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: 1) vacate an approximate 640-acre exploratory drilling and spacing unit established by Order No. 535-144 for Section 32, Township 7 North, Range 59 West, 6^th P.M.; 2) vacate Order No. 535-154 which pooled all interests in an approximate 640-acre exploratory drilling and spacing unit; and 3) establish an approximate 1280-acre exploratory drilling and spacing unit for Sections 29 and 32, Township 7 North, Range 59 West, 6^th P.M., and approve up to four 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.  Section 29, Township 7 North, Range 59 West, 6^th P.M. is subject to Rule 318.a. for the Niobrara Formation.

5.         On March 5, 2012, the Commission entered Order No. 535-144 which, among other things, established three approximate 640-acre exploratory 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 32, Township 7 North, Range 59 West, 6^th P.M. is subject to this Order for the Niobrara Formation.

6.         On March 5, 2012, the Commission entered Order No. 535-154 which, among other things, pooled all interests in an approximate 640-acre exploratory drilling and spacing unit established for Section 32, Township 7 North, Range 59 West, 6^th P.M., for the development and operation of the Niobrara Formation.

7.         On April 18, 2013, Condor, by its attorneys, filed with the Commission pursuant to §34-60-116 C.R.S., a verified application (“Application”) for an order to: 1) vacate an approximate 640-acre exploratory drilling and spacing unit established by Order No. 535-144 for Section 32, Township 7 North, Range 59 West, 6^th P.M.; 2) vacate Order No. 535-154 which pooled all interests in an approximate 640-acre exploratory drilling and spacing unit; and 3) establish an approximate 1280-acre exploratory drilling and spacing 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 7 North, Range 59 West, 6^th P.M.

                        Section 29:      All

                        Section 32:      All

8.         On June 4, 2013, Condor, 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.         Land testimony and exhibits submitted in support of the Application by Sean Fitzgerald, Engineering and Land Manager of South Texas Reservoir Alliance LLC for Condor, showed 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.

10.       Geologic testimony and exhibits submitted in support of the Application by Cynthia L. Welch, Geoscience Manager of South Texas Reservoir Alliance LLC for Condor, showed the Niobrara Formation is present throughout the Application Lands, is approximately 240 to 265 feet thick, and is generally of uniform thickness throughout the Application Lands.

11.       Engineering testimony and exhibits submitted in support of the Application by Sean Fitzgerald, Engineering and Land Manager of South Texas Reservoir Alliance LLC for Condor, showed nearby horizontal Niobrara type wells on 1280-acre units drained an average of 153-acres.  Testimony further showed an estimated ultimate recovery (“EUR”) of 368 MBO and 552 MMCF of gas at a 5% recovery factor.  Testimony concluded the use of long horizontal wells in a 1280-acre unit will increase the recovery of hydrocarbons from the reservoir and that the economics of the project are sound.

12.       On June 12, 2013 an Administrative Hearing was held to receive supplemental 511 testimony regarding certain assumptions used in the engineering testimony.  Condor, by its Engineering Manager, Sean Fitzgerald, revised its request for approval of up to eight wells to four, and adjusted its EUR projections.  After the hearing, Stuart Ellsworth, COGCC Engineering Manager, recommended approval of the application.

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.       Condor 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: 1) vacate an approximate 640-acre exploratory drilling and spacing unit established by Order No. 535-144 for Section 32, Township 7 North, Range 59 West, 6^th P.M.; 2) vacate Order No. 535-154 which pooled all interests in an approximate 640-acre exploratory drilling and spacing unit; and 3) establish an approximate 1280-acre exploratory drilling and spacing unit for Sections 29 and 32, Township 7 North, Range 59 West, 6^th P.M., and approve up to four horizontal wells within the unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED:

1.         Order No. 535-154 which pooled all interests in an approximate 640-acre exploratory drilling and spacing unit established for Section 32, Township 7 North, Range 59 West, 6^th P.M., is hereby vacated.

2.         An approximate 640-acre exploratory drilling and spacing unit established by Order No. 535-144 for Section 32, Township 7 North, Range 59 West, 6^th P.M., is hereby vacated.

3.         An approximate 1280-acre exploratory drilling and spacing unit for the below-described lands, is hereby established, and up to four 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 7 North, Range 59 West, 6^th P.M.

                        Section 29:      All

                        Section 32:      All

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