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

REPORT OF THE COMMISSION

The Commission heard this matter on November 15, 2012, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to approve up to four horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 36, Township 9 North, Range 59 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 and 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.         On October 31, 2011, the Commission entered Order No. 535-102 which, among other things, established three approximate 640-acre drilling and spacing units, and approved up to two horizontal wells within each unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 36, Township 9 North, Range 59 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

5.         On September 17, 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 approve up to four horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the horizontal wellbore to be no closer than 600 feet from the unit boundaries, and no closer than 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                        Township 9 North, Range 59 West, 6^th P.M.

                        Section 36:    All

6.         On November 2, 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 right to drill in the Application Lands.

8.         Geologic testimony and exhibits submitted in support of the Application by Douglas Reid, Geological Manager for Carrizo, included an isopach map of the interval from the top of the Niobrara Formation to the top of the Codell Formation which showed the total thickness of the Niobrara Formation underlying the 1280-acre unit averages approximately 305 feet.  A type log of the Niobrara Formation showed resistivity and density values similar to logs from analogous wells producing from the Niobrara Formation.  Stratigraphic cross-sections and gross thickness isopach tests show the Niobrara to be consistent, continuous, and underlying all the Application Lands.

9.         Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Manager of Reservoir Engineering for Carrizo, showed that analog wells drilled by Carrizo within its Weld County operational area indicate an estimated ultimate recovery (“EUR”) of 200 MBO and a drainage area estimated at 70-acres.  Testimony further showed drainage estimates for the best 35 horizontal wells in the nearby Silo Field varied from 41 to 356-acres, with an average for all 65 horizontal wells of 78-acres.  Testimony concluded that applying reasonable resource recovery and price projections to the Application wells generates a positive rate of return sufficient for economic investment.

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 Hearings Officer review of the Application under Rule 511., the Commission should enter an order to approve up to four horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 36, Township 9 North, Range 59 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 up to four horizontal wells within an approximate 640-acre drilling and spacing unit established for the below-described lands, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the horizontal wellbore to be no closer than 600 feet from the unit boundaries, and no closer than 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

Township 7 North, Range 60 West, 6^th P.M.

Section 3:      All

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 _____ day of November, 2012, as of November 15, 2012.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         

                                                                                    Robert J. Frick, Secretary