Inpex Corporation (1605) Earnings Call Transcript & Summary

We'd like to start the FY 2026 first half of the Financial Results Investor Meeting. Thank you very much for gathering despite the busy schedule today. My name is Shohei Yoshida, General Manager of the Corporate Communications Unit, and I'll be serving as the moderator for this session. Please allow me to introduce the attendees from INPEX. We have Mr. Takayuki Ueda, Representative Director, President and CEO; Mr. Toshiaki Takimoto, Director and Senior Executive Vice President; Mr. Daisuke Yamada, Director and Executive Vice President. For the program today, we will spend about 35 minutes for the explanation and about 25 minutes for Q&A, a total of 60 minutes. And today's session will be a hybrid session with online participation as well, and the session will be interpreted simultaneously. For those people participating through Zoom, please choose the language of your choice. And for the presentation material, please select your language in the button at the top of the slide of the page. Mr. Ueda will first explain the business overview, and Mr. Yamada then will talk about the consolidated financial results for the 6 months ended June 30, 2026, and then talk about the consolidated financial forecast for the full year. So Mr. Ueda, please.

This is Ueda, CEO. Thank you very much for coming despite your busy schedule and also despite the very hot weather. And I would like to explain the overview in regards to the business situation as well as the first half of the year. So please refer to the document. So to begin with, the impact of the Middle East conflict, what type of impact does this have on our company? And what is our view? And what is our expectation going forward? So please allow me to explain about that. The closure of the Strait of Hormuz has continued for some time. And so sales volume from the Abu Dhabi has been a constraint to a certain extent. But so we feel that there is a significant positioning in regards to our Middle East business, and we'll continue to undertake our business there. So Abu Dhabi business, what's the current situation as described here. Well, the production volume has not fallen very much in Abu Dhabi, but the sales volume and in comparison to the same period last year, our sales volume has come down by around 30%. Why? And so Abu Dhabi has a port called Fujairah, which is outside the Strait of Hormuz. And so majority of the oil has been exported from Fujairah for onshore production. But for the offshore, we need to go through the Strait of Hormuz. And so we are impacted to an extent. But with the effort of ADNOC and they have been preparing the ships. So we have been able to maintain production volume, but the sales volume has come down by around 30%, particularly for Asia. And if we look at this from a long-term perspective, from May last year, we have expected around 30% reduction. Now the assumption is that the Hormuz Strait will actually normalize around October. And that was the basis upon which we have made the assumption of about 30% reduction in sales volume for the full year. And from the revenue, well, we have been able to generate the revenue to offset the reduction from Abu Dhabi and I call this the victory of our portfolio and our portfolio, certainly, Abu Dhabi accounts for a large portion, but we also have Australia, Asia or Europe and also domestic. And so because of the diversified portfolio, the impact of the closure of Strait of Hormuz has not been all that significant. In fact, Ichthys the project is operating very well and the oil price has been at a higher level on a relative basis due to the Middle East situation right now. So overall, then the loss from the Abu Dhabi has been made up for elsewhere. And so the profit for the first half of the year, highest on record, and we're expecting also to achieve the record profit for the full year. So what will be the situation with the world going forward due to the Middle East. Previously, energy system has focused on efficiency. And efficiency will remain to be very important, but energy security or resilience, those will be emphasized more. So the system is going to shift a little bit with a greater focus on them. So as you can see on the right, dependence on the Strait of Hormuz that's been considered more highly. So amongst the Middle East countries, UAE has the Fujairah port, we have one pipeline, but they intend to increase that to 3 pipeline to Fujairah in several years. And so if they achieve that, they are able to export majority of their oil from outside the Strait of Hormuz. And so dependence on the Strait of Hormuz will be reduced. Saudi Arabia, they have Yanbu, which is a port that they have on the Red Sea side. So that's one movement. And also the other is diversification of procurement. So the crude oil from U.S. crude oil from Mexico. So many entities are trying to import from those areas and exporting