REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 19, 1990 at 8:30 a.m., in Room 101, State Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of Timka Resources, Ltd., for an order approving a certain Unit Agreement and Unit Operating Agreement for a Dakota Sandstone Formation Unit Area, providing for unit operations of the reservoir consisting of the Dakota Sandstone underlying certain lands in the Berthoud Field, Larimer County, Colorado.

FINDINGS

The Commission finds as follows:

1. Timka Resources, Ltd., 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 Dakota Sandstone was encountered in the interval between the depths of 3914 feet to 3896 feet in the well Berthoud State No. 3 located 1650 feet FSL and 1980 feet FWL Section 16, Township 4 North, Range 69 West, 6th P.M., Larimer County, Colorado. Said Dakota Sandstone, 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 County, Colorado, to-wit:

Township 4 North, Range 69 West, 6th P.M. Section 16: All

containing 640 acres, more or less.

5. The Colorado State Board of Land Commissioners is the sole owner of the minerals of said Section 16.

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6. 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 a secondary recovery program by the injection of water into the Dakota Sandstone reservoir underlying the Unit Area, 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 cost incident to conducting such operations.

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 operated;

b. The nature of said operation;

c. The allocation to the separately owned tracts in the Dakota Sandstone 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 owners in the Dakota Sandstone Unit Area for their respective investments in wells, tanks, pumps, machinery, material, and equipment contributed to the unit operations;

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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 of the unit operations, in respect to which each person shall have a vote of 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 circumstance under which the unit operations shall terminate.

8. Testimony presented to the Hearing Officer indicated that said Unit Agreement and Unit Operating Agreement have been approved in writing by 100% of the working interest owners and 100% by the owners of the production and proceeds attributable to royalty, overriding royalty and productive payments.

9. The Hearing Officer recommends approval of the Unit Agreement and Unit Operating Agreement.

O R D E R

NOW, THEREFORE, IT IS ORDERED:

1. The Unit Agreement and Unit Operating Agreement covering lands in the Dakota Sandstone Unit Area, 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 Dakota Sandstone reservoir, common source of supply underlies the following lands in Larimer County, Colorado, to-wit:

Township 4 North, Range 69 West, 6th P.M. Section 16: All

containing 640 acres, more or less.

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to 34-60-118 of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as

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the Commission's plan of involuntary unit operations for such lands.

4. The secondary recovery project by the injection of water into the Dakota Sandstone reservoir of the Unit Area, as presented by the applicant, is hereby approved as being necessary to increase the ultimate recovery from said reservoir, and the operator is authorized to inject into said reservoir through injection wells in such quantities as shall be reasonably determined by the operator to best achieve the maximum recovery of oil without waste.

5. In the event that it becomes necessary in the future to convert additional producing wells to input wells; to plug and abandon certain wells in the Unit Area, or to drill additional producing or input wells as dictated by developments in the course of the operations of the waterflood, the Unit Operator is authorized to make such changes in the operation of the project as may be required to facilitate the efficient development thereof.

6. All injection wells shall be approved by the Director in accordance with the rules and regulations of the Commission.

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7. The following existing wells are the only wells included in the unit at the time of approval:

State Deines #2 SE/NW - Section 16 Berthoud State #1 NW/SW - Section 16 Berthoud State #3 NE/SW - Section 16

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective April 1, 1990.

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.

ENTERED this day of ,

1990, as of March 19, 1990.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

Dated at Suite 380 1580 Logan Street Denver, Colorado 80203

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