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Carrizo Oil and Gas Investor Symposium

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Carrizo Oil and Gas Investor Symposium Powered By Docstoc
					     Nasdaq: CRZO

    Oil and Gas Investor
Energy Investment Symposium
  Houston   June 11, 2008
Forward Looking Statements / Note Regarding
Reserves
 The statements contained in all parts of this presentation, including, but not limited to, those relating to our schedule, targets,
 estimates or results of future drilling, including the number, timing and results of wells, budgeted wells, increases in wells, the timing
 and risk involved in drilling follow-up wells, expected working or net revenue interests, planned expenditures, prospects budgeted
 and other future capital expenditures, risk profile of oil and natural gas exploration, acquisition of 3-D seismic data (including
 number, timing and size of projects), planned evaluation of prospects, probability of prospects having oil and natural gas, expected
 production or reserves, increases in reserves, acreage, working capital requirements, hedging activities, the ability of expected
 sources of liquidity to implement the Company’s business strategy, anticipated size of and proceeds from this offering, future
 exploration activity, production rates, 2008 drilling program, growth in production, development of new drilling programs, hedging of
 production and exploration and development expenditures and all and any other statements regarding future operations, financial
 results, business plans and cash needs and other statements that are not historical facts are forward looking statements. When
 used in this presentation, the words “anticipate,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions are
 intended to be among the statements that identify forward looking statements. Such statements involve risks and uncertainties,
 including, but not limited to, those relating to the Company's dependence on its exploratory drilling activities, the volatility of oil and
 natural gas prices, the need to replace reserves depleted by production, operating risks of oil and natural gas operations, the
 Company's dependence on its key personnel, factors that affect the Company's ability to manage its growth and achieve its
 business strategy, technological changes, significant capital requirements of the Company, the potential impact of government
 regulations, litigation, competition, the uncertainty of reserve information and future net revenue estimates, property acquisition
 risks, availability of equipment, weather, availability of financing, the results of audits, adverse market conditions and assessments
 and other factors detailed in the “Risk Factors” and other sections of the Company's Registration Statement on Form S-3,
 Prospectus Supplement and Annual Report on Form 10-K for the year ended December 31, 2007 and other filings with the
 Securities and Exchange Commission (“SEC”). Should one or more of these risks or uncertainties materialize, or should underlying
 assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-
 looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these
 risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement
 speaks only as of the date of the particular statement and the Company undertakes no obligation to update or revise any forward-
 looking statement. We use certain terms in this presentation such as “Potential”, “Potential Reserves”, “Potential Exposure”,
 “Estimated Resource”, “Unrisked Exploration Potential”, “Unrisked Reserve Potential”, “Probable”, “2P” and “3P” that the SEC’s
 guidelines strictly prohibit us from including in filings with the SEC. These terms include reserves with substantially less certainty,
 and no discount or other adjustment is included in the presentation of such reserve numbers. U.S. investors are urged to consider
 closely the disclosure in our Form 10-K for the year ended December 31, 2007, File No. 000-29187-87, and in our other filings with
 the SEC, available from us at 1000 Louisiana, Suite 1500, Houston, Texas, 77002 and in our registration statement. These forms
 can also be obtained from the SEC by calling 1-800-SEC-0330.

                                                                                                                                               2
     Reconciliation of Non-GAAP Financial Measures
     Reg. G -- Definition of EBITDA


         ($ Millions)
                                                                                                      3 Months
                                                                 Year Ended December 31,                Ended
                                                       2003    2004       2005        2006    2007    3/31/2008

         Net income before dividends                   $7.9    $11.6     $10.3       $18.2    $15.5    ($5.3)
         Adjustments:
            DD&A Expense                               11.9    15.4       21.4       31.1     41.9      14.1
            Interest exp.(1)                             -      0.6       4.3         8.1     14.0      2.6
            Income taxes                                5.1     7.3       7.3        10.2      9.2      (2.5)
            Non-cash loss/(gain) on derivatives          -     (1.1)      4.2         (9.3)    8.0      29.1
            Equity in loss of PGR                       0.8     1.4       2.5           -       -         -
            Stock option expense (benefit)              0.3     1.1       2.5         2.9      4.9      1.5
            Loss on early debt extinguishment            -       -        3.7         0.3       -         -
            Bad debts and other                          -       -          -         1.9      0.1      (0.0)
         EBITDA, as defined                            $26.0   $36.3     $56.2       $63.4    $93.7    $39.4




(1) Net of capitalized interest and interest income.




