BEFORE THE OIL AND GAS CONSERVATION COMMISSION
OF THE STATE OF COLORADO

REPORT OF THE COMMISSION

The Commission heard this matter on July 9, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit, and authorize up to two horizontal wells within the unit for Section 21, Township 3 South, Range 64 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Carrizo Oil & Gas, Inc. (“Carrizo” or “Applicant”), 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 pursuant to the Oil and Gas Conservation Act.

4.         Rule 318.a. of the Rules and Regulations of the Oil and Gas Conservation Commission requires that wells drilled in excess of 2,500 feet in depth be located not less than 600 feet from any lease line, and located not less than 1,200 feet from any other producible or drilling oil or gas well when drilling to the same common source of supply. Section 21, Township 3 South, Range 64 West, 6^th P.M. is subject to Rule 318.a. for the Niobrara Formation.

5.         On May 15, 2012, Carrizo, by its attorneys, filed with the Commission pursuant to § 34-60-116 C.R.S., a verified application (“Application”) for an order to establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), and authorize up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 1,200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 3 South, Range 64 West, 6^th P.M.

6.         On June 27, 2012, Carrizo, by its attorneys, filed with the Commission a written request to approve the Application based on the merits of the verified Application and the supporting exhibits. Sworn written testimony and exhibits were submitted in support of the Application.

7.         Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager – Western US for Carrizo, showed that Carrizo has a significant leasehold in the Application Lands.

8.         Geologic testimony and exhibits submitted in support of the Application by Douglas Reid, Geological Manager for Carrizo, showed that the Niobrara Formation underlying the Application Lands is fairly uniform in thickness and contiguous.  Additional testimony indicated that the thickness of the Niobrara Formation underlying the Application Lands averages around 380 feet and appears to be productive in the area.

9.         Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Manager of Reservoir Engineering for Carrizo, showed that analogous horizontal wells drilled and completed in the Niobrara Formation have an average drainage radius of approximately 78 acres with an anticipated recovery of about 1,679 bbls of oil per acre drained.  Additional testimony showed that the economics for horizontal Niobrara wells drilled on the Application Lands are sound, and that the proposed drilling and spacing unit will promote efficient drainage, while protecting correlative rights and avoiding waste.

10.       The above-referenced testimony and exhibits show that granting the Application will allow more efficient reservoir drainage, will prevent waste, will assure a greater ultimate recovery of hydrocarbons, and will not violate correlative rights.

11.       Carrizo agreed to be bound by oral order of the Commission. 

12.       Based on the facts stated in the verified Application, having received no protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to establish an approximate 640-acre drilling and spacing unit, and authorize up to two horizontal wells within the unit for Section 21, Township 3 South, Range 64 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 640-acre drilling and spacing unit, is hereby established, for the below-described lands, and up to two horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the wellbore to be located no closer than 600 feet from the unit boundaries and no closer than 1,200 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 3 South, Range 64 West, 6^th P.M.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective immediately.

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.

IT IS FURTHER ORDERED, that under the State Administrative Procedure Act the Commission considers this Order to be final agency action for purposes of judicial review within 30 days after the date this Order is mailed by the Commission.

IT IS FURTHER ORDERED, that an application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED this  11^th  day of July, 2012, as of July 9, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary

Dated at Suite 801

1120 Lincoln Street

Denver, Colorado 80203

July 11, 2012