to explain our initiatives concerning our natural gas business in Japan as well as our efforts regarding renewable energy and carbon recycling. In our natural gas business in Japan, sales volume for the fiscal year ended December 2020 came to Approximately 2,070,000,000 cubic meters. We implemented various measures to fight as much as possible the drop in demand caused by the expanding COVID-nineteen pandemic. In this respect, we were positively impacted by poor weather and the Cold temperature experienced since December last year. And as a consequence, we saw a significant increase in gas Demand this winter in comparison to normal years. We will continue to work towards achieving as early as possible our goal of 2,500,000,000 cubic meters of Annual gas supply. In regards to renewable energy and carbon recycling efforts, we continued commercial operations of the Sarula Geothermal IPP project in Indonesia. We also continued with an environmental impact assessment in Akita Prefecture with a view to building a geothermal power station and we commenced flow tests at the site in 2020. In Niigata Prefecture, we built a methanation testing facility for synthetically producing methane from carbon dioxide and hydrogen. The facility is now being fully commissioned and is currently undergoing various test operations. We are starting to potentially increase the scale of the facility. In May last year, we joined a consortium for an offshore wind power project in Akita Prefecture. Also as a member of ARPCAM, Japan Technological Research Association or Artificial Photosynthetic Chemical process, we are responsible for developing the technology for solar hydrogen production that does not emit carbon dioxide during the production In December last year, we set up artificial photosynthesis panels in our testing facility in Darwin, where our Ixpress onshore plant is located, where we are now validating the panel performance. These are the 1st artificial photosynthesis panels to be located in a region with a large amount of sunlight and as such constitute an important step towards commercialization. Next, I would like to explain our net production volume for the fiscal year ended December Here, achieved partially as a result of the quick introduction of COVID-nineteen countermeasures, which prevented us from having to stop production unexpectedly at our facilities and as a result of high availability achieved at Iclus. IMPAQ is currently shifting its focus from oil to gas, and our ratio of production between oil and gas is now at 60% oil and 40% gas. This page describes trends in production cost indices regarding production volume and reserves And the actual amounts of proved and probable reserves. Production cost per barrel was $5.20 during the fiscal year ended December 2020. Proved reserves as at the end of December 2020 fell somewhat in comparison to the end of the previous fiscal year. Next is our investment and cost reduction measures. In fiscal year 2020, the initial target of reducing the Cost of development and exploration by 20% or more and 40% or more, respectively, was exceeded with the actual reduction Of 37% 64%, respectively, compared to the initial target based on the diligent efforts. We will continue cost reduction and optimization in all areas, including investments, OpEx and management expenditures. Next is the measures to secure sufficient liquidity and free cash flow. At present, We have abundant funds and have secured commitment lines with sufficient volume and duration from our core banks. The available funds as of December 31, 2020 were approximately 200,000,000,000 yen. We expect to secure approximately 1,185,000,000,000 yen in free cash flow for fiscal year 2021. As the recent oil price appears to be recovering to a certain degree, we hope to continue Chaining liquidity and generating sufficient level of free cash flow from our business activities. Now let me talk about our business development strategy towards Net 0 Carbon Society. On January 27, 2021, we announced our business development strategy towards a Net 0 Carbon Society. Our basic policy on management is to proactively engage in energy structure reforms Towards the realization of a net zero carbon society by 2,050, while responding to the growing energy demands of Japan and the world and fulfilling its responsibility for the development and stable supply of energy over the long term. The first is the stable supply of energy. Impex will continue to position its upstream business as a core business And we'll work to fulfill its 2 social responsibilities of providing a stable supply of energy and responding to climate change by strengthening its upstream business and making it cleaner. Our Our company will accelerate its shift to natural gas and continue enhancing initiatives to its global gas value chain in Japan and the growing markets in Asia, while promoting carbon neutral LNG. Secondly, we will set goals and promote the initiatives towards a net zero carbon society. ImpEx will set its climate change response goals, including a net zero carbon emission by our company by 2,050 in In order to contribute to the realization of the Paris Agreement objectives in relation to climate change. In this process, we will reduce 30% or more net Carbon intensity by 2,030 compared to 2019. The subject of the reduction is scope 12, which are the carbon emission from our business processes. Scope 3, which is the carbon emission from burning oil and natural gas, which we sell, is the challenge we will tackle as a whole value chain. The company will actively promote 5 business pillars in order to achieve the goals. Firstly, based on the technological advantage we accumulated through projects, including the CCUS, Which was the first demonstration test ever made in Japan, we will apply them to other domestic and overseas operations, including the IXYS LNG project in Australia by compressing CO2 from the upstream operation underground. Through such operation, We hope to achieve a safe and secure storage and utilization of CO2. On top of that, we will work thoroughly to increase Efficiency of energy saving and energy use in all areas including exploration, development and operation, while promoting the shift to natural gas and marketing carbon neutral LNG among others. In particular, we will promote CCUS For the reduction of CO2 in the upstream operation, such as the CO2 EOR demonstration tests In Niigata and other areas of Japan as well as the discussion of CCS for the excess LNG project in overseas. Secondly, in light of the Hydrogen Society, which will come over the mid- to long term, we will enter into hydrogen production and supply business. We will promote the integrated hydrogen business test project in Kashiwazaki, Niigata, Japan, the clean ammonia business in Abu Dhabi and others. Thirdly, we will accelerate our initiatives both in Japan overseas relating to geothermal power generation business applying our oil and gas development technologies And the Offshore Wind Power Generation business leveraging experience in the construction and operation of offshore floating facilities gained at operational sites overseas. Through such activities, we will work to enhance and emphasize the renewable energy initiatives. Fourthly, Impax will accelerate mesovation business while promote carbon recycling, including artificial photosynthesis Based on the synergies with our oil and gas operations, we aim to set up such a business at an early stage while swiftly pursue initiatives in new business fields That shows signs of growth. 5thly, impacts will promote CO2 absorption through forest conservation in Indonesia and other regions. The image of the capital allocation to these 5 business pillars is the following. Based on the track record post IXYS startup, The estimated average capital expenditure per annum over the next 5 years or so is around 250,000,000,000 to 300,000,000,000 yen Based on the oil price of $50 to $60 per barrel, out of which around 20,000,000,000 to 30,000,000,000 yen Will be used over the midterm to explore the 5 business fields where our company's strength can be used. Through such initiatives, We aim to proactively respond to the change towards a net zero carbon society and become a pioneer in the area of energy transformation. As the resolution of the 15th ordinary general meeting of shareholders is required, we would like to shift the Japanese corporate name to Impex, which is widely recognized particularly outside of Japan and conduct our operation as a global brand both in Japan and around the world. Effective as of April 1, 2021, we will change from Kokusai Sekiyu Kaihatsu Teiseki Kabushiki Kaisha to Kabushiki Kaisha Impacts. Under a new corporate name, we will contribute to the stable supply of energy, environmental conservation, Economic prosperity and social development among others through the stable supply of diverse and cleaner energy to both Japan and the countries around the world. Moreover, we will work to improve the corporate value of the entire group to proactively react to the change towards net 0 carbon society and aim to be an innovative pioneer in the area of energy transformation. In fact, the corporate name ImpEx also can be interpreted as Innovative pioneer of energy transformation. Let me move to the progress against the medium term business plan and the outlook for this fiscal year. As we have explained in the past, the business activities, the fiscal year ended December 2020 was the 3rd year in the medium term business plan Where we achieved an extremely steady ramp up of the existing LNG project, took on initiatives around the geothermal and off Sure wind power generations to enhance renewable energy among others, allowing steady achievements of the important milestones in the medium term business plan. In this fiscal year ending December 2021, we will maintain our initiatives to achieve the important milestones Such as continuing the stable operation of Exos LNG project post ramp up, completing the demonstration tests of methanation in the field of renewable energy and others. We have previously announced in the medium term business plan our net Sales target of 1,300,000,000,000 yen or so in the fiscal year ending December 2022. While the net sales were at 771,000,000,000 yen in the previous fiscal year December 2020 And the forecast is JPY 883,000,000,000 in the fiscal year December 2021. The net income attributable to owners of parent in the Fiscal year ended December 2020 was negative 111,600,000,000 yen mainly due to the impact from impairment losses coming from the low oil price. The forecast for this fiscal year is 100,000,000,000 yen. The net income goal for the year ending December 2022 is around 150,000,000,000 yen which is an attainable target based on the external factors such as oil price and exchange rate assumptions in the medium term business plan. The net production target is 700,000 boed for the fiscal year ending December 2022, While the actual was 573,000 boed in December 2020 and is forecasted at 559,000 BOED in December 2021 due to assumption of continued production cuts of OPEC countries, partial maintenance, etcetera. ROE in the fiscal year ended December 2020 was negative 3.9% due to the unprofitable year end result and we hope to see an improvement in this fiscal year ending December 21 by turning into black. The guidance of investment for growth for the 5 year period It's 1,700,000,000,000 yen while the actual was 488,400,000,000 yen in fiscal year ended March JPY 243,200,000,000 in the fiscal year ended December 2019 And JPY 180,800,000,000 in the fiscal year ended December 2020. The estimate in the fiscal year ending December 2021 is 255,000,000,000 yen Due to a more careful investment decision and the estimate over the 4 year period is 1,167,400,000,000 yen In addition, Intax has been considering ways to optimize the company wide portfolio by not only the volume, but also the quality and the strategic positioning. By promoting the disposition of assets, which relative importance have declined or projects which are considered favorable to monetize at an early stage, The company aims to secure sufficient liquidity and free cash flow. As explained earlier, Dividend is 24 yen per share for the fiscal year 2020 and the forecast is 27 yen per share for the fiscal year ending December 2021. Going forward, we will continue rewarding our shareholders to respond to the support we receive in our daily operation. Thank you for your kind attention. I am Daisuke Yamada, and I'm responsible for the Finance and Accounting division. I would like to explain the financial results for the fiscal year ended December 2020. I'd like to once again Begin by explaining the change to our accounting period. We changed the accounting period for ImpEx and Consolidated in December 2019 aligning the fiscal year end at December of each year. Because of this change In the accounting period, there were only 9 months in the fiscal year ended December 2019. However, from the fiscal year ended December 2020, The fiscal years will cover the entire year from January to December. In order to enable year on year comparison regarding the fiscal year ended December 2020, We included in this presentation material reference figures from the same period last year, as you can see on the left side of the table, covering the period from January to December 2019. This slide outlines the highlights of financial results for the fiscal year. Because the average Brent oil prices fell to $43.20 or by 32.7 percent compared to the same period last year. Net sales dropped by 400,100,000,000 yen or by 34.2 percent to 771,000,000,000 yen Operating income decreased by 310,700,000,000 yen or by 55.6 percent to 248,400,000,000 yen And ordinary income fell by 3 27,300,000,000 yen or by 56 percent to 257,300,000,000 yen Moreover, because we recognized an impairment loss of JPY189,900,000,000 for the year, Net loss attributable to owners of parent for the fiscal year came to 111,600,000,000 yen as against 167,300,000,000 yen of Profit we recorded during the same period last year. Because