Inpex Posts Record Half-Year Profit Despite Middle East Disruption
Japan's largest oil and gas producer delivered its highest first-half profit on record, offsetting a 30% drop in Abu Dhabi sales through portfolio diversification.
Record Profits Amid Regional Uncertainty
Inpex Corporation reported its highest first-half profit on record at ¥263.1 billion ($1.8 billion) for the six months ended June 30, 2026, despite ongoing disruptions from the Middle East conflict that has constrained oil exports through the Strait of Hormuz (earnings call, 2026-08-07).
The company maintained its full-year net profit forecast at ¥510 billion, which would also represent a record annual result, with operating cash flow expected to reach approximately ¥1 trillion.
Portfolio Resilience Offsets Abu Dhabi Impact
CEO Takayuki Ueda attributed the strong performance to what he termed "the victory of our portfolio," as production from Australia, Asia, Europe, and domestic operations compensated for reduced Middle East volumes. Sales from Abu Dhabi operations declined roughly 30% compared to the prior-year period due to the Strait of Hormuz closure, though production levels remained largely stable (earnings call, 2026-08-07).
"The majority of oil has been exported from Fujairah for onshore production," Ueda explained, referring to the UAE port outside the strait. "But for the offshore, we need to go through the Strait of Hormuz. And so we are impacted to an extent" (earnings call, 2026-08-07).
The company assumes the Strait of Hormuz will normalize around October 2026, with the full-year forecast incorporating an approximately 30% reduction in Abu Dhabi sales volumes.
Abadi Project Advances Toward FID
Inpex reported significant progress on its flagship Abadi LNG project in Indonesia, with front-end engineering and design (FEED) work now 80% complete. The company has commenced engineering, procurement, and construction (EPC) tendering as of July 2026, targeting a final investment decision (FID) "sometime in the middle of next year," according to Ueda (earnings call, 2026-08-07).
The project has secured key commercial agreements, with basic term sheet contracts signed in May with BP, Shell, and Indonesian national gas companies covering a substantial portion of the planned 8 million tonnes per year of long-term LNG sales from the total 9.5 million tonne capacity.
Inpex conducted a groundbreaking ceremony on Cempedak Island approximately one month prior to the earnings call, attended by Indonesia's Energy Minister and other senior officials, with President Prabowo participating virtually. "There was a huge interest and also support from the Indonesian government," Ueda noted (earnings call, 2026-08-07).
The company expects to accumulate approximately ¥770 billion in cash reserves by fiscal year-end to fund Abadi development, with full-year investment cash flow forecast at ¥859 billion.
Shareholder Returns and Growth Outlook
Inpex announced an annual dividend of ¥112 per share, representing a ¥12 increase from the prior year, alongside ¥140 billion in share buybacks for a total payout ratio of approximately 53% (earnings call, 2026-08-07).
The company highlighted its 10-year operating cash flow growth rate has exceeded both major integrated oil companies and independent exploration and production firms. Management projects production will increase from the current 730,000 barrels of oil equivalent per day to 800,000 BOE/d following Abadi's startup, with operating cash flow targeted to grow from ¥1 trillion to ¥1.5 trillion by 2035.
MarginX data shows Inpex is scheduled to present at Gastech 2026 on September 14.
This article was generated by MarginX from the earnings call on 2026-08-07. It is not investment advice.