REPORT OF THE COMMISSION

This cause came on for hearing before the Commission at 8:30 a.m. on July 17, 1995, in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing, as required by law on the amended application of Vessels Oil & Gas Company, for an order to amend Cause No. 232 to allow four (4) wells to be drilled at exception locations for commingled production from the "J" Sand, Codell, and Niobrara Formations. Further, the A pplicant requests approval of the proposed allocation method for all wells in which "J" Sand Formation production is commingled with production from the Codell and Niobrara Formations,

FINDINGS

The Commission finds as follows:

1. Vessels Oil & Gas Company, 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 with said units to consist of the N1/2 and S1/2 or the E1/2 and W1/2 of a governmental section for production from the "J" Sand Formation, and with the authorized well to be located in the NE1/4 and the SW1/4 of each section, no closer than 990 feet from the boundaries of the quarter section. By Order No. 232-20, the Commission authorized the drilling of a second well f or each 320-acre drilling and spacing unit, with the additional well to be located no closer than 990 feet from the boundaries of the quarter section upon which it is located, including Sections 19 and 30, Township 1 North, Range 68 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 Sections 19 and 30, Township 1 North, Range 68 West, 6th P.M.

6. Order Nos. 407-66 and 232-47 issued April 16, 1991, among other things, allowed the recompletion, downhole commingling and approval of allocation methods for production from the "J" Sand, Codell, and Niobrara Formations, including Sections 19 and 30, Township 1 North, Range 68 West, 6th P.M.

7. On July 12, 1995, Snyder Oil Corporation filed with the Commission a written protest to the application. At the time of the administrative hearing, the Applicant indicated that they were working with the protestant to resolve the matter where upon the protest would be withdrawn.

8. This matter was heard by the Hearing Officers who recommend approval based upon the testimony presented at the administrative hearing that the existing "J" Sand Formation wells will not adequately drain "J" Sand Formation reserves in the S1/2 of Section 19 or in Section 30, and additional "J" Sand Formation wells are required to drain the "J" Sand Formation.

9. Further, the Hearing Officers recommend approval provided that the following tests be performed by Vessels to gather information about the "J" Sand reservoir:

a) Vessels should perform pressure buildup tests using bottom hole pressure bombs on the Minerals A Unit #1, the Minerals A Unit #2, and the Minerals E #2. These buildups should be performed on the "J" Sand Formation prior to production from wells approved in this application. The purpose of these tests is to determine the current "J" Sand Formation reservoir pressure;

b) Vessels should perform pressure buildup tests using bottom hole pressure bombs on the four wells approved for exception locations in this application. These buildups should be performed on the "J" Sand Formation both prior to hydraulic fracturing and after hydraulic fracturing;

c) Vessels should monitor existing offset wells for pressure changes while hydraulic fracturing the wells approved in this application;

d) Vessels should keep daily records of production and flowing tubing pressures for both existing and newly drilled wells in Section 30 and the S1/2 of Section 19, Township 1 North, Range 68 West; and

e) After six (6) months Vessels should again perform pressure buildup tests as required in sub-section "a" and "b" above.

10. An order of the Commission should be entered allowing the below-listed wells to be drilled for production from the "J" Sand Formation, and to allow the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, for the below-described drilling and spacing units. The wells marked with an asterisk may be drilled directionally from existing well pads to avoid additional surface disturbance.

320-acre Drilling Well Name Approximate Location# and Spacing Unit *Vessels Minerals No. 30-5 SW1/4NW1/4 30-1N-68W W1/2 2180' FNL, 860' FWL *Vessels Minerals No. 30-14 SE1/4SW1/4 30-1N-68W W1/2 860' FSL, 2180' FWL Barb Limited No. 30-8 SE1/4NE1/4 30-1N-68W E1/2 2180' FNL, 860' FEL Vessels Minerals No. 19-15 SW1/4SE1/4 19-1N-68W S1/2 860' FSL, 1980' FEL

# Applicant proposes to drill the above-described wells at legal locations in accordance with Cause No. 407, as close to the approximate location as possible, subject to surface considerations and setbacks from the existing "J" Sand Formation wells.

ORDER

NOW, THEREFORE, IT IS ORDERED, that Order No. 232-1 is hereby amended to allow the below-listed wells to be drilled at exception locations, for production from the "J" Sand Formation, and to allow the downhole commingling of production from the "J" Sand Formation with production from the Codell and Niobrara Formations, for the below-described 320-acre drilling and spacing units.

320-acre Drilling Well Name Approximate Location and Spacing Unit Vessels Minerals No. 30-5 SW1/4NW1/4 30-1N-68W W1/2 2180' FNL, 860' FWL Vessels Minerals No. 30-14 SE1/4SW1/4 30-1N-68W W1/2 860' FSL, 2180' FWL Barb Limited No. 30-8 SE1/4NE1/4 30-1N-68W E1/2 2180' FNL, 860' FEL Vessels Minerals No. 19-15 SW1/4SE1/4 19-1N-68W S1/2 860' FSL, 1980' FEL

IT IS FURTHER ORDERED, that Vessels Oil & Gas Company shall perform pressure buildup tests using bottom hole pressure bombs on the Minerals A Unit #1, the Minerals A Unit #2, and the Minerals E #2. These buildups shall be performed on the "J" Sand Formation prior to production from wells approved in this application. The purpose of these tests is to determine the current "J" Sand Formation reservoir pressure. Vessels shall perform pressure buildup tes ts using bottom hole pressure bombs on the four wells approved for exception locations in this application. These buildups shall be performed on the "J" Sand Formation both prior to hydraulic fracturing and after hydraulic fracturing. Vessels shall monitor existing offset wells for pressure changes while hydraulic fracturing the wells approved in this application. Vessels shall keep daily records of production and flowing tubing pressures for both exis ting and newly drilled wells in Section 30 and the S1/2 of Section 19, Township 1 North, Range 68 West. After six (6) months Vessels shall again perform pressure buildup tests as described above.

IT IS FURTHER ORDERED, that should a commercial well be completed at the location set forth above, the Commission shall, upon application of any interested person, take such action as will offset any advantage which the person securing the exception may have over other procedures by reason of the drilling of the well as an exception location.

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 day of , 1996, as of July 17, 1995.

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 January 18, 1996 ??

(232#152)

(232#152)