IN THE MATTER OF THE PROMULGATION AND CAUSE NOS

IN THE MATTER OF THE PROMULGATION AND                  CAUSE NOS. 232, 407
ESTABLISHMENT OF FIELD RULES TO GOVERN                                    493 and 499
OPERATIONS IN THE WATTENBERG GAS SPACED
AREA, THE CODELL- NIOBRARA SPACED AREA AND        ORDER NOS. 232-213, 407-272,
THE WATTENBERG FIELD, WELD COUNTY, COLORADO                         493-44 and 499-59

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on March 31, 1998, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the verified application of HS Resources, Inc., for an order to allow four (4) wells to be drilled as third wells for production of gas and associated hydrocarbons from the "J" Sand Formation for the specified 320-acre drilling and spacing unit. In addition, the Applicant requests to drill the Wardell UPRR #42-29A Well at an exception location in the center of the SE¼ NE¼ of Section 29, Township 3 North, Range 65 West, 6th P.M., with a tolerance of 200 feet in any direction for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the N½ of said Section 29. The Applicant may recomplete these wells to the Dakota Formation for the 320-acre drilling and spacing units and to the Codell, Niobrara and Sussex Formations in the future for the 80-acre drilling and spacing units and commingle any production with the "J" Sand Formation.

FINDINGS

The Commission finds as follows:

1. HS Resources, Inc. 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.

4. In Cause No. 232, the Commission established 320-acre drilling and spacing units for the production of gas from the "J" Sand Formation in the Wattenberg Field with one well allowed for each unit to be located in the NE¼ and SW¼ and no closer than 990 feet to the boundaries of the quarter section. On August 21, 1979, the Commission issued Order No. 232-20 which allowed a second well to be drilled on each 320-acre unit.

5. In Order No. 407 1, the Commission established 80 acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Codell Formation. Wells shall be located in the center of the 40 acre tract or quarter quarter section with a tolerance of 200 feet in any direction. In Order Nos. 407 10 and 407 13, the Commission amended Order No. 407 1 to include production from the Niobrara Formation in certain lands and to allow the downhole commingling of production from the Codell and Niobrara Formations.

6. In Order Nos. 407-66 and 232-47, the Commission, among other things, allowed recompletion to shallower zones, the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, and approval of an allocation method for commingled production.

7. In Order Nos. 493 9, 407-100, 232-66 and 499-3, the Commission established 80 acre drilling and spacing units for the production of oil and/or gas and associated hydrocarbons from the Sussex Formation in certain lands in Weld County, Colorado. Wells shall be located in the center of the 40 acre tract or quarter quarter section with a tolerance of 200 feet in any direction and the downhole commingling of production from the Sussex, Codell and Niobrara Formations shall be allowed.

8. In Order No. 499-3, 232-66, 407-100 and 493-9, the Commission established 320-acre drilling and spacing units for the production of oil, gas and associated hydrocarbons from the Dakota Formation in certain lands, with the 320-acre drilling and spacing units to be identical to those previously established for the "J" Sand Formation under Cause No. 232, with the permitted wells to be located in the NW¼ and the SE¼ of the section and no closer than 990 feet from the boundaries of the quarter section. In Order Nos. 499-15, 232-89, 407-125, 493-22 and 496-3, the Commission allowed the commingling of production from the Dakota, "J" Sand, Codell, Niobrara, Sussex and Shannon Formations.

9. The below-listed wells are to be drilled as third wells for production of gas and associated hydrocarbons from the "J" Sand Formation for the specified 320-acre drilling and spacing unit.

Proposed Well Location 320-acre Unit
Beebe Draw UPRR #42-17A SE¼ NE¼ Sec 17-3N-65W N½
HSR Henderson #11-2A NE¼ SW¼ Sec 2-3N-66W S½
HSR Smalley #15-15A SW¼ SE¼ Sec 15-3N-66W S½
HSR Nellis #11-15A NE¼ SW¼ Sec 15-3N-67W W½

10. The Wardell UPRR #42-29A Well is to be drilled at an exception location in the center of the SE¼ NE¼ of Section 29, Township 3 North, Range 65 West, 6th P.M., with a tolerance of 200 feet in any direction for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the N½ of said Section 29.

11. Evidence submitted by the Applicant and reviewed by the Hearing Officer shows that the original gas in place is 9.2 BCF, and indicates that the estimated ultimate recovery from the two existing “J” Sand Formation wells in each specified 320-acre drilling and spacing unit ranges from 0.2 BCF to 1.6 BCF, which equates to recovery factors ranging from twelve percent (12%) to twenty-six percent (26%).

12. That in order to prevent waste and protect the correlative rights, an additional well is necessary to recover remaining "J" Sand Formation reserves.

13. The applicant agrees to request Commission approval not before six (6) months from the date production is obtained from the “J” Sand Formation to recomplete the well to the Dakota Formation at an exception location and to the Codell, Niobrara, Sussex or Shannon Formations and commingle production from these formations with production from the “J” Sand Formation.

14. The Applicant agreed to be bound by oral order of the Commission.

15. Based on the facts stated in the application, having received no protests and having been heard by the Hearing Officer who recommends approval of the application, an order of the Commission should be entered amending Order Nos. 232-89, 407-125, and 499-15 to allow the four (4) wells listed in Finding #9 to be drilled as third wells for production of gas and associated hydrocarbons from the "J" Sand Formation for the specified 320-acre drilling and spacing unit. In addition, an order should be entered allowing the Wardell UPRR #42-29A Well to be drilled at an exception location in the center of the SE¼ NE¼ of Section 29, Township 3 North, Range 65 West, 6th P.M., with a tolerance of 200 feet in any direction for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the N½ of said Section 29. In the future, the Applicant may recomplete these wells to the Dakota Formation for the 320-acre drilling and spacing units and to the Codell, Niobrara and Sussex Formations for the 80-acre drilling and spacing units and commingle any production with the "J" Sand Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 232-89, 407-125 and 499-15 are hereby amended to allow the below-listed wells to be drilled as third wells for production of gas and associated hydrocarbons from the "J" Sand Formation for the specified 320-acre drilling and spacing unit. The Applicant may recomplete these wells to the Dakota Formation for the 320-acre drilling and spacing units and to the Codell, Niobrara and Sussex Formations in the future for the 80-acre drilling and spacing units and commingle any production with the "J" Sand Formation.

Proposed Well Location 320-acre Unit
Beebe Draw UPRR #42-17A SE¼ NE¼ Sec 17-3N-65W N½
HSR Henderson #11-2A NE¼ SW¼ Sec 2-3N-66W S½
HSR Smalley #15-15A SW¼ SE¼ Sec 15-3N-66W S½
HSR Nellis #11-15A NE¼ SW¼ Sec 15-3N-67W W½

IT IS FURTHER ORDERED, that the Applicant shall be allowed to drill the Wardell UPRR #42-29A Well at an exception location in the center of the SE¼ NE¼ of Section 29, Township 3 North, Range 65 West, 6th P.M., with a tolerance of 200 feet in any direction, for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the N½ of said Section 29.

IT IS FURTHER ORDERED, that the Applicant shall request Commission approval not before approximately six (6) months from the date production is obtained from the "J" Sand Formation to recomplete the well to the Dakota Formation at an exception location and to the Codell, Niobrara, Sussex or Shannon Formations and commingle production from these formations with production from the “J” Sand Formation.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective forthwith.

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.

ENTERED this 10th day of April, 1998, as of March 31, 1998.

OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Patricia C. Beaver, Secretary

Dated at Suite 801 1120 Lincoln Street Denver, Colorado 80203 April 10, 1998

(232-213)