REPORT TO THE COMMISSION

This cause came on for hearing before the Commission on November 19, 1984 at 9:00 a.m., in Suite 380, Logan Tower Building, 1580 Logan Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of R. E. Hibbert for an order pursuant to 34-60-116, C.R.S. 1973, as amended, pooling interests in the 40-acre unit consisting of the SW/4NW/4 of Section 26, Township 2 South, Range 53 West, 6th P.M., for the development of oil and associated hydrocarbons from the "J" Sand underlying said unit.

FINDINGS

The Commission finds as follows:

1. R. E. Hibbert, as applicant herein (hereinafter "Applicant"), is an interested party in the subject matter of the above-referenced hearing by virtue of his present ownership of a leasehold working interest in the subject lands.

2. Sundance Exploration Company, as Protestant herein (hereinafter "Protestant"), is an interested party in the subject matter of the above-referenced hearing by virtue of its present ownership of a leasehold working interest in the subject lands.

3. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

4. The C,ommission has jurisdiction over the subject matter embraced in the notice of the aforesaid hearing, and of the parties interested therein, as well as jurisdiction to promulgate the hereinafter prescribed order.

5. The Commission has previously established a 40-acre drilling and spacing unit for "J" Sand production covering the SW/4NW/4 of Section 26, Township 2 South, Range 53 West, 6th P.M. (hereinafter the "Spacing Unit").

6. An order by the Commission pooling all interests in the Spacing Unit has been applied for and is necessary in order to protect correlative rights and to afford each owner of an interest in the Spacing Unit the opportunity to recover and receive his just and equitable share of the oil and gas and associated hydrocarbons from the common source of supply underlying said unit.

7. Production obtained from the Spacing Unit should be allocated to each working interest owner therein on the basis of the proportion that the number of net mineral acres owned by each owner bears to the total number of mineral acres within said unit.

8. Evidence was presented at the hearing, and the parties agree, that there are separately and undividedly owned interests in the Spacing Unit and the interest of each working interest owner in the Spacing Unit is as follows: R. E. Hibbert, Applicant, undivided 56,%; Sundance Exploration Company, Protestant, undivided 50%.

9. Protestant, Sundance Exploration Company, has consented to the pooling of the interests within the Spacing Unit but has objected to the imposition of any penalty under 34-60-116 (7) (b), C.R.S. 1973, as amended on the grounds that it was not offered an opportunity to elect whether to participate in the proposed drilling operation nor was it given sufficient information in the form of an AFE or other comment on which to base such an election, prior to the drilling of the subject well.

10. Applicant has drilled a well in the Spacing Unit but did not make a prima facie case that it offered Protestant the opportunity to participate in the drilling of such well, or that it notified Protestant of the estimated cost of drilling such well or of supervision and storage. The only offer made to Protestant was an oral offer that Protestant "farmout" its interest in the Spacing Unit.

ORDER

NOW, THEREFORE, IT IS ORDERED that:

1. Pursuant to the provisions of 34-60-116, C.R.S., 1973, as amended, of the Oil and Gas Conservation Act of the State of Colorado, all interests in the,drilling and spacing unit consisting of the SW/4NW/4 Section 26, Township 2 South, Range 53 West, 6th P.M., Midnight Field, Washington County, Colorado, ("the Spacing Unit") are hereby pooled for the operation and development of oil and associated hydrocarbons from the "J" Sand underlying said unit.

2. The production obtained from the Spacing Unit shall be allocated to each mineral owner in the unit in proportion to the total number of mineral acres within said unit; each owner of an interest in Spacing Unit shall be entitled to receive his share of the production the well located in the unit applicable to his mineral ownership interest in said unit.

3. The cost of the well already drilled in the Spacing Unit, including any supervision and storage cost and all future operations, shall be borne 50% by Applicant and 50% by Protestant, without penalty to Protestant, and

subject to the requirement that such costs shall be reasonable as required by law. Applicant shall be

the operator of such well.

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 and/or all of the above orders.

ENTERED this 7th day of January 1985, nunc pro tunc as of November 19, 1984.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE COLORADO

By Frank J. Piro, Secretary 2 -(420-2)