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

IN THE MATTER OF THE PROMULGATION AND ESTABLISHMENT OF FIELD RULES TO GOVERN OPERATIONS IN AN UNNAMED FIELD, GARFIELD AND MESA COUNTIES, COLORADO

)

CAUSE NO. 440 & 510

ORDER NOS. 547-4

PREVIOUS ORDER NOS.

440-65 & 510-56

CORRECTED

REPORT OF THE COMMISSION

The Commission heard this matter on April 16, 2012, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, upon application for an order to establish an approximate 2,921.58-acre drilling and spacing unit for certain lands in Sections 7 and 18, Township 8 South, Range 95 West, 6^th P.M., and Sections 1, 2, 11 and 12, Township 8 South, Range 96 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations.

FINDINGS

The Commission finds as follows:

1. Noble Energy, Inc. (“Noble” 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. The lands subject to this application are unspaced as to the Mancos, Niobrara, Frontier, and Mowry Formations (“Mancos Group Formations”) and are therefore subject to Rule 318.a.

5. On November 22, 2011, Noble, by its attorneys, filed with the Commission a verified application (“Application”) for an order to: 1) establish an approximate 2,921.58-acre drilling and spacing unit for the below-described lands (“Application Lands”), for the production of oil, gas and associated hydrocarbons from the Mancos Group Formations, with the treated interval of the wellbore being located downhole anywhere upon the Application Lands but no closer than 600 feet from the boundaries of the proposed drilling and spacing unit, and also located no closer than 600 feet from any other well producing from the Mancos Group Formations; and 2) authorize that all vertical, directional, or horizontal wells drilled within the unit shall be located on a new, common, or existing well pad, however, with the exception of the NW¼ SE¼ of Section 1, Township 8 South, Range 96 West, 6^th P.M. where Applicant intends to drill at least the initial three wells from one new wellpad located on surface owned by Applicant, no more than one surface well pad shall be located in any governmental quarter-quarter section or 40-acre equivalent thereof, without exception being granted by the Director:

Township 8 South, Range 95 West, 6^th P.M.

Section 7: Tract 37, Tract 38

Section 18: A parcel of land situated in the northwest quarter, the northwest quarter of the northeast quarter, the southwest quarter of the northeast quarter and the southwest quarter of Section 18 in Township 8 South and Range 95 West of the Sixth Principal Meridian in Garfield and Mesa counties, Colorado and being the Government Tracts described as follows:

1. That portion of government Tract No. 38 lying within the said Section 18;

2. Government Tract No. 39;

3. Government Tract No. 40, save and except that portion described as follows:

Considering the north line of the said northwest quarter of Section 18 as bearing North 89 degrees 55 minutes 28 seconds West, and all the bearings shown herein are referenced from. The terminus of the said north line being monumented with Brass Caps set during the U. S. General Land Office Independent Resurvey made in 1929.

Beginning at the southeast corner of the said Tract 40, same being angle point 4 of Tract 40 and angle point 3 of Tract 41.

THENCE, along the south line of the said Tract 40, South 88 degrees 29 minutes 41 seconds West a distance of 766.15 feet;

THENCE, North 0 degrees 05 minutes 58 seconds East a distance of 661.40 feet;

THENCE, South 89 degrees 58 minutes 02 seconds East a distance of 755.32 feet to the east line of the said Tract 40;

THENCE, along the said east line of Tract 40, South 0 degrees 50 minutes 28 seconds East a distance of 640.91 feet to the Point of Beginning.

The above described save and except portion containing 11.37 acres of land more or less.

4. Government Tract 41, save and except that portion described as follows:

Beginning at the southeast corner of the said Tract 41, same being angle point 6 of Tract 41;

THENCE, along the south line of said Tract 41, South 89 degrees 41 minutes 23 seconds West a distance of 2621.10 feet to the southwest corner (angle point 5) of said Tract 41;

THENCE, along the most westerly line of said Tract 41, North 0 degrees 39 minutes 59 seconds West a distance of 1344.36 feet to the most southerly northwest corner (angle point 4) of said Tract 41;

THENCE, along the most westerly north line of said Tract 41, North 88 degrees 29 minutes 41 seconds East a distance of 1214.47 feet to an “ell” corner (angle point 3) of said tract 41;

THENCE, along the middle west line of said Tract 41, North 0 degrees 50 minutes 28 seconds West a distance of 640.91 feet;

THENCE, South 89 degrees 58 minutes 02 seconds East a distance of 522.52 feet to the east line of the southwest quarter of said Section 18;

THENCE, along the said east line of the southwest quarter, North 0 degrees 16 minutes 22 seconds East a distance of 1313.13 feet to the center quarter corner location of the said Section 18;

THENCE, along the north line of the southeast quarter of said Section 18, South 89 degrees 55 minutes 21 seconds East a distance of 788.83 feet to the east line of the said Tract 41;

THENCE, along the said east line of Tract 41, South 2 degrees 04 minutes 46 seconds East a distance of 1983.25 feet to the northwest corner (angle point 3) of Tract 44;

THENCE, continuing along the said east line of said Tract 41, South 1 degrees 49 minutes 34 seconds East a distance of 1333.29 feet to Point of Beginning.

The above described save and except portion containing 126.27 acres of land more or less.

The combined area of that portion of the said Section 18 being within the Application Lands being 352.34 acres of land, more or less.

Township 8 South, Range 96 West, 6^th P.M.

Section 1: Lots 2, 3, 4, S½ NW¼, SW¼ NE¼, NW¼ SE¼, S½ SE¼, SW¼

Sections 2, 11 and 12: All

The unitized formation is described as follows:

The interval below the stratigraphic equivalent of the base of the Iles Formation as found at a depth of 6,619 feet and extending down to the top of the Dakota Formation as found at a depth of 10,881 feet in the M. Dutton 1-34B Well located in the SW¼ SE¼ of Section 1, Township 8 South, Range 96 West, 6^th P.M., Garfield County, Colorado.

Further, Noble requested that the M. Dutton 1-34B Well (API No. 05-045-13189) and the Edson Scholl 11-14 Well (API No. 05-077-10061), vertical wells drilled and producing from the Mancos Group Formations, and 10 acres surrounding these wells, be excluded from the proposed drilling and spacing unit, and that the distribution of proceeds from these wells be unaltered.

6. On January 4, 2012, Linda Dixon, General Partner of the Dutton FLLLP Trust (“Dutton”), filed a protest, alleging Noble’s land description used for the Application Lands were inconsistent with their most recent survey, and asked for additional time to resolve issues.

7. On January 5, 2012, Noble requested, and Commission Staff granted, a continuance to the March 5, 2012 hearing.

8. On January 9, 2012, Dutton filed a more definitive list of discrepancies between Noble’s survey and the Dutton Trust.

9. On April 4, 2012, Dutton withdrew the protest after consulting with an Attorney and Surveyor. Dutton was advised the Noble land description differed as a result of the difference between describing lands in computer modeling software and an actual on-the-ground survey, and the Noble description would not affect their actual surveyed property lines or boundaries as filed in county land records. Dutton stated that it still objected to the tract acreage changes; however, if the total acreage remained the same at payout, it would have no issues.

10. The Application was reviewed by the Colorado Department of Public Health and Environment (“CDPHE”) pursuant to consultation provisions of Rule 306.d. In a letter dated January 6, 2012, the CDPHE Oil & Gas Coordinator indicated that CDPHE does not believe any additional conditions of approval are necessary for approving the amended Application.

11. On April 3, 2012, Noble, 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.

12. Land testimony and exhibits submitted in support of the Application by Robert Hoelsken, Land Manager for Noble, showed that based on recent surveys the actual acreage of the Application Lands is 2,969.36-acres.

13. Geologic testimony and exhibits submitted in support of the Application by Gordon Stucker, Senior Geologist for Noble, indicated that the Mancos, Niobrara, Frontier, and Mowry Formations underlie the Application Lands.

14. Engineering testimony and exhibits submitted in support of the Application by Donald Peacock, Production Engineer for Noble, indicated that ultimate recovery of hydrocarbons using horizontal well technology would be economic, with an ultimate recovery of 6.2 Bcfe.

15. 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.

16. Noble agreed to be bound by oral order of the Commission.

17. Based on the facts stated in the verified Application, having received no unresolved protests, and based on the Hearing Officer review of the Application under Rule 511., the Commission should enter an order to establish an approximate 2,969.36-acre drilling and spacing unit for certain lands in Sections 7 and 18, Township 8 South, Range 95 West, 6^th P.M., and Sections 1, 2, 11 and 12, Township 8 South, Range 96 West, 6^th P.M., for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations.

ORDER

NOW, THEREFORE IT IS ORDERED, that an approximate 2,969.36-acre drilling and spacing unit for the below-listed lands, is hereby established, for the production of oil, gas and associated hydrocarbons from the Mancos, Niobrara, Frontier, and Mowry Formations (“Mancos Group Formations”):