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

REPORT OF THE COMMISSION

The Commission heard this matter on March 5, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 640-acre drilling and spacing unit consisting of Section 11, Township 6 North, Range 87 West, 6th P.M., and authorize a horizontal well within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Continental Resources, Inc. (“Continental” 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.  Section 11, Township 6 North, Range 87 West, 6th P.M. is subject to Rule 318.a. for the Niobrara Formation.

5.         On January 5, 2012, Continental, by its attorneys, filed with the Commission 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 authorize a horizontal well within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit, without exception being granted by the Director:

Township 6 North, Range 87 West, 6th P.M.
Section 11:    All

6.         On February 21, 2012, Continental, 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 Michael Schooley, Emerging Plays Landman for Continental, showed that Continental owns less than half of the leasehold interests in the Application Lands.

8.         Geologic testimony and exhibits submitted in support of the Application by Kent Keller, Geologist for Continental, showed that the Niobrara Formation is present below the Application Lands, and ranges in thickness from 857 to 1025 feet.

9.         Engineering testimony and exhibits submitted in support of the Application by Archie Taylor, Reservoir Engineering Application Manager for Continental, indicate that the drainage areas for vertical and directional wells are calculated to be approximately 100 acres.  The addition of a horizontal well in the proposed 640-acre drilling and spacing unit could increase the drainage area to approximately 220 acres.

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

12.       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 establish an approximate 640-acre drilling and spacing unit consisting of Section 11, Township 6 North, Range 87 West, 6th P.M., and authorize a horizontal well within the proposed unit, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 640-acre drilling and spacing unit for the below-described lands, is hereby established, and a horizontal well within the unit, is hereby authorized, for the production of oil, gas and associated hydrocarbons from the Niobrara Formation, with the treated interval of the permitted wellbore to be located no closer than 600 feet from the boundaries of the proposed unit, without exception being granted by the Director:

Township 6 North, Range 87 West, 6th P.M.
Section 11:    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 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.

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   8th  day of March, 2012, as of March 5, 2012.
           
                                                                        OIL AND GAS CONSERVATION COMMISSION
                                                                        OF THE STATE OF COLORADO

                                                                        By____________________________________         
                                                                                    Peter J. Gowen, Acting Secretary

Dated at Suite 801
1120 Lincoln Street
Denver, Colorado 80203
March 8, 2012