of the drop in oil prices caused by COVID-nineteen pandemic, We were forced to record a better result this year, our first full year net loss since our merger in 2,008. For your information, profit contribution from the Exos LNG project was approximately €40,000,000,000 Next, I would like to explain Net sales in terms of crude oil and natural gas. Sales volume of crude oil remained more or less flat, decreasing by 4.1 percent or by 5,000,000 barrels to 117,000,000 barrels. Average unit price of Volvos' production came to $40 falling by $25 or by 38.3 percent, which was greater than the drop of Brent oil price. As a result, net sales of crude oil decreased by 366 yen or by 42 percent year on year to end the fiscal year at 505,500,000,000 yen The main reason for the lower net Sales was simply because of the lower oil prices. Sales volume of natural gas increased by 11.3% or by 47,300,000,000 cubic feet to 467,400,000,000 cubic feet benefiting from increased production at IFRAS. And the average unit price of overseas production fell by 16.6 percent or by $0.72 to $3.61 Average unit price of domestic sales dropped by 14.1 percent or by 7.69 yen to 46.93 yen All of these changes were essentially caused by lower oil prices. As a consequence, net sales of natural gas remained more or less flat, dropping by €29,700,000,000 or by 10.7 percent to 247,800,000,000 yen Higher sales volume enabled by ICSIS production increase was essentially canceled out by the fall in gas price, which was caused by lower oil prices. This is the statement of income. I will explain the movements in net income or loss attributable to owners of parent using the waterfall I'd like to explain the movements in consolidated net income compared to the same period last year in terms of Income before one off profits and losses, which excludes one off factors and in terms of net income, including one off factors. Net loss of €111,600,000,000 can be broken down into €54,600,000,000 of income before 1 off profits and losses and 1,000,000,000 yen of 1 off losses. I would like to first compare the JPY4.6 billion of income before one off profits and losses to the JPY149,500,000,000 of income before 1 off profits and losses recorded last year. Decrease in net sales due to lower oil and gas prices came to around 400,000,000,000 yen More than 90%, some €360,000,000,000 of this was due to reduced unit price of sales, which caused significant impact to our profitability. As for cost of sales, sales royalty fell in line with net sales for In keeping with the reduced sales of Abu Dhabi crude oil, however, because depreciation expenses increased For upstream operation of ICS due to higher production regarding gas, the overall decrease in cost of sales only reached 71,200,000,000 yen. Exploration expenses excluding one off factors improved net income by 16,000,000,000 yen as against 23,600,000,000 yen recorded last fiscal year. We were able to do this because we lowered exploration expenses to slightly more than 7,000,000,000 yen About onethree of the level we spent last year as part of a company wide effort to reduce exploration investment to counter Lower oil prices. We also implemented thorough measures to reduce expenses and as such, SG and A expenses net income positively by 3,500,000,000 yen For your information, we saved some 900,000,000 yen due to lower Travel and entertainment expenses resulting from the COVID-nineteen pandemic. Income tax payable fell by 217,300,000,000 yen due to lower net sales. When you net all of these factors, our net income before one off profits and losses for the fiscal year ended December 20 20 came to JPY 54,600,000,000 dropping by JPY 94,800,000,000 on a year on year basis. Next, I would like to explain the impact of 1 off profits and losses. Income before 1 off profits and losses for the fiscal year ended December came to €54,600,000,000 During this period, the spread of COVID-nineteen pandemic caused energy demand to fall And this, amongst other reasons, led to a significant drop in oil prices. Accordingly, we conducted impairment tests On the group's assets and consequently recognized an impairment charge of JPY 189,900,000,000 Specifically, we booked impairment losses of JPY 100 and €29,000,000,000 for the Prelude FLNG project, €33,200,000,000 for Eagle Ford, €18,600,000,000 For Lucius Oilfield and yen 8,900,000,000 for Bayou Unden. After reflecting yen 39,900,000,000 from tax effect on impairment losses, 1 off gain of €13,800,000,000 associated with excess refinancing, loss on valuation of investment Securities expenses related to exiting from projects and others, one off profits and losses for the fiscal year came to negative 166 3,000,000,000 yen after subtracting 166,300,000,000 yen of one off losses from 54.6 1,000,000,000 yen of income before one off profits and losses, net loss attributable to owners of parent for the fiscal year came to 111,600,000,000 yen Next, I would like to explain our consolidated balance sheet. Total assets at the end of the fiscal year came to yen4.6345 trillion, decreasing by 2 115,400,000,000 yen in comparison to the end of the previous fiscal year. This was mainly due to the impairment charge we recognized on fixed assets. Incidentally, total assets of excess downstream JV, which is not included in Consolidated balance sheet came to 3,601,000,000,000 yen As for liabilities, the total at the end of the fiscal year, including both Current and long term came to 1,6331,000,000,000 yen which was an increase of 80,300,000,000 yen in comparison to the end of the previous fiscal year. The increase was mainly due to additions in loans. Net assets came to 3,000,013,000,000,000 yen decreasing by at the end of the previous fiscal year, this was mainly due to a decrease in shareholders' equity caused by the loss we recorded and reduction in accumulated other comprehensive income. Incidentally, Impex's total net loans, including net loans of the IFS downstream JV, came €92,100,000,000,000 at the end of the fiscal year. Next, I would like to explain our cash flow, including the ICFESS Downstream JV. Cash flow from operations before exploration expenditure came to 349,200,000,000 yen Despite being impacted by the significant oil price plunge experienced during the previous fiscal year, thanks to the steady production achieved at Ichthys amongst other reasons, Cash flow from investment was negative €167,200,000,000 due to cost reductions and optimization implemented to accommodate Weaker oil prices. As a consequence, we secured free cash flow of JPY 182,000,000,000 for the fiscal year ended December 2020. Cash flow from financing activities was negative JPY195,400,000,000 due to reasons such as expenditures related to loan repayments. Next is the consolidated financial forecast for the fiscal year ending December 31, 2021. The assumption for the oil price and exchange rate is the following. The oil price is traded at around $60 per barrel today, And it is in a recovery trend. The average price in January was around $55 per barrel and the oil price features are showing a backwardation, I. E. Higher current price, lower futures. Due to COVID-nineteen pandemic, We think that market will remain to be unstable based on various factors. For these reasons, we have a conservative oil price assumption of $53 per barrel. The exchange rate assumption is 103 yen against the U. S. Dollar. Compared to the actual of the previous fiscal year, The oil price is $9.79 or 22.7 percent higher, while the exchange rate is 3.77 yen or 3.5 percent appreciated against the U. S. Dollar on a yearly average basis. The full year forecast based on these assumptions are the following as shown in the slide. Consolidated net sales are expected to increase From 771,000,000,000 yen in the previous fiscal year to 883,000,000,000 yen up 112,000,000,000 yen or 14.5 Consolidated ordinary income is expected to increase from 257,300,000,000 yen in the previous fiscal year To 353,000,000,000 yen up 95,700,000,000 yen or 37.2%. Net income attributable to owners of parent It's expected to increase mainly due to the absence of impairment losses, which was booked in the previous fiscal year and the upgrade in the oil price assumption By around $10 per barrel compared to the actual in the previous fiscal year, improving from a net loss of 111,600,000,000 yen in the previous year to a net income of 100,000,000,000 yen in this fiscal year, up 211,600,000,000 yen The profit contribution from the Exis LNG project is expected to be around 65,000,000,000 yen on the full year basis Versus the actual 40,000,000,000 yen in the previous fiscal year, up by 25,000,000,000 yen or so. The year end dividend in the fiscal year ended December 2020 is 12 yen per share as previously explained by our CEO. Together with the 12 yen per share at the end of the second quarter, the annual dividend is 24 yen per share. The forecast dividend for the fiscal year ending December 2021 is 27 yen per share, an increase of 3 yen from the yen 24 per share in the previous fiscal year. The differences between the actual of the previous fiscal year and the forecast of this fiscal year [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] It's shown in the waterfall chart based on the financial impact to the net income attributable to owners of parents. First of all, The income from one off profit is the amount excluding the 166,300,000,000 one off losses of the