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

REPORT OF THE COMMISSION

The Commission heard this matter on March 25, 2013, at the offices of the Colorado Oil and Gas Conservation Commission, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 1280-acre drilling and spacing unit for Sections 8 and 17, Township 6 North, Range 60 West, 6^th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Condor Energy Technology, LLC (“Condor” 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.  Sections 8 and 17, Township 6 North, Range 60 West, 6^th P.M. are subject to Rule 318.a. for the Niobrara Formation.

5.         On January 24, 2013, Condor, by its attorneys, filed with the Commission a verified application (“Application”) for an order to establish an approximate 1280-acre unit for the below-described lands (“Application Lands”), and approve up to eight 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 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

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

Section 8:        All

Section 17:      All

6.         On March 11, 2013, Prima Exploration, Inc. (“Prima”), by its attorneys, filed with the Commission a written protest (“Protest”) to the Application.

7.         On March 25, 2013, the Commission convened an adjudicatory hearing wherein Condor presented evidence in support of its Application and Prima presented evidence in support of its Protest.  The Commission deliberated and made the following findings and entered the following orders.

8.         Land testimony and exhibits submitted in support of the Application by Sean Fitzgerald, President of Business Development for South Texas Reservoir Alliance LLC as contract operator for Condor, showed that the surface of the Application Lands is owned in fee, the mineral ownership of the Application Lands is held in fee, and that Condor owns a partial leasehold ownership interest in the Application Lands.

9.         Geologic testimony and exhibits submitted in support of the Application by Cynthia L. Welch, Geoscience Manager for South Texas Reservoir Alliance LLC, as contract operator for Condor stated an analysis of cross-sections from nearby Niobrara Formation type wells, demonstrating the Niobrara Formation underlies, and is generally of uniform thickness throughout the Application Lands. 

10.       Engineering testimony and exhibits submitted in support of the Application by Sean Fitzgerald, of South Texas Reservoir Alliance LLC, as contract operator for Condor, indicated that the use of horizontal wells in the Application Lands is necessary to increase the recovery of hydrocarbons from the reservoir and the economics utilized for the project are economic and efficient.

11.       Land testimony and exhibits submitted in support of the Protest by M. Scott Homsher, Land Manager for Prima, showed that the combined leasehold interests of Prima and its partners is greater than 59% in Sections 8 and 17, Township 6 North, Range 60 West, 6^th P.M., (approximately 38% and 82% of the total acreage found in the respective sections).  Additional testimony showed that spacing the Application Lands for 1,280-acre development of the Niobrara Formation may result in the dilution of interests in the respective sections, thereby adversely affecting Prima’s correlative rights.

12.       Geologic testimony and exhibits submitted in support of the Protest by Jay T. Speer, Geologist for Prima, showed that the Niobrara Formation underlies the Application Lands and is a common source of supply. 

13.       Engineering testimony and exhibits submitted in support of the Application by David G. Rhodes, Petroleum Engineer for Prima, indicated analogous horizontal wells recently drilled in the general vicinity of the Application Lands showed that a longer lateral (drilled within a 1,280-acre unit) may recover approximately 58% more in oil reserves than the reserves drained from a shorter lateral (drilled within a 640-acre unit), while the drilling and completion of the longer lateral is approximately 61% higher than the shorter lateral.  Additional testimony indicated that drilling longer laterals in the Niobrara Formation underlying the Application Lands will not promote the efficient and economic drainage of the reservoir.

14.       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.

15.       Condor agreed to be bound by oral order of the Commission.

16.       The Commission requested that this matter be set for review by the Commission in one year.

17.       Based on the facts stated in the verified Application, having received one protest, and based on the evidence presented to the Commission at an adjudicatory hearing, the Commission should enter an order to establish an approximate 1280-acre drilling and spacing unit for Sections 8 and 17, Township 6 North, Range 60 West, 6^th P.M., and approve up to eight horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 1280-acre drilling and spacing unit for the below-described lands, is hereby established, and up to eight 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 150 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

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

Section 8:        All

Section 17:      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 Procedures 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   16^th   day of April, 2013, as of March 25, 2013.    

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary