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Energy

Analysis of Natural Gas Prices

NATURAL GAS : We written with Sprott Asset Administration Research Analyst Eric Nuttall about the natural gas situation in Europe and the fate of several CBM gas producers and developers. Because our last discussion spot natural gas prices have slipped by 15 percent.

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Natural gas prices

NATURAL GAS : We written with Sprott Asset Administration Research Analyst Eric Nuttall about the natural gas situation in Europe and the fate of several CBM gas producers and developers. Because our last discussion spot natural gas prices have slipped by 15 percent. Natural gas storage levels are about 2.5 billion cubic feet, some 423 thousand cubic feet higher when compared to a year ago. Eric Nuttall told people, “The majority of small-cap natural gas producers took it in one’s teeth this year. The price reduces inside their stocks have already been absolutely brutal. These day there are organizations whose stocks are down 40 per cent year-to-date, and however remain clearly rising generation on an modified share basis.” How may the CBM and natural gas sector pot out through the conclusion of in 2010? He thinks the gas storage surplus may correct itself.


StockInterview: How are the lower natural gas prices impacting Coalbed Methane manufacturers?

Eric Nuttall: For most CBM or shallow gas producers, this implies their recent drilling program is probable uneconomic, suggesting deferrals in drilling applications until natural gas prices strengthen. It is this very offer response that we need to balance storage levels, therefore it should perhaps not come as a complete surprise.

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StockInterview: What, then, must investors do while storage levels are rebalancing?

Eric Nuttall: I’d view this period as an opportunity for medium to long-term minded persons to begin building positions in not only unconventional gas producers, but traditional types as well. The long-term fundamentals remain exceptionally bullish for natural gas. Several quality titles are down 20 to 40 per cent year-to-date.


StockInterview: How will you view the long-term fundamentals for gas?

Eric Nuttall: North National natural gas production has been in decline for a number of years. Most slow generation is via smaller, more expensive-to-drill, thinner financial, higher decline pools and reservoirs. In the last five decades first-year decline charges on natural gas wells have doubled to 50 percent. The beds base decline charge in addition has doubled to approximately 25 to 30 percent. Pool size in addition has lowered materially over the period frame. The Western Canadian Sedimentary Sink and a lot of the US producing basins are mature. Subsequently, higher and higher natural gas prices are expected to create incentive for manufacturers to punch increasingly little wells.

StockInterview: And you anticipate an extension of declining natural gas production? And that’s that the conclusion for higher natural gas pricing?

Eric Nuttall: Conventional gas production has been in decline for many years, and the development parts have mainly been unconventional, such as the Piceance Sink (tight gas), the Barnett Shale (shale gas), and the Jonah Field (tight, strong gas). Also, most of the development resources, such as the Barnett Shale, are actually a couple of years into progress, and as the wells have this type of high decline charge in the initial several years, it’s only adding to the depleting foundation that individuals have to produce up. It is impossible that over another 36 months, the escalation in unconventional gas can offset the decline in traditional, as the depleting foundation is indeed significantly larger. The major natural gas basins in North America are mature. Drop charges are increasing. Pool size is decreasing. Platform count is increasing however generation are at most useful flat. Until LNG imports increase in a cloth approach, which isn’t anticipated for at least a half dozen far more years, I think true intended for healthy natural gas prices is definitely intact.


StockInterview: Previous, anyone noted burrowing appeared to be far more expensive.

Eric Nuttall: In the last season, onshore drillings pricing is upwards in excess of 15 percentage though managing pricing is upwards in excess of 10 percent. A recent Retaining wall Block Journal article stated on the way system premiums for the Beach involving Mexico, on really profound burrowing tools, usually are as high as $520,000 a day, upwards through $185,000 many years ago. As well as the burrowing tools continue to be departing this Beach involving Mexico! Although most are departing this Beach involving Mexico to attend far more prospective parts for example the Western Cameras Shore, the current system circumstances continues to somewhat tight inside the Gulf. Many of us have only started to view signs and symptoms of moderating system price pricing.

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StockInterview: How could awful climate, maybe a typhoon, impact natural gas prices?

Eric Nuttall: Temporary, you’d probably view both equally natural gas and related stocks and options surge. In case a typhoon visits this creating perhaps the Beach, and then we just about will need one to – to improve the actual surplus supply situation. To start with, you have a psychological upwards response. Solely after assessing this status involving production tools and sub-sea structure would probably we all know this longer-term impact.

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StockInterview: Ought to shareholders end up being viewing this Climate Route and ready to telephone its stockbrokers?

Eric Nuttall: Timing on almost any natural gas investment at this time is definitely tricky. You’ll want some sort of medium- to help longer-term focus. Many of us likely include an additional sixty days involving volatility. There’s two camps at this time on natural gas. One stay says in which because of fat hard drive quantities firms definitely will increasingly lie down its burrowing stations, trim production suggestions, and stress its stability sheets. After that within the fall, any time firms collection its 2007 budgets, they will be applying low gas prices and offering moderating production progress information recommended to their investors.

StockInterview: How much does additional stay express?

Eric Nuttall: One more stay states that the current natural gas strip already savings this current and forecasted hard drive levels. Additionally, stocks and options usually are low cost using a price-to-cash movement and price-to-net property value rates, and the next step is to help load up on this stocks. My partner and i slender in the direction of this particular viewpoint. Although I am in addition recognizing in which until finally the fall, barring an extreme typhoon, it’s likely that the stocks and options definitely will commerce sideways, compared to in any distinct direction.


StockInterview: One equities strategist, who many of us surveyed, suggested several quantity of August natural meats begin to be aware of the natural gas stocks switching higher.

Eric Nuttall: There is a probable in which natural meats experience an additional thirty day period or perhaps 2 of ripped dealing within tiny top natural gas stocks. By simply no more August, it’s likely in which i will had both equally some sort of demand and supply reaction – problems involving large setting up involving stations, forced effectively shut-in’s, and overleveraged stability sheets will need to have subsided. People begins to spotlight this natural gas strip rather than place charges, which will now remain $9.00 for the impending wintertime and $8.00 intended for following summer.

StockInterview: Together with for now?

Eric Nuttall: Until such time as this period unfolds, It possibly, because friends, the larger hats may outperform. They can indeed be extra measured closer to acrylic, and still have been holding some bid on that back heel of any big $22 one million million all-cash takeover by just Anadarko regarding Western Gas and Kerr-McGee. Importantly to get unconventional gas investors, Anadarko paid out round $2.00 to get 3P (Possible) Mcf, that could be rather nourishing (Western Gas was mostly tight gas in Wyoming and then coalbed methane in the Pulverulence Water Basin). That talks to Anadarko’s observe regarding formidable long-term natural gas fundamentals. Such all-cash trades possibly establish the foot in the significant caps.


StockInterview: Find out how to experience small, reduced known gas companies?

Eric Nuttall: Most small-cap natural gas producers have it again in the your teeth this unique year. The fee lowers for their stocks have been completely certainly brutal. There are now organizations whoever stocks really are down 40 proportion year-to-date. They can indeed be even so solidly thriving output by using an altered present basis. To date, they’re investing as little as 2.5 point in time 2007 income flow. Many stocks possess been given quite cheap. However the marketplace will probably be slightly slapdash to get a few months, I do believe there are a few great bargains for sale for ones persistent investor.

StockInterview: Find out how to summarize that natural gas equities sector, these days?

Eric Nuttall: By now, there’s lots of inexpensive natural gas weighted companies. Companies along with busy drilling software programs, which are totally borrowed and then placed upon remarkably future acreage, really are investing underneath threefold 2007 income flow. Should the stock values will not improve for ones juniors, We would believe numerous older persons and then trusts may start around the business to obtain prevailing output here precisely what present-day finding and then enhancement prices would probably necessitate via quest or enhancement drilling.


StockInterview: Why don’t we examine a lot of the extra inquisitive organizations a number of us brought up earlier this planting season, similar to Team Energy levels, Rockyview Energy levels and then Canadian Spirit. Find out how to experience these people now?

