REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN: This cause came on for hearing before the Commission on May 18, 1987, at 9:00 A.M. in Room 110, State Centennial Building, 1313 Sherman Street, Denver, Colorado 80203, after giving Notice of Hearing as required by law on the verified application of Medallion Petroleum, Inc., for an order establishing 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation underlying certain lands in Cheyenne County, Colorado.

FINDINGS

The Commission finds as follows:

1. Medallion Petroleum Inc., 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.

4. Evidence presented at the hearing indicates that the Morrow formation constitutes a common source of supply of oil and associated hydrocarbons underlying the following described lands in Cheyenne County, Colorado, to-wit: Township 14 South Range 42 West, 6th P.M. Section 21: All Section 27: All Section 22: All Section 28: All Section 23: All Section 33: All Section 26: All Section 34: All Section 35. All

5. In order to prevent waste of oil and gas as defined by law; to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources, an order should be made establishing 80-acre, more or less, drilling and spacing units for the production of oil and associated hydrocarbons from the Morrow formation, a common source of supply underlying the lands described herein; that the units should consist of 80-acres, more or less, and consist of theE/2 and W/2, or the N/2 and S/2, of a governmental quarter section, with the unit described by the operator of the first well drilled in the quarter section. The following however, should be the designated units: S/2 SW/4 Section 23, N/2 NE/4 Section 27, S/2 NE/4 Section 27 and the N/2 NW/4 Section 27 Township 14 South, Range 42 West 6th P.M. The permitted well for each unit should be at a location in the center of the NE/4 and SW/4 of each quarter section with a tolerance of 200 feet in any direction. Well No. 27-1 Arapahoe, located in the SE/4 NW/4 of said Section 27 should be considered an exception and be the permitted well for the unit consisting of the S/2 NW/4 of said Section 27. Well No Funk A, located in the S/2 S/2 NE/4 of said Section 26 should also be considered an exception and be the permitted well for the unit consisting of the S/2 NE/4 of said Section.

6. All available geological and engineering date concerning said Morrow formation indicate that one well will efficiently and economically drain an area of approximately 80-acres, more or less and that the drilling units of the size and shape hereinabove described are not smaller than the maximum area that can be efficiently economically drained by one well producing from said Morrow formation and

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted in the Morrow formation underlying the Arapahoe Field herein described, in addition to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith.

Rule 1. Eighty (80) acres, more or less, drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Morrow formation underlying the following described lands in the Arapahoe Field, Cheyenne County, Colorado, to-wit: Township 14 South, Range 42 West, 6th P.M. Section 21: All Section 27: All Section 22: All Section 28: All Section 23: All Section 33: All Section 26: All Section 34: All Section 35: All Rule 2. Said drilling units shall consist of 80-acres, more or less, and shall consist of the E/2 and W/2 or the N/2 and S/2 of a governmental quarter section, with the unit designated by the operator of the first well drilled in the quarter section. The following shall be the designated units: S/2 SW/4 Section 23, N/2 NE/4 Section 27, S/2 NE/4 Section 27 and the N/2 NW/4 Section 27, Township 14 South, Range 42 West 6th P.M.

Rule 3. The permitted well location shall be in the center of the NE/4 and the SW/4 of each quarter section with a tolerance of 200 feet in any direction. Well No. 27-1 Arapahoe, located in SE/4 NW/4 of said Section 27 shall be considered an exception and be the permitted well for the unit consisting of the S/2 NW/4 of said Section. Well No. Funk A, located in the S/2 S/2 NE/4 of said , Section 26 shall also be considered an exception and be the permitted well for the unit consisting of the S/2 NE/4 of said Section.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

(449-1)

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.

ENTERED this day of 1987, as of May 18, 1987.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary