Anadarko Announces First-Quarter Results

0

Source: Marketwire

HOUSTON, TX -- (Marketwire) -- 05/02/11 -- Anadarko Petroleum Corporation (NYSE: APC) today announced first-quarter 2011 net income attributable to common stockholders of $216 million, or $0.43 per share (diluted). These results include certain items typically excluded by the investment community in published estimates. In total, these items decreased net income by approximately $147 million, or $0.29 per share (diluted) on an after-tax basis.(1) Cash flow from operating activities in the first quarter of 2011 was $1.289 billion, and discretionary cash flow totaled $1.674 billion.(2)

First-Quarter 2011 Highlights
-- Achieved record sales volumes, comprised of 42 percent liquids
-- Announced a $1.6 billion joint venture in the Eagleford Shale
-- Announced six successful offshore discoveries and/or appraisal wells
-- Reduced lease operating expense per unit by 13 percent over the
   fourth-quarter 2010
-- Announced the $576 million acquisition of the Wattenberg Processing
   Plant

'Anadarko delivered record sales volumes in the first quarter, including a 15-percent quarter-over-quarter increase in daily liquids volumes, strong cash flow and improved margins,' said Anadarko Chairman and CEO Jim Hackett. 'This record performance was highlighted by the rapid growth of our shale plays and our first lifting from the Jubilee field offshore Ghana. Our deepwater exploration program also achieved excellent results in the quarter with three discoveries and three successful offshore appraisal wells. Early in the second quarter, we closed the previously announced $1.6 billion joint venture with KNOC (Korea National Oil Corporation) in the Eagleford Shale, validating the tremendous embedded value of this resource.'

During the first quarter of 2011, sales volumes totaled 62 million barrels of oil equivalent (BOE), or 690,000 BOE per day, averaging approximately 2.4 billion cubic feet of natural gas per day, 212,000 barrels of oil per day (BOPD), and 76,000 barrels of natural gas liquids per day.

Operations Summary

Anadarko's record sales volumes benefited from the company's first oil lifting at the Jubilee field in Ghana, as well as continued production growth in the Eagleford and Marcellus shale plays. In Ghana, current gross production from the Jubilee field is more than 70,000 BOPD and continues to ramp up toward capacity of 120,000 BOPD, which is expected by the third quarter of 2011. In the company's shale plays, average sales volumes in the Eagleford and Marcellus areas increased by about 30 percent and 82 percent, respectively, over the fourth quarter of 2010.

The company recently closed the $1.6 billion Eagleford joint-venture agreement with a subsidiary of KNOC. Under the terms of the agreement, KNOC will fund approximately 100 percent of capital costs in the play for the remainder of this year and up to 90 percent of costs thereafter, until the carry is exhausted. The amount to be paid includes an approximate $48 million post-effective date reimbursement, and KNOC also exercised its option to acquire an approximate 25-percent interest in associated midstream assets for reimbursement of an additional $38 million.

In the Rockies, Anadarko announced the acquisition of the Wattenberg Processing Plant in northeastern Colorado. This acquisition is expected to improve field recoveries and allow for future expansion in the greater Denver-Julesburg Basin, where Anadarko continues an active program with seven rigs drilling directional wells in the Wattenberg field and three rigs drilling horizontal wells in the emerging Niobrara play.

Exploration Summary

Anadarko announced three deepwater discoveries during the first quarter of 2011. The Teak-1 and Teak-2 discoveries, located in the 30.875-percent-owned West Cape Three Points Block offshore Ghana, encountered high-quality oil, condensate and natural gas pay in Turonian-age reservoirs similar to those found in the adjacent Jubilee field, as well as Campanian-age reservoirs. In Mozambique, the company announced the Tubarão discovery, marking its fourth operated natural gas discovery in the 36.5 percent-owned Offshore Area 1 of the Rovuma Basin.

In the Deepwater Tano Block offshore Ghana, where Anadarko holds an 18-percent working interest, the company and its partners announced successful appraisal wells at Enyenra-2A, Tweneboa-3 and Tweneboa-3ST. Subsequent to quarter end, the operator also announced the successful Tweneboa-4 appraisal well. Additional appraisal activity is ongoing in the Tweneboa/Enyenra complex as the partnership continues to work toward a declaration of commerciality, which is expected later this year.

