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                                   and 499
OPERATIONS IN THE WATTENBERG GAS SPACED
AREA, THE CODELL- NIOBRARA SPACED AREA AND        ORDER NOS. 232-219, 407-275,
THE WATTENBERG FIELD, WELD COUNTY, COLORADO                     and 499-63

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 the HSR Magness 11-6A Well to be drilled in the center of the NE¼ SW¼ with a tolerance of 200 feet in any direction of Section 6, Township 2 North, Range 66 West, 6th P.M., as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 6. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara, Sussex and Shannon Formations for an 80-acre drilling and spacing unit 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, including Section 6, Township 2 North, Range 66 West 6th P.M.

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, including Section 6, Township 2 North, Range 66 West 6th P.M.

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 No. 499-7, 232-77, 407-11 and 493-14, 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, including Section 6, Township 2 North, Range 66 West 6th P.M.

8. The HSR Magness 11-6A Well is to be drilled in the center of the NE¼ SW¼ of Section 6, Township 2 North, Range 66 West, 6th P.M., with a tolerance of 200 feet in any direction, as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 6.

9. Evidence submitted by the Applicant and reviewed by the Hearing Officer shows that the original gas in place is 8.8 BCF and indicates that the estimated ultimate recovery from the two existing “J” Sand Formation wells in the specified 320-acre drilling and spacing unit will be 2.2 BCF, which equates to a recovery factor of twenty-five percent (25%).

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

11. 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. A bottomhole pressure test of the "J" Sand Formation will not be obtained.

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

13. 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 HSR Magness 11-6A Well to be drilled in the center of the NE¼ SW¼ of Section 6, Township 2 North, Range 66 West, 6th P.M., with a tolerance of 200 feet in any direction, as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 6. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara, Sussex and Shannon Formations for an 80-acre drilling and spacing unit 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 HSR Magness 11-6A Well to be drilled in the center of the NE¼ SW¼ of Section 6, Township 2 North, Range 66 West, 6th P.M., with a tolerance of 200 feet in any direction ,as a third well for production of gas and associated hydrocarbons from the "J" Sand Formation for the 320-acre drilling and spacing unit consisting of the S½ of Section 6. In the future, the Applicant may recomplete this well to the Dakota Formation for said 320-acre drilling and spacing unit and to the Codell, Niobrara, Sussex and Shannon Formations for an 80-acre drilling and spacing unit and commingle any production with the "J" Sand Formation.

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 13th 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 13, 1998

(232-219)