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

REPORT OF THE COMMISSION

The Commission heard this matter on July 29, 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 640-acre drilling and spacing unit Section 31, Township 10 North, Range 60 West, 6^th P.M., and approve up to 13 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.         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, on unspaced lands, 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 31, Township 10 North, Range 60 West, 6^th P.M. is subject to Rule 318.a. for the Niobrara Formation.

5.         On May 30, 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 establish an approximate 640-acre drilling and spacing unit for the below-described lands (“Application Lands”), and approve up to thirteen horizontal wells in 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 300 feet from the treated interval of any other wellbore located in the unit, without exception being granted by the Director:

            Township 10 North, Range 60 West, 6^th P.M.

                        Section 31:      All

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

6.         On July 16, 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.

7.         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.

8.         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 355 feet thick and to be consistent, continuous, and underlying all of 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 on 300 feet internal wellbore setbacks with frac half-lengths of 75 feet, and an assumed lateral length of 5080 feet in the lateral should exhibit an Estimated Ultimate Recovery (“EUR”) between 128.3 and 136.3 MBO.  This configuration will accommodate 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.

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 resolved all protests, and based on the Hearing Officer review of the Application under Rule 511, the Commission should enter an order to establish an approximate 640-acre drilling and spacing unit for  Section 31, Township 10 North, Range 60 West, 6^th P.M., and approve up to 13 horizontal wells within the unit, for the production of oil, gas, and associated hydrocarbons from the Niobrara Formation.

ORDER

IT IS HEREBY ORDERED that:

1.            An approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and up to 13 horizontal wells within the unit, are hereby approved, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation:

            Township 10 North, Range 60 West, 6^th P.M.

                        Section 31:      All

2.            The treated interval of the horizontal wellbore shall 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.

3.            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 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.

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

ENTERED this   27   day of August, 2013, as of July 29, 2013.

                                                                        OIL AND GAS CONSERVATION COMMISSION

                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________       

                                                                                    Robert J. Frick, Secretary