REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on February 21, 1986 at 9:00 A.M., in Room 110 State Centennial Building, 1313 Sherman Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of TXO Production Corporation for an order establishing 10-acre drilling and spacing units for the production of oil and associated hydrocarbons from the Morro formation underlying certain lands in Cheyenne County, Colorado

FINDINGS

The Commission finds as follows:

1. TXO Production Corporation, 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. Evidence presented at the hearing indicates that the Morrow formation constitutes a common source of supply of oil and associated hydrocarbons underlying the following described lands in Cheyenne County, Colorado to-wit: Township 16 South, Range 41 West, 6th P.M. Sections 7, 8, 17, 18, 19 & 20: All Township 16 South, Range 42 West, 6th P.M. Sections 12, 13 and 24: All

5. Geological and engineering evidence presented at the hearing indicates that 10-acre drilling and spacing units are smaller than the maximum area that can be efficiently and economically drained by one well and that 40-acre units would be more reasonable.

6. In order to prevent the waste of oil and gas, as defined by law, and to protect the correlative rights of all parties concerned; to prevent the drilling of unnecessary wells, and to insure proper and efficient development and promote conservation of the oil and gas resources of the State, an order should be made establishing 40-acre drilling and spacing units consisting of a quarter-quarter section according to the governmental survey for the production of oil and associated hydrocarbons from the Morrow formation underlying the lands defined herein. The permitted well should be at a location no closer than 330 feet from the boundaries of the quarter-quarter section.

7. All available geological and engineering data concerning said Morrow formation indicates that one well will efficiently and economically drain an area of approximately 40-acres and that the drilling unit of the size and shape hereinafter described is not smaller than the maximum area that can be efficiently and economically drained by one well producing from said Morrow formation.

ORDER

NOW, THEREFORE, IT IS ORDERED, that the following rules and regulations shall apply hereafter to wells drilled, completed, or recompleted in the Morrow formation underlying certain lands in the Stockholm Field, Cheyenne County, Colorado, herein described, in addition. to other applicable rules and regulations and orders of the Commission, if any, heretofore adopted and not in conflict herewith:

Rule 1. Forty (40) acre drilling and spacing units shall be and the same are hereby established for the production of oil and associated hydrocarbons from the Morrow formation underlying the following described lands in Cheyenne County, Colorado, to-wit: Township 16 South, Range 41 West, 6th P.M. Sections 7, 8, 17, 18, 19 & 20: All Township 16 South, Range 42 West, 6th P.M. Sections 12, 3 and 24: All

Rule 2. The units shall consist of 40-acres, more or less, and consist of a governmental quarter-quarter section. The permitted well shall be at a location no closer than 330 feet to the boundaries of the quarter-quarter section.

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, 1986, as of February 21, 1986.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Frank J. Piro, Secretary

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