Inpex Defies Hormuz Disruption with Record Profit and a Bold Buyback Signal
Middle East trouble is offset by portfolio strength and weaker yen; management says the market undervalues the growth story and pivots toward share repurchases.
1605.T · Earnings Call · 2026-08-07
Middle East Disruption, Record Profit
The closure of the Strait of Hormuz is the single most important factor in Inpex's first-half results. Management explained that sales volumes from Abu Dhabi fell ~30% year-on-year, but the impact was fully offset by higher oil prices, a weaker yen, and excellent performance from the Ichthys LNG project. “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.” — Takayuki Ueda, CEO · 2026-08-07 The first-half net profit reached JPY 263.1 billion, and the full-year forecast is JPY 510 billion, both records. CFO Yamada captured the mood: “We ended up with JPY 226.3 billion (sic) 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.” — Daisuke Yamada, Executive or Senior Management (likely CFO or similar) · 2026-08-07 The company expects the strait to normalize around October, but even if it doesn't, the impact is now more manageable.Abadi: Progress and Persistent Risks
Abadi remains the key growth catalyst. The company has executed key-term sheet agreements with BP and Shell for LNG sales, and the Indonesian government's support was evident at a groundbreaking ceremony. Management reiterates its target of a mid-teens equity IRR, but acknowledges cost inflation and the need for incentives. When asked about the biggest hurdle, CEO Ueda said, “So there are 2 major factors. First is Indonesian government... But more important is to what extent can we achieve a reduction in cost of the project.” — Takayuki Ueda, CEO · 2026-08-07 The company has built a JPY 770 billion cash reserve for the upstream portion, a year ahead of schedule, but Ueda admitted it may not be sufficient if project costs continue to escalate.From Dividend Bias to Share Buyback
Perhaps the most notable change is the pivot in capital-return policy. In August 2025, the company stressed that it would “use the dividend as the fundamental approach and to use a share buyback in a supplementary way.” — Takayuki Ueda, CEO, President & Representative Director · 2025-08-09 Less than a year later, management is making buybacks the main message, with JPY 140 billion in repurchases and a total payout ratio of about 53%. The CEO was explicit:He then added, “So that's why we have focused a lot on the share buyback this time for the shareholder return, and that's the policy.” — Takayuki Ueda, CEO · 2026-08-07 This shift is even more striking because just last quarter the company warned that free cash flow would turn negative as it ramped up investment. “And so free cash flow will be negative. In other words, so we are investing more than the operating cash flow.” — Daisuke Yamada · 2026-02-17 Yet now, strong cash generation and balance-sheet control allow the company to fund both growth and returns.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.