                                                                                                                  3
 Operating Profile

  Net Shale Acreage Summary
Fort Worth Barnett           85,000
Marcellus Shale              51,000                                         Marcellus
W TX / NM                    70,000                                          Shale
Fayetteville Shale           24,000
Floyd Shale                 137,000                        New Albany
New Albany Shale             22,000                          Shale


                                           Fayetteville
                                             Shale

                                                                  Floyd
  WTX/NM          Barnett Shale                                   Shale
  Barnett /      FT. Worth Basin
                                                                                 U.K. North Sea
  Woodford
   Shale
                                           Camp Hill


                                      Gulf Coast
                                                                                          UKCS
        Marfa
        Basin
       Barnett /                            Areas with Carrizo production
       Woodford
        Shale                               Prospective shale plays

                                            North Sea discovery



                                                                                                  4
Strategy - Growth Through the Drillbit

  “Manufacturing” gas in Barnett Shale

   – 6 rigs drilling in Barnett core; 68 wells planned in 2008

   – Aggressive drilling program leads to predictable production growth

  Apply shale development expertise to new areas with similar characteristics

   – Drilling first Marcellus Shale vertical well

  Plan drilling activities for maximum reserve and production impact

  Utilize advanced 3-D seismic and interpretation techniques

  Generate and maintain multi-year drilling portfolio

  Control land and data for drill schedule and capital expenditure optimization

  Mitigate risk to increase option value

                                                                                  5
      Investment Considerations

         Proven growth in reserves and production via the drillbit

            –    Proved reserves up 66% year-over-year; $1.49/mcfe all-in F&D cost for 2007

            –    Year-over-year production up 95%(1)

         Significant additional reserve potential – 984 Bcfe net potential in Barnett Shale(2)

         Large number of internally generated drill sites from sizable land and seismic position

            –    800+ remaining Barnett Shale horizontal drillsites at 60 acre spacing

         Marcellus Shale represents a potentially high-impact transfer of shale exploitation expertise

            –    Currently own 51,000 net acres, aggressively leasing

         Additional exposure / option value in the North Sea, Gulf Coast and other shale plays

            –    Huntington discovery estimated at 108 Bcfe, net to Carrizo(2)

            –    Fayetteville, Floyd, WTX / NM Woodford / Barnett, Marfa Basin, New Albany Shale

         Attractive industry fundamentals, most costs flat or dropping
(1) Based on average production in 1Q08 compared to average production in 1Q07.
(2) Based on internal estimates.


                                                                                                         6
             Reserve Growth

              12/31 Proved Reserves (Bcfe)                                              Wells Drilled (net)
       400                                                                80                                         100%

                                                                                                              98%
                                              347.6                                                  96%
                                                                                              94%
       350                                                                70          92%                     68.2   88%
                                                                               90%


       300                                                                60                                         75%



       250                                                                50                                         63%




                                                                                                                            Gross Success Rate
                                                      Net Wells Drilled
                                                                                                     44.9
                                      210.0
Bcfe




       200                                                                40                                         50%
                                                                                              35.8

                              150.6
       150                                                                30          27.3                           38%

                      109.3
       100                                                                20                                         25%
               70.4

                                                                               10.2
       50                                                                 10                                         13%




        0                                                                 0                                          0%
               2003   2004    2005    2006    2007                             2003   2004    2005   2006     2007

                                                                                                                                                 7
                  Production and EBITDA Growth

                  Average Daily Production (Mmcfe/d)                                                  EBITDA ($mms)(1)
             80                                                                        180



                                                                          69.6                                                         $157.5
                                                                                       160
             70



                                                                                       140
             60


                                                                                       120
             50                                               47.9

                                                                                       100                                   $93.7
   Mmcfe/d




             40

                                                                                       80
                                                  32.1

             30                                                                                                      $63.4
                                      26.3
                                                                                       60                    $56.2
                          22.7
                   20.4
             20
                                                                                       40            $36.3

                                                                                             $26.0
             10
                                                                                       20



             0                                                                          0
                   2003   2004        2005        2006        2007        1Q08               2003    2004    2005    2006    2007      1Q08
                                                                                                                                     Annualized
(1) Please see reconciliation of this non-GAAP measure in the Appendix.
(2) Reflects growth from year ended 2003 through annualized quarter ended 3/31/2008.

