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

REPORT OF THE COMMISSION

The Commission heard this matter on March 25, 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 643.40-acre exploratory drilling and spacing unit for Sections 31 and 32, Township 34 North, Range 12 West, M, and approve one horizontal well within the unit for the production of oil, gas, and related hydrocarbons of the Niobrara Formation.

FINDINGS

The Commission finds as follows:

1.         Swift Energy Operating, LLC (“Swift” 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.  Sections 31 and 32, Township 34 North, Range 12 West, M is subject to this Rule for the Niobrara Formation.

5.         On December 13, 2012, Swift Energy Operating, LLC (“Swift” or “Applicant”), 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 643.40-acre exploratory drilling and spacing unit for the below-described lands (“Application Lands”), and approve one horizontal well within the unit, 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 34 North, Range 12 West, M

            Section 31:   N½

            Section 32:   N½ 

6.         On January 25, 2013, La Plata County (“La Plata” or “Intervenor”) filed an Intervention to the Application. 

7.         On January 30, 2013, the parties requested, and the Commission staff granted, a continuance to the March hearing.

8.         On March 18, 2013, Swift, by its attorneys, filed with the Commission a written request to approve the Application based on its merits of the verified application and the supporting exhibits.  Sworn written testimony and exhibits were submitted in support of the Application.

9.         On March 19, 2013, the La Plata County Commissioners approved the Memorandum of Understanding (“MOU”) entered into between Swift and La Plata.  La Plata subsequently withdrew its intervention. Swift requests Exhibit A of the MOU be made a part of this order.  A signed copy of the MOU is attached to this Order.

10.       Land testimony and exhibits submitted in support of the Application by Land testimony and exhibits submitted in support of the Application by Justin R. Matthews, Senior Landman for Swift, showed that Swift holds a 100% mineral leasehold interest in the Application Lands.

11.       Geologic testimony and exhibits submitted in support of the Application by John Caprara, Chief Geoscientist Resource Plays and Unconventional Reservoirs for Swift, showed that the Niobrara Formation exists under all of the Application Lands. The proposed unit is at a base of a monocline dipping to the south with vertical drilling depths of approximately 2100 – 2500 feet in the proposed unit.

12.       Engineering testimony and exhibits submitted in support of the Application by Keith Claghorn, senior Reservoir Engineer for the strategic Growth team for Swift, showed calculations of Original Oil in place (OOIP), estimated ultimate recovery (EUR) and drainage area for 28 Niobrara vertical oil producers in La Plata County in the red mesa Field.  The oil production from those wells has been highly variable, ranging from less than 1 to 74 acres drainage area. The average drainage area of the 28 vertical wells was 20 acres, with a recovery factor of 5%.  Testimony concluded the economics of the project are 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.       Swift 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 establish an approximate 643.40-acre exploratory drilling and spacing unit for Sections 31 and 32, Township 34 North, Range 12 West, M, and approve one horizontal well within the unit, for the production of oil, gas, and related hydrocarbons of the Niobrara Formation.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 643.40-acre exploratory drilling and spacing unit for the below-described lands, is hereby established, and one horizontal well within the unit, is hereby approved, for the production of oil, gas, and related hydrocarbons of 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 34 North, Range 12 West, M

Section 31:   N½

Section 32:   N½ 

IT IS FURTHER ORDERED, that Exhibit A of the MOU between Swift and La Plata County is made a part of this Order.

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   5^th   day of April, 2013, as of March 25, 2013.      

                                                            OIL AND GAS CONSERVATION COMMISSION

                                                            OF THE STATE OF COLORADO

                                                                                                                                                                                                                        By____________________________________       

                                                                        Robert J. Frick, Secretary