`SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
`
`WESTERNGECO LLC
`
`VS.
`
`ION GEOPHYSICAL
`
`CORPORATION, FUGRO
`GEOTEAM,
`INC., ET AL
`
`09—CV—1827
`
`Houston, Texas
`
`7:39 a.m.
`
`August 1, 2012
`
`JURY TRIAL
`
`Volume 8
`
`Morning Session
`
`BEFORE THE HONORABLE KEITH P. ELLISON
`UNITED STATES DISTRICT JUDGE
`
`APEEARANES:
`
`FOR THE PLAINTIFF:
`
`Lee L. Kaplan
`SMYSER, KAPLAN & VESELKA, LLP
`700 Louisiana, Suite 2300
`Houston, Texas 77002
`713.221.2300
`
`Gregg F. LoCascio
`KIRKIAND & ELLIS LLP
`655 Fifteenth Street Northwest
`
`Washington, DC 20005
`202.879.5290
`
`Sarah Tsou
`
`Timothy K. Gilman
`KIRKLAND & ELLIS LLP
`
`Citigroup Center
`153 East 53rd Street
`
`New York, New York 10022
`212.446.6435
`
`18
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`19
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`20
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`21
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`22
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`23
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`24
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`25
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`TREEATTEg%?PYI CERTHFY
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`Johnny c. Sanchez, RMR, CRR —
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`j%;.v « ~
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`WESTERNGECO Exhibit 2106, pg. 1
`PGS v. WESTERNGECO
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`FOR IO GEOPHYSICAL CORPORATION:
`
`David L. Burgert
`Susan Kopecky Hellinger
`Jonathan M. Pierce
`
`Jonna N. Stallings
`Ray T. Torgerson
`Eric D. Wade
`
`PORTER & HDGES LEP
`
`Reliant Energy Plaza
`1000 Main Street, 36th Floor
`Houston, Texas 77002
`713.226.6694
`
`KOCO\1O‘\U”1sJ>-(;.)[\)}—‘
`
`EOR.FUGRO GEOTENM, INC.:
`10 Gordon T. Arnold
`Jason A. Saunders
`
`11 Anthony Hong
`ARNOLD KNOBLOCH LLP
`
`12 4900 Woodway Drive
`Suite 900
`
`13 Houston, Texas 77056
`
`14
`
`James M. Thompson
`15 ROYSTN RAYZOR VICKERY & WILLIAMS LLP
`Pennzoil Place
`
`16 711 Louisiana Street, Suite 500
`Houston, Texas 77002
`17 713.890.3218
`
`18
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`19 Court Reporter:
`Johnny C. Sanchez, RPR, RMR, CRR
`20 515 Rusk, #8016
`Houston, Texas 77002
`21 713.250.5581
`
`22 Proceedings recorded by mechanical stenography. Transcript
`23 produced by computer—assisted transcription.
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`24
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`25
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`Johnny C. Sanchez, RMR, CRR ~ 7'CsCou1'treporte1'@aol.com
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`WESTERNGECO Exhibit 2106, pg. 2
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`”RECT EXAMINATION BY M. KAPLAN..... 2375
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`CROSS-EXAMINATION BY M. BURGERT .
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`. .
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`. .. 2441
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`WESTERNGECO Exhibit 2106, pg. 3
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`Di'rect—Sims/By Mr. Kaplan
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`of this benefit in my calculation.
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`If I did,
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`the
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`quantification —- the benefits would have been even
`
`higher.
`
`Q.
`
`So you looked at the 12 items that were specifically
`
`listed?
`
`A.
`
`Correct.
`
`Q.
`
`—— in that document on Slide 72?
`
`A.
`
`Right.
`
`Q.
`
`And did you decide there were some that you thought
`
`you could_put a dollar value on?
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`A.
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`Yes. Based on all the information in the record,
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`the
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`documents that were produced by Fugro and ION,
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`there were
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`a lot of documents that indicated benefits of infill
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`reduction,
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`line change efficiency and faster and safer
`
`deployment and recovery.
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`So those are the ones that I focused on to
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`quantify,
`
`in terms of the benefits.
`
`Q.
`
`I mean, it's pretty hard to figure out how much money
`
`somebody saved by having more safety; right? Maybe they
`
`put a dollar number on it somewhere, but you haven't tried
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`to ascribe one?
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`A.
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`I haven't seen anything in their documents that
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`indicate that they put a dollar amount on it. Clearly
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`it's a benefit, and certainly it does have a cost, a
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`dollar value to it, but I don't know what that dollar
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`Johnny C. Sanchez, RMR, CRR
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`jcscourtreporte-r@aol.ccm
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`WESTERNGECO Exhibit 2106, pg. 4
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`Di'rect—Sims/By Mr. Kaplan
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`value is, so I didn't include it.
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`Q.
`
`And if there were fewer cable tangles, it's probably
`
`unlikely that somebody wrote in the ship's log because we
`
`steerable streaming this week, we didn't have a tangle?
`
`A.
`
`Correct.
`
`Q.
`
`A.
`
`so you didn't put a dollar value on that either?
`
`No.
`
`Q. All right. Well, let's look at three out of the l2
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`items that you tried to put a value on. And how did you
`
`go about doing that?
`
`A.
`
`Again,
`
`I looked at the documents, all the documents
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`that were produced, and I tried to get as much information
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`as I could about the amount of savings or value
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`contributed by lateral steering in those three areas, and
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`I did a calculation.
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`And this is a summary o: my calculation.
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`And it indicates that in total,
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`the quantifiable benefits
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`from those three items was somewhere between l9.9 and 21.8
`
`percent of the value of the surveys, survey revenue on
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`average.
`
`Q.
`
`All right.
`
`So let's look at the three items you did
`
`talk about and that you put a value on. And the first one
`
`we're going to talk about is infill?
`
`A.
`
`Right.
`
`Q.
`
`And what does Slide 76 show?
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`Johnny C. Sanchez, RMR, CRR — jr:scourtreporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 5
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`Direct —Si'ms/By Mr. Kaplan
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`A. Well,
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`these are a couple of documents that indicate
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`how much infill could be or typically is for 3D seismic
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`surveys.
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`So the top document which comes out o;
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`Fugro's records indicates that infill shooting may be as
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`much as 25 percent or more of the total cost, of prime
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`seismic acquisition.
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`The document on the bottom I'm
`
`trying to recall --
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`Q.
`
`A.
`
`It's an ION document.
`
`I think it's an ION document,
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`indicates that the cost
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`of the infill can account for 30 percent of the total
`
`acquisition cost. And I think if you recall in that video
`
`we watched earlier this morning, Mr. Monk indicated that
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`infill could be 30 percent of the total survey cost.
`
`Q.
`
`A.
`
`Those are Plaintiff's Trial Exhibit 375 and l64?
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`Right.
`
`So infill can be a substantial portion of the
`
`cost of the survey.
`
`So the question is, how does the
`
`lateral steering contribute to reducing infill? And what
`
`I did was I identified documents and testimony that
`
`addressed that issue.
`
`Here's Mr. Cunkleman who indicated that
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`one of the important benefits is reduce infill,
`
`the
`
`benefits of lateral steering is reducing infill and cost
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`reduction. And that he indicated that reducing infill 20
`
`to 30 percent would not be unusual.
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`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.Com
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`WESTERNGECO Exhibit 2106, pg. 6
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`Direct —Sims/By Mr . Kaplan
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`Q.
`
`And then let's look at another Fugro document
`
`plaintiff's Trial Exhibit 398, and what was the outcome or
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`the reflection or conclusion of that document?
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`A.
`
`Okay. Well, here again, how does DigiFIN steerable
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`streamers affect the performance of the survey, and the
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`indication is that it reduces infill percentage from
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`15 percent to 8 percent.
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`So that's about a 70 percent --
`
`I'm sorry —— 45 percent reduction.
`
`Q.
`
`Right.
`
`So if you're starting at 15 percent, this is
`
`zero, you go down 8 percent, it's not a 7 percent.
`
`It may
`
`be a 7 percent reduction on the whole, but of the infill
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`it's almost half?
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`A.
`
`Q.
`
`A.
`
`Right.
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`It's 7 out of 15. About 45 percent.
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`And they actually put some days on that, didn't they?
`
`Yeah,
`
`they said about 4.8 days due to reduced infill,
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`that they saved.
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`Q.
`
`And that gets back to among other things,
`
`to
`
`Mr. Walker's testimony and Mr. LoCascio‘s art work showing
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`how you can literally get a survey done in a lesser time
`
`and increase your revenue because you don't have to go
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`back?
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`A.
`
`Q.
`
`Correct. You move on to the next project.
`
`All right.
`
`So another internal Eugro document,
`
`this
`
`is Plaintiff's Trial Exhibit 385.
`
`A.
`
`Right. And this is talking about a specific survey,
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`Johnny C. Sanchez, RMR, CRR — jcsCoL2rtreporter@aol.Com
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`WESTERNGECO Exhibit 2106, pg. 7
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`Direct—Sims/By Mr. Kaplan
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`BP in Vietnam —— actually, no. They're talking about ~-
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`well,
`
`they are talking about, but they're referring to the
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`StatoilHydro project where they experienced a 50 percent
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`reduction in infill, lower infill.
