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. 232-227, 407-281,
THE WATTENBERG FIELD, WELD COUNTY, COLORADO                         and 499-69

REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on April 29, 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 seven (7) wells previously drilled to the Codell Formation to be deepened to the "J" Sand Formation as third wells for the production of gas and associated hydrocarbons for certain 320-acre drilling and spacing units. In the future, the Applicant may recomplete these wells to the Dakota Formation for said 320-acre drilling and spacing units and to the Niobrara Formation for 80-acre drilling and spacing units and commingle all 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 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.

8. The below-listed wells were originally drilled for production from the Codell Formation and HS Resources proposes to deepened these wells to the "J" Sand Formation as third wells for the production of gas and associated hydrocarbons for the described 320-acre drilling and spacing units:

Well Location 320-acre unit
Cannon Land UPRR 41-3#2A NE¼ NE¼ Sec. 3-2N-66W N½
HSR Faust #13-21A SW¼ SW¼ Sec. 21-3N-66W S½
The Chairman #1-22A NE¼ NE¼ Sec. 22-3N-66W E½
Sarchet UPRR #41-23#1A NE¼ NE¼ Sec. 23-3N-66W N½
HSR Smyth #14-27A SE¼ SW¼ Sec. 27-3N-66W S½
HSR Jerry "D" #11-28A NE¼ SW¼ Sec. 28-3N-66W W½
HSR Lemon #12-23A NW¼ SW¼ Sec. 23-3N-67W S½

9. Evidence submitted by the Applicant and reviewed by the Hearing Officer shows that the original gas in place ranges from 5.8 to 9.8 BCF and that estimated ultimate recovery from the two existing “J” Sand Formation wells in each specified 320-acre drilling and spacing unit ranges from 0.9 BCF to 2.5 BCF, which equates to recovery factors ranging from fourteen percent (14%) to forty-seven percent (47%).

10. That in order to prevent waste, protect correlative rights and prevent the drilling of unnecessary wells, recompletion of existing wells 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 and the Niobrara, Codell and Sussex Formations and commingle production from these formations with production from the “J” Sand Formation.

12. The Applicant will conduct a bottom hole pressure test of the "J" Sand Formation on the HSR Faust #13-21A Well.

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

14. Based on the facts stated in the application, having received no protests and having been reviewed 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 seven (7) wells listed in Finding #8 to be deepened to the "J" Sand Formation as third wells for the production of gas and associated hydrocarbons for certain 320-acre drilling and spacing units. In the future, the Applicant may recomplete these wells to the Dakota Formation for said 320-acre drilling and spacing units and to the Niobrara Formation for 80-acre drilling and spacing units and commingle all production with the "J" Sand Formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order Nos. 232-89, 407-125, 499-15 and 493-22 are hereby amended to allow the below-listed wells previously drilled to the Codell Formation to be deepened to the "J" Sand Formation as third wells for the production of gas and associated hydrocarbons for certain 320-acre drilling and spacing units. In the future, the Applicant may recomplete these wells to the Dakota Formation for said 320-acre drilling and spacing units and to the Niobrara Formation for 80-acre drilling and spacing units and commingle all production with the "J" Sand Formation.

Well Location 320-acre unit
Cannon Land UPRR 41-3#2A NE¼ NE¼ Sec. 3-2N-66W N½
HSR Faust #13-21A SW¼ SW¼ Sec. 21-3N-66W S½
The Chairman #1-22A NE¼ NE¼ Sec. 22-3N-66W E½
Sarchet UPRR #41-23#1A NE¼ NE¼ Sec. 23-3N-66W N½
HSR Smyth #14-27A SE¼ SW¼ Sec. 27-3N-66W S½
HSR Jerry "D" #11-28A NE¼ SW¼ Sec. 28-3N-66W W½
HSR Lemon #12-23A NW¼ SW¼ Sec. 23-3N-67W S½

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, Codell, Niobrara or Sussex Formations and commingle production from these formations with production from the “J” Sand Formation.

IT IS FURTHER ORDERED, that the Applicant shall conduct a bottom hole pressure test of the "J" Sand Formation on the HSR Faust #13-21A Well.

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 21st day of May, 1998, as of April 29, 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 May 19, 1998

(232-227)