REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 12, 1988 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 Mull Drilling Company, Inc. et al for an order for all wells, located in the spaced area as established by Order No. 449-1, producing gas from the Morrow formation be restricted from production which have a solution gas to oil ratio of 200 to 250 MCF gas per barrel of oil or more. This matter was continued from the Commission hearing of January 13, 1988 at which time a restriction was ordered by the Commission of gas leaving the lease at 100 MCF per day, on a monthly average, for each well located in the Arapahoe Field spaced area. The restriction was ordered commencing January 14, 1988 until the ating on February 12, 1988.

FINDINGS

The Commission finds as follows:

1. Mull Drilling Company, Inc. et al as applicant herein, is an interested party in the subject matter of the above-entitled matter.

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. By Order No, 449-1, 80-acre drilling and spacing units were established for production of oil and associated hydrocarbons from the Morrow formations underlying the following described lands in Cheyenne County, Colorado: 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. By Order No. 449-3, a restriction of the gas leaving a lease at 100 MCF per day, based on a monthly average, for each well producing from the Morrow formations in the Arapahoe Field described in Finding 4 herein was established. Such gas shall be measured by an orifice and recording meter installed on the line where the gas leaves the lease.

6. Testimony presented at the hearing indicates the presence of two or more gas caps. Production information indicates varying gas oil ratios. There was indication that all operators in the field are working towards optimum production rates and are supportive of continuing production restrictions. Production restrictions should result in higher primary recovery of the hydrocarbons in place.

7. A maximum allowable of 100 MCF of gas per day, based on a monthly average, per 80-acre unit should be imposed on the production of all wells within the Arapahoe spaced area. Gas production for the purposes of determining the restrictions shall include all gas se flared or re-injected, less that amount used on the lease and should De measured by an orifice and recording meter in accordance with Rule 331 of the Colorado Oil and Gas Conservation Commission. Regular production reports should be made to the Commission in accordance with Rule 307, of the Colorado Oil and Gas Conservation Commission and copies distributed to the other operators in the field by each operator for their own wells.

8. For the determination of the monthly gas production attributable to each well, and for the case when production is to a central lease battery, each well should be allocated a theoretical production volume based on a monthly production test of the well. This will be done by calculating the theoretical production percent for each well on the lease and multiplying that percent by the total monthly lease production to give the total monthly individual well production.

9. Overproduction should be made up during the month following overproduction and should not exceed one (1) months allowable. Underproduction should be made up within two (2) months following the month of underproduction. Should more than one well produce from the same 80-acre unit, cumulative gas production from the wells should be restricted to 100 MCF per day.

10. The above restrictions and practices should remain in effect for six months at which time all operators in the field should report to the Commission at its August hearing with additional information, including production data.

ORDER

NOW, THEREFORE IT IS ORDERED, that the following rules and regulations shall apply to wells producing from the Morrow formations underlying the following described lands in the Arapahoe Field, Cheyenne County, Colorado:

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 1. Commencing February 12, 1988 a production restriction shall be imposed on each well of 100 MCF per day per 80-acre unit based on the average monthly gas production. Gas production shall mean actual wellhead production including all volumes used on the lease.

Rule 2. Such gas shall be measured by an orifice and recording meter installed on the line where such gas leaves the lease in accordance with Rule 331 of the Rules and Regulations of the Oil and Gas Conservation Commission. Reports shall be made monthly to the Commission in accordance with Rule 307 of the Rules and Regulations of the Oil and Gas Conservation Commission, and copies distributed in a timely fashion to all other operators in the field by each operator for their own wells.

Rule 3. Each well shall be tested on a monthly basis.

Rule 4. Overproduction of the allowable shall be made up during the month following overproduction. Overproduction shall not exceed one (1) Month's production. Underproduction shall be made up within two (2) months following the month of underproduction or be lost.

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(449-5)

Rule 5. Should more than one well be produced from the same 80-acre spaced unit, cumulative gas production from the wells shall be restricted to 100 MCF per day.

IT IS FURTHER ORDERED that, the restriction shall remain in effect for a period of six months until the August hearing of the Commission and that operators and any interested party in the Arapahoe Field shall appear with additional information including production data thru July 31, 1988.

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

IT IS FURTHER ORDERED, that the Commission expressly reserves its rights, after notice of hearing, to alter, amend or repeal any and/or all of the above order. Entered this day of March 1988, as of February 12, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

(449-5)