`
`Q.
`
`And did they also -— they also talked about some of
`
`the other benefits -— and we will come back to that. But
`
`let's stay with infill for now and total reduction. And
`
`then again this is ION talking about this intelligent
`
`acquisition technology reducing infill?
`
`A.
`
`Correct.
`
`So this document indicated that they're
`
`seeing reductions of 20 percent to 50 percent,
`
`in infill
`
`on vessels using intelligent acquisition technologies,
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`which is their DigiFIN system, which could save the oil
`
`and gas companies 5 percent to l5 percent on their
`
`acquisition bills.
`
`Q.
`
`Okay. And then let's look at Plaintiff's Trial
`
`Exhibit 230 from ION and 386,
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`the Fugro document.
`
`A.
`
`Okay.
`
`Q. What did ION see?
`
`A. Well, again,
`
`these are -— this is again, documents
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`reflecting experience on —— from using lateral steering
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`and related to infill. And here it says almost four times
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`less infill than expected,
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`4 percent versus l5 percent.
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`I probably wouldn't have said four times
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`less, but what that is,
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`is it's a reduction of about
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`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 8
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`Direct—Sims/By Mr. Kaplan
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`70 percent, 9 or I'm sorry, ll percent drop from l5 down
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`to four.
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`So it's a significant reduction of infill. And
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`then the next document again indicates that we,
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`they,
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`being Fugro, see between 30 percent to 50 percen: less
`I.‘
`infill than compared to a standard spread with no
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`steerable units.
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`So when they add steering,
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`they get a
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`30 percent to 50 percent less infill than when they don't
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`use steering.
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`So these are all significant.
`
`Q.
`
`And in looking at the collection of documents and
`
`information from ION and Fugro on infill reduction, did
`
`you reach some conclusions about typical infill reduction?
`
`A.
`
`I did. Well, not typical, but on average, when you
`
`look at all that information and look at the average,
`
`the
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`average was —- you know,
`
`the median was 43.7 percent,
`
`the
`
`mean was 4l.7 percent reduction in infill.
`
`And then what I did was I tried to
`
`determine how much infill was as a percentage of the total
`
`survey revenue. And you'll see —- you will recall that we
`
`saw documents that indicated 25 percent or more, up to
`
`30 percent.
`
`There are other documents that indicate
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`20 percent.
`
`I used the 20 percent, which is the low
`
`number, and determined that the value of the infill
`
`reduction as a percentage of the total survey revenue was
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`Johnny C. Sanchez, RMR, CRR — jcscourt:reporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 9
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`Di'rect—Sims/By Mr. Kaplan
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`between 8.3 and 8.7 percent.
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`If I had used the
`
`CO\lO\U'|d§(.;Jl\)§—‘
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`30 percent,
`
`then it would be closer to 13 percent —- yeah,
`
`13 percent as a percentage of the total surveyed revenue.
`
`Q.
`
`Can we go to Slide 76 for a moment, please. Let's go
`
`back to that. What you're talking about is these
`
`assessments internally by the companies that infill may be
`
`as much as 25 percent or more of the total cost,
`
`the cost
`
`o: infill can account for 30 percent, but -- and please
`
`return to 82.
`
`You didn't use 25 or 30 percent, did you?
`
`A.
`
`No.
`
`1 used 20 percent.
`
`Q.
`
`;f you had taken 25 percent instead of 20 percent,
`
`then your bottom number instead of what it being 8.3,
`
`would have been over lO percent; is that right?
`
`A.
`
`It would have been a little over lO.3.
`
`Q.
`
`So you used a lower, more conservative figure for
`
`just the value of infill reduction?
`
`A.
`
`Correct.
`
`Q.
`
`All right. Let's turn to
`
`the next issue, which is --
`
`or the next type of savings that you quantified,
`.x_.
`
`line
`
`change efficiency,
`
`that is the _urns?
`
`A.
`
`Correct.
`
`Q.
`
`And let's start with the deposition of Mr. Sweetman
`
`at ION, and what did he tell us?
`
`A.
`
`First of all, he said there is a quantifiable benefit
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`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 10
`PGS v. WESTERNGECO
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`Direct -Sims/By 1‘/Ir . Kaplan
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`for using steerable streamers in the turns, says the turns
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`were faster, and how many minutes were saved? He said it
`
`was around 10 minutes.
`
`Q.
`
`A.
`
`All right.
`
`So he indicated that —— 10 minutes.
`
`Q.
