`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
`
`09-CV-1827
`Houston, Texas
`
`7:39 a.m.
`August 1, 2012
`
`*
`*
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`**
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`***
`
`WESTERNGECO LLC
`VS.
`ION GEOPHYSICAL
`CORPORATION, FUGRO
`GEOTEAM, INC., ET AL
`
`JURY TRIAL
`Volume 8
`Morning Session
`BEFORE THE HONORABLE KEITH P. ELLISON
`UNITED STATES DISTRICT JUDGE
`
`APPEARANCES:
`FOR THE PLAINTIFF:
`Lee L. Kaplan
`SMYSER, KAPLAN & VESELKA, LLP
`700 Louisiana, Suite 2300
`Houston, Texas 77002
`713.221.2300
`
`Gregg F. LoCascio
`KIRKLAND & ELLIS LLP
`655 Fifteenth Street Northwest
`Washington, DC 20005
`202.879.5290
`Sarah Tsou
`Timothy K. Gilman
`KIRKLAND & ELLIS LLP
`Citigroup Center
`153 East 53rd Street
`New York, New York 10022
`212.446.6435
`
`Johnny C. Sanchez, RMR, CRR - jcscourtreporter@aol.com
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 1
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`2362
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`FOR ION GEOPHYSICAL CORPORATION:
`David L. Burgert
`Susan Kopecky Hellinger
`Jonathan M. Pierce
`Jonna N. Stallings
`Ray T. Torgerson
`Eric D. Wade
`PORTER & HEDGES LLP
`Reliant Energy Plaza
`1000 Main Street, 36th Floor
`Houston, Texas 77002
`713.226.6694
`
`FOR FUGRO GEOTEAM, INC.:
`Gordon T. Arnold
`Jason A. Saunders
`Anthony Hong
`ARNOLD KNOBLOCH LLP
`4900 Woodway Drive
`Suite 900
`Houston, Texas 77056
`
`James M. Thompson
`ROYSTON RAYZOR VICKERY & WILLIAMS LLP
`Pennzoil Place
`711 Louisiana Street, Suite 500
`Houston, Texas 77002
`713.890.3218
`
`Court Reporter:
`Johnny C. Sanchez, RPR, RMR, CRR
`515 Rusk, #8016
`Houston, Texas 77002
`713.250.5581
`Proceedings recorded by mechanical stenography. Transcript
`produced by computer-assisted transcription.
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`Johnny C. Sanchez, RMR, CRR - jcscourtreporter@aol.com
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 2
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`I N D E X
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`WITNESS
`RAYMOND SIMS
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`CONTINUED DIRECT EXAMINATION BY MR. KAPLAN..... 2375
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`CROSS-EXAMINATION BY MR. BURGERT............... 2441
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 3
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`Direct-Sims/By Mr. Kaplan
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`2413
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`of this benefit in my calculation. If I did, the
`quantification -- the benefits would have been even
`higher.
`So you looked at the 12 items that were specifically
`Q.
`listed?
`A.
`Correct.
`-- in that document on Slide 72?
`Q.
`A.
`Right.
`And did you decide there were some that you thought
`Q.
`you could put a dollar value on?
`A.
`Yes. Based on all the information in the record, the
`documents that were produced by Fugro and ION, there were
`a lot of documents that indicated benefits of infill
`reduction, line change efficiency and faster and safer
`deployment and recovery.
`So those are the ones that I focused on to
`quantify, in terms of the benefits.
`I mean, it's pretty hard to figure out how much money
`Q.
`somebody saved by having more safety; right? Maybe they
`put a dollar number on it somewhere, but you haven't tried
`to ascribe one?
`A.
`I haven't seen anything in their documents that
`indicate that they put a dollar amount on it. Clearly
`it's a benefit, and certainly it does have a cost, a
`dollar value to it, but I don't know what that dollar
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 4
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`Direct-Sims/By Mr. Kaplan
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`value is, so I didn't include it.
`And if there were fewer cable tangles, it's probably
`Q.
`unlikely that somebody wrote in the ship's log because we
`steerable streaming this week, we didn't have a tangle?
`A.
`Correct.
`So you didn't put a dollar value on that either?
`Q.
`A.
`No.
`All right. Well, let's look at three out of the 12
`Q.
`items that you tried to put a value on. And how did you
`go about doing that?
`A.
`Again, I looked at the documents, all the documents
`that were produced, and I tried to get as much information
`as I could about the amount of savings or value
`contributed by lateral steering in those three areas, and
`I did a calculation.
`And this is a summary of my calculation.
