Japan’s largest energy explorer, increased its full-year profit forecast, predicting record earnings as higher oil prices boost the value of its crude and natural gas business.
Net income is estimated to rise to a record 177 billion yen (US$1.6 billion) for the year ending March 31, compared with the May projection of 120 billion yen, the Tokyo-based company said in a statement to the stock exchange today. Inpex posted record profit of 173.2 billion yen on revenue of 1.203 trillion yen in the year ended March 2008.
The explorer now expects benchmark prices for Brent crude oil, which touched an all-time high of US$147.50 on July 11 in London, to average US$107 a barrel this fiscal year, revising its earlier forecast of US$85. Oil and gas output declined 7.7% by volume in the last quarter as Inpex awaits the start-up of two major projects. The stock has declined 11% this year.
“Shares of Inpex, which you can buy at around 1 million yen, may be a relatively cheap investment vehicle, given future prospects for the company’s oil and gas production growth,” said Lalita Gupta, an analyst at Morgan Stanley in Tokyo. Projects including Ichthys in Australia and Abadi in Indonesia “will help Inpex boost production volume in the years ahead”.
Inpex is moving ahead with liquefied natural gas plant projects to capitalise on growing demand for the cleaner fuel. The company has found adequate reserves at the Masela gas field in Indonesia’s Timor Sea to build the 5 million-tonne-a-year Abadi liquefied natural gas plant, with production slated to begin 2016.
Inpex has said it is awaiting approval for the location of the A$12 billion (US$11.1 billion) Ichthys LNG plant, either at the Maret Islands off Western Australia or in Darwin in the country’s Northern Territory.
“Within a month or two, we’ll determine the Ichthys plant location,” director Mutsuhisa Fujii told reporters in Tokyo.
Net income rose 29.1% to 49.77 billion yen in the quarter ended June 30 from 38.5 billion yen a year earlier, Inpex said in the statement. Sales increased 41.3% to 381.3 billion yen from 269.8 billion yen.
The shares fell 0.7% to close at 1.07 million yen in Tokyo.
A swing of US$1 a barrel in oil prices affects Inpex’s annual net profit by 2.2 billion yen, Fujii said.
Crude oil prices in New York have climbed 66% in the past 12 months and traded at US$118.26 a barrel at 5:42 p.m. in Tokyo. Brent crude for September settlement traded at US$116.06 a barrel on the London’s ICE Futures Exchange.
Shift to Natural Gas
Concerns about global warming have prompted a global shift to natural gas from oil products. Demand is projected to grow by 1.3% a year until 2050, according to the International Energy Agency, the Paris-based adviser to 27 of the world’s richest industrialised countries.
Japan’s natural gas sales increased 3.5% in June to an all-time high for the month, driven by demand from manufacturers, according to the Japan Gas Association’s latest data. Sales to industrial users grew 5% in June, marking the 86th consecutive month of year-on-year increases.
Japan Petroleum Exploration Co., the country’s second-biggest oil explorer, today also increased its full-year profit outlook because of higher oil prices.
Net income is estimated at 26.4 billion yen for this fiscal year, compared with its May projection of 11.1 billion yen, the company said in a statement to the stock exchange. Japan Petroleum posted a profit of 20.1 billion yen on revenue of 208 billion yen in the year ended March. The shares rose 2.4% in Tokyo today to close at 6,750 yen.