`
`All right. And did ION also have a document that
`
`indicated that it accepted that as a number that it could
`
`trumpet or discuss with its customers?
`
`A. Well,
`
`I think this ION document probably predates
`
`Mr. Cunkelman —— was it Cunkelman?
`
`I can't recall.
`
`Q.
`
`Correct.
`
`A.
`
`His testimony. And they indicated that 10 minutes
`
`per line change as well. Well before —- actually even
`
`before they introduced the product into the market, I
`
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`
`Q.
`
`Just to make sure we've got this, this is a document
`
`that's making some assumptions about eight line changes
`
`per day; is that right?
`
`I4 &O
`
`A.
`
`Correct.
`
`I\J Q
`
`R) f-—‘
`
`l\.) R)
`
`Q.
`
`And that's a time when the streamers were a little
`
`shorter, so you could make faster turns and get back more
`
`quickly?
`
`l\.) (.0
`
`A.
`
`Correct.
`
`l\) LB
`
`Q.
`
`And these are savings that they were assessing with
`
`shorter streamers?
`
`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 11
`PGS v. WESTERNGECO
`IPR2014-01478
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`Direct—Sims/By Mr. Kapldn
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`J>LUDOF4
`
`A.
`
`Yes, shorter streamers and shorter turns.
`
`Q.
`
`All right. And nowadays with longer streamers and a
`
`bigger turning radius is that savings likely to be larger?
`
`A.
`
`In terms of time I think -— probably I think we've
`
`heard evidence testrnony that it is longer,
`
`there are
`
`1‘I‘OJR)F4CDKOCD\JO\LN
`
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`
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`
`greater savings.
`
`Q.
`
`Looking at the next slide from an internal Fugro
`
`document, Plaintiff's Trial Exhibit 386,
`
`they talk about
`
`trials of fully populated spreads.
`
`Do you see this?
`
`A.
`
`Q.
`
`A.
`
`Q.
`
`I do.
`
`These are their own tests?
`
`Correct.
`
`And what do they determine?
`
`:\
`
`J>
`
`A.
`
`They're seeing improved turn times of l5 to
`
`Ex LN
`
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`
`20 minutes per turn.
`
`Q.
`
`And if we look also at a Fugro internal e-mail, Trial
`
`Exhibit 385, now we're moving to -- we're looking at some
`
`actual experience of StatoilHydro and shorter line turns,
`
`and what do they say there?
`
`A.
`
`They say that on this StatoilHydro job,
`
`they
`
`experienced shorter line turns by —— they shortened them
`
`by 15 to 20 minutes on that job.
`
`Q.
`
`Per turn?
`
`A.
`
`Q.
`
`Per turn, using the DigiFIN technology.
`
`Did you attempt then by looking at the information
`
`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.com
`
`WESTERNGECO Exhibit 2106, pg. 12
`PGS v. WESTERNGECO
`IPR2014-01478
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`Di'rect—Sims/By Mr . Kaplan
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`1
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`that was available from the defendants,
`
`to assess the
`
`savings just from shorter line turns or line change
`
`efficiency?
`
`A.
`
`I did. And I used the same calculation that ION had
`
`used in that prior document.
`
`So I just went through it
`
`the same way they did, and determined —— first of all, I
`
`determined that on average the line change savings was 10
`
`to 12 minutes, and then I did the calculation and
`
`determined that the value of the faster line changes as a
`
`percentage of the total revenue, survey revenue was
`
`somewhere between 10.8 and 13.1 percent.
`
`Q.
`
`Now,
`
`that was based on having eight line changes per
`
`day in these shorter streamers; right? The original ION
`
`document?
`
`A.
`
`Yeah. And $3,000 cost per square kilometer.
`
`Q. All numbers that have now been increased; is that
`
`right?
`
`A.
`
`Correct.
`
`Q.
`
`And did you run this discussion or this issue by
`
`Mr. Walker again to kind of get a reality check for what
`
`the situation is in the present day, or over the last few
`
`years?
`
`A.
`
`Right.
`
`So as things have changed,
`
`the spreads are
`
`wider,
`
`the spreads are longer,
`
`the turns are longer, so
`
`there's fewer line changes per day, but the cost per
`
`Johnny C. Sanchez, RMR, CRR — jcscourtreporLer@aol.Com
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`WESTERNGECO Exhibit 2106, pg. 13
`PGS v. WESTERNGECO
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`Directvsims/By Mr. Kaplan
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`CD\1O\U‘ld>-U)l\)l4
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`square kilometer is higher. And so,
`
`in talking with
`
`Mr. Walker and going through the calculations, we
`
`concluded —— he concluded, that it's a linear —— it's
`
`linear, so that even though the cost per line,
`
`the number
`
`of line changes may be lower,
`
`the savings per line changes
`
`is higher.