from those countries, of course, the cost will increase. And the oil from crude oil, they can use the LCC very large ship and it can actually reach in 20 days. But from Africa, and then they have to go around the Cape of Good Hope, which will require a much longer period. and EV is attracting attention again, so not just gasoline. And so whether it be EVs or whether it be non-gasoline, so the ammonia or something like that, non-heavy oil fuel for the vessels and renewable energy as well, but clean energy has been -- have received renewed attention from the perspective of security. So in totality for energy overall, we are moving slightly towards more emphasis on security. But at the same time, there are also challenges as well. So for example, if a pipeline to be installed elsewhere, they will all increase cost. So security doesn't come for free. And so to achieve security and resilience, some costs will be required. So over the medium to long term, overall energy cost could potentially increase. And so users they want energy with high security, but they want the price to remain at the current level. So many people are still saying that, but that would be the challenge overall for the medium- to long-term perspective in regards to energy. So how is the impact responding for crude oil? And the competitiveness of Abu Dhabi will remain and Abu Dhabi's competence will remain. And so we'll continue to invest proactively in Abu Dhabi. Gas, we have already achieved diversification Ichthys and we're now working in Abadi. And so we are not going through a chokepoint, the Strait of Hormuz. So our gas won't go through the chokepoint. And so we want to expand our portfolio with high security. So that's the direction that we want to proceed towards. So that's the recent overall situation. So these are the highlights from the first half of the year. Mr. Yamada will talk about the detailed numbers. But for the first half of the year, highest profit on record at JPY 263.1 billion for full year. So we didn't use a range, and we have come up with a number. But for the net profit, we are expecting JPY 510 billion of profit record level. Operating cash flow, about JPY 1 trillion. And Abadi, so we want to reach FID next year. And so we have been building up on the cash reserve for the development. And we expect to accumulate about JPY 770 billion by the end of fiscal year. Investment cash flow for the full year, we are expecting JPY 859 billion. And there are various investment for growth. Abadi and Ichthys I'll talk about that later on. But even prior to Abadi, the production, there are things that will contribute to production. So the interest acquisition in Malaysia. So [ SJP ] and so this is the Caspian or Indonesia. So we have been working to acquire the interest, those that are already producing or about to start producing soon. So we intend to pick up on those assets. For these assets, we are expecting several billion yens of profit contribution per annum. And so through these, even prior to Abadi and even after Abadi, we intend to continue to realize the growth. And shareholder return, I will come back to this later on, but we are going to be paying JPY 112 per share for the full year, which is JPY 12 higher than last year and about JPY 140 billion of share buyback. And total payout ratio is expected to be about 53% and so on next page, so I wanted to kind of describe INPEX as a company. So what we have worked on for the past 10 years have been described in this graph on the left, these are the operating cash flow and the net production volume CAGR converted into USD. And these are the numbers from 2015 to 2025, operating cash flow on the vertical axis and the production volume on the horizontal axis and the major and the independent E&Ps. And so you can see INPEX is located here. And so operating cash flow, the average the growth rate over the last 10 years is higher than the majors and independent E&Ps. The horizontal axis production volume, we're not at the top, but we're in the middle, but we are at quite a high level in terms of growth rate against the majors as well. So last 10 years, INPEX has continued to achieve a steady growth. Going forward, it is shown on the right, and this is showing the production value and 730,000 BOE/d. And after Abadi production start, we expect to reach 800,000 BOE/d and operating cash flow will grow from JPY 1 trillion to JPY 1.5 trillion. And so last 10 years until 2035, we intend to continue to achieve steady growth. This is the assumption that we have made. Next page, please. So the progress of each project, Abadi Ichthys, I would like to explain more in detail. First, regarding Abadi, we have a steady progress, a very steady progress today. The fee FEED has been continued for last year, and we have seen a steady progress and mostly 80% of progress is what we have achieved. In fall, we'll be completing. And in fact, already, simultaneously, we have the OTC, which is on the actual tender of the construction, which is starting from July this year. The tendering in the end will go. As you know, for the FEED there is a dual FEED where the 2 consortiums are competing, and we are doing the FEED together. So from these 2 consortiums in the end, we will have consortium that will be selected. And that consortium will be in charge of the construction. And that selection is the EPC FEED. For the EPC, we will have the tender. And that has already started. For the marketing, we also are seeing good progress. As we announced at the end of May this year, for the Abadi project, the total production of LNG is 9.5 million tonnes of expectation. Out of that, we would like to have buffer. So it's not based on long-term contract. But out of that, the long-term contract is around 8 million tonnes or so. And out of that 8 million tonnes of long-term contract, we already have a certain amount, which is where we have signed the key term sheet agreement, which is where we signed the price and the volume as a basic contract. This is what we have signed with the buyers in May. in particular, BP, Shell, the super major and also the Indonesian national company, gas company, we have had this basic key term sheet agreement, which is the base of the long-term contract. And for the Japanese, it's going to happen going forward and also others because of the Middle East conflict, there is a lot of free interest in the Asian market, and that is where there is a high interest, and there's a good reputation today. So for the marketing, we think it will go well. In fact, for the actual work, we started the -- we have to start the actual work from this year. For the case of Indonesia, the. Abadi LNG is on the Cempedak a very rural area. That's where the LNG facility will be constructed. And the LNG plant in the surrounding area, we have the fencing and also divergent road, which is you need to have the road to diverge. So those construction have to start. And then we need to have the local agreement. So we have contacted the Indonesian government, and we had the groundbreaking ceremony to have the local cooperations. For about 1 month ago, on the Cempedak Island, we visited. And it's actually with a charter, it's a 4-hour flight one way and 8 hours runways. So this is a picture taken at that time. It was a really wonderful ceremony. And from Indonesia, we have the Energy Minister and 3, 4 other ministers visited as well. And also President Prabowo also wanted to participate. So in the end, as shown on the right, it was very far. So in an online manner, he participated in the ceremony. And from the start to the end, Mr. President Prabowo also participated. So this is where he was doing a speech, and that was a picture. But there was a huge interest and also support from the Indonesian government. And today, we are in the feed work and marketing is going well. and also the strong interest and also support from Indonesian government. And after the FID, what happens with the economics, that is still the question. However, from my perspective, Abadi from the -- sometime in the middle of next year, we will come to FID, the final investment decision, and we think that is quite a higher possibility at this moment. And perhaps that is also the market recognition. And then that is for one. And then next is Ichthys. For the cargoes for this year, we have seen a very steady progress. Operation is doing very well. And we had the strike and a lot of concerns were around the strike, but this actually happens once every 4 years. We have the enterprise agreement where we have a reval of the labor contract. And based on the labor party, we had a lot of strong labor party position in the past, and we have this revision under that environment. So it's been a very strong environment, and we had some strike, but it was not really a big impact. It was a minimal impact to the cargo arrangement. So that was the case, and that is where we are able to sign a 4-year contract for the labor -- with the labor union. And with this, so far, the operation is doing relatively well at this moment. For Ichthys, one of the big thing is in this year, in summer -- in spring, the Beetaloo Basin sub-basin is where a huge shale gas reserve is expected and that interest, we bought in 3 blocks from Daly Waters. And as you can see in the picture, this is a huge area in jungle, and there's a pilot production, which is underway today. From June, we have the pilot project, which commenced and we would like to partly sell to the Northern Territory. And then how much reserve are there is something we'd like to understand. So the exploration work is continuing at this moment. But there's a huge expectation from the Australian government as well. It's a huge expectation as a project. And going forward, this will be a new Train 3 gas. It will be a base for the new Train 3 gas for Ichthys. So that is also