`And it indicates that in total, the quantifiable benefits
`from those three items was somewhere between 19.9 and 21.8
`percent of the value of the surveys, survey revenue on
`average.
`All right. So let's look at the three items you did
`Q.
`talk about and that you put a value on. And the first one
`we're going to talk about is infill?
`A.
`Right.
`And what does Slide 76 show?
`Q.
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 5
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`Direct-Sims/By Mr. Kaplan
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`A.
`Well, these are a couple of documents that indicate
`how much infill could be or typically is for 3D seismic
`surveys.
`
`So the top document which comes out of
`Fugro's records indicates that infill shooting may be as
`much as 25 percent or more of the total cost, of prime
`seismic acquisition. The document on the bottom I'm
`trying to recall --
`It's an ION document.
`Q.
`A.
`I think it's an ION document, indicates that the cost
`of the infill can account for 30 percent of the total
`acquisition cost. And I think if you recall in that video
`we watched earlier this morning, Mr. Monk indicated that
`infill could be 30 percent of the total survey cost.
`Those are Plaintiff's Trial Exhibit 375 and 164?
`Q.
`A.
`Right. So infill can be a substantial portion of the
`cost of the survey. So the question is, how does the
`lateral steering contribute to reducing infill? And what
`I did was I identified documents and testimony that
`addressed that issue.
`Here's Mr. Cunkleman who indicated that
`one of the important benefits is reduce infill, the
`benefits of lateral steering is reducing infill and cost
`reduction. And that he indicated that reducing infill 20
`to 30 percent would not be unusual.
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 6
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`Direct-Sims/By Mr. Kaplan
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`2416
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`And then let's look at another Fugro document
`Q.
`plaintiff's Trial Exhibit 398, and what was the outcome or
`the reflection or conclusion of that document?
`A.
`Okay. Well, here again, how does DigiFIN steerable
`streamers affect the performance of the survey, and the
`indication is that it reduces infill percentage from
`15 percent to 8 percent. So that's about a 70 percent --
`I'm sorry -- 45 percent reduction.
`Right. So if you're starting at 15 percent, this is
`Q.
`zero, you go down 8 percent, it's not a 7 percent. It may
`be a 7 percent reduction on the whole, but of the infill
`it's almost half?
`A.
`Right. It's 7 out of 15. About 45 percent.
`And they actually put some days on that, didn't they?
`Q.
`A.
`Yeah, they said about 4.8 days due to reduced infill,
`that they saved.
`And that gets back to among other things, to
`Q.
`Mr. Walker's testimony and Mr. LoCascio's art work showing
`how you can literally get a survey done in a lesser time
`and increase your revenue because you don't have to go
`back?
`A.
`Correct. You move on to the next project.
`All right. So another internal Fugro document, this
`Q.
`is Plaintiff's Trial Exhibit 385.
`A.
`Right. And this is talking about a specific survey,
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 7
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`Direct-Sims/By Mr. Kaplan
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`2417
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`BP in Vietnam -- actually, no. They're talking about --
`well, they are talking about, but they're referring to the
`StatoilHydro project where they experienced a 50 percent
`reduction in infill, lower infill.
`And did they also -- they also talked about some of
`Q.
`the other benefits -- and we will come back to that. But
`let's stay with infill for now and total reduction. And
`then again this is ION talking about this intelligent
`acquisition technology reducing infill?
`A.
`Correct. So this document indicated that they're
`seeing reductions of 20 percent to 50 percent, in infill
`on vessels using intelligent acquisition technologies,
`which is their DigiFIN system, which could save the oil
`and gas companies 5 percent to 15 percent on their
`acquisition bills.
`Okay. And then let's look at Plaintiff's Trial
`Q.
`Exhibit 230 from ION and 386, the Fugro document.
`A.
`Okay.
`What did ION see?
`Q.
`A.
`Well, again, these are -- this is again, documents
`reflecting experience on -- from using lateral steering
`and related to infill. And here it says almost four times
`less infill than expected, 4 percent versus 15 percent.
`I probably wouldn't have said four times
`less, but what that is, is it's a reduction of about
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 8
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`Direct-Sims/By Mr. Kaplan
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`2418
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`70 percent, 9 or I'm sorry, 11 percent drop from 15 down
`to four. So it's a significant reduction of infill. And
`then the next document again indicates that we, they,
`being Fugro, see between 30 percent to 50 percent less
`infill than compared to a standard spread with no
`steerable units.
`
`So when they add steering, they get a
`30 percent to 50 percent less infill than when they don't
`use steering. So these are all significant.
