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

REPORT OF THE COMMISSION

The Commission heard this matter on May 6, 2013, at the Weld County Southwest Services Complex, 4209 Weld County Road 24 ½, Longmont, Colorado, upon application for an order to: 1) vacate Order No. 535-99 and Order No. 535-159 which spaced and pooled an approximate 640-acre drilling and spacing unit for Section 27, Township 10 North, Range 59 West, 6^th P.M.; 2) vacate two approximate 640-acre exploratory drilling and spacing units established by Orders 535-272 and 535-264 for Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M.; and 3) establish one approximate 320-acre and one approximate 960-acre exploratory drilling and spacing units for Sections 27, 28 and 33, Township 10 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 & 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, unless authorized by order of the Commission upon hearing.  Sections 27, 28 and 33, Township 10 North, Range 59 West, 6^th P.M. will be subject to Rule 318.a. upon vacating previously entered orders requested by this application.

5.         On December 12, 2011, the Commission entered Order No. 535-99 which established an approximate 640-acre drilling and spacing unit, and approved up to two horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Section 27, Township 10 North, Range 59 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         On May 29, 2012, the Commission entered Order No. 535-159 which pooled all interests in an approximate 640-acre drilling and spacing unit established for Section 27, Township 10 North, Range 59 West, 6^th P.M. to accommodate the Nelson Ranches 27-14-10-59 Well (API No. 05-123-35279) (“Well”), for the development and operation of the Niobrara Formation.

7.         On February 11, 2013, the Commission entered Order No. 535-272 which established three approximate 640-acre exploratory drilling and spacing units, and approved one horizontal well within each unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M. are subject to this Order for the Niobrara Formation.

8.         On February 11, 2013, the Commission entered Order No. 535-264 which approved up to six wells within each unit for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.  Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M. are subject to this Order for the Niobrara Formation.

            9.         On March 7, 2013 (Amended March 25, 2013), Carrizo, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified amended application (“Amended Application”) for an order to: 1) vacate the approximate 640-acre drilling and spacing unit established by Order No. 535-99 and pooled by Order No. 535-159 for Section 27, Township 10 North, Range 59 West, 6^th P.M.; 2) vacate two approximate 640-acre exploratory drilling and spacing units established by Orders 535-272 and 535-264 for Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M.; and 3) establish one approximate 320-acre and one approximate 960-acre exploratory drilling and spacing units 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, without exception being granted by the Director:

Township 10 North, Range 59 West, 6^th P.M.

Section 27:      All

Section 28:      E½                                                      (DSU #1, 960-acres)

Township 10 North, Range 59 West, 6^th P.M.

Section 33:      E½                                                      (DSU #2, 320-acres)

10.       On April 23, 2013, 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.

11.       Land testimony and exhibits submitted in support of the Application by Craig E. Wiest, Land Manager for Carrizo, showed the Applicant is an owner with the right to drill in the Application Lands.

12.       Geologic testimony and exhibits submitted in support of the Application by Paul Fears, Geological Manager for Carrizo, included stratigraphic cross-sections and gross thickness isopach tests showing the Niobrara Formation is approximately 335 feet thick and to be consistent, continuous, and underlying all of the Application Lands.

13.       Engineering testimony and exhibits submitted in support of the Application by Stephen C. Peters, Reservoir Engineering Manager for Applicant, showed from nearby type wells that the Estimated Ultimate Recovery (“EUR”) was approximately 133,300 barrels of oil plus associated gas and processed natural gas liquids.  Testimony further showed horizontal well development would increase the recovery factor from 7 to 10 percent within the Application Lands.  Testimony concluded the economics of the project were sound.

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

16.       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: 1) vacate Order No. 535-99 and Order No. 535-159 which spaced and pooled an approximate 640-acre drilling and spacing unit for Section 27, Township 10 North, Range 59 West, 6^th P.M.; 2) vacate two approximate 640-acre exploratory drilling and spacing units established by Orders 535-272 and 535-264 for Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M.; and 3) establish one approximate 320-acre and one approximate 960-acre exploratory drilling and spacing units for Sections 27, 28 and 33, Township 10 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 Order No. 535-159 which pooled all interests in an approximate 640-acre drilling and spacing unit for Section 27, Township 10 North, Range 59 West, 6^th P.M., is hereby vacated.

IT IS FURTHER ORDERED, that Order No. 535-99 which established an approximate 640-acre drilling and spacing unit for Section 27, Township 10 North, Range 59 West, 6^th P.M., is hereby vacated.

IT IS FURTHER ORDERED, that two approximate 640-acre exploratory drilling and spacing units established by Order No. 535-272 for Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M., are hereby vacated.

IT IS FURTHER ORDERED, that two approximate 640-acre exploratory drilling and spacing units, approved for up to six wells, by Order No. 535-264 for Sections 28 and 33, Township 10 North, Range 59 West, 6^th P.M., are hereby vacated.

            IT IS FURTHER ORDERED, that one approximate 320-acre and one approximate 960-acre exploratory drilling and spacing units for the below-described lands, are hereby established, 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, without exception being granted by the Director:

Township 10 North, Range 59 West, 6^th P.M.

Section 27:      All

Section 28:      E½                                                      (DSU #1, 960-acres)

Township 10 North, Range 59 West, 6^th P.M.

Section 33:      E½                                                      (DSU #2, 320-acres)

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 _____ day of May, 2013, as of May 6, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary