IN THE MATTER OF THE PROMULGATION AND          CAUSE NO. 407
ESTABLISHMENT OF FIELD RULES TO GOVERN
OPERATIONS IN THE CODELL NIOBRARA                    ORDER NO. 407 236
SPACED AREA, WELD COUNTY, COLORADO

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on July 1, 1997, 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 and Gas Company, to amend Order No. 407 1 to segregate the WSW (Lot 4) of Section 6, Township 3 North, Range 64 West, 6th P.M. into two separate and distinct drilling and spacing units consisting of one 40-acre drilling unit in the SW SW (S of Lot 4) and one 29.40 acre drilling and spacing unit in the NW SW (North 29.40 acres of Lot 4) of said Section 6, for production from the Codell and Niobrara Formations

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 E and W or the N and S 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 option 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. Section 6, Township 3 North, Range 64 West, 6th P.M., Weld County, Colorado lies within the area spaced by these orders.

5. The Faramir Farms No. 6-1 RC Well located in the SWSW of Section 6, Township 3 North, Range 64 West, 6th P.M., was completed as a producing well in the Codell and Niobrara Formations prior to the issuance of Order No. 407-1 and has been continuously operated and produced from the 40-acre drilling and spacing unit consisting of the south 40 acres of Lot 4.

6. The Faramir Farms No. 6-32 Well located in the north 29.40-acres of Lot 4 (NWSW) of Section 6, Township 3 North, Range 64 West, 6th P.M., has been drilled and completed by Prima Oil & Gas Company for production from the Codell and Niobrara Formations, and payment to royalty owners in this irregular quarter quarter section has not yet occurred.

7. Testimony presented at the administrative hearing indicated that drainage radii between 7.14 acres and 8.10 acres have been calculated for cumulative gas production for the two wells in the W SW of Section 6 and that drainage radii for ultimate gas recovery has been calculated for the Faramir Farms No. 6-1 Well to be 19.66 acres and for the Faramir Farms No. 6-32 to be 28.10 acres

8. The Faramir Farms No. 6-1 Well located in the SW SW and the Faramir Farms No. 16-32 Well located in the NW SW of said Section 6 should be approved as the permitted wells for the 40-acre drilling and spacing unit and the 29.40 drilling and spacing unit.

9. At the time of the administrative hearing, Prima Oil & Gas Company agreed to be bound by oral order of the Commission.

10. Based on the facts stated in the application, having received no protests, and having been heard by the Hearing Officer who recommends approval, the Commission should enter an order approving the request to amend Order No. 407 1 to segregate the WSW (Lot 4) of Section 6, Township 3 North, Range 64 West, 6th P.M. into two separate and distinct drilling and spacing units consisting of one 40-acre drilling unit in the SW SW (S of Lot 4) and one 29.40 acre drilling and spacing unit in the NW SW (North 29.40 acres of Lot 4) of said Section 6, for production from the Codell and Niobrara Formations with the Faramir Farms No. 6-1 RC Well located in the SWSW of Section 6, Township 3 North, Range 64 West, 6th P.M., as the permitted well for the south 40 acres of Lot 4 and the Faramir Farms No. 6-32 Well located in the NWSW of Section 6, Township 3 North, Range 64 West, 6th P.M., the permitted well for the north 29.40-acres of Lot 4.

O R D E R

NOW, THEREFORE, IT IS ORDERED, that Order No. 407 1 shall be amended to segregate the 80-acre drilling and spacing unit consisting of the WSW (Lot 4) of Section 6, Township 3 North, Range 64 West, 6th P.M. into two separate and distinct drilling and spacing units consisting of one 40-acre drilling unit in the SW SW (S of Lot 4) and one 29.40 acre drilling and spacing unit in the NW SW (North 29.40 acres of Lot 4) of said Section 6, for production from the Codell and Niobrara Formations.

IT IS FURTHER ORDERED, that the Faramir Farms No. 6-1 RC Well located in the SWSW of Section 6, Township 3 North, Range 64 West, 6th P.M., shall be the permitted well for the south 40 acres of Lot 4.

IT IS FURTHER ORDERED, that the Faramir Farms No. 6-32 Well located in the NWSW of Section 6, Township 3 North, Range 64 West, 6th P.M., shall be the permitted well for the north 29.40-acres of Lot 4.

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 18th day of July, 1997, as of July 1, 1997.

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 July 3, 1997

(407-236)