Financial Summary

Anadarko ended the first quarter of 2011 with approximately $3.5 billion of cash on hand, maintained access to its five-year, $5 billion undrawn credit facility and generated $87 million of free cash flow. The company's estimated 2011 capital expenditures were increased by approximately $600 million as a result of the Wattenberg Processing Plant acquisition, resulting in an estimated capital spending range of $6.2 to $6.6 billion, excluding capital expenditures related to Western Gas Partners, LP.

Operations Report

For more details on Anadarko's operations, please refer to the comprehensive report on first-quarter 2011 activity. The report is available at www.anadarko.com on the Investor Relations page.

Conference Call Tomorrow at 9 a.m. CDT, 10 a.m. EDT

Anadarko will host a conference call on Tuesday, May 3, at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) to discuss first-quarter results, current operations and the company's outlook for the remainder of 2011. The dial-in number is 888.713.4217 in the United States or 617.213.4869 internationally. The confirmation number is 98218183. For complete instructions on how to participate in the conference call, or to listen to the live audio webcast and slide presentation, please visit www.anadarko.com. A replay of the call will also be available on the Web site for approximately 30 days following the conference call.

Financial Data

Eight pages of summary financial data follow, including current hedge positions, financial guidance and supplemental production guidance.

(1) See the accompanying table for details of certain items affecting comparability.

(2) See the accompanying table for a reconciliation of GAAP to non-GAAP financial measures and a statement indicating why management believes the non-GAAP financial measures provide useful information for investors.

Anadarko Petroleum Corporation's mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world's health and welfare. As of year-end 2010, the company had approximately 2.42 billion barrels-equivalent of proved reserves, making it one of the world's largest independent exploration and production companies. For more information about Anadarko, please visit www.anadarko.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Anadarko believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this news release, including Anadarko's ability to commercially operate the drilling prospects identified in this news release. See 'Risk Factors' in the company's 2010 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other public filings and press releases. Anadarko undertakes no obligation to publicly update or revise any forward-looking statements.

                      Anadarko Petroleum Corporation

                  Certain Items Affecting Comparability

                                                       Quarter Ended
                                                       March 31, 2011
                                                 -------------------------
                                                 Before    After  Per Share
millions except per-share amounts                  Tax      Tax   (diluted)
                                                 -------  -------  -------
Unrealized gains (losses) on derivatives, net*   $  (253) $  (160) $ (0.32)
Other general and administrative items, net           24       15     0.03
Impairments                                           (2)      (2)      --
                                                 -------  -------  -------
                                                 $  (231) $  (147) $ (0.29)
                                                 =======  =======  =======

* For the quarter ended March 31, 2011, before-tax unrealized gains
  (losses) on derivatives, net includes $(313) million related to commodity
  derivatives, $59 million related to other derivatives, and $1 million
  related to gathering, processing, and marketing sales.

                                                       Quarter Ended
                                                       March 31, 2010
                                                 -------------------------
                                                 Before    After  Per Share
millions except per-share amounts                  Tax      Tax   (diluted)
                                                 -------  -------  -------
Unrealized gains (losses) on derivatives, net*   $   545  $   348  $  0.71
Loss on early retirements of debt                    (40)     (25)   (0.05)
Gains (losses) on divestitures and other, net        (13)      (7)   (0.01)
Impairments                                          (12)      (8)   (0.02)
Change in uncertain tax positions (FIN48)             --       (4)   (0.01)
                                                 -------  -------  -------
                                                 $   480  $   304  $  0.62
                                                 =======  =======  =======

* For the quarter ended March 31, 2010, before-tax unrealized gains
  (losses) on derivatives, net includes $567 million related to commodity
  derivatives, $(29) million related to other derivatives, and $7 million
  related to gathering, processing, and marketing sales.


                Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of cash provided by operating activities (GAAP)
to discretionary cash flow from operations and free cash flow (non-GAAP),
and net income (loss) attributable to common stockholders (GAAP) to
adjusted net income (loss) (non-GAAP) as required under Regulation G of the
Securities Exchange Act of 1934. Management uses discretionary cash flow
from operations and free cash flow to demonstrate the Company's ability to
internally fund capital expenditures and to service or incur additional
debt. It is useful in comparisons of oil and gas exploration and production
companies because it excludes fluctuations in assets and liabilities.
Management uses adjusted net income (loss) to evaluate the Company's
operational trends and performance.


                                                            Quarter Ended
                                                              March 31,
                                                          ----------------
millions                                                    2011     2010
                                                          -------  -------
Net cash provided by operating activities                 $ 1,289  $ 1,317
Add back:
 Change in accounts receivable                                251       27
 Change in accounts payable and accrued expenses              177      281
 Change in other items--net                                   (43)     (95)
                                                          -------  -------
Discretionary cash flow from operations                   $ 1,674  $ 1,530
                                                          =======  =======




                      Anadarko Petroleum Corporation

                Reconciliation of GAAP to Non-GAAP Measures


                                                           Quarter Ended
                                                             March 31,
                                                          ----------------
millions                                                   2011     2010
                                                          ------- --------
Discretionary cash flow from operations                   $ 1,674 $  1,530
Less:  Capital expenditures*                                1,587    1,239
                                                          ------- --------
Free cash flow                                            $    87 $    291
                                                          ======= ========

* Includes Western Gas Partners, LP (WES) capital expenditures of $317
  million and $4 million for the quarters ended March 31, 2011, and 2010,
  respectively.


                                          Quarter Ended     Quarter Ended
                                         March 31, 2011    March 31, 2010
                                        ----------------  ----------------
                                         After  Per Share  After  Per Share
millions except per-share amounts         Tax   (diluted)   Tax   (diluted)
                                        ------  --------  ------- --------
Net income (loss) attributable to
 common stockholders                    $  216  $   0.43  $   716 $   1.43
Less: Certain items affecting
 comparability                            (147)    (0.29)     304     0.62
                                        ------  --------  ------- --------
Adjusted net income (loss)              $  363  $   0.72  $   412 $   0.81
                                        ======  ========  ======= ========

Presented below is a reconciliation of total debt (GAAP) to net debt (non-
GAAP). Management uses net debt as a measure of the Company's outstanding
debt obligations that would not be readily satisfied by its cash and cash
equivalents on hand.


millions                                                          March 31,
                                                                    2011
                                                                  --------
Total debt                                                        $ 13,193
Less:  Cash and cash equivalents                                     3,460
                                                                  --------
Net debt                                                          $  9,733
                                                                  ========

Net debt                                                          $  9,733
Stockholders' equity                                                20,909
                                                                  --------
Adjusted capitalization                                           $ 30,642
                                                                  ========

Net debt to adjusted capitalization ratio                               32%
                                                                  ========




                      Anadarko Petroleum Corporation
                                (Unaudited)

                                                            Quarter Ended
Summary Financial Information                                 March 31,
                                                          ----------------
millions except per-share amounts                           2011     2010
                                                          -------  -------
Consolidated Statements of Income
                                                          -------  -------
Revenues and Other
                                                          -------  -------
Gas sales                                                 $   854  $ 1,081
Oil and condensate sales                                    1,807    1,502
Natural-gas liquids sales                                     333      274
Gathering, processing, and marketing sales                    230      273
Gains (losses) on divestitures and other, net                  29        9
                                                          -------  -------
Total                                                       3,253    3,139
                                                          =======  =======
Costs and Expenses
                                                          -------  -------
Oil and gas operating                                         232      187
Oil and gas transportation and other                          209      191
Exploration                                                   179      155
Gathering, processing, and marketing                          171      183
General and administrative                                    235      210
Depreciation, depletion, and amortization                     985      981
Other taxes                                                   344      301
Impairments                                                     2       12
                                                          -------  -------
Total                                                       2,357    2,220
                                                          =======  =======
Operating Income (Loss)                                       896      919
                                                          =======  =======
Other (Income) Expense
                                                          -------  -------
Interest expense                                              220      224
(Gains) losses on commodity derivatives, net                  256     (588)
(Gains) losses on other derivatives, net                      (59)      29
Other (income) expense, net                                   (24)       9
                                                          -------  -------
Total                                                         393     (326)
                                                          =======  =======
Income (Loss) Before Income Taxes                             503    1,245
                                                          =======  =======
Income Tax Expense (Benefit)                                  266      517
                                                          =======  =======
Net Income (Loss)                                         $   237  $   728
                                                          =======  =======
Net Income Attributable to Noncontrolling Interests            21       12
                                                          =======  =======
Net Income (Loss) Attributable to Common Stockholders     $   216  $   716
                                                          =======  =======
Per Common Share:
                                                          =======  =======
Net income (loss) attributable to common
 stockholders--basic                                      $  0.43  $  1.44
Net income (loss) attributable to common
 stockholders--diluted                                    $  0.43  $  1.43
                                                          =======  =======
Average Number of Common Shares Outstanding--Basic            497      493
                                                          =======  =======
Average Number of Common Shares Outstanding--Diluted          499      496
                                                          =======  =======

