REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on November 21, 1995 at 8:30 a.m. in Suite 801, The Chancery Building, 1120 Lincoln Street, Denver, Colorado, after giving Notice of Hearing as required by law, on the application of Walsh Production Inc., for an order approving a certain Unit Agreement and Unit Operating Agreement for the Lilli Field, providing for unit operations and development of the reservoir consisting of the "D" Sand Formation u nderlying certain lands in Weld County, Colorado.

FINDINGS

The Commission finds as follows:

1. Walsh Production, 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. The "D" Sand Formation was encountered in the stratigraphic interval between the depths of 6,293 feet and 6,373 feet as found on the DIL log of the Federal Sooner No. 4-9 Well located in the NW1/4 NW1/4 of Section 9, Township 8 North, Range 58 West, 6th P.M., and as so encountered, is a common source of supply and has been defined and determined by drilling to be productive underlying the following described lands in the Lilli Field:

Township 8 North, Range 58 West, 6th P.M. Section 1: Lot 4, SW1/4NW1/4, W1/2SW1/4 Sections 2 - 11: All Section 12: W1/2NW1/4, NW1/4SW1/4 Section 14: NW1/4, W1/2SW1/4 Section 15: N1/2, SE1/4, E1/2SW1/4 Section 16: N1/2N1/2 Section 17: N1/2N1/2, SW1/4NW1/4 Section 18: NE1/4, E1/2NW1/4, Lot 1

Township 8 North, Range 59 West, 6th P.M. Section 1: All Section 2: Lots 1, 2, S1/2NE1/4, SE1/4 Section 11: E1/2 Section 12: All Section 13: N1/2N1/2

Township 9 North, Range 58 West, 6th P.M. Section 32: S1/2SW1/4 Section 34: S1/2 Section 35: S1/2

Township 9 North, Range 59 West, 6th P.M. Section 36: S1/2SE1/4

5. The terms and conditions provided by the Lilli Field Unit Agreement and Unit Operating Agreement meet the requirements of the statute and are just and reasonable to all interests contained within said unit area. The plan for unit operations as presented by the Applicant, as described herein is necessary to increase the ultimate recovery of oil and gas and the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations.

6. The provisions contained in said Unit Agreement and Unit Operating Agreement are just and reasonable and include the following:

a. The description of the pool to be so operated;

b. The nature of said operation:

c. The allocation to the separately owned tracts in the Lilli Field Unit Area of all the oil and gas that is produced from said Unit Area and is saved;

d. The provision for the credits and charges to be made in the adjustment among the owners in the Lilli Field Unit Area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operations;

e. The provision providing how the costs of unit operations, including capital investments, shall be determined and charged to the separately owned tracts, and how said costs shall be paid, including the provision providing when, how, and by whom the unit production allocated to an owner who does not pay the share of the cost of unit operations charged to such owner, or the interest of such owners, may be sