BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

REPORT OF THE COMMISSION

The Commission heard this matter on May 29, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 80-acre drilling and spacing unit, and authorize one or more vertical wells within the unit, for Section 12, Township 7 North, Range 64 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Noble Energy, Inc. (“Noble” or “Applicant”), 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 pursuant to the Oil and Gas Conservation Act.

4.         On April 27, 1998, the Commission adopted Rule 318A, which, among other things, established drilling windows and allowed certain drilling locations to be utilized to drill or twin a well, deepen a well or recomplete a well and to commingle any or all of the Cretaceous Age Formations from the base of the Dakota Formation to the surface.  Rule 318A (a)(4)(C) allows an operator to designate a drilling and spacing unit not smaller than a governmental quarter-quarter section if the well is proposed to be located greater than 460 feet from the quarter-quarter section boundary in which it is located.  Pursuant to Rule 318A.k., Rule 318A supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of GWA wells.  Section 12, Township 7 North, Range 64 West, 6^th P.M. is subject to this Rule for the Codell-Niobrara Formation.

5.         On February 16, 2012, Noble Energy, Inc. (“Noble” or “Applicant”), by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to: 1) establish an approximate 80-acre drilling and spacing unit (“DSU #1”) for the below-described lands, for the production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations; and 2) establish an approximate 160-acre drilling and spacing unit (“DSU #2”) for the below-described lands (collectively “Application Lands”), for the production of oil, gas and associated hydrocarbons from the “J” Sand Formation, and authorize a vertical well in each unit with the option to drill and complete additional wells in the drilling and spacing units pursuant to current Rule 318A, with surface locations pursuant to 318A or subject to a surface use agreement with the appropriate surface owner(s), and the treated interval of the wellbore to be located no closer than 460 feet from the boundaries of the applicable drilling and spacing unit:

Township 7 North, Range 64 West, 6^th P.M.

Section 12:      E½ SE¼         (80-acre – Codell and Niobrara – “DSU #1”)

Section 12:      SE¼                (160-acre – J-Sand – “DSU #2”)

6.         On March 30, 2012, Noble requested, and Commission Staff granted, a continuance to the May 29, 2012 hearing.

7.         On May 15, 2012, Noble, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.

8.         Land testimony and exhibits submitted in support of the Application by Joseph H. Lorenzo, Senior Land Manager for Noble, showed: 1) Noble has a 75% mineral interest in the Application Lands; 2) the Application Lands are private fee leases; and 3) interested parties received proper notice of the Application. This testimony also claimed that Noble was withdrawing its request for establishment of a 160-acre drilling and spacing unit for the SE¼ of Section 12, Township 7 North, Range 64 West, 6^th P.M, from the Application Lands.

9.         Geologic testimony and exhibits submitted in support of the Application by Ron Pritchett, Senior Geologist for Noble, showed that the Codell Formation is a sandstone reservoir and the Niobrara Formation is both a hydrocarbon source rock and a reservoir; both underlying the Application Lands.  An isopach map of the Codell Formation showed total thickness ranges from approximately 12 to 14 feet, with a structural dip of approximately one-half degree to the southwest, and the reservoir-scale test of permeability ranges between 19.5 to 35.5 microdarcies for the Application Lands.  An isopach map of the Niobrara Formation showed total thickness ranges from approximately 287 to 294 feet in the Application Lands.  A correlation cross-section showing Codell and Niobrara thickness and reservoir log properties showed the Codell and Niobrara Formations to be consistent, continuous, and underlying all of the Application Lands as a common source of supply.

10.       Engineering testimony and exhibits submitted in support of the Application by Ryan Sullivan, Engineering Team Lead for Noble, showed that the Walcker AB12-09 Well has produced 2001 BOE to date.  The estimated ultimate recovery of this well will range between 15 to 25 MBOE based upon offset data.  The Well is located in an unspaced area of the GWA, and wells with similar EURs in offset sections are spaced on 80-acre spacing.  The testimony concluded that the Application lands should have 80-acre spacing for the Codell-Niobrara Formation.

11.       The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

12.       Noble agreed to be bound by oral order of the Commission. 

13.       Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to establish an approximate 80-acre drilling and spacing unit, and authorize one or more vertical wells within the unit, for Section 12, Township 7 North, Range 64 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 80-acre drilling and spacing unit is hereby established for the below-described lands, for the production of oil, gas and associated hydrocarbons from the Codell-Niobrara Formation, and one or more vertical wells, are hereby approved for the unit, with surface locations consistent with Rule 318A or subject to a surface use agreement with the appropriate surface owner(s), and the treated interval of the wellbore to be located no closer than 460 feet from the boundaries of the applicable drilling and spacing unit:

Township 7 North, Range 64 West, 6^th P.M.

Section 12:      E½ SE¼        

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

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.

IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 30 days after the date this Order is mailed by the Commission.

IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this   4^th  day of June, 2012, as of May 29, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Peter J. Gowen, Acting Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

June 4, 2012