Eric Nuttall: Team (TSX: CR) is a well dash natural gas focused company. Many people are going to expand output each and every present above 40% at the moment and next, enjoy a busy drilling program for ones last half in the year. Canadian Philosophy Sources (TSX: SPI) have been shredded in half by reviewing the height, but only the buying price of natural gas has changed. We have been even so relatively bullish upon Canadian Spirit. Ones own engage in is during beginning, and then output and then commercial hazards remain, nevertheless if they’d like to reiterate the recent interest rates, I do believe they will enjoy a significant and then commercial project. Rockyview (TSX: RVE) in recent times reduce the drilling capex by just 67% consuming a great amount of impetus away from scenario short-term. Along with a healing period during natural gas, that share should certainly recoil in conjunction with all of those other group.

StockInterview: Just what improper organizations thinking of right after?

Eric Nuttall: Efficient keenly as soon as the drilling advancement regarding EnCana (NYSE: ECA; Greater: ECA) in the Columbia Water Drainage basin during New york State. Intended for a trader looking for a reduced dangers, pretty reduced amount regarding come back, EnCana is an excellent path for a trader to do advertising mileage to natural gas. They have got round 95 percent health of their 2007 natural gas hedged by to some extent above $7 each and every mcf, so are protected through today’s brutalized spot price. Still another is Calfrac (TSX: CFW), that is down 45 per cent from its top, and is now 10X 2007 earnings estimates. They’re heavily exposed to CBM, and with a healing in natural gas prices, the inventory should healing nicely.


StockInterview: And a few of the the others we discussed, such as Ember, True Methods and Pacific Asia China Energy. Do you have any changes?

Eric Nuttall: Ember Methods (TSX: EBR) has gotten positively crushed. They have an active drilling plan for the next half of the year. To account it, they’ll probably need to get further equity financing. This has created an overhang on the stock. Until they can execute some form of a financing, the inventory may stay poor in the short-term. True Methods (TSX: RER) has been executing effectively on their drilling program. Once a pipeline is completed in the next month, manufacturing should jump 37 per cent to 16,500 Boe/d. The company rests on 450,000 internet undeveloped miles, prospective for many different objectives including Devonian Nisku, 190 Bakken gentle oil places, and as much as 1.1Tcf of recoverable CBM as assigned by Sproule. When trading at 3.5X 2007 cashflow, the inventory gift ideas an excellent opportunity. Pacific China Asia Power (TSX: PCE) lately introduced data on three core openings revealing fairly good gas contents and seam thicknesses, as expected. The problem however stays whether wells can make at an financial rate, that you simply just know by drilling test wells. I do believe that’s scheduled for later this season or early next. They remain on what seems to be always a really prospective land spread, and only need the time to drill, and effort to accomplish financial prices across their acreage.

StockInterview: What would you see for the near-term?

Eric Nuttall: Many individuals have already been wanting that hot temperature or hurricanes would support in functioning off the excess offer, but Mother Character hasn’t been really useful up to now this summer. It seems that people can quit the natural gas injection season at the least 10% around last year. Barring any incredible temperature waves or substantial hurricanes, natural gas prices are likely to stay sub-$6.50 before fall. Unless we’ve a serious hot cause or a substantial hurricane, it is likely that natural gas stocks will be really erratic without apparent direction around summer time in to the fall. I’d believe perhaps not before fall, probably September – October, when people begin to target perhaps not on natural gas spot rates, but on the reel pricing for winter months, that is however around C$10. Until the period comes, I wouldn’t see any apparent direction in the stocks. Industry is now giving opportunities to buy companies with top quality management for below-average multiples, frequently measured on a price-to-cash movement metric.

StockInterview: Perhaps you have abadndoned the CBM industry or could it be coming back?

Eric Nuttall: There’s zero uncertainty in my own brain that natural gas is an excellent long-term investment. We have peaked in our power to boost manufacturing meaningfully, just like we’ve with gentle oil. I do believe for there to be a rise in long-term natural gas supply, you have to provide incentive to manufacturers to go drill wells that increasingly have lower financial prices of return. And to do that, you’ll need higher natural gas prices. One of many few outstanding development prospects in Canada for natural gas production is coalbed methane. At current gas prices, the economics are extremely challenging. So to get a offer reaction from coalbed methane manufacturers, you again need higher gas prices. The existing surplus in gas storage can correct itself, and investors should place themselves before natural gas stocks reacting to the inevitability.

