REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on December 2, 1999, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado on the application of Mesa Hydrocarbons, Inc., for an order to allow additional wells to be drilled and completed for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, on certain 320-acre drilling and spacing units.

FINDINGS

The Commission finds as follows:

1. Mesa Hydrocarbons, Inc., 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. On January 26 1995, corrected February 17, 1995, the Commission issued Order No. 513-1 which established 320-acre drilling and spacing units for production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group for Sections 8 and 17, Township 6 South, Range 91 West, 6th P.M.

5. On October 12, 1999, Mesa Hydrocarbons, Inc., by its attorney, filed with the Commission a verified application for an order to allow up to a total of eight wells to be drilled and completed for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, on each of the 320-acre drilling and spacing units described in Finding #4 at the option of the operator. Said additional wells should be located in ac cordance with Rule 318. of the Rules and Regulations of the Oil and Gas Conservation Commission. Further, the Director should be given the authority to grant exception locations for topographic reasons without notice or hearing.

6. Testimony and exhibits presented at the administrative hearing indicated that there is extremely steep topography in the N1/2 of Section 8, Township 6 South, Range 91 West, 6th P.M. The BLM and Schultz Family Partnership acreage has not been leased in this area because of the limited number of surface locations that are available in that area.

7. Testimony and exhibits presented at the administrative hearing showed that there are five (5) wells that are currently drilled in the application lands. These wells are the Snyder Oil Company Jolly #1-8 Well located in the SE1/4 SW1/4 of Section 8, Township 6 South, Range 91 West, 6th P.M., the Amoco Production Company Jolly #1 Well located in the SW1/4 NE1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., the Nassau Resources, Inc. Newcast le #17-7 Well located in the SW1/4 NE1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., the Snyder Oil Company #1C-17 Well located in the SE1/4 SW1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., and the Nassau Resources Jolly # 17-14 Well located in the SE1/4 SW1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M.

8. Testimony and exhibits presented at the administrative hearing showed that Mesa Hydrocarbons, Inc. plans to plug and abandon four out of five of the existing wells, the Snyder Oil Company Jolly #1-8 Well located in the SE1/4 SW1/4 of Section 8, Township 6 South, Range 91 West, 6th P.M., the Amoco Production Company Jolly #1 Well located in the SW1/4 NE1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., the Snyder Oil Company #1C-17 Well loca ted in the SE1/4 SW1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., and the Nassau Resources Jolly #17-14 Well located in the SE1/4 SW1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M. A cement bond log will be run in the fifth well, the Nassau Resources, Inc. Newcastle #17-7 Well located in the SW1/4 NE1/4 of Section 17, Township 6 South, Range 91 West, 6th P.M., to determine if it is suitable for further completion work.

9. Engineering testimony presented at the administrative hearing indicated the calculated drainage areas varied between 1.5 and 69.0 acres, with an average calculated drainage area for the twenty wells of 38.75 acres. Additional engineering testimony presented at the administrative hearing showed that the average ultimate per well gas recovery for the twenty (20) Williams Fork Formation wells is .686 BCF.

10. Testimony presented at the administrative hearing showed that, based on current information, eight Williams Fork Formation wells are necessary to efficiently and economically drain a 320-acre unit in the application lands while preventing waste and protecting correlative rights. Additional testimony and exhibits presented at the administrative hearing showed that additional data obtained from the wells drilled in the application area may support an application for even greater well density at some point in the future.

11. At the time of the administrative hearing, Mesa Hydrocarbons, Inc. agreed to be bound by oral order of the Commission.

12. Based on the facts stated in the application and the testimony presented at the administrative hearing, having received no protests, and having been heard by the Hearing Officer who recommends approval, the Commission should approve and order to allow up to eight wells to be drilled and completed for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, on each of the 320-acre drilling and spacing units in Sections 8 and 17, Township 6 South, Range 91 West, 6th P.M.

ORDER

NOW, THEREFORE IT IS ORDERED that Order No. 513-1 is hereby amended to allow the drilling and completion of up to eight (8) wells for the production of gas and associated hydrocarbons from the Williams Fork Formation of the Mesaverde Group, on the 320-acre drilling and spacing units in Sections 8 and 17, Township 6 South, Range 91 West, 6th P.M., at the option of the operator. Said additional wells shall be located in accordance with Rule 318. of the Ru les and Regulations of the Oil and Gas Conservation Commission and the Director shall be given the authority to grant exception locations for topographic reasons without notice or hearing.

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 December, as of December 2, 1999.

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 16, 1999 ??

(513-2)