`
`So it would work —— it works out to about the
`
`same.
`
`In fact, he did a calculation independent
`
`of what I had done, and he came up with 13 percent.
`
`Q.
`
`All right. And did that give you assurance that
`
`ZON's original assessment was correct and that carrying
`
`that far would made good sense?
`
`A.
`
`Yeah. He confirmed that my calculation was
`
`reasonable.
`
`Q.
`
`All right.
`
`So let's turn to the third savings that
`
`you evaluated and that's faster safer deployment?
`
`A_
`
`Right. And here's a document from Fugro talking
`
`about safer streamer deployment, and it indicates that
`
`using steerable streamers could save one to two days at
`
`the start of every survey. And so, what I did is I
`
`assumed it would save one day.
`
`-Q.
`
`Plaintiff's Trial Exhibit 398 is a Fugro document.
`
`So you did a calculation there?
`
`A.
`
`Correct.
`
`Q.
`
`And this is relatively small savings?
`
`Johnny C. Sanchez, RMR, CRR ~ jcsCourtreporter@aol.com
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`WESTERNGECO Exhibit 2106, pg. 14
`PGS v. WESTERNGECO
`IPR2014-01478
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`I71‘,rect Sims/By Mr. Kaplan
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`OO\IO‘\U‘InJ>-L».)R>f-‘
`
`A.
`
`It is. You know one day, based on the cost of the
`
`crew, $50,000, so it would save .3 percent.
`
`It's not very
`
`much, but it's something we could quantify.
`
`Q.
`
`All right. And then you took the three quantifiable
`
`benefits,
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`leaving out the actual safety issue,
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`the tangle
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`savings and things like that.
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`On the quantifiable
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`benefits that you looked at, did you then come to some
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`percentage figures on savings?
`
`A.
`
`I did. What I determined was that if you look at the
`
`median, it was 19.9 percent savings or benefit, not
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`savings.
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`If you look at the mean, it was
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`2l.8 percent value of the benefits of the percentage of
`
`the total revenue.
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`And I actually,
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`instead of using the
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`average,
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`the 21.8, I used the midpoint of the two.
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`Q.
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`A.
`
`And that's what, 20.8?
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`I used 20.8.
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`Q.
`
`All right. And so, now you found a percentage of
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`quantifiable benefit. What have you done with it?
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`A. Well, I could have applied it to all of the Fugro
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`surveys. Now,
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`remember this is looking at the royalty for
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`Fugro.
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`I could have applied it to all of the Fugro
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`royalties -- sorry —— surveys.
`L‘
`focussing only on —— in _act,
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`But what I did was I
`
`I did the calculation for
`
`Johnny C. Sanchez, RMR, CRR — jcscourtreporter@aol.com
`
`WESTERNGECO Exhibit 2106, pg. 15
`PGS v. WESTERNGECO
`IPR2014-01478
`
`
`
`Uirect—Si'ms/By Mr. Kaplan
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`CD\1C5\U‘l+bUJI\.)I—‘
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`both, and they came up lower for —— if I looked only at
`
`the 91 surveys that were claiming a reasonable royalty.
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`So I used that in my analysis, rather than the other
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`calculations.
`
`Q.
`
`As opposed to the —— if you had added in those other
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`15 Fugro surveys?
`
`A.
`
`Correct.
`
`Q.
`
`A.
`
`Q.
`
`So you didn't look at lO6, you got back to 9l?
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`I only looked at the 9l.
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`And it just so happens out of l82 other surveys, 9l
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`were by Fugro and 91 were by others ——
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`A.
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`Q.
`
`A.
`
`Right.
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`—— who were supplied by ION?
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`Correct.
`
`Q.
`
`Okay.
`
`So this is now looking at quantifying the
`
`benefits for Fugro?
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`A.
`
`Correct.
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`So what I did was I determined the survey
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`revenues for those 91 surveys, which is $1.25 billion and
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`then I applied that 20.8 percent quantifiable benefit to
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`that $1.25 billion and determined there's a benefit of
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`$260.2 million from using steerable streamers.
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`Q.
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`And then now we're on Slide 92. What did you do with
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`quantifiable benefit?
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`A. Well, I determined that the benefit was
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`260.2 million, but there was a cost of the infringing
`
`Johnny C. Sanchez, RMR, CRR ~ jcscourtreporte-r@aol,com
`
`WESTERNGECO Exhibit 2106, pg. 16
`PGS v. WESTERNGECO
`IPR2014-01478