REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on December 20, 1993 at 8:30 a.m. in the Boettcher Auditorium, Colorado History Museum, 1300 Broadway, Denver, Colorado, after giving Notice of Hearing as required by law, on the amended application of Skaer Enterprises, Inc., for an order approving a certain Unit Agreement and Unit Operating Agreement for the Loveland Unit, providing for unit operations and development of the reservoir consisting of t he Niobrara/Timpas/Codell Formation underlying certain lands in Larimer and Weld Counties, Colorado.

FINDINGS

The Commission finds as follows:

1. Skaer Enterprises, Inc., 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 Niobrara/Timpas/Codell Formation was encountered in the stratigraphic interval between the depths of 4420 feet and 4750 feet measured from the Kelly Bushing, in the Skaer Farms No. 3 Well located in the SW1/4 SW1/4 of Section 30, Township 5 North, Range 68 West, 6th P.M., Larimer County, Colorado, and 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 Larimer and Weld Counties, Colorado:

Township 4 North, Range 68 West, 6th P.M. Section 5: W1/2 NE1/4, NW1/4, N1/2 SW1/4, NW1/4 SE1/4 Section 6: N1/2

Township 4 North, Range 69 West, 6th P.M. Section 1: E1/2 NE1/4

Township 5 North, Range 68 West, 6th P.M. Section 19: S1/2 Section 20: W1/2 SW1/4, S1/2 S1/2 NW1/4 SE1/4, S1/2 S1/2 N1/2 SE1/4, SE1/4 SW1/4, S1/2 SE1/4 Sections 29 through 32: All

Township 5 North, Range 69 West, 6th P.M. Section 25: Small parcel in the E1/2 E1/2 SE1/4

containing 2,896 gross acres, more or less.

5. The terms and conditions provided by the Loveland 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, as described herein is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cos t incident to conducting such operations.

6. 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 Loveland Unit Area 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 Loveland 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 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.

7. At the time of the administrative hearing before the Commission, Skaer Enterprises, Inc. indicated that those persons having one-hundred percent (100%) of the working interests and eight percent (8%) of the non-cost bearing interests had approved in writing the aforementioned plan of unit operations.

8. Based on the facts stated in the verified application, the Commission should enter an order approving the Loveland Unit Agreement and Unit Operating Agreement becoming effective upon receipt of approval by eighty percent (80%) of the non-cost bearing interests.

ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1. The Loveland Unit Agreement and Unit Operating Agreement, covering lands in the Loveland Field, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.

2. The Niobrara/Timpas/Codell reservoir, common sources of supply, underlies the following lands in Larimer and Weld Counties, Colorado:

Township 4 North, Range 68 West, 6th P.M. Section 5: W1/2 NE1/4, NW1/4, N1/2 SW1/4, NW1/4 SE1/4 Section 6: N1/2

Township 4 North, Range 69 West, 6th P.M. Section 1: E1/2 NE1/4

Township 5 North, Range 68 West, 6th P.M. Section 19: S1/2 Section 20: W1/2 SW1/4, S1/2 S1/2 NW1/4 SE1/4, S1/2 S1/2 N1/2 SE1/4, SE1/4 SW1/4, S1/2 SE1/4 Sections 29 through 32: All

Township 5 North, Range 69 West, 6th P.M. Section 25: Small parcel in the E1/2 E1/2 SE1/4

containing 2896 gross acres, more or less.

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to C.R.S. Section 34-60-118, as amended, of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of involuntary unit operations for such lands.

4. Any injection well to be located in the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective upon receipt of approval by eighty percent (80%) of the non-cost bearing interests.

IT IS FURTHER ORDERED, that the Unit Operator shall advise the Commission in writing as to the effective date of commencement of operations, and submit all documentation required at that time, including Form 10, Certificate of Clearance, for each well, and further that the Unit Operator shall advise the Commission in writing as to the termination of the unit.

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

ENTERED this day of , 1994, as of December 20, 1993.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado January 9, 1994 ??

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