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 verified application of Diversified Operating Company for an order establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the D' Sand underlying certain lands in Weld County, Colorado.

FINDINGS

The Commission finds as follows:

1. Diversified Operating Company, as applicant here-in, 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. Based upon the facts stated in the verified application and exhibits submitted, and receiving no objections and having been heard and recommend by the Director as Hearing Officer, on September 15, 1987, the Commission should enter an order establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons from the D' Sand underlying the following described lands in Weld, County, Colorado:

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

Section 2: All Section 10: All Section 3: All Section 11: All

5. In order to prevent the waste of oil and gas, as defined by law, to protect 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 of the State, an order should be made establishing 160-acre drilling and spacing units for the production of gas and associated hydrocarbons D' Sand. The units consist of 160-acres, more or less, and consist of a quarter section according to the governmental survey. The permitted well should be at a location no closer than 600 feet to the boundaries of the quarter section and well No. 7-10 Federal, located in the SW/4 NE/4 of said Section 10 should be considered the permitted well for the unit consisting of the NE/4 of said Section.

6. All available geological and engineering data concerning said D' Sand indicate that one well will efficiently and economically drain an area of approximately 160-acres, and that the drilling unit of the size and shape hereinabove described is not smaller than the maximum area that can be efficiently and economically drained by one well producing from said D' Sand.

7. A well should be classified as a gas well if its initial productive test results in a gas - oil ratio of 10,000 cubic feet per barrel or greater.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the D' Sand underlying certain lands in the Lilli 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. One hundred sixty (160) acre drilling and spacing units shall be and the same are hereby established for the production of gas and associated hydrocarbons from the D' Sand underlying the following described lands in Weld County, Colorado, to-wit: Township 8 North, Range 58 West, 6th P.M. Section 2: All Section 10: All Section 3: All Section 11: All Rule 2. Each unit shall consist of 160-acres, more or less, and consist of a quarter section of land, according to the governmental survey. The permitted well shall be at a location no closer than 600 feet from the boundaries of the unit. Well No. 7-10 Federal, located in the SW/4 NE/4 Section 10, Township 8 North, Range 58 West, 6th P.M. shall be the permitted well for the unit consisting of the NE/4 of said Section 10.

Rule 3. A well shall be classified as a gas well if its initial productive test results in a gas - oil ratio of 10,000 cubic feet per barrel or greater.

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 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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