REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on September 21, 1987, at 9:00 A.M., in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of TXO Production Corporation, for an order approving a certain Unit Agreement and Unit Operating Agreement for the Southwest Stockholm South (Morrow) Unit Area, providing for unit operations of the reservoir consisting of the Morrow formation underlying that portion of the lands in the unit area located in Cheyenne County, Colorado. The remaining area is located in Greeley County, Kansas.

FINDINGS

The Commission finds as follows:

1. TXO Production Corporation, as applicant 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. The Morrow formation was encountered in the interval between the depths of 5125 feet to 5172 in Well No 5 Otis, located in the C NE/4 NE/4 Section 12, Township 16 South, Range 43 West, 6th P.M., Greeley County, Kansas as so encountered, is a common source of supply and has been defined and determined by drilling, to be productive underlying the following described lands in Cheyenne County, Colorado.

Township 16 South, Range 41 West, 6th P.M. Section 8: Lots 5 and 6 (ada. S/2)

The remaining lands in the Unit Area are located in Greeley County, Kansas and consists of the following described lands:

Township 16 South, Range 43 West, 6th P.M. Section 11: All Section 12: N/2, SW/4

5. The terms and conditions provided by the Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, providing for a secondary recovery program by the injection of water into the Morrow formation reservoir underlying the Southwest Stockholm South (Morrow) Unit Area, as described herein is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

6. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following: a. The description of the pool to be so operated; b. The nature of said operation; c. The allocation to the separately owned tracts in the Southwest Stockholm South (Morrow) Unit Area of all the oil and gas that is produced from said Unit Area and is saved; d. The provision for the credits and charges to be made in the adjustment among the owners in the Southwest Stockholm South (Morrow) Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations; e. The provision providing how the costs of unit operations, including capitol investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs; f. The provision for the supervision and conduct of the unit operations, in respect to which person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

7. That lots 5 and 6 (ada. S/2) Section 8, Township 16 South, Range 41 West, 6th P.M. should be deleted from the spacing provisions as established by Order No. 442-1.

ORDER

NOW, THEREFORE, IT IS ORDERED:

1. The Unit Agreement and Unit Operating Agreement covering lands in the Southwest Stockholm South (Morrow) Unit Area, which agreements are attached to, and made a part of the original order of this Commission on file in the off the Commission, are approved as being in the public interest for conservation.

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2. The Morrow reservoir, common source of supply, underlies the following lands in Cheyenne County, Colorado: Township 16 South, Range 41 West, 6th P.M. Section 8: Lots 5 and 6 (ada. S/2)

The remaining lands in the Unit Area are located in Greeley County, Kansas and consists of the following described lands:

Township 16 South, Range 43 West, 6th P.M. Section 11: All Section 12: N/2, SW/4

3. The provisions contained in said Unit Agreement and Unit, Operating Agreement as they pertain to 34-60-118 of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of unit operations for such lands.

4. The secondary recovery project by the injection of water into the Morrow Reservoir of said Unit Area, as presented by applicant, is hereby approved as being necessary to increase the ultimate recovery from said reservoir.

5. Any injection well to be located in the Colorado portion of the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

IT IS FURTHER ORDERED, that lots 5 and 6 (ada. S/2) Section 8, Township 16 South, Range 41 West, 6th P.M. are hereby deleted from the spacing provisions as established by Order No. 442-1.

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 rights, after notice and hearing, to alter, amend or repeal any and/or all of the above orders. ENTERED this 16th day of October 1987, as of September 21, 1987.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

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