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Itochu Writes Down Samson Investment as U.S. Shale Bet Sours

Itochu Corp. (8001), Japan’s third-largest trading house, said it booked another writedown on its investment in oil and gas producer Samson Investment Co., as its bet on the U.S. shale boom sours.

The latest impairment of 29 billion yen ($279 million) follows charges of about 33 billion yen reported by the Tokyo-based company last year. Itochu has now written down most of the 78 billion yen, worth $1.04 billion at the time, it paid in 2011 for a 25 percent stake in family-owned Samson.

The development of shale, which involves extracting hydrocarbons from rock formations through chemical injections, has slapped investors with writedowns in the last two years after U.S. gas prices fell to their lowest level in more than a decade in April 2012. BHP Billiton Ltd., the world’s largest mining company, in August 2012 announced a $2.8 billion writedown of its U.S. shale gas assets.

Itochu joined a KKR & Co.-led purchase of most of Tulsa, Oklahoma-based Samson as part of the biggest leveraged buyout in the oil and gas production industry, according to data compiled by Bloomberg. It is also Itochu’s third-largest acquisition in raw materials.

The loss reported today will be reflected in its financial results for the quarter ended March 31, Itochu said, although it won’t have an impact on its full-year profit estimate. On Feb. 4, Itochu raised its net income forecast for the 12 months ended March 31 to 310 billion yen.

The Samson purchase included oil-producing fields in North Dakota and the U.S. northwest, and shale-gas fields in Texas and Louisiana. It excluded its onshore Gulf Coast and deep-water Gulf of Mexico assets, which were retained by Samson’s family owners.

Itochu shares closed 0.3 percent lower in Tokyo at 1,203 yen, while the Nikkei 225 Index rose 1 percent.

To contact the reporters on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net; Ichiro Suzuki in Tokyo at isuzuki@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Indranil Ghosh

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