Exploration Expense
                                                          =======  =======
Dry hole expense                                          $    16  $    25
Impairments of unproved properties                             74       88
Geological and geophysical expense                             48        3
Exploration overhead and other                                 41       39
                                                          -------  -------
Total                                                     $   179  $   155
                                                          =======  =======




                      Anadarko Petroleum Corporation
                                (Unaudited)



Summary Financial Information                      Quarter Ended March 31,
                                                  ------------------------
millions                                              2011         2010
                                                  -----------  -----------
Cash Flows from Operating Activities
                                                  -----------  -----------
Net income (loss)                                 $       237  $       728
Depreciation, depletion, and amortization                 985          981
Deferred income taxes                                      73          154
Dry hole expense and impairments of unproved
 properties                                                90          113
Impairments                                                 2           12
(Gains) losses on divestitures, net                        --          (13)
Unrealized (gains) losses on derivatives, net             253         (545)
Other                                                      34          100
                                                  -----------  -----------
Discretionary Cash Flow from Operations                 1,674        1,530
(Increase) decrease in accounts receivable               (251)         (27)
Increase (decrease) in accounts payable and
 accrued expenses                                        (177)        (281)
Other items--net                                           43           95
                                                  -----------  -----------
Net Cash Provided By Operating Activities         $     1,289  $     1,317
                                                  ===========  ===========

                                                  ===========  ===========
Capital Expenditures                              $     1,587  $     1,239
                                                  -----------  -----------



                                                   March 31,  December 31,
millions                                              2011         2010
Condensed Balance Sheets
                                                  -----------  -----------
Cash and cash equivalents                         $     3,460  $     3,680
Other current assets                                    3,227        2,995
Net properties and equipment                           38,423       37,957
Other assets                                            1,537        1,616
Goodwill and other intangible assets                    5,366        5,311
                                                  -----------  -----------
Total Assets                                      $    52,013  $    51,559
                                                  -----------  -----------
Current debt                                      $       424  $       291
Other current liabilities                               3,641        3,823
Long-term debt                                         12,769       12,722
Other long-term liabilities                            13,395       13,284
Stockholders' equity                                   20,909       20,684
Noncontrolling interests                                  875          755
                                                  -----------  -----------
Total Liabilities and Equity                      $    52,013  $    51,559
                                                  ===========  ===========
Capitalization
                                                  -----------  -----------
Total debt                                        $    13,193  $    13,013
Stockholders' equity                                   20,909       20,684
                                                  -----------  -----------
Total                                             $    34,102  $    33,697
                                                  ===========  ===========
Capitalization Ratios
                                                  -----------  -----------
Total debt                                                 39%          39%
Stockholders' equity                                       61%          61%
                                                  ===========  ===========




                      Anadarko Petroleum Corporation
                                (Unaudited)

Sales Volumes and Prices

                            Average Daily Volumes       Sales Volumes
                            ----------------------- -----------------------
                                     Crude                   Crude
                                     Oil &                   Oil &
                            Natural Conden-         Natural Conden-
                              Gas    sate    NGLs     Gas    sate     NGLs
                            MMcf/d  MBbls/d MBbls/d   Bcf    MMBbls  MMBbls
                            ------- ------- ------- ------- ------- -------
Quarter Ended March 31,
 2011
United States                 2,412     131      76     217      12       7
Algeria                                  55                       5
Other International                      26                       2
                            ------- ------- ------- ------- ------- -------
Total                         2,412     212      76     217      19       7
                            ------- ------- ------- ------- ------- -------

Quarter Ended March 31,
 2010
United States                 2,393     139      65     215      12       6
Algeria                                  69                       6
Other International                      14                       2
                            ------- ------- ------- ------- ------- -------
Total                         2,393     222      65     215      20       6
                            ------- ------- ------- ------- ------- -------


                              Average Sales Price
                            -----------------------
                                    Crude
                                    Oil &
                            Natural Conden-
                              Gas    sate    NGLs
                            Per Mcf Per Bbl Per Bbl
                            ------- ------- -------
Quarter Ended March 31,
 2011
United States               $  3.93 $ 91.56 $ 48.86
Algeria                               98.45
Other International                  101.66
                            ------- ------- -------
Total                       $  3.93 $ 94.58 $ 48.86
                            ------- ------- -------

Quarter Ended March 31,
 2010
United States               $  5.02 $ 74.98 $ 46.64
Algeria                               76.04
Other International                   73.16
                            ------- ------- -------
Total                       $  5.02 $ 75.18 $ 46.64
                            ------- ------- -------



                              Average
                               Daily      Sales
                              Volumes    Volumes
                               MBOE/d     MMBOE
                             ---------  --------

Quarter Ended March 31, 2011       690        62
Quarter Ended March 31, 2010       686        62




Sales Revenue and Commodity Derivatives

                        Sales            Commodity Derivatives Gain (Loss)
                ----------------------- ----------------------------------
                                                             Crude Oil
                                          Natural Gas       & Condensate
                        Crude Oil       ----------------  ----------------
                Natural & Conden-                  Un-               Un-
millions          Gas     sate   NGLs   Realized realized Realized realized
                ------- ------- ------- -------- -------  -------  -------
Quarter Ended
 March 31, 2011
United States   $   854 $ 1,080 $   333 $     72 $   (47) $   (12) $  (275)
Algeria                     491                                (3)       9
Other
 International              236
                ------- ------- ------- -------- -------  -------  -------
Total           $   854 $ 1,807 $   333 $     72 $   (47) $   (15) $  (266)
                ------- ------- ------- -------- -------  -------  -------

Quarter Ended
 March 31, 2010
United States   $ 1,081 $   935 $   274 $     19 $   566  $    (1) $    (5)
Algeria                     470                                 3        6
Other
 International               97
                ------- ------- ------- -------- -------  -------  -------
Total           $ 1,081 $ 1,502 $   274 $     19 $   566  $     2  $     1
                ------- ------- ------- -------- -------  -------  -------




                      Anadarko Petroleum Corporation
                Financial and Operating External Guidance
                            As of May 2, 2011

                                               2nd Qtr        Total Year
                                               Guidance        Guidance
                                            --------------  --------------
                                                Units           Units
                                            --------------  --------------

Total Sales (MMBOE)                            60  -    62    244  -   248

Crude Oil (MBbl/d):                           224  -   231    215  -   219

 United States                                129  -   131    127  -   129
 Algeria                                       61  -    64     53  -    54
 Other International                           34  -    36     35  -    37

Natural Gas (MMcf/d):

 United States                              2,250  - 2,300  2,325  - 2,375

Natural Gas Liquids (MBbl/d):

 United States                                 61  -    64     65  -    67

                                            --------------  --------------

                                                $ / Unit      $ / Unit
                                            --------------  --------------
Price Differentials vs NYMEX (w/o hedges)

Crude Oil ($/Bbl):                              -  -  1.00  (1.00) -  1.00

 United States                              (3.00) - (5.00) (5.00) - (7.00)
 Algeria                                     8.00  - 10.00   6.00  -  8.00
 Other International                         6.00  -  8.00   4.00  -  6.00

Natural Gas ($/Mcf):

 United States                              (0.15) - (0.25) (0.20) - (0.30)
                                            --------------  --------------




                Financial and Operating External Guidance
                            As of May 2, 2011