doing very well at this moment. Outside of that, we have Abu Dhabi. We have a good production, but the sales are not going well. However, Abu Dhabi is still important country. So the Upper Zakum investment is what we'd like to continue. And the other day, the onshore cap gas -- gas cap development, where the gas layer, which is on the top -- on the top -- which is called a gas cap. So those development is what we have come to an agreement just the other day. And also, we have the Azerbaijan's ACG oil field, which part of the interest we bought from the government. In Malaysia, we have the Sarawak Block 2E interest that we bought and also Indonesia. So before and after, but we also have these projects, we would like to conduct these projects, which will lead to profits. And then next, we have the CCS, blue hydrogen and Power Resources. For CCS, the CCS plant has started operation last year. And in a full scale, we are going into the execution. The methanation plant has already started and the green methane has already been serving the pipeline. And also the metropolitan area CCS is to be done in Shiba to bring the CO2 in the Tokyo area and to have that captured storage. And we have this exit. On the right-hand side, you can see the drilling rig picture taken as a picture from the onshore. And all the people in the beach might have a look at this and then wonder what this is. But it's about 2,000 meters of rig is being explored, and we have the CCS projectability, which is confirmed through these projects. And as we don't have time, we also have power resources, but I would like to go on to the next page. And next is the shareholder returns. Of course, we are thinking about the return, I'd like to mention one thing. As mentioned, we have the JPY 112 of DPS, which is record high in the share buyback of JPY 140 billion and 53%, approximately 53% of total payout ratio. And for 24 years, 5x or less is how much we have increased the dividend. For the dividend, there are times when it's high or low, but this is an all-time high record today. And when we discuss internally, when we look at the stock price today, there are a lot of discussions. And as a result, I would like to explain, but today, we believe that our growth potential is not evaluated. We have some discounted value. So for this fiscal year, we would like to have a share buyback. And of course, there are people who expect dividends. But for the dividend, JPY 112 is the dividend. And for this time, the -- considering the stock price today, we have decided to focus more on the share buyback. So that is the shareholder policy, return policy. And as you can see why in this graph, at the bottom, this is the oil price. The top is the stock price. And as you can see, until the Iranian war, it's -- our price used to be told it's linked to oil. But before the Iranian war, it was because of the growth strategy. So there were higher stock price than the oil price. But after the Iranian war started, it was getting close to the oil price and with the stock price increase or if the oil price increase, there was an increase in stock price and also vice versa. So there was a lot of volatility. What happened in the end is when the oil price and share price were about the same or before the war end of February, the oil price was $73 and the oil price -- the stock price was JPY 3,800. At the end of June, with the same oil price with $73, it was JPY 32.65 per share. And if you look at today, it's slightly above. So $83 is the oil price. And so compared to $73; today, $83 per barrel, and there's a $10 of increase, but JPY 3,500 is today's stock price. So we wonder why. And in the meantime, our company's growth strategy, if that did not work well, then we understand. However, as mentioned, we have steadily executed the growth strategy and Abadi is one example, but also for Ichthys, we have been doing steady progress against the growth. And the oil price increased by $10 per barrel, but the stock price maybe is JPY 3,500 today. So it's a drop, and it's not really a welcoming situation. And there's nothing we can say for what happens in the market. But for our company, although we're not trying to give dreams, we are doing this business steadily and returning to our shareholders steadily as well. That is the policy. So the JPY 3,500 and $83 per barrel of oil is something that we think is kind of a mismatch or there's a discount. Therefore, as we are going to execute the growth strategy, even compared with the pre-war, we think the price should be higher. From that standpoint, we think internally, we think we are undervalued and that is, as a company, the understanding we have today. Therefore, when the stock price is low, we should do a buyback. So that's why we have focused a lot on the share buyback this time for the shareholder return, and that's the policy. So that was a long explanation. That's all for me.

So Mr. Yamada will continue.