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buyung-1 | Energy

Buyung Afrianto (UCLA ’26) is a serial technopreneur who founded Buyung Technologies Co., Ltd, a holdings company that owns: BuyungAfrianto.com™ | The latest daily blog site that presents news of the day and the latest news around the world to finance, lifestyle, automotive and sports news. And a very profitable Instagram channel @BuyungAfrianto also Twitter Account @BuyungCo . By doing what he love for living, he brings new meaning to the art of freedom. If I can be of any help or if you would like to do business with me, don’t hesitate to reach out!

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Energy

Energy Plan to Decrease Its Dependence on Fossil fuel

ENERGY PLAN : Based on a U.S. Congressional – Executive Commission on China, which held a series of Issues Roundtables in late 2004, it was estimated that 12 Chinese mine workers die for each and every million tons of coal produced. The majority are killed by methane gas explosions while within the coal mines.

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Why is energy efficiency important?

ENERGY PLAN : Based on a U.S. Congressional – Executive Commission on China, which held a series of Issues Roundtables in late 2004, it was estimated that 12 Chinese mine workers die for each and every million tons of coal produced. The majority are killed by methane gas explosions while within the coal mines. China Business Weekly reported in July 2000, “To stop gas explosions, China emits 6 billion cubic meters of methane from mines annually, seriously polluting the environment…” Last year, instruments on the world’s largest environment-monitoring satellite, the European Space Agency’s Envisat, revealed the world’s largest quantity of nitrogen dioxide was hanging over Beijing and northeastern China. Because the country emits more methane from its coal mining than any other coal producing country, China pollutes the earth’s atmosphere with about one-third of the full total annual emissions of methane. In line with the US Environmental Protection Agency, methane traps heat twenty times significantly more than carbon dioxide, which impacts global warming.


Energy Efficiency Appliances


On March 6th, People’s Daily reported, “Shanxi, China’s largest coal-producing province, plans to put the brakes on the further expansion of coal mining in the next five years.” Shanxi Governor Yu Youjun at a recent press conference announced, “We cannot continue the rough method of development any longer and must limit coal production strictly with the guidance of scientific notion of development.” While only slightly reducing the country’s aggressive GDP growth, China has instituted reforms to maximize its energy efficiency and minimize environmentally friendly damage and loss of human life. Not only is the country stamping down on the factors behind these problems, it wants western technology to simply help be efficient.

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Since September 2005, Shanxi shut down nearly 5,000 illegal mines and fined or imprisoned significantly more than 1,200 operators, including 60 local officials. Coal produced about 70 percent of China’s energy supply in 2005. The Chinese government worries China’s dependence upon coal could rise above 80 percent over another five years. The united states is second and then the U.S. as a net importer of petroleum. Nontraditional sources are now being encouraged to wash up the environmental surroundings and reduce China’s dependence upon foreign oil. StockInterview.com has widely discussed China’s scramble for uranium as the country has embarked upon probably the most aggressive nuclear power program since the United States in the 1970s.


Why is Energy Efficiency Important ?


Alongside nuclear energy, China hopes to exponentially expand its natural gas program as a way of lowering its astronomical quantities of air pollution. Chinese Premier Wen Jiabao told the National People’s Congress earlier this month that the country’s growth rate would be reduced to 7.5 percent over the country’s next five year plan. Economic growth reached nearly 10 percent in 2005. The strain imposed on China’s natural resources and labor has been taking its toll. According to the next five-year plan, China’s government policy will concentrate on developing a resource-efficient and environment-friendly society. Their idea would be to sustain the high output while reducing waste.

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That might not be so simple. On February 20th, China Daily reported, “The majority of China’s gas-fired power plants are on the verge of closure because of shortage of natural gas.” Wang Yonggan, secretary general of China Electricity Council, said nearly 40 percent of China’s power plant capacity remained unused due to the not enough gas supplies. Wang warned an idea drafted the National Development and Reform Commission to boost China’s gas power opportunity to 30 gigawatts by 2010 (up from 10.7 now) would make “such targets impossible to reach,” due to the gas shortfalls.


Coal Bed Methane Gas Development


Among the most serious reforms being addressed would be the energy crisis inside context of the environmental stigma now connected to China. Coal is a problem because, as toxic because it is known as, it assists fuel China’s growth, literally. Though the dark rock has its bright side. Adopting the examples from the U.S. coal industry, predominantly in New Mexico’s San Juan Basin, Wyoming’s Powder River Basin, and Alabama’s Black Warrior Basin, and the modern rise of Alberta’s Horseshoe Canyon, China has aggressively moved into the growth of its coal bed methane gas industry. The degasification of coal can but not only increase mining safety, nevertheless it is an economic way of natural gas production.

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Within a 2005 report issued by the Federal Reserve Bank of Dallas, coal bed methane is it being taken very seriously instead energy source with strong growth potential inside the U.S. energy mix. “Geologists refer to it continuous gas, however it is otherwise known as unconventional gas or simply weird gas. Whatever you want to refer to it, you need to give it due respect for its growing importance. The Department of Energy reports the share of unconventional gas doubled from 17 percent of Lower 48 natural gas supplies in 1990 to 35 percent in 2003. By 2025 it really is projected to generally be 44 percent— matching the role of conventional gas—with the rest of the 12 percent of domestic supplies imported.”

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By 2010, China hopes to boost its dependence upon cleaner burning fuels, just like nuclear and natural gas. However, the greatest immediate growth, for example over the next several years, is likely to derive from natural gas. Recent statistics show natural gas to generally be about 3 percent of China’s energy mix. Numerous announcements within the last 2 yrs have been made that the continent wants gas in the energy mix to reach 8 percent or more. In case you have traveled to China, there is no secret the continent is due to dire necessity of cleaner burning fuels. Official statistics reveal that China uses 2.45 a great deal of water to create a large amount of coal. Coal bed methane, a byproduct, is normally wasted. In 1996, China established China United Coalbed Methane (CUCBM) to harness that byproduct as well as reduce the toxic pollution and alarming fatalities, generated by coal mining.

Energy Efficiency Products


CUCBM is really a sole professional company together with the exclusive to certainly explore and develop coalbed methane resources in joint ventures with foreign companies. It’s controlled jointly by PetroChina Energy Company and the China Coal Energy Group Corporation. CUCBM is actively developing China’s coal bed methane industry by drawing upon the expertise, technology and capital of the foreign partners. “More dangerous technologies should be deployed to make certain reliable power supplies,” Ma Songde, China’s vice minister of technology and science told Associated Press at the end of February. “By developing these technologies, you can resolve issues restricting growth and enhance growth.” China is actively seeking foreign investment and cooperation in power generation, particularly clean energy.


To provide a light hydrocarbon, coal bed methane is among the cleanest options for energy. Published reports show that China’s coal bed methane (CBM) resources, buried with a recoverable depth of 2000 meters, are estimated at approximately 36.81 trillion cubic meters. China provides the world’s third largest CBM resource. Following behind the United States, oahu is the second country to have conducted large-scale field quest for coal bed methane. According to a new March 9th article in People’s Daily, “China’s coal bed methane industry made important headway in 2005.” About 340 CBM wells were drilled all over the country. That would possibly not sound astonishing when compared to the quantity of wells drilled in Canada, during the identical year, which surpassed the 3,000 level for the very first time. Because context, China remains nearly a virgin territory for CBM. CUCBM has become actively partnering when using the world’s giant oil companies yet others to educate yourself regarding their vast CMB reserves. In 1998, Texaco (now Chevron-Texaco) was the first one to partner with CUCBM and generated geological studies, exploratory wells and development contracts.