                                                                                                                                                  8
              Reserve Replacement


                 Since 2003, Carrizo has successfully maintained a triple digit reserve replacement ratio


             1000%
                                                                                                                                          887%
             900%

             800%

             700%
                                                                                                                                   607%
             600%                                              569%
Percentage




                                                                                                 529%
             500%

             400%

             300%
                             196%
             200%

             100%

               0%
                             2003                              2004                              2005                              2006   2007



Note: Reserve replacement ratio calculated as the annual change in reserves plus annual production divided by annual production.

                                                                                                                                                 9
        Reserves by Region

        Total 1P – 347.6 BCFE(1)                                                                               Total 3P – 3,407 BCFE(2)


                                                                                                                     2P            3P   1P
                                                                                                                                                    1P




             Barnett Shale                    Other Shales
             Gulf Coast                       Camp Hill
             North Sea


            Net Shale Acreage Summary
                                                                             2/3P                                                                             2P
         Fort Worth Barnett                     85,000
         Marcellus Shale                        51,000
         W TX/NM                                70,000
         Fayetteville Shale                     24,000
         Floyd Shale                           137,000
                                                                                                                                                         1P
         New Albany Shale                       22,000                                                                                       2/3P


(1) Based on LaRoche, Ryder Scott and Fairchild reserve reports as of 12/31/2007.
(2) Internal estimates; other shales assume 50% drillable acreage, 80 acre well spacing and 1 Bcfe per well, average NRI of 80%.

                                                                                                                                                               10
2008 Capital Program

 The revised 2008 capital program is expected to increase ~87% over 2007
 Drilling capital will be focused primarily in the Barnett
          $US Millions
                                                      Original     Revised
                         Category        2007          2008         2008
          Drilling
            Barnett Shale                 $131.5         $186.4       $219.2
            Other Shales                        0.8         17.1         9.3
            Gulf Coast                      28.5            22.6        21.0
            North Sea                           9.4         17.3        11.7
            Camp Hill                           3.6          5.3         5.1
            Other Texas                         0.0          0.0         9.0
            Total Drilling                $173.8         $248.8       $275.3


          Land Acquisition
            Barnett Shale                  $30.8          $21.2        $90.8
            Marcellus and Other Shales          3.3         15.3        40.3
            Gulf Coast & Other              11.2             5.6         5.3
            Total                          $45.3          $42.1       $136.3


          Seismic & Other                    5.6            9.1          8.4
          Total Capex                     $224.7         $300.0       $420.0

                                                                               11
      Change in Capital Structure

       (In Millions)

                                                                        12/31/07 (1)             3/31/08 (2)

       Cash & Equivalents                                                 $109.4                  $168.8

       Borrowing Base Availability                                          145.0                  145.0



       Drawn on Revolver                                                       -                     -

       Term B Loan                                                         220.5                    -
       Convertible Senior Notes                                                                   373.8
       Total Debt                                                         $220.5                 $373.8



       Total Net Debt                                                     $111.1                 $ 205.0



       Net Debt to Net Capitalization                                       19.9%                   32.0%


(1)     Proforma for the $135.4 MM equity raised in February ‘08
(2)     Proforma for the $373.8 million issuance of Convertible Senior notes closed on 5/28/08
                                                                                                               12
    Barnett Shale
    Industry Overview

      Average over 2.7 Bcfe/d – over 30% annual
      increase(1)
                                                                           Jack           Wise              Denton

      Over 1,500 new completions reported in
      2007(1)
                                                                                                    Tarrant
      Major activity focused on Tarrant, Johnson,                   Palo Pinto       Parker            Ft. Worth
      Parker, Denton, Wise, Hood, Hill and Erath
      counties
                                                                                     Hood
                                                                                                  Johnson
      Activity increasing in Somervell, Jack and Palo
      Pinto counties                                                     Erath
                                                                                     Somervell


      Barnett oil play expanding in Cooke,                                                                  Hill

      Montague, Wise and Clay counties (6% of                                            Bosque
      2007 completions)
                                                                          Hamilton




(1) Based on 2007 data provided by the Texas Railroad Commission.

                                                                                                                     13
   Barnett Shale
   Continuing to Grow


         3,000
                                                                                        Total Newark east
         2,500                                                                          field production
                                                                                        (gas & oil) from
         2,000                                                                          RRC
MMCFED




                                                                                        Denton/Wise
         1,500
                                                                                        volumes flat

         1,000
                                                                                        Tarrant surpassed
                                                                                        Denton & Wise in
          500                                                                           March 2006
                                                                                        Johnson surpassed
            0                                                                           Tarrant in
                 99      00       01        02      03      04      05     06      07
                                                                                        November 2006
                  Wise   Denton        Tarrant   Johnson   Parker   Hood   Other




                                                                                                            14
                     Barnett Shale
                     Carrizo Rapid Growth

                                                                                                                                     Production
                                                                                                       60


                                                                                                       50

                     Gross Wells Drilled and Success Rate                                              40




                                                                                             Mmcfe/d
                90
                                                                                                       30
                80                                                     100%
                70                                                     88%                             20




                                                                             Success Rate
Wells Drilled




                60                                                     75%
                                                                                                       10
                50                                                     63%
                40                                                     50%                              0
                                                                                                                1Q06   2Q06   3Q06   4Q06   1Q07   2Q07   3Q07   4Q07   1Q08 Current (1)
                30                                                     38%
                20                                                     25%
                                                                                                                               Proved Reserves
                10                                                     13%
                                                                                                       300
                0                                                      0%
                      2003   2004     2005    2006    2007      2008                                   250
                                                                Plan
                                                                                                       200
                CRZO Op H-Well      Non-Op H-Well    Vertical    Success Rate
                                                                                            Bcfe

                                                                                                       150

                                                                                                       100

                                                                                                        50

                                                                                                            0
                                                                                                                  YE 2003       YE 2004        YE 2005       YE 2006        YE 2007
      (1) As of 5/8/2008.

                                                                                                                                                                                       15
 Barnett Shale
 Carrizo Leases / 2007 Industry Completions

                         Wise
                          Wise                                                     Over 85,000 acres leased
 Jack
                                                               Denton
                                                               Denton
                                                                                   Potential for 800+ horizontal
                                                                                   wells and 1,260 Bcfe (60
                                                                                   acre spacing)
                                                          Tarrant
                                                          Tarrant
                                                                                   160 (109 net) wells
                Parker
                Parker
                                     Ft. Ft. Worth
                                         Worth
                                                                                   producing
                                                                                   Current 50 Mmcfe/d net
                                                                                   production
                                                                                   64 net Mmcfe/d drilled and
                                                                                   not on-line; includes 19
                Hood                                                               SE Tarrant wells

                                                     Johnson
                                                     Johnson
                                                                        SE Tarrant                   2007A   2008 Est.
                         Somervell                                      Capital Expenditures ($MM)    52       155
  Erath                                                                 Wells Drilled                21         49
                                       Hill
                                      Hill                              Producing Wells              13
Carrizo lease
                                                                        YE Production (Mmcf/d)       28
Carrizo lease
Industry completion
Industry completion

                                                                                                                         16
 Barnett Shale
 Value Proposition



                                         Net Acreage                                                            85,000 acres

                                         % Drillable                                                               65%       (2)
                                         Average Well Spacing                                                  60 acres/well(1)
                                         Net Wells(2)                                                               921

                                         Average EUR/Well                                                          1.8 Bcfe
                                         Average Royalty                                                             24%
                                         Total Net Potential Reserves                                             1,260 Bcfe

                                         Assumed Market Value(3)                                                  1.50 $/Mcfe
                                         Valuation                                                                $1,890 MM
                                                                (4)
                                         Barnett Value per share                                                    $61.69




(1) Assumes future well spacing below historical average.
(2) Includes wells Carrizo has drilled from inception to present.
(3) Carrizo’s internal estimate of value based on factors including NYMEX natural gas strip prices, precedent transactions and public market values.
(4) Based on basic shares outstanding; not pro forma for this offering.


