REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on March 18, 1994 in Room 318, State Centennial Building, 1313 Sherman Street, Denver, Colorado on the application of Vessels Oil and Gas Company for an order to amend Cause Nos. 232 and 407 to allow the Dinner No. 18-4b Well to be drilled at an exception location 1942 feet FNL and 2142 feet FEL in the SW1/4 NE1/4 of Section 18, Township 4 North, Range 65 West, 6th P.M. for production from the "J" Sand Formation, for the 320-acre drilling and spacing unit consisting of the N1/2 of said Section 18. In addition, the applicant requests approval for recompletion of the well to the Codell and Niobrara Formations for the 80-acre drilling and spacing unit consisting of the W1/2 NE1/4 of Section 18 for production from the Codell and Niobrara Formations, and to allow the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations.

FINDINGS

1. Vessels Oil and Gas Company, 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. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand Formation in the Wattenberg Field with one well allowed for each unit to be located in the NE1/4 and SW1/4 and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit, including Section 18, Township 4 North, Range 65 West, 6th P.M.

5. 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 downhole commingling of production from the Codell and Niobrara Formations, including Section 18, Township 4 North, Range 65 West, 6th P.M.

6. In Order Nos. 407-66 and 232-47, the Commission, among other things, allowed the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, including Section 18, Township 4 North, Range 65 West, 6th P.M.

7. This matter was heard by the Hearing Officers who recommend approval based upon the testimony presented at the administrative hearing that the location of the well at an exception location would minimize surface impacts to the irrigation system, and that a well drilled at the permitted location for production from only the "J" Sand Formation would not be economic.

8. No objections to the application were received and an order of the Commission should be entered allowing the Dinner No. 18-4b Well to be drilled at an exception location 1942 feet FNL and 2142 feet FEL in the SW1/4 NE1/4 of Section 18, Township 4 North, Range 65 West, 6th P.M. for production from the "J" Sand Formation, for the 320-acre drilling and spacing unit consisting of the N1/2 of said Section 18. In addition, the

order should approve the recompletion of the well to the Codell andNiobrara Formations for the 80-acre drilling and spacing unit consisting ofthe W1/2 NE1/4 of Section 18 for production from the Codell and Niobrara Formations, and allow the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations.

O R D E RIT IS FURTHER ORDERED, that an exception is hereby granted to the spacing pattern established in Cause Nos. 232, for a well to be drilled and completed at an exception location 1942 feet FNL and 2142 feet FSL in the SW1/4 NE1/4 of Section 18, Township 4 North, Range 65 West, 6th P.M., for production from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the N1/2 of Section 18.

IT IS FURTHER ORDERED, that approval for recompletion to the Codell and Niobrara Formations for the 80-acre drilling and spacing unit consisting of the W1/2 NE1/4 of Section 18 is hereby granted, and for the downhole commingling of production from the "J" Sand, Codell, and Niobrara Formations.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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.

ENTERED this day of , 1994, as of March 18, 1994.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By

Patricia C. Beaver, Secretary Dated at Suite 380 1580 Logan Street Denver, Colorado 80203 March 24, 1994

(232#107)

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