previous fiscal year, including the impairment losses. Based on this calculation, I would like to explain the increase or decrease from the income before one off profit of 54 point 1,000,000,000 yen in the previous fiscal year to the forecasted net income of 100,000,000,000 yen in this fiscal year. The oil price assumption was raised $10 from the actual average in the previous fiscal year, pushing up profit by 42,600,000,000 yen The exchange rate assumption was revised towards a stronger yen, pushing down profit by 7,500,000,000 yen Exploration expenses were mostly flat against the previous fiscal year, pushing down profit by 200,000,000 yen The individual projects have both positive and negative contributions, but more or less flat against the previous fiscal year, pushing by 500,000,000 yen or so. Other one off profits are expected in this fiscal year, pushing our profit by 11,000,000,000 yen As a result, we expect the net income attributable to owners of parent to increase from net loss of 111.6 1,000,000,000 yen in the previous fiscal year to net income of 100,000,000,000 yen in this fiscal year, up 211,600,000,000 yen increase in profit of 42,600,000,000 yen due to oil price has a discrepancy with the calculated oil price impact, Which is based on around $10 difference between the actual and forecasted brands from the previous fiscal year to this fiscal year And the oil price sensitivity for this fiscal year, this is due to the consideration of lagging effects in some gas sales. Let me cover the sales and investment plans for this fiscal year, which is the base of the financial forecast that I've just explained. The sales volume of crude oil is expected to drop to 111,000,000 barrels, down 5,550,000 barrels or 4.7 Compared to the previous fiscal year, while the sales volume of natural gas is expected to increase to 481,400,000,000 cubic feet, Up 13,900,000,000 cubic feet or 3.0 percent year on year. The sales volume of crude oil is down due to the The sales volume of natural gas is up partially from the Production restart of Prelude FLNG project, ramp up of the Konsan projects, etcetera. Regarding the investment plan, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Both the development and exploration expenditures are planned based on thorough discussions around the investment effectiveness. As a result, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The development expenditure and others are expected to increase to 231,000,000,000 yen up 38.2% year on year, [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] While the exploration expenditure is expected to increase to 16,000,000,000 yen up 49.5% year on year. The forecast amount of investment has increased versus the actual in the previous fiscal year. But as we showed on Page 12, The cash flow from operations before exploration investment is forecasted to be approximately JPY 440,000,000,000 an increase of around 90,000,000,000 yen versus the previous fiscal year. Even after we factor the increased cash flow from investment, which is an amount of approximately 255,000,000,000 yen We believe that the same level of cash flow can be generated as the previous fiscal year as free cash flow becomes around JPY 185,000,000,000 [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] The amount of development expenditure includes the following activities based on the business development strategy, which we announced recently: number 1, reducing CO2 emission from the Number 2, developing the hydrogen and ammonia business number 3, promoting forest conservation number 4, enhancing renewable energy and number 5, promoting carbon recycling. The exploration expenditure is expected to increase to 16,000,000,000 yen up 5,300,000,000 yen or 49.5 percent year on year, mainly due to the increase in works in the Middle East region. Based on the financial conditions at the beginning of this fiscal year, we have shown the oil price exchange rate sensitivity to our net income in the fiscal year ending December 2021. The impact from increase of $1 per barrel is estimated to be positive 6,600,000,000 yen at the beginning of this fiscal year, Including the lagging effects of some gas sales that reflect oil price, the oil price sensitivity is expected to change quarterly With a positive 4,600,000,000 yen at the beginning of Q2, a positive 2,400,000,000 yen at the beginning of Q3 And a positive 1,000,000,000 yen at the beginning of Q4. The second footnote Shows the quarterly breakdown of the oil price sensitivity for your reference. The exchange rate sensitivity based on a 1 yen depreciation against US dollar is expected to be positive 2,000,000,000 yen The net income sensitivity related to the valuation of