                                                                                                                                                       17
Barnett Shale
Near Term Upside

 Downspacing
     Industry data confirms sufficient unique reserves to justify 40 acre
     spacing; operators investigating 20 acre horizontals
     Carrizo has operated and participated in a number of projects at 40-50
     acre spacing in the Core and Tier 1. Early production rates validate
     downspacing in both areas to 50 acres or less
 Stacked Laterals
     Micro-seismic indicates limited Barnett Shale vertical section contacted
     by fracture stimulation in SE Tarrant wells
     Currently drilling a stacked lateral between two 500 foot spaced wells
     Potential reserves of 2.2 net Bcfe based on log data for upper lateral
 Re-Fracs
     Perform first re-frac of a horizontal well in 2H 2008




                                                                                18
 Barnett Shale
 Value Proposition Sensitivity Table



                                                                                                          (1)
                                                                              Barnett Value per Share
                                                                                  Spacing / Number of Drillsites
                                                                    60-acre    50-acre        40-acre               30-acre               20-acre
                                                                     921        1,105          1,381                 1,842                 2,763
                           Average Gross EUR / Well (Bcfe)




                                                             1.80   $61.69     $74.03         $92.54               $123.38               $185.08


                                                             2.00   $68.55     $82.26        $102.82               $137.09               $205.64


                                                             2.50   $85.68     $102.82       $128.53               $171.37               $257.05


                                                             3.00   $102.82    $123.38       $154.23               $205.64               $308.46




(1) Assumes 85,000 net acres, 65% of acreage drillable, average royalty of 24%, assumed market value of $1.50 per Mcfe and basic shares outstanding as of 5/1/08.

                                                                                                                                                                    19
   Barnett Shale
   Tarrant County Urban Development Overview


                                                                                                               DFW
       15,000 acres leased in
       Tarrant, including 4,000
       acres leased in 2008
       Very successful in acquiring
       drillsites
       “Halo” leasing around
       drillsites in progress                                            Fort Worth             UT-Arlington
                                                                                      Pantego
       Resolution of midstream
       infrastructure in progress
       Potential to drill 300 wells
       (net) and develop 900 Bcfe
       (net)(1)


      Carrizo acreage                      Completions
      Existing drillsite                   Permits
      ET pipeline
      New acquisition area
(1) Assumes 40 acre well spacing and average of 3 Bcfe (net) per well.

                                                                                                                     20
Barnett Urban Drilling
UT-Arlington and Pantego

  UT-Arlington – Urban Drillsite                              Pantego




 400 acre lease; 2,500 acre “Halo”             Competitive bid managed by O&G leasing
 Completed drilling of first six wells at UT   committee for home and business owners
 Arlington campus with H&P Flex Rig            Carrizo recommended by committee in November
 Anticipate first production by October 2008   2007
                                               Initiated lease acquisitions in December 2007;
                                               80% complete



                                                                                           21
  Marcellus
  Industry Overview

                                                                                                Emerging Appalachian shale play
                                                                                                   –      Located at depths of 5,000’ – 8,500’; shale
                                                                                                          varies in thickness from 50’ – 300’
                                                                                                   –      Advances in drilling and completion
                                                                                                          technologies key to unlocking potential
                                                Over pressured
                                                      -                                         Potentially larger resource in place than Barnett
                                                                                                given aerial extent of shale
                                               Under pressured
                                                       -             Comparative
                                                                      Size of the                  –      Devonian shale fairway encompasses 63
                                                                     Barnett Shale
                                                                      Core / Tier I                       million acres vs. ~2 million for Ft. Worth
                                                                         Area
                                                                                                          Barnett
                                                                                                   –
Source: Range Resources.
                                                                                                          Recoverable natural gas estimates of

                         U.S. Shale Comparison                                                            32 – 95 Tcfe
                                                                                                Pennsylvania area of most focus to date
                                 Barnett         Woodford Fayetteville     Marcellus
Depth                              7,500            7,550        3,000      6,350                  –      Northern WV / southern NY also focus areas
Thickness (net)                      389              175         250         130
Porosity (% )                           6                6          7           6
                                                                                       Source: Wall Street research.
Gas in-place (sq. mi.)               147                60         68          72

Source: Devon Energy Corp. investor presentation (April 2008).




                                                                                                                                                        22
UK North Sea
Huntington Recent Development
                                                                                 Largest North Sea discovery
                                                           10 Km
                                                                                 since 2001
                                                                                  –   Estimated resource of
                                                                                      110 Mmbo (gross)
                                                                                  –   18 Mmbo (108 Bcfe) net
                                                    Well 22/14 -5                     to Carrizo’s interest

                   22/13b                                                        Forties zone tested 7,940
      To Howe
                  W.I. 27.3%                                                     Boe/d (15% WI / 17% NRI)
      (19 km)
                                                                                  –   Appraisal complete
                                                                                  –   Development plan in
    To Nelson & Forties
                                                                                      progress
     (32 km & 40 km)
                                                                    22/14b        –   First production
                                                                   W.I. 15%           estimated late 2009 /
      To Montrose
        (22 km)                                                                       early 2010
                                                                                 Fulmar zone tested 4,891
                                                                                 Boe/d (15% / 17% NRI)
                                               22/19b
                                              W.I. 15%                            –   Appraisal to be
                                                                                      completed in 2008
 Carrizo acres under lease: ~110,000 gross / ~24,800 net
                                                                                  –   Test on Fulmar structure
 Jurassic (Fulmar) Prospects                     Paleocene (Forties) Prospects
                                                                                      in 13b in 2009
 Huntington Discovery (Forties & Fulmar)         Follow-up locations

                                                                                                              23
Gulf Coast
Overview
     23.7 Bcfe proved reserves
     42,400 net acres
     18 Mmcfe/d current production
     Prospects covering up to 400 Bcfe net to Carrizo’s working interest of
     unrisked exploration potential in Gulf Coast




                           $ Millions                                 Remaining
                                             2008 Capital Program     Identified
                                                        Wells to be    Leased
                           Core Areas        Capex        Drilled     Locations
                           Frio/Vicksburg     $2.6            4          12
                           Southeast Texas     4.1            4          17        County / Parish
                           Wilcox              4.1            4          21        3D Seismic Data
                           South Louisiana    10.2            2          13
                                                                                   Producing Fields
                           Other               1.6            1           6
                           Total              22.6           15          69
                                                                                   2008 Planned Well


                                                                                                       24
      Investment Considerations

         Proven growth in reserves and production via the drillbit

            –    Proved reserves up 66% year-over-year; $1.49/mcfe all-in F&D cost for 2007

            –    Year-over-year production up 95%(1)

         Significant additional reserve potential – 984 Bcfe net potential in Barnett Shale(2)

         Large number of internally generated drill sites from sizable land and seismic position

            –    800+ remaining Barnett Shale horizontal drillsites at 60 acre spacing

         Marcellus Shale represents a potentially high-impact transfer of shale exploitation expertise

            –    Currently own 51,000 net acres, aggressively leasing

         Additional exposure / option value in the North Sea, Gulf Coast and other shale plays

            –    Huntington discovery estimated at 108 Bcfe, net to Carrizo(2)

            –    Fayetteville, Floyd, WTX / NM Woodford / Barnett, Marfa Basin, New Albany Shale

         Attractive industry fundamentals, most costs flat or dropping
(1) Based on average production in 1Q08 compared to average production in 1Q07.
(2) Based on internal estimates.


                                                                                                         25
Near-Term Upside Catalysts

 Barnett Shale
  – Execution
      • Six rigs drilling in Core area (five in SE Tarrant Co. and one in Denton Co.)
      • Aggressively leasing urban drillsites / leases
      • Drilled first six wells on UT-Arlington campus
      • Drilling first stacked lateral in SE Tarrant Co.
  – Upside
      • Additional urban leasing in Core
      • Add another drilling rig in 2H08
      • Increased recovery: downspacing, stacked laterals and re-fracs
 Marcellus Shale
  – Aggressively acquiring new acreage
  – Drilling first vertical well; currently planning five wells in 2008
 North Sea
  – Forties development plan
  – Additional Fulmar appraisal drilling




                                                                                        26
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