So please allow me to explain about the results of the first half of the year and the forecast for the full year. So as our CEO, Mr. Ueda has explained, and so we ended up with JPY 226.3 billion (sic) [ JPY 226.33 per share ] for the half year period, highest. And for the full year, JPY 510 billion is the forecast we have, which is highest on record and shareholder returns highest on the level. So the triple victories, if you like. And so that's the kind of the numbers that we are referring to. So the highlight for the first half of the year, oil price was between $70 to $87. The FX, the yen has weakened. As a consequence, revenue has come down slightly, but the net profit or profit attributable to owner parent reached the highest level, JPY 263.1 billion. So the impact of the Middle East was quite evident. As you can see, the sales volume did come down significantly, but the oil price has come up. And the FX, the yen has weakened due to the Middle East situation when the oil price goes up and the LNG price also increased. And so towards the end of the year, particularly with the strong performance of the excess production. And so the production volume and cash flow of the Ichthys has increased and so the recycling revenue also increased as for Abu Dhabi and taxable income come down. And so we also see a significant decrease in the income tax. And so because of that, there were both negative and positive from the Middle East sector, but a stronger impact was a positive factor. And when we talked about the May -- full year forecast in May, we said that the Middle East is likely to act positive for us, and that was reflected in the numbers on this occasion. And this is revenue by major product, crude oil on top and natural gas on the bottom. And so the crude oil revenue, JPY 780 billion last fiscal year, it came down to JPY 694.9 billion, came down by about JPY 85 billion, but this is Abu Dhabi reduction because we weren't able to sell all of the embody. And so there was this decrease. But in terms of the average unit price, it came up, the FX, the weaker yen. And for the natural gas, JPY 251.4 billion to JPY 271.9 billion, increasing by about JPY 20.5 billion. The sales volume because of strong performance exists and it increased by about JPY 8.5 billion. For the unit price, it has come down unit price, but it's essentially flat. So average unit price of the overseas for domestic and the FX impact, so we ended up with JPY 271.9 billion. And this is the waterfall chart. So on the left is JPY 223.5 billion. And this is the second quarter of FY '25. On the right is first half for 2026, an increase of about JPY 40 billion. So the revenue and because of the significant decrease in the crude oil, we ended up with JPY 48.3 billion negative. And the share profit and investment accounted for using equity method and the other income is essentially Ichthys related, which have performed well and towards the end of the year, and the oil price will also increase and so about JPY 10 billion pickup in downstream and also TA recycling and the cash flow of Ichthys has increased and so we were able to achieve significant the paid-in capital reduction of Ichthys. And on the right, we have the income tax, the benefit because of a lower tax. And so the revenue came down by about JPY 50 billion, by about JPY 50 billion positive from Ichthys and the tax JPY 50 billion and hence JPY 40 billion. So Abu Dhabi or the Middle East situation had both positive and negative, but the positive factor were larger. So that was essentially the result. So the full year, the Brent oil price and about $80 for the quarter 3 and about $70 for quarter 4. That is the assumption. So we expect the oil price to come down slightly, $2 or so of a decrease for FX for quarter 3 and quarter 4, we are expecting JPY 160 and so slight decrease in yen. And similar type of trend to the first half of the year, but -- so the revenue came down, but the profit came up. And so that's JPY 510 billion. So JPY 500 billion is like a dream number for us, but we will finally exceed that level and ROE too, more than 10% on this occasion. The net PE ratio has come up slightly. But like Mr. Ueda was saying, so we have the cash reserve for bodies. So it is not to be netted. But if you actually net this, there was 0.2% impact. So there is no issue from the financial position perspective. That's the result. So this is the waterfall chart. So this JPY 450 billion, this is the upside case. So in this case, around July is when Abu Dhabi will normalize. That's the time when we had assumed. And this