Order No. 349-5

IN THE MATTER Of THE PROMULGATION AND ESTABLISHMENT Of FIELD RULES TO GOVERN OPERATIONS IN THE SORRENTO FIELD,

Cause No. 349 Order No. 349-5

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 16, 1984 at 9:00 A.M., in Room 110, State Centennial Building, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Mull Drilling Co., which was amended, for an order approving a certain Unit Agreement and Unit Operating Agreement for the Mull Unit/Sorrento Field, providing for involuntary unit operations of the reservoir consisting of the Morrow formation underlying certain lands in the Sorrento Field, Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Mull Drilling Co., as applicant herein, is an interested party in the subject matter of the above-referenced hearing.

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. The Morrow formation of Pennsylvanian Age was encountered in the interval between the depths of 5528 feet to 5570 feet in Well No. 13-33 McCormick, located in the NW/4SW/4 Section 33, Township 13 South, Range 49 West, 6th P.M. Said Morrow formation, as so encountered, is a common source of supply and has been defined and determined by drilling, to be productive underlying the following described lands in Cheyenne County, Colorado, to-wit:

Township 13 South, Range 49 West, 6th P.M. Section 32: All Section 33: S/2 Township 14 South, Range 49 West, 6th P.M. Section 3: W/2 Section 4: All Section 5: NE/4, E/2SE/4 Section 9: All Section 10: W/2

5. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, providing for the conduct of operations to recover oil and gas is necessary to increase the ultimate recovery and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

6. The formula for determining tract participation is based on several factors as shown in Exhibit "A" of the Unit Agreement. .

7. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Mull Unit/Sorrento Field of all the oil and gas that is produced from said Unit Area and is saved;

d. The provision for the credits and charges to be made in the adjustment among the owners in the Mull Unit/Sorrento Field Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;

e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which each person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

8. Re-injection of produced gas from the Morrow formation underlying said unit area should be allowed in order to prevent waste and promote conservation and maintain pressure maintenance in the reservoir.

9. Well No. 13 McCormick 11-3, located in the NW/4NW/4, Well No. 11 McCormick 22-3, located in the SE/4NW/4, Well No. 6 McCormick 24-3, located in the SE/4SW/4, all in Section 3 and Well No. 12 McCormick 11-9, located in the NW/4NW/4 Section 9, Township 14 South, Range 49 West, should be excluded from the unit. 10. The approval of the unit plan of operations should not become effective unless, or until the Applicant demonstrates, by affidavit submitted to the Director of the Commission, that persons owning the required percentages of interest in the unit area approve said agreement. 11. Provisions of Order No. 349-1, establishing 80-acre drilling and spacing units and Order No. 349-4 providing for restrictions on production from the Morrow formation should be rescinded for the Unit Area herein described.

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ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1. The Unit Agreement and Unit Operating Agreement covering the Morrow formation of Pennsylvanian age underlying lands in the Mull Unit/Sorrento Field are hereby approved as being in the public interest for conservation.

2. Said Morrow formation reservoir is a common source of supply and underlies the following described lands in Cheyenne County, Colorado, to-wit:

3. Well No. 13 McCormick 11-3, located in the NW/4NW/4, Well No. 11 McCormick 22-3, located in the SE/4NW/4, Well No. 6 McCormick 24-3, located in the SE/4SW/4, all in Section 3 and Well No. 12. McCormick 11-9, located in the NW/4NW/4 Section 9, Township 14 South, Range 49 West, shall be excluded from the unit.

4. A re-injection project of produced gas from the unit reservoir, as presented by the Applicant, is hereby approved and the operator is authorized to commence and maintain such a project upon approval of the Director.

5. The conduct of operations for the recovery of oil and gas from the Morrow formation underlying said Unit Area is hereby approved as being necessary to increase the ultimate recovery from such reservoir and prevent waste.

IT IS FURTHER ORDERED, that the provisions of Order No. 349-1, establishing 80-acre drilling and spacing units and Order No. 349-4 providing for restrictions on production from the Morrow formation are hereby rescinded for the Unit Area, herein described.

IT IS FURTHER ORDERED, that the plan of unit operations shall not become effective unless, or until the persons owning the required percentages of interests in the unit approve said plan.

IT IS FURTHER ORDERED, that within six (6) months from the date of this order, and upon affidavit submitted to the Director of the Commission by the unit operator, and stating that the approval of the required percentage of interest for the plan of unit operations has been obtained, the plan for unit operations shall become effective. In the event such approval has not been obtained within this period of time, or an extended period of time as provided in the statute, the approval of the Commission for the plan of unit operations shall become ineffective and this order shall be revoked.

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 right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

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ENTERED this 13th day of August 1984, as of July 16, 1984

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

(349-5)