REPORT OF THE COMMISSION

TO ALL INTERESTED PARTIES AND TO WHOM IT MAY CONCERN:

This cause came on for hearing before the Commission on August 17, 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 Diversified Operating Corporation, which was amended at the time of hearing to delete Sections 3 and 10, T8N-R58W-6th P.M., from the requested spaced area, for an order establishing 80-acre drilling and spacing units for the production of oil and associated hydrocarbons from the "D" Sand formation underlying certain lands in Weld County, Colorado.

FINDINGS

1. Diversified Operating Corporation, 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 indicated that the D' Sand formation constitutes a common source of supply of oil and associated hydrocarbons underlying the following described lands in Weld County, Colorado, to-wit:

Township 8 North, Range 58 West, 6th P.M.

Section 4: All Section 7: All Section 5: All Section 8: All Section 6: All Section 9: 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 D' Sand 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 the E/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 permitted well for each unit should be located in the center of the NW/4 and the SE/4 of each quarter section with a tolerance of 200 feet in any direction. Well No. 15-5 Bringleson, located in the SW/4 SE/4 of said Section 5 and well No. 7-10 Federal, located in the SW/4 NE/4 of said Section 10 should each be considered exceptions and be the permitted well for the unit to be designated by the operator. Exceptions to the permitted well locations may be granted by the Director, provided owners of the contiguous and cornering units file a waiver or consent in writing agreeing to such exception.

6. All available geological and engineering data concerning said "D" Sand formation indicates 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 and economically drained by one well producing from said D' Sand formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to a well drilled, completed, or recompleted in the D' Sand formation underlying the Lilli Filed 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 D' Sand formation underlying the following described lands in the Lilli Field, Weld County, Colorado, to-wit: Township 8 North, Range 58 West, 6th P.M. Section 4: All Section 7: All Section 5: All Section 8: All Section 6: All Section 9: 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 permitted well for each unit shall be located in the center of the NW/4 and the SE/4 of each quarter section with a tolerance of 200 feet in any direction. Well No. 15-5 Bringleson, located in the SW/4 SE/4 of said Section 5 and well No. 7-10 Federal, located in the SW/4 NE/4 of said Section 10 shall each be considered exceptions and be the permitted well for the unit to be designated by the operator. Exceptions to the permitted well locations may be granted by the Director, provided owners of the contiguous and cornering units file a waiver or consent in writing agreeing to such exception.

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

ENTERED this 8th day of September

1987, as of August 17, 1987.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Frank J. Piro, Secretary

(451-1)