REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on August 18, 2003 at 10 a.m. in the Petroleum Hall at the Green Center, Colorado School of Mines, 1500 Illinois Street, Golden, Colorado for an order to establish 80-acre and 40-acre drilling and spacing units for certain lands for production of oil, gas and associated hydrocarbons from the Dakota "J" Sand, Codell and Niobrara Formations.

FINDINGS

The Commission finds as follows:

1. CFG Energy, Inc. ("CFG") and Eddy Oil Company ("Eddy Oil"), 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. On June 18, 1971, the Commission issued Order No. 232-3, to add certain lands to the provisions of Order No. 232-1, which established 320-acre drilling and spacing units for the production of gas and associated hydrocarbons from the "J" Sand Formation, including the below-listed lands:

Township 5 North, Range 63 West, 6th P.M. Section 32: All

5. On December 2, 1992, the Commission issued Order No. 499-15 which established 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Dakota Formation, including the below-listed lands:

Township 5 North, Range 63 West, 6th P.M. Section 32: All

6. On April 29, 1998, effective on May 30, 1998, the Commission promulgated Rule 318A. for certain lands in the Greater Wattenberg Area, including Section 32, Township 5 North, Range 63 West, 6th P.M., which among other things designated drilling locations in certain windows within each quarter section and allowed the commingling of production from all Cretaceous Age Formations.

7. On May 22, 2003, CFG and Eddy Oil, by their attorneys, filed with the Commission a verified Application for an order to amend Order Nos. 232-3 and 499-15 to establish 80-acre drilling and spacing units for below-listed lands for the production of oil, gas and associated hydrocarbons from the Dakota, "J" Sand, Codell and Niobrara Formations:

Township 5 North, Range 63 West, 6th P.M. Section 32: SW1/4, NE1/4, NW1/4, W1/2 SE1/4

8. The Applicants also requested an order to establish 40-acre drilling and spacing units for the below-listed lands, with each well to be drilled pursuant to Rule 318A. for production of oil, gas and associated hydrocarbons from the Cretaceous Age Formations:

Township 5 North, Range 63 West, 6th P.M. Section 32: E1/2 SE1/4

9. On June 30, 2003, Patina Oil & Gas Corporation, by its attorney, filed with the Commission a protest to the application. Prior to the July 14, 2003 hearing, the protest was verbally withdrawn. On August 6, 2003, a written withdrawal of the protest was filed with the Commission indicating that the parties had resolved their issues.

10. Testimony and exhibits presented at the administrative hearing showed that CFG has a leasehold interest in the N1/2 SW1/4, the E1/2 NW1/4 and the NE1/4 of Section 32 and that Patina Oil & Gas has a leasehold interest in the S1/2 SW1/4, the S1/2 SE1/4, the NW1/4 SE1/4 and the E1/2 NW1/4 of Section 32. Additional testimony showed that Eddy Oil has a leasehold interest in the NE1/4 SE1/4 of Section 32, with one producing Codell Formation well an d that approval of the application would allow each operator to drill and deepen wells on its leasehold.

11. Testimony and exhibits presented at the administrative hearing showed that correlative rights would not be adversely affected by the granting of the application and that Patina Oil & Gas has voluntarily agreed to establishing 40-acre drilling and spacing units in the E1/2 SE1/4 of Section 32.

12. Testimony and exhibits presented at the administrative hearing showed that 40-acres is not smaller than the maximum area that can be efficiently and economically drained by one well for production of oil, gas and associated hydrocarbons from the Dakota, "J" Sand, Codell or Niobrara Formations.

13. At the time of the administrative hearing, CFG Energy, Inc. and Eddy Oil Company agreed to be bound by an oral order of the Commission.

14. Based on the facts stated in the verified application, having received no protests and having been heard by the Hearing Officer who recommended approval, the Commission should approve an order to establish 80-acre and 40-acre drilling and spacing units for the lands described above in Finding Nos. 7 and 8 for production of oil, gas and associated hydrocarbons from the Dakota "J" Sand, Codell and Niobrara Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that Order Nos. 232-3 and 499-15 are hereby amended to establish 80-acre drilling and spacing units for the lands described below for production from the Dakota "J" Sand, Codell and Niobrara Formations, with the permitted well to be located in accordance with Rule 318A:

Township 5 North, Range 63 West, 6th P.M. Section 32: SW1/4, NE1/4, NW1/4, W1/2 SE1/4

IT IS FURTHER ORDERED, that Order Nos. 232-3 and 499-15 are hereby amended to establish 40-acre drilling and spacing units for the lands described below for production from the Cretaceous Age Formations, with the permitted well to be located in accordance with Rule 318A:

Township 5 North, Range 63 West, 6th P.M. Section 32: E1/2 SE1/4

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 right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of August, 2003, as of August 18, 2003.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 August 27, 2003

(232-#237)

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