`And in looking at the collection of documents and
`Q.
`information from ION and Fugro on infill reduction, did
`you reach some conclusions about typical infill reduction?
`A.
`I did. Well, not typical, but on average, when you
`look at all that information and look at the average, the
`average was -- you know, the median was 43.7 percent, the
`mean was 41.7 percent reduction in infill.
`And then what I did was I tried to
`determine how much infill was as a percentage of the total
`survey revenue. And you'll see -- you will recall that we
`saw documents that indicated 25 percent or more, up to
`30 percent.
`
`There are other documents that indicate
`20 percent. I used the 20 percent, which is the low
`number, and determined that the value of the infill
`reduction as a percentage of the total survey revenue was
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 9
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`Direct-Sims/By Mr. Kaplan
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`2419
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`between 8.3 and 8.7 percent. If I had used the
`30 percent, then it would be closer to 13 percent -- yeah,
`13 percent as a percentage of the total surveyed revenue.
`Can we go to Slide 76 for a moment, please. Let's go
`Q.
`back to that. What you're talking about is these
`assessments internally by the companies that infill may be
`as much as 25 percent or more of the total cost, the cost
`of infill can account for 30 percent, but -- and please
`return to 82.
`
`You didn't use 25 or 30 percent, did you?
`A.
`No. I used 20 percent.
`If you had taken 25 percent instead of 20 percent,
`Q.
`then your bottom number instead of what it being 8.3,
`would have been over 10 percent; is that right?
`A.
`It would have been a little over 10.3.
`So you used a lower, more conservative figure for
`Q.
`just the value of infill reduction?
`A.
`Correct.
`All right. Let's turn to the next issue, which is --
`Q.
`or the next type of savings that you quantified, line
`change efficiency, that is the turns?
`A.
`Correct.
`And let's start with the deposition of Mr. Sweetman
`Q.
`at ION, and what did he tell us?
`A.
`First of all, he said there is a quantifiable benefit
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 10
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`for using steerable streamers in the turns, says the turns
`were faster, and how many minutes were saved? He said it
`was around 10 minutes.
`All right.
`Q.
`A.
`So he indicated that -- 10 minutes.
`All right. And did ION also have a document that
`Q.
`indicated that it accepted that as a number that it could
`trumpet or discuss with its customers?
`A.
`Well, I think this ION document probably predates
`Mr. Cunkelman -- was it Cunkelman? I can't recall.
`Correct.
`Q.
`A.
`His testimony. And they indicated that 10 minutes
`per line change as well. Well before -- actually even
`before they introduced the product into the market, I
`think.
`Just to make sure we've got this, this is a document
`Q.
`that's making some assumptions about eight line changes
`per day; is that right?
`A.
`Correct.
`And that's a time when the streamers were a little
`Q.
`shorter, so you could make faster turns and get back more
`quickly?
`A.
`Correct.
`And these are savings that they were assessing with
`Q.
`shorter streamers?
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 11
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`Direct-Sims/By Mr. Kaplan
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`A.
`Yes, shorter streamers and shorter turns.
`All right. And nowadays with longer streamers and a
`Q.
`bigger turning radius is that savings likely to be larger?
`A.
`In terms of time I think -- probably I think we've
`heard evidence testimony that it is longer, there are
`greater savings.
`Looking at the next slide from an internal Fugro
`Q.
`document, Plaintiff's Trial Exhibit 386, they talk about
`trials of fully populated spreads. Do you see this?
`A.
`I do.
`These are their own tests?
`Q.
`A.
`Correct.
`And what do they determine?
`Q.
`A.
`They're seeing improved turn times of 15 to
`20 minutes per turn.
`And if we look also at a Fugro internal e-mail, Trial
`Q.
`Exhibit 385, now we're moving to -- we're looking at some
`actual experience of StatoilHydro and shorter line turns,
`and what do they say there?
`A.
`They say that on this StatoilHydro job, they
`experienced shorter line turns by -- they shortened them
`by 15 to 20 minutes on that job.
`Per turn?
`Q.
`A.
`Per turn, using the DigiFIN technology.
`Did you attempt then by looking at the information
`Q.
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 12
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`Direct-Sims/By Mr. Kaplan
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`2422
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`that was available from the defendants, to assess the
`savings just from shorter line turns or line change
`efficiency?
`A.
`I did. And I used the same calculation that ION had
`used in that prior document. So I just went through it
`the same way they did, and determined -- first of all, I
`determined that on average the line change savings was 10
`to 12 minutes, and then I did the calculation and
`determined that the value of the faster line changes as a
`percentage of the total revenue, survey revenue was
`somewhere between 10.8 and 13.1 percent.
`Now, that was based on having eight line changes per
`Q.
`day in these shorter streamers; right? The original ION
`document?
`A.
`Yeah. And $3,000 cost per square kilometer.
`All numbers that have now been increased; is that
`Q.
`right?
`A.
`Correct.
`And did you run this discussion or this issue by
`Q.
`Mr. Walker again to kind of get a reality check for what
`the situation is in the present day, or over the last few
`years?
`A.
`Right. So as things have changed, the spreads are
`wider, the spreads are longer, the turns are longer, so
`there's fewer line changes per day, but the cost per
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 13
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`Direct-Sims/By Mr. Kaplan
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`square kilometer is higher. And so, in talking with
`Mr. Walker and going through the calculations, we
`concluded -- he concluded, that it's a linear -- it's
`linear, so that even though the cost per line, the number
`of line changes may be lower, the savings per line changes
`is higher. So it would work -- it works out to about the
`same.
`
`In fact, he did a calculation independent
`of what I had done, and he came up with 13 percent.
`All right. And did that give you assurance that
`Q.
`ION's original assessment was correct and that carrying
`that far would made good sense?
`A.
`Yeah. He confirmed that my calculation was
`reasonable.
`All right. So let's turn to the third savings that
`Q.
`you evaluated and that's faster safer deployment?
`A.
`Right. And here's a document from Fugro talking
`about safer streamer deployment, and it indicates that
`using steerable streamers could save one to two days at
`the start of every survey. And so, what I did is I
`assumed it would save one day.
`Plaintiff's Trial Exhibit 398 is a Fugro document.
`Q.
`So you did a calculation there?
`A.
`Correct.
`And this is relatively small savings?
`Q.
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 14
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`Direct-Sims/By Mr. Kaplan
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`2424
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`A.
`It is. You know one day, based on the cost of the
`crew, $50,000, so it would save .3 percent. It's not very
`much, but it's something we could quantify.
`All right. And then you took the three quantifiable
`Q.
`benefits, leaving out the actual safety issue, the tangle
`savings and things like that. On the quantifiable
`benefits that you looked at, did you then come to some
`percentage figures on savings?
`A.
`I did. What I determined was that if you look at the
`median, it was 19.9 percent savings or benefit, not
`savings.
`
`If you look at the mean, it was
`21.8 percent value of the benefits of the percentage of
`the total revenue.
`And I actually, instead of using the
`average, the 21.8, I used the midpoint of the two.
`And that's what, 20.8?
`Q.
`A.
`I used 20.8.
`All right. And so, now you found a percentage of
`Q.
`quantifiable benefit. What have you done with it?
`A.
`Well, I could have applied it to all of the Fugro
`surveys. Now, remember this is looking at the royalty for
`Fugro. I could have applied it to all of the Fugro
`royalties -- sorry -- surveys. But what I did was I
`focussing only on -- in fact, I did the calculation for
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`Johnny C. Sanchez, RMR, CRR - jcscourtreporter@aol.com
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 15
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`Direct-Sims/By Mr. Kaplan
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`2425
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`both, and they came up lower for -- if I looked only at
`the 91 surveys that were claiming a reasonable royalty.
`So I used that in my analysis, rather than the other
`calculations.
`As opposed to the -- if you had added in those other
`Q.
`15 Fugro surveys?
`A.
`Correct.
`So you didn't look at 106, you got back to 91?
`Q.
`A.
`I only looked at the 91.
`And it just so happens out of 182 other surveys, 91
`Q.
`were by Fugro and 91 were by others --
`A.
`Right.
`-- who were supplied by ION?
`Q.
`A.
`Correct.
`Okay. So this is now looking at quantifying the
`Q.
`benefits for Fugro?
`A.
`Correct. So what I did was I determined the survey
`revenues for those 91 surveys, which is $1.25 billion and
`then I applied that 20.8 percent quantifiable benefit to
`that $1.25 billion and determined there's a benefit of
`$260.2 million from using steerable streamers.
`And then now we're on Slide 92. What did you do with
`Q.
`quantifiable benefit?
`A.
`Well, I determined that the benefit was
`260.2 million, but there was a cost of the infringing
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`Johnny C. Sanchez, RMR, CRR - jcscourtreporter@aol.com
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`PGS v WESTERNGECO (IPR2014-00687)
`WESTERNGECO Exhibit 2084, pg. 16
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