REPORT OF THE COMMISSION

TO ALL INTERESTED PERSONS AND TO WHOM IT MAY CONCERN:

This cause came on for hearing before the Commission on May 16, 1988 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 Medallion Petroleum, Inc. to re-designate the 80-acre drilling and spacing units as the W/2 NW/4 and the E/2 NW/4 of Section 27, Township 14 South, Range 42 West, 6th P.M. with the Medallion #27-1 as the permitted well in the E/2 NW/4 unit and the permitted well for the W/2 NW/4 at the undrilled location SW/4 NW/4. Protests were filed by Mull Drilling Company et al by their attorney, and by Union Pacific Resources Company by their attorney.

FINDINGS

The Commission finds as follows:

1. Medallion Petroleum, 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 the notice of the aforesaid hearing, and of the parties interested therein, as well as jurisdiction to promulgate the hereinafter prescribed order.

4. On May 18, 1987, the Commission issued Order No. 449-1 which established field rules for Arapahoe Field in Cheyenne County, Colorado for the production of oil and associated hydrocarbons from the Morrow Formation. It was ordered that drilling units shall consist of 80-acre, more or less, and shall consist of the E/2 and W/2 or the N/2 and S/2 of a governmental quarter section, with the unit designated by the operator of the first well drilled in the quarter section. The following shall be the designated units: S/2 SW/4 Section 23, N/2 NE/4 Section 27, and the N/2 NW/4 Section 27, Township 14 South, Range 42 West, 6th P.M.; and that the permitted well location shall be in the center of the NE/4 and the SW/4 of each quarter section with a tolerance of 200 feet in any direction. Well No. 27-1 Arapahoe, located in the SE/4 NW/4 of said Section 27 shall be considered an exception and be the permitted well for the unit consisting of the S/2 NW/4 of said Section. Well No. Funk A', located in the S/2 S/2 HE/4 of said Section 26 shall also be considered an exception and be the permitted well for the unit consisting of the S/2 HE/4 of said Section.

5. Testimony at the time of hearing indicated that the Medallion Petroleum, Inc. well Medallion #27-7 encountered the Morrow Sand, that the well could not be completed as a producing well in the Morrow Sand and, that the well has been temporarily abandoned as a non-commercial well.

6. That another well should be allowed to be drilled in the NW/4 of Section 27 to allow the just and equitable drainage of the Morrow sand underlying the above lands, and that said well should be located at the permitted location of the center of the SW/4 with a tolerance of 200 feet in any direction.

7. That the drilling and spacing units in the NW/4 of Section 27 should consist of the W/2 NW/4 and the F./2 NW/4 with the permitted well for the E/2 NW/4 being the Medallion #27-1 and the permitted location for the W/2 NW/4 being the SW/4 NW/4.

ORDER

NOW THEREFORE IT IS ORDERED, that the drilling and spacing units in the NW/4 of Section 27, Township 14 South, Range 42 West, 6th P.M., Cheyenne County, Colorado shall consist of the W/2 NW/4 with the permitted well location being in the SW/4 NW/4 and the E/2 NW/4 with the permitted well being the Medallion #27-1 located in the SE/4 NW/4.

ENTERED this 27th day of May 1988, as of May 16, 1988.

THE OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO

By Dennis R. Bicknell, Secretary

(449-8)