time, we have JPY 550 billion. But this time, Abu Dhabi's normalization will be around October, and that is the revised timing. So that's how we came up with this number. The left-hand side is the external factors. And mostly the Middle East conflict and the impact from that is reflected. And for the foreign exchange because of the Middle East, there is some yen depreciation. On the oil price, this is the only different area. In the past, in the full year forecast, so when we announced the results, we talked about the sensitivity, oil price sensitivity. But this time, compared to the May forecast, oil prices dropped, but the oil impact is positive. That's because of premium LPG and those -- there was a lot of premium. So that's why it's a reverse situation. But that's also coming from Middle East conflict. And then minus JPY 17.5 billion is a project factor. But as mentioned before, Abu Dhabi cash is included. And also, we have profit booster. But these TA recycling is included, it's about JPY 100 billion of TA recycling included this time. So the investment incentive and combined together, a total of JPY 100 billion or so with 3 included in total, those are the external factors. We thought it will be positive in the May forecast. But this time, it was slightly negative, but more there were positive factors than negative. So that's why there's about JPY 10 billion of improvement. And then with the Middle East, it's a positive thing, and it's not really a good news, but that was the actual result. And then for the others, we have the Ichthys where the sales volume increased. There's 10 cargo per month and the sales are doing well. And then we have JPY 16.9 billion. And then on the right-hand side, we have one-off. There is some impairment in ARO as well as others. So it's about JPY 20 billion plus and in the end, JPY 510 billion. And we are starting from October, we think it will be normalized in October, and it's hard to say for the Strait of Hormuz. But let's say it will be normalized by end of the year, what happens. And we also have that calculation. Let's say, it will not normalize in the year-end. If it happens still until -- if it's still not normalized until next year, I think it's not JPY 10 billion, but maybe JPY 0.7 billion to JPY 0.8 billion of decline. But the oil price will not change, and that's the assumption. So if this production will not change, then maybe less than JPY 10 billion will be the impact if it will not normalize by end of the year. Then next is the cash flow. The very top, you can see the operating cash flow, which is more than JPY 1 trillion. And the investment cash flow, JPY 859 billion. And from May forecast, about JPY 60 billion of increase. However, as you can see in the bottom, the growth investment is declined. The reason is because in Abu Dhabi was not so much of a change for Abu Dhabi, but there's a slight decline, plus the other interest investment we had, that was about JPY 100 billion, which went over the fiscal year. So the growth investment is mostly no problem. And the reason why there is an increase in investment cash flow is the others. it says JPY 183 billion, and that is Abadi, the cash reserves for the development of Abadi, about JPY 100 billion or JPY 200 billion is what we have set aside. And in May, there's some increase in decrease. So that's why we thought it will not be so much of normal. We could not make these cash reserves. But this time, we had additional JPY 100 billion. So this is how we ended up. And the next is the investment cash flow. As you can see on the left-hand side, as mentioned, JPY 800 billion is -- JPY 859 billion today. The content is mostly the same, but just one thing is the cash reserves for Abadi. We did not factor this in the May forecast, but now we have this included, and we have JPY 859 billion in total. JPY 859 billion and also the JPY 200 billion for Abadi, how to look at this? In '26, end of December, we will have an increase of JPY 770 billion. So this will be a cash to be used for the upstream. So JPY 770 billion will be used. And then in the midterm plan, we had about JPY 600 billion to JPY 800 billion. But in 1 year prior timing, we're able to achieve that. And the JPY 1.9 trillion is on track to what we stated in the midterm plan. And on the right-hand side, as mentioned, these are the disclosed projects we have and also the profit contribution. So Abadi, before the Abadi production start-up will happen, we have these investments. And then this is the ROIC by segment. So as you can see, this is the details. So that's all for me.

So we would now like to receive questions. We receive questions from the venue first then after that from online participants. [Operator Instructions]

Now I have 2 questions. And I was somewhat held back because of the strong message, but I will ask a question. Now 2 questions from me. The first question is regarding the body. On Page 7, you have shared with us the schedule and the progress on different parts, and this was very easy to follow. I think the situation has been clarified a lot through this information. And as indicated in the text on this slide, this project and equity IRR, so we are going to aim for the mid-teens percentage for IRR -- equity IRR. And this is something you have been explaining from the past, and I understand that things are progressing quite steadily. But in regards to marketing, and it seems that you have been able to kind of come to a kind of a consensus in terms of the terms at an early stage, which is quite a strong progress. But in order to secure equity IRR mid-teens, in order to secure that, what would be the biggest hurdle? And what's the progress against that hurdle, if you like, at this point in time? So that's the first question. And I think it's really up to the negotiation with the Indonesian government, in my view, based on the presentation material. So the taxation or the conditions with the Indonesian government is likely to be the key. But equity IRR in order to achieve this number, what will be the biggest hurdle? So if you could kind of give some explanation about that? That's the first question. And together with that, you said JPY 770 billion of the cash reserve, which is a year ahead of your original schedule. So with that, for the upstream portion, the expected amount of the fund, have you already secured the amount required? If you could also refer to that as well, that would be helpful. So that's the first question. And the second question is on your slide, Page 21. Together with the investment, the project, you've also provided information in regards to the timing of profit contribution. This is very helpful, although it may be difficult for you to respond, but I want to ask anyway. And so Abu Dhabi related where you are investing a lot in recent times. And so the profit contribution as well as the production increase, the contribution. Can you give some more color and it may be aligned with the government initiative, but you said that there will be contribution prior to Abadi start. But if there is anything more that you're able to think about, so prior to Abadi production start, Abu Dhabi is an important profit and the growth driver. And so could you give some more color in terms of the timing of profit contribution and so forth? So these are my 2 questions.

Thank you. First of all, in regards to Abadi, equity IRR more than 10%. What is the biggest hurdle? Well, for me, I feel that there are 2 major factors. First is Indonesian government. And so negotiation for incentive where this will go well or not. But more important is to what extent can we achieve a reduction in cost of the project. And we are currently undergoing a fee process right now. But so cost is not something that comes up as a lump sum and that's it. So we can talk with the contractors. Can we reduce cost here? Can we actually change the schedule here and so forth. There are a lot of the negotiations. So if we are able to reduce local content a little bit, then the cost will come down this much. So there are various ways we can work on reduction. And so for us to achieve success of the project, the economics is important. But prior to incentive, we have to work on achieving cost reduction through various means. So in that regard, cost is not something that you can actually address in one go. I won't say it's a living thing, but it's like that. And so we need to continue to thoroughly and continuously work on achieving reduction in cost. This is one significant hurdle for us in my view. But even after that, if the economics is not sufficient, then we need to engage in negotiation with Indonesian government for incentives. So these would be the 2 hurdles. And your second question, Abadi, so we have cash reserve of JPY 770 billion. Is it sufficient for the investment for upstream? Well, so it really depends on the CapEx, so the project cost. So it's difficult to say. But if we think about the past, the Abadi CapEx in 2018 when we did a POD, it was said that was about JPY 20 billion -- sorry, $20 billion. And so we're going to add CCS so there is a 5% increase in terms of cost. This was the number back in 2018. But after that, and we need to change that to 2026 numbers. And of course, the cost has increased quite significantly due to inflation in the meantime. So if we take all that into consideration, then that becomes the total CapEx of the project. Now how much this will be? Well, we need to think about the cost reduction initiatives that we are working on that will have a significant impact. So we don't know at this point in time. So FEED or EPC tenders, we need to go through those processes. And the number will become more clear. But -- so from the numbers in 2018, even if the cost increases by 30% or 40%, it's not going to be a significant surprise. Now that's -- that is the CapEx for the entire project upstream and downstream. We have 56% so that's the equity portion and upstream, downstream, the LNG plant. So we need to actually allocate funds for that. The downstream, it will be TB -- trustee borrowing scheme. So we will be borrowing the money where we will provide the credit guarantee, that guarantee. So the cash is required for the upstream. And so JPY 770 billion is what we have built up as a cash reserve. We don't know at this point in time whether this is sufficient or not. And I don't think this has reached 100%, and so we probably need additional effort. And your second question, the increase in production impact from the Abu Dhabi, and we have the confidentiality agreement. So we can't talk about the production volume very much, and I hope you'll forgive me for that. But on that basis, and on Page 21, there are 2 projects related to Abu Dhabi. And so one is the Upper Zakum, further development. Now in '26 or '27, so we will reach about 5 million barrels per day from 4 million or so right now. So that is where there is going to be a large production increase in the Upper Zakum oil field. And so we will be spending several hundred billion yen of investment over these years, and we expect a large contribution from that in several times. And so Bab Gas Cap Development, and this is to develop the gas which is on top of the oil, and we are currently doing the FEED for this right now. And hopefully, during 2026, we want to make the FID. And so the production start is likely to be 2028, 2029. And so that will be the kind of timing where we can potentially expect a profit contribution. And so we are spending -- well, we are expecting several billion yen of profit contribution from each of the projects described on this slide.

Two questions. First, Abadi. My question is, as you explained, the long-term contract of 8 out of 8 million, 5.9 million is the base contract that you completed and you have a good inquiry today. So over the mid- to long-term profit to have a stabilized profit, the long-term contract, as you can see or as you mentioned, there are a lot of inquiries, you'll be increasing more of these long-term contracts. Is that a possibility? So the long-term stable contract or fixed volume contract is something that you're planning to increase? Is that what you're thinking? So that's number one. And second is regarding the shareholder return. There is a strong message today. And -- of course, that strong message in this fiscal year is where you have more weight on share buyback. I think that's one point. On the other hand, the total payout will be 53%, so within the range, but it's actually just a part of the JPY 50 billion and above -- 50% and above of the total payout that you mentioned. So just per se, if we have a strong will or intention, maybe we can try to increase the percentage more. And also for the cash reserves, as you are going to have a 1-year achievement 1 year in advance. So thinking about the cash, is there maybe a stronger message that you can communicate? I just wanted to purely think whether that is possible or not. Not thinking that you would increase the shareholder itself. But once again, I just want to ask your opinion or what your views are.

Thank you very much. So the first question was Abadi and the fixed contract or the long-term contract, I think the question is whether we should increase that or not. And basically, we think it is possible completely. However, we're not trying to do that as a company. That's the answer because as mentioned, by the LNG, we have 9.5 million tonnes of LNG plus 150 mm gas pipeline. So that's the business. And then out of that 9.5 million of LNG between Ichthys; for Ichthys is 90-some percent of long-term contract. So it was a good finance situation. But just because of Ichthys, when we had a lot of troubles, if we have too much tighter contract, then we may not have any room. So for Abadi, we wanted to have some buffer. That was the policy. So as mentioned, 9.5 million tonnes out of that, 1.5 million tonnes is something we'd like to have a buffer. So that means the 8-point-some million tonnes will be the long-term contract. So we thought 8-points million tonnes can be the long-term contract, as mentioned. And so far from the overseas buyers, we have a strong inquiry today. So we can assign this right away or we can increase further. But as mentioned, because of the reason, we are not trying to increase more of the long-term contract than what we have today. And then the second is regarding the shareholder return. Why don't we do a more stronger message of increasing this reward? I think that was the strong request, but I would like to use that as a good reference. In our company's policy, however, instead of doing a forceful reward, we are a growing company. And while growing, we would like to reward our shareholders along the way. Therefore, the total payout this time is 53% as a forecast. But by maintaining that level, we would like to make sure we have a growth and then a good return to our shareholders, and that's the policy that we want to implement. And if that happens, then it will be around 53%. So as you mentioned, the feedback, we would like to take back your feedback going forward.