Consequently, CUCBM has become extremely selective in choosing its joint venture partners to create the ultra-valuable Production Sharing Contracts (PSCs). After attracting oil majors along the lines of Texaco and Conoco-Phillips, only a complete of 26 Production Sharing Contracts happen to be awarded to foreign-owned companies. Total coverage of such contracts now extends about 34,000 square kilometers of China’s below surface coal basins. Foreign companies have investment greater than $150 million in the contracted blocks. CUCBM hopes to ramp up coal bed methane output by 2010 to aid meet the national gas growth target of 10 billion cubic meters.


Pacific Asia Energy Corporation


The pioneer Canadian publicly traded company awarded a Production Sharing Contract was Pacific Asia China Energy Inc (PACE), which props up PSC through its wholly owned subsidiary, Asia Canada Energy Corp. Pacific Asia China Energy, which trades on Toronto’s Venture Exchange below the ticker symbol of PCE, also holds an extra PSC through another wholly owned subsidiary China Canada Energy Corporation. It’s the previous which interested us, their Guizhou Project in southern China. In speaking with Dr. David Marchioni, one in every of Canada’s leading CBM geologists, he explained of CUCBM, “The Chinese government doesn’t want to hand out resources in order to who don’t take desperate measures with them.

They desire them developed. They need to have gas. They need to have energy.” Dr. Marchioni helped co-author “An Assessment of Coalbed Methane Exploration Projects in Canada,” published from the Geological Survey of Canada. He can be president of Petro-Logic Services in Calgary, whose clients have included the Canadian divisions of Apache, BP, BHP, Burlington, Devon, El Paso Energy, and Phillips Petroleum, among others. He is another director of Pacific Asia China Energy is overseeing their CBM exploration program in China. But are usually strategy here? If Alberta currently is turning the corner and putting itself about the map as being a serious CBM contender, why would one in every of Canada’s top CBM geologists get excited and pursue a house in southern China.


Energy Efficiency and Conservation


“We have use of a huge resource for little money,” said Dr. Marchioni. “As opposed to paying poisonous for the concession this size, we paid limited fraction of that. Comparably, the project at Guizhou can have cost as many as $200 million to accumulate in Alberta.” China needs to attract foreign capital, that will be generous beforehand, but did PACE get hold of pig during the poke? We questioned him for the potential size for the resource. Marchioni responded, “The layman may believe those are actually big numbers, nonetheless only have to view the state reports. These are the basic numbers those guys think.” He was looking at the Sproule assessment for the resource, which offered a three-case scenario, starting at nearly 1 billion cubic feet and reaching the maximum greater than 11 trillion cubic feet.

Still, their assessment for just a “most likely scenario” has been a hefty 5.2 trillion cubic feet. Marchioni added, “People were numbers we originally thought we, and they have been confirmed.” The size of is big in such cases? “I do think we could fully support some large plant of some sort,” Marchioni explained. “This can be more of the long-term thing where choosing investigating a vital industrial development. Selecting looking with the idea to have enough money yourself or you do reel in partners to carry out such thinggs as liquefied propane or major gas-fired power station, liquefaction of coal.” Marchioni was quite excited about the CBM project in Guizhou, “These are common big projects, nevertheless the resource maybe there is with supporting a great project. Because of the resource is indeed , huge, you are able to support a project like that. There also are lots of potential industrial users for gas during the region.” China Daily reported South China, from where the Guizhou province is at, is facing gas shortage problems due to the high energy demands of Guangdong province. And what does PACE bring around the Chinese? “Hopefully, they’ll offer an operating CBM project or two contributing clean burning fuel for their energy mix, which can be really what they really want,” answered Marchioni. “We also bring entry to outside technology from locations that are producing CBM.”


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buyung-1 | Energy

Buyung Afrianto (UCLA ’26) is a serial technopreneur who founded Buyung Technologies Co., Ltd, a holdings company that owns: BuyungAfrianto.com™ | The latest daily blog site that presents news of the day and the latest news around the world to finance, lifestyle, automotive and sports news. And a very profitable Instagram channel @BuyungAfrianto also Twitter Account @BuyungCo . By doing what he love for living, he brings new meaning to the art of freedom. If I can be of any help or if you would like to do business with me, don’t hesitate to reach out!

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