REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on March 18, 1996, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the application of Prima Oil & Gas Company, to allow the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of Section 6, Township 4 North, Range 65 West, 6th P.M. to be segregated into two 40-acre drilling and spacing units for production from the Codell and Niobrara Formations underlying the 80-acre drilling and spacing unit.

FINDINGS

The Commission finds as follows:

1. Prima Oil & Gas Company, as applicant herein, is an interested party in the subject matter of the above-entitled 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. On December 19, 1983, the Commission authorized Order No. 407-1 to be issued which established 80-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Codell Formation. The units consist of the E1/2 and W1/2 or the N1/2 and S1/2 of each governmental quarter-quarter section. The permitted well shall be located in the center of either 40-acre tract within the unit, with a tolerance of 200 feet and the opti on to drill an additional well in the undrilled 40-acre tract. Subsequent Order No. 407-10 included the Niobrara Formation and allowed downhole commingling of production from the Codell and Niobrara Formations. The SW1/4 of Section 6, Township 4 North, Range 65 West, 6th P.M., Weld County, Colorado lies within the area spaced by these orders.

5. The McCarthy No. 6-1 Well and the McCarthy No. 6-33 Well have been drilled in the SE1/4 SW1/4 and in the SW1/4 SW1/4 of said Section 6 to establish production from the Codell and Niobrara Formations.

6. Testimony presented at the administrative hearing indicated that the McCarthy No. 6-1 Well was drilled prior to 1983, prior to the issuance of Order No. 407-1, and payout on this well has always been on a 40-acre basis.

7. Based on the facts stated in the application and testimony presented at the hearing, the Commission should approve the request and amend Order Nos. 407-1 and 407-10 to segregate the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 and establish two 40-acre units consisting of the SE1/4 SW1/4 and SW1/4 SW1/4 of said Section 6 for the commingled production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with i two existing wells designated as the permitted wells for the 40-acre units.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that the 80-acre drilling and spacing unit consisting of the S1/2 SW1/4 of Section 6, Township 4 North, Range 65 West, 6th P.M., Weld County, Colorado is hereby segregated into two 40-acre drilling and spacing units consisting of the SE1/4 SW1/4 and the SW1/4 SW1/4 for the commingled production of oil, gas and associated hydrocarbons from the Codell and Niobrara Formations, with the two existing wells designated as the permi tted wells for the 40-acre units.

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 with the verbal consent of the interested parties at the time of hearing, this order shall become effective forthwith.

ENTERED this 29th day of March 1996, as of March 18, 1996.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1110 Lincoln Street Denver, Colorado 80203 March 29, 1996