REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 21, 1995, at 8:30 a.m., in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Union Pacific Resources Company for an order to establish 320-acre drilling and spacing units for certain lands in the Arrowhead Field for production of gas and associated hydrocarbons from the Morrow Formation, with the permitted well to be located no closer than 1000 feet from the boundaries of the unit and no closer than 2640 feet from the nearest well permitted to, drilling to, completed in, or producing from the Morrow Formation for certain lands in Townships 16, 17, and 18 South, Range 46 West, 6th P.M.

FINDINGS

The Commission finds as follows:

1. Union Pacific Resources Company, as applicant herein, is an interested party in the subject matter of the above-referenced matter.

2. Due notice of the time, place and purpose of the hearing has been given in all respects as required by law.

3. That 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. That evidence presented at the administrative hearing indicates that the Morrow Formation is identified as the stratigraphic equivalent of the interval between 4,726 feet and 4,936 feet as shown on the Compensated Density-Neutron log for the UPRC Bowen 22-10 No. 1 Well located in the SE1/4 NW1/4 of Section 10, Township 17 South, Range 46 West, 6th P.M. The Morrow Formation constitutes a common source of supply of gas and associated hydrocarbons unde rlying the below-listed lands:

Township 16 South, Range 46 West, 6th P.M. Sections 25 - 28: All Sections 33 - 36: All

Cheyenne County

Township 17 South, Range 46 West, 6th P.M. Sections 2 - 4: All Sections 9 - 11: All Sections 14 - 16: All Sections 21 - 23: All Sections 26 - 28: All Sections 33 - 35: All

Township 18 South, Range 46 West, 6th P.M. Sections 2 - 4: All

Kiowa County

5. That the available geological and engineering data concerning said Morrow Formation indicates that one well will efficiently and economically drain an area of approximately 320-acres, and that drilling units to 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 Morrow Formation.

6. That an operator, in its discretion, should designate either the N1/2 and S1/2 or the E1/2 and W1/2 of each governmental section as the drilling and spacing unit for each section which has not been previously designated. The operator who drills the first well in a section should designate the drilling and spacing unit for the entire section.

7. That the typical well location for a 320-acre drilling and spacing unit is too restrictive for the Morrow channel sand and thus the permitted well should be located no closer than 1000 feet from the boundaries of the unit and no closer than 2640 feet from the nearest well permitted to, drilling to, completed in, or producing from the Morrow Formation in order to provide a more flexible drilling window 660 feet wide and 3,280 feet long. The below-lis ted existing wells should be designated the exception wells and permitted wells for specific 320-acre units upon which they are located.

320-acre 320-acre Well and Location Unit Well and Location Unit

UPRC North Navajo 41-34 No. 4 N1/2 UPRC Navajo 11-3 #4 W1/2 Section 34-T16S-R46W Section 3-T17S-R46W 1,200' FNL, 1,200' FEL 1,000' FNL, 1,200' FWL Cheyenne County Kiowa County

UPRC North Navajo 34-34 No. 2 S1/2 Vintage Petroleum Inc. Barlow #1-3 W1/2 Section 34-T16S-R46W Section 3-T18S-R46W 660' FSL, 1,980' FEL 600' FNL, 1,000' FWL Cheyenne County Kiowa County

UPRC Mayer 12-2 No. 1 W1/2 UPRC Navajo 32-3 No. 3 E1/2 Section 2-T17S-R46W Section 3-T17S-R46W 1,500' FNL, 700' FWL 1,977' FNL, 1,980' FEL Kiowa County Kiowa County

UPRC Bowen 22-10 No. 1 W1/2 UPRC Pawnee 11-15 No. 1 W1/2 Section 10-T17S-R46W Section 15-T17S-R46W 1,775' FNL, 1,950' FWL 750' FNL, 700' FWL Kiowa County Kiowa County

UPRC Pawnee 33-15 No. 3 E1/2 Bucklin No. 2-34 S1/2 Section 15-T17S-R46W Section 34-T17S-R46W 1,923' FSL, 2,171' FEL no less than 600' FSL, 600' FWL Kiowa County Kiowa County

8. The Director should be allowed to grant an exception to the permitted well location for certain circumstances provided a waiver or consent signed by the lease owner toward whom the well is proposed to be moved is obtained. If the owner of a proposed well is also the majority owner of the leasehold interest covering a spacing unit toward which the well is proposed to be moved, then a waiver or consent shall be obtained from the mineral interest owner subject to such lease.

9. Vintage Petroleum, Inc. has requested a waiver from Union Pacific Resources Company and Sinclair for a well to be drilled at an exception location in the SW1/4 of Section 34, Township 17 South, Range 46 West, 6th P.M., at a location no closer than 600 feet FSL and 600 feet FWL of the SW1/4, for the 320-acre drilling and spacing unit consisting of the S1/2 of Section 34, and that both parties had agreed to such exception location.

10. That only two (2) wells in the area proposed to be spaced are located less than 2,640 feet from other wells drilled to or producing from the Morrow Formation.

11. Letters in support of the application were filed by Sinclair and Jayaree Exploration, Inc.

12. Based on the facts stated in the application, having received no protests, and having been heard by the Hearing Officer who recommends approval of the application, the Commission should approve the request to establish 320-acre drilling and spacing units for production from the Morrow Formation for the above-described lands, and to designate the wells described in Finding 7 as the permitted wells for the 320-acre units upon which they are located.

ORDER

NOW, THEREFORE, IT IS ORDERED, that 320-acre drilling and spacing units are hereby established for the Morrow Formation as a source of supply of gas and associated hydrocarbons underlying the below-listed lands, and that the bottomhole location and completion interval for the authorized well shall be located no closer than 1,000 feet from the boundaries of the 320-acre unit, and no closer than 2,640 feet from the nearest well permitted to, drilling to, c ompleted in or producing from the Morrow Formation.

Township 16 South, Range 46 West, 6th P.M. Sections 25 - 28: All Sections 33 - 36: All

Cheyenne County

Township 17 South, Range 46 West, 6th P.M. Sections 2 - 4: All Sections 9 - 11: All Sections 14 - 16: All Sections 21 - 23: All Sections 26 - 28: All Sections 33 - 35: All

Township 18 South, Range 46 West, 6th P.M. Sections 2 - 4: All

Kiowa County

IT IS FURTHER ORDERED that an operator, in its discretion, shall designate either the N1/2 and S1/2 or the E1/2 and W1/2 of each governmental section as the drilling and spacing unit for each section which has not been previously designated. The operator who drills the first well in a section shall designate the drilling and spacing unit for the entire section.

IT IS FURTHER ORDERED that the Director may grant an exception to the permitted well location without hearing for certain circumstances provided a waiver or consent signed by the lease owner toward whom the well is proposed to be moved is obtained. If the owner of a proposed well is also the majority owner of the leasehold interest covering a spacing unit toward which the well is proposed to be moved, then a waiver or consent shall be obtained from the mineral interest owner subject to such lease.

IT IS FURTHER ORDERED that the below-listed wells currently permitted or drilled to the Morrow Formation or proposed to be drilled to the Morrow Formation, and the 320-acre drilling and spacing unit upon which they are located, are hereby designated as exception wells and as the permitted wells for such units.

320-acre 320-acre Well and Location Unit Well and Location Unit

UPRC North Navajo 41-34 No. 4 N1/2 UPRC Navajo 11-3 #4 W1/2 Section 34-T16S-R46W Section 3-T17S-R46W 1,200' FNL, 1,200' FEL 1,000' FNL, 1,200' FWL Cheyenne County Kiowa County

UPRC North Navajo 34-34 No. 2 S1/2 Vintage Petroleum Inc. Barlow #1-3 W1/2 Section 34-T16S-R46W Section 3-T18S-R46W 660' FSL, 1,980' FEL 600' FNL, 1,000' FWL Cheyenne County Kiowa County

UPRC Mayer 12-2 No. 1 W1/2 UPRC Navajo 32-3 No. 3 E1/2 Section 2-T17S-R46W Section 3-T17S-R46W 1,500' FNL, 700' FWL 1,977' FNL, 1,980' FEL Kiowa County Kiowa County

UPRC Bowen 22-10 No. 1 W1/2 UPRC Pawnee 11-15 No. 1 W1/2 Section 10-T17S-R46W Section 15-T17S-R46W 1,775' FNL, 1,950' FWL 750' FNL, 700' FWL Kiowa County Kiowa County

UPRC Pawnee 33-15 No. 3 E1/2 Bucklin No. 2-34 S1/2 Section 15-T17S-R46W Section 34-T17S-R46W 1,923' FSL, 2,171' FEL no less than 600' FSL, 600' FWL Kiowa County Kiowa County

IT IS FURTHER ORDERED that the Bucklin No. 2-34 Well shall be allowed to be drilled at an exception location by Vintage Petroleum, Inc. in the SW1/4 of Section 34, Township 17 South, Range 46 West, 6th P.M., at a location no closer than 600 feet FSL and 600 feet FWL of the SW1/4, for the 320-acre drilling and spacing unit consisting of the S1/2 of Section 34.

IT IS FURTHER ORDERED, that the rules and regulations contained herein 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, rules and regulations.

ORDERED this day of , 1995, as of November 21, 1995.

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 December 19, 1995 ??

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