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

REPORT OF THE COMMISSION

            The Commission heard this matter on June 17, 2013, at the Two Rivers Convention Center, 159 Main Street, Grand Junction, Colorado, upon application for an order to approve up to thirteen horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 20, Township 8 North, Range 61 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 February 22, 2011, the Commission entered Order No. 535-3 which, among other things, established 160 approximate 640-acre 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.  Section 20, Township 8 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

5.         On February 11, 2013, the Commission entered Order No. 535-265 which, among other things, approved up to six horizontal wells within each of five approximate 640-acre drilling and spacing units, for the production of oil, gas, and other 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 600 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director.  Section 20, Township 8 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         On March 25, 2013, the Commission entered Order No. 535-287 which, among other things, pooled all interests in an approximate 640-acre drilling and spacing unit, to accommodate the Sievers 20-44-8-61 Well, for the development and operation of the Niobrara Formation.  Section 20, Township 8 North, Range 61 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

7.         On April 18, 2013, 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 thirteen 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 internal wellbores offset by 300 feet and unit boundary setbacks of 600 feet.  Applicant requested 100 foot “heel-and-toe” completed interval setbacks from the unit boundaries perpendicular to the well laterals apply so long as Applicant obtains exception location approvals pursuant to Rule 318.c. This exception location requirement for reduced unit boundary setbacks shall not apply if superseded by a subsequent Commission Rule or Order:

                    Township 8 North, Range 61 West, 6^th P.M.

                    Section 20:          All

The proposed wells shall be located on no more than one wellpad per quarter quarter section within the drilling and spacing unit.

8.         On June 4, 2013 (Revised June 11, 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.

9.         On June 11, 2013, Carrizo, by its attorneys, withdrew the request for the 100 foot “heel and toe” setbacks.

10.       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.

11.       Geologic testimony and exhibits submitted in support of the Application by Paul Fears, the DJ Basin Geologist for Carrizo, included stratigraphic cross-sections and gross thickness isopach tests showing the Niobrara Formation is approximately 345 feet thick and to be consistent, continuous, and underlying all of the Application Lands.

12.       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 on 300 feet internal wellbore setbacks with frac half-lengths of 75 feet, and the assumed lateral length of 5080 feet should exhibit an Estimated Ultimate Recovery (“EUR”) between 128.3 and 136.3 thousand oilfield barrels of oil (“MBO”) plus associated gas and processed natural gas liquids (NGLs).  This configuration will accommodate up to 13 wellbores in a 640-acre drilling and spacing unit with 600 feet unit boundary setbacks. Testimony concluded the economics of the project were sound.

13.       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.

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

15.       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 approve up to thirteen horizontal wells within an approximate 640-acre drilling and spacing unit established for Section 20, Township 8 North, Range 61 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED that:

1.            Up to thirteen 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 300 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

                    Township 8 North, Range 61 West, 6^th P.M.

                    Section 20:          All

2.            The proposed wells shall be located on no more than one wellpad per quarter quarter section within the drilling and spacing unit.

IT IS FURTHER ORDERED:

1.         The provisions contained in the above order shall become effective immediately.

2.         The Commission expressly reserves its right, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

3.         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.

4.         An application for reconsideration by the Commission of this Order is not required prior to the filing for judicial review.

ENTERED THIS  8^th  day of July, 2013, as of June 17, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary