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

REPORT OF THE COMMISSION

The Commission heard this matter on March 25, 2013, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve two additional wells, up to a total of six horizontal wells within an approximate 640-acre exploratory drilling and spacing unit established for Section 3, Township 7 North, Range 62 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Carrizo Oil and Gas, Inc. (“Carrizo” 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, 1988, the Commission adopted Rule 318A which, among other things, 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 Cretaceous Age Formations from the base of the Dakota Formation to the surface.  Rule 318A supersedes all prior Commission drilling and spacing orders affecting well location and density requirements of Greater Wattenberg Area wells.  On December 5, 2005, Rule 318A was amended, among other things, to allow interior infill and boundary wells to be drilled and wellbore spacing units to be established.  On August 8, 2011, Rule 318A was again amended, among other things, to address drilling of horizontal wells.  Section 3, Township 7 North, Range 62 West, 6^th P.M. is subject to Rule 318A for the Niobrara Formation.

5.         On May 29, 2012, the Commission entered Order Nos. 407-642 and 535-163 which, among other things, established four approximate 640-acre drilling and spacing units, and authorized up to four horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of any horizontal well to be no closer than 460 feet from the boundaries of the unit.  Section 3, Township 7 North, Range 62 West, 6^th P.M. is subject to this Order for the Niobrara Formation. 

6.         On December 13, 2012, Carrizo, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”), for an order to approve two additional wells, for a total of six horizontal wells within the approximate 640-acre exploratory drilling and spacing unit established for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries, and no closer than 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 7 North, Range 62 West, 6^th P.M.

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7.         On January 29, 2013, Carrizo, 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.         On February 5, 2013, the Secretary of the Commission continued the matter to the March 25, 2013 hearing.

9.         On March 8, 2013, Carrizo, by its attorneys, filed with the Commission a second 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.

10.       Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager for Carrizo, showed the Applicant is an owner with the right to drill in the Application Lands.

11.       Geologic testimony and exhibits submitted in support of the Application by Paul Fears, DJ Basin Geologist for Carrizo, included Stratigraphic cross-sections and gross thickness isopach tests showing the Niobrara Formation is approximately 300 feet thick and to be consistent, continuous, and underlying all of the Application Lands.

12.       Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Manager of Reservoir Engineering for Carrizo, showed an estimated ultimate recovery (“EUR”) of 200 MBO and a drainage area estimated at 70-acres, for analogous type wells drilled by Carrizo within its Weld County operational area.  Testimony further showed drainage estimates for the best 35 horizontal wells in the nearby Silo Field varied from 41 to 356-acres, with an average of 78-acres.  Testimony concluded the economics of the project were sound.

13.       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.

14.       Carrizo agreed to be bound by oral order of the Commission. 

15.       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 approve two additional wells, up to a total of six horizontal wells within an approximate 640-acre exploratory drilling and spacing unit established for Section 3, Township 7 North, Range 62 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that a total of up to six horizontal wells, are hereby approved, within the approximate 640-acre exploratory drilling and spacing unit established for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 460 feet from the unit boundaries, and no closer than 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 7 North, Range 62 West, 6^th P.M.

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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   5^th   day of April, 2013, as of March 25, 2013.      

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary