BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE APPLICATION )

OF DIVERSIFIED OPERATING )

CORPORATION FOR AN ORDER ) CAUSE NO.

ESTABLISHING A NEW SPACING UNIT )

AND FOR AN ORDER ALLOWING THE ) Docket No._____________

COMPULSORY POOLING OF A NON- )

CONSENTING OWNER FOR SUCH UNIT )

COMPLETED IN THE "D" OR "J" SAND )

FORMATION, CARETAKER FIELD, )

WELD COUNTY, COLORADO )

COMES NOW, Diversified Operating Corporation, a Colorado Corporation, and makes application to the Oil and Gas Conservation Commission of the State of Colorado, for an order establishing a spacing unit for a previously non spaced area and for an order establishing the compulsory pooling of a non-consenting owner in the newly established spacing unit for the "D" or "J" Sand Formation, Caretaker Field, Weld County, Colorado. In support thereof, Diversified Operating Corporation ("Applicant") states and alleges as follows:

1. That the Applicant is the owner of certain leasehold interests in Weld County, Colorado located within the area requested for the establishment of a new spacing unit and the compulsory pooling of a non-consenting owner of the newly established spacing unit described as follows:

Township 7 North, Range 59 West, 6^th P.M.

Section 6: E/2

containing 320.52 acres, more or less.

As such, Diversified Operating Corporation has the right to bring this Application pursuant to Section 34-60-116 of the Colorado Revised Statutes and Rule 503 of the Rules and Regulations of the Colorado Oil and Gas Conservation Commission.

2. That the Applicant is the operator of the Paul #6-7 well located within the Subject Lands (actual legal location is 2615’ FSL and 2040’ FEL of Section 6, Township 7 North, Range 59 West) and Applicant desires to space the subject land to allow for a total of up to eight (8) "D" or "J" Sand Formation wells to be located not less than six hundred (600) from any lease line and to be located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing.

3. That Applicant has made offers to all owners and interested parties within the Subject Lands to either lease their oil and gas interests or to sign a Joint Operating Agreement and participate in the drilling of a well within the Subject Lands. Although Applicant has negotiated in good faith and sent numerous notices to all of the oil and gas interest owners, Applicant has been unable to obtain agreement from all owners and interested parties. By date of this filing, more than thirty (30) days has elapsed since the tender of the offers to participate or to lease.

All owners and interested parties within the Subject Lands are designated on Exhibit "A" attached hereto. All non-consenting owners are designated on Exhibit "B" attached hereto.

4. Applicant believes that the granting of this Application is necessary for the prevention of waste, for the protection of correlative rights, to assure the efficient and orderly development of the "D" and "J" Sand Formation common source of supply and to avoid the drilling of unnecessary wells.

5. Applicant respectfully request this Commission enter an order providing:

A. The establishment of a spacing unit on the subject lands which allows for a total of up to eight (8) "D" or "J" Sand Formation wells to be located not less than six hundred (600) from any lease line and to be located not less than one thousand two hundred (1,200) feet from any other producible or drilling oil or gas well when drilling to the same common source of supply, unless authorized by order of the Commission upon hearing.

B. That the Order determine the interest of each owner in the drilling unit, as provided on Exhibit "B" attached hereto, and provide that each consenting owner be entitled to receive production attributable to non-consenting owners, including penalties, in accordance with the provisions of Section 34-60-116 of the Colorado Revised Statutes.

Attached hereto as Exhibit "A" are the names and addresses of all interested parties as defined by the statutes and the rules of this Commission who own interests and are entitled to receive notice within the area affected by this Application. Attached as Exhibit "B" are the names and proportionate interest of the non-consenting parties affected by this Application.

WHEREFORE, Applicant respectfully requests that this matter be set for hearing by the Commission; that notice thereof be given as required by law; and that upon such hearing this Commission issue its order granting this Application as requested herein. Applicant further requests that the Commission in its order grant such other provisions as the Commission may find to be necessary or desirable in the cause.

DATED this 11^th day of August, 2004.

Respectfully submitted,

Contract Landman for Diversified Operating Corporation

518-17^th Street, #390

Denver, CO 80202

(303) 623-4747

Diversified Operating Corporation

15000 West 6^th Ave., #102

Golden, CO 80401

VERIFICATION

STATE OF COLORADO )

)ss.

COUNTY OF JEFFERSON)

Catherine S. Cammon, upon oath, deposes and says that she is Corporate Secretary of Diversified Operating Corporation; that she has read the foregoing Verified Application before the Oil and Gas Conservation Commission of the State of Colorado; and states that the matters therein are true in the best of her knowledge and belief.

_________________

Catherine S. Cammon

Subscribed to and sworn before me this 11^th day of August, 2004, by Catherine S. Cammon as Corporate Secretary of Diversified Operating Corporation.

____________________

Notary Public

My Commission expires: Address:_______________

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