                                                2nd Qtr       Total Year
                                               Guidance        Guidance
                                            --------------  --------------
                                                 $ MM            $ MM
                                            --------------  --------------
Other Revenues:
 Marketing and Gathering Margin                50  -    70    225  -   275
 Minerals and Other                            35  -    45    110  -   140

                                            --------------  --------------
Costs and Expenses:

                                                $ / Boe         $ / Boe
                                            --------------  --------------
 Oil & Gas Direct Operating                  3.80  -  4.20   3.80  -  4.20
 Oil & Gas Transportation/Other              3.40  -  3.65   3.40  -  3.65
 Depreciation, Depletion and Amortization   15.25  - 15.75  15.25  - 15.75
 Production Taxes (% of Revenue)             11.5% -  12.5%  10.0% -  12.0%


                                                 $ MM            $ MM
                                            --------------  --------------
 General and Administrative                   240  -   260    950  - 1,050
 Exploration Expense
  Non-Cash                                    100  -   150    600  -   700
  Cash                                         75  -   100    325  -   375
 Interest Expense (net)                       210  -   230    850  -   875
 Other (Income) Expense                         -  -    20      -  -    80


Tax Rate

Algeria  (All Current)                         55% -    65%    55% -    65%
Rest of Company  (All Deferred)                35% -    45%    35% -    45%

                                            --------------  --------------

Avg. Shares Outstanding (MM)

 Basic                                        495  -   497    496  -   498
 Diluted                                      497  -   499    498  -   500


                                                 $ MM            $ MM
                                            --------------  --------------
Capital Investment *

 Capital Expenditures                       1,750  - 1,900  6,060  - 6,450
 Capitalized Interest                          30  -    40    140  -   150

 * Excludes Western Gas Partners, LP (WES)




                      Anadarko Petroleum Corporation
          Commodity Hedge Positions (Excluding Natural Gas Basis)
                            As of May 2, 2011

                                        Weighted Average Price per MMBtu
                              Volume     -------------------------------
                            (thousand     Floor       Floor      Ceiling
                              MMBtu/d)     Sold     Purchased      Sold
                             ---------   -------    ---------    -------
Natural Gas
 Three-Way Collars
 2011                              480   $  5.00    $    6.50    $  8.29
 2012                              500   $  5.00    $    6.50    $  9.03

 Fixed Price - Financial
 2011                               90   $  6.17


                                        Weighted Average Price per barrel
                              Volume     -------------------------------
                            (thousand     Floor       Floor      Ceiling
                              MMBtu/d)     Sold     Purchased      Sold
                             ---------   -------    ---------    -------
Crude Oil
 Three-Way Collars
 2011                              126   $ 64.29    $   79.29    $ 99.95
 2012                                2   $ 35.00    $   50.00    $ 92.50




                      Anadarko Petroleum Corporation
                    Natural Gas Basis Hedge Positions
                            As of May 2, 2011

                                 Volume
                               (thousand  Price per
                               MMBtu/d)     MMBtu
                               ---------- ---------
Basis Swaps
2011
 Mid Continent                         15 $   (0.76)
 Rocky Mountains                       30 $   (2.22)
                               ---------- ---------
                                       45 $   (1.74)



                        Interest Rate Derivatives*
                            As of May 2, 2011


                              Start           Rate    Rate
Instrument   Notional Amt.     Date  Maturity Paid  Received
            --------------- -------- -------- ----  --------

Swap        $   750 Million Oct-2011 Oct-2021 4.72% 3M LIBOR
Swap        $ 1,250 Million Oct-2011 Oct-2041 4.83% 3M LIBOR
Swap        $   250 Million Oct-2012 Oct-2022 4.91% 3M LIBOR
Swap        $   750 Million Oct-2012 Oct-2042 4.80% 3M LIBOR
            --------------- -------- -------- ----  --------

*Excludes Western Gas Partners, LP (WES)

ANADARKO CONTACTS
MEDIA:
John Christiansen
Email Contact
832.636.8736

Brian Cain
Email Contact
832.636.3404

INVESTORS:
John Colglazier
Email Contact
832.636.2306

Dean Hennings
Email Contact
832.636.2462

Wayne Rodrigs
Email Contact
832.636.2305

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