REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on January 18, 1996, at 8:30 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Vessels Oil & Gas Company for an order allowing the drilling of up to four (4) wells in each of the existing 160-acre spacing units to be completed for the production of gas and associated hydrocarbons from the S hannon Formation for certain lands located in the Spindle Field, to commingle production from the Shannon Formation with the Codell, Niobrara and Sussex Formations, and to allocate production from these formations on the basis of 160-acre drilling and spacing units.

FINDINGS

The Commission finds as follows:

1. Vessels Oil & Gas Company as applicant herein, is an interested party in the subject matter of the above-referenced matter.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. The Commission has jurisdiction over the subject matter embraced in said Notice and of the parties interested therein, and jurisdiction to promulgate the hereinafter prescribed order.

4. On February 16, 1979, the Commission authorized Order No. 250-22 to be issued which, among other things, established 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the Shannon Formation underlying certain lands in the Spindle Field in Weld County, Colorado. The units shall consist of a governmental quarter section, with the permitted well to be located in the SE1/4 of each quarter section, with a toler ance of 200 feet in any direction.

5. Subsequent orders issued by the Commission allowed an additional well to be drilled for production from the Shannon Formation on 80-acre drilling and spacing units and on 40-acre drilling and spacing units. These orders also authorized the downhole commingling of production from the Sussex and Shannon Formations. On September 21, 1992, the Commission issued Order No. 250-33, which allowed the drilling of an additional well for production from the Shannon Formation on the 160-acre drilling and spacing units in the NE1/4, NW1/4 and SE1/4 of Section 30, Township 2 North, Range 68 West, 6th P.M., a portion of the lands included in this application. The lands included in this application, therefore, are subject to orders allowing either one or two wells per quarter section, while other lands subject to Cause No. 250 are subject to orders allowing four wells per quarter section.

6. In Order No. 407-1, the Commission established 80-acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40-acre tract or quarter-quarter section with a tolerance of 200 feet in any direction. Subsequent orders of the Commission amended Order No. 407-1 to include production from the Niobrara Formation in certain lands and to allow the do wnhole commingling of production from the Codell and Niobrara Formations, including in the lands described in Finding 7.

7. Evidence presented at the administrative hearing indicated that the quality of Sussex and Shannon Formations was poor in the below-listed lands, and that a well drilled only for Sussex and Shannon Formation production would not be economic.

Township 2 North, Range 68 West, 6th P.M. Section 19: All Section 30: All

Township 2 North, Range 69 West, 6th P.M. Section 24: All Section 25: All

8. Vessels Oil & Gas Company wishes to drill for Codell and Niobrara Formation production in the above-described lands and evaluate the Sussex and Shannon Formations during the drilling of the wells. Approval of the Application would make the spacing and well location uniform for the four (4) formations and allow for multiple completions in the same wellbore.

9. Based on the facts stated in the verified application and having been heard by the Hearing Officer who recommends approval of the application, and having received no protests, the Commission should approve the request to drill up to four (4) wells in each of the existing 160-acre spacing units to be completed for the production of gas and associated hydrocarbons from the Shannon Formation for the lands described in Finding 7 located in the Spindle Fi eld, to commingle production from the Shannon Formation with the Codell, Niobrara and Sussex Formations, and to allocate production from these formations on the basis of 160-acre drilling and spacing units.

O R D E R

NOW, THEREFORE IT IS ORDERED, that up to four (4) wells may be drilled in each of the existing 160-acre spacing units in the below-listed lands, for the production of gas and associated hydrocarbons from the Shannon Formation, to commingle production from the Shannon Formation with the Codell, Niobrara and Sussex Formations, and to allocate production from these formations on the basis of 160-acre drilling and spacing units.

Township 2 North, Range 68 West, 6th P.M. Section 19: All Section 30: All

Township 2 North, Range 69 West, 6th P.M. Section 24: All Section 25: All

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

IT IS FURTHER ORDERED, that the Commission expressly reserves its rights, after notice and hearing to alter, amend or repeal any and/or all of the above orders.

Entered this day of , 1996 as of January 18, 1996.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 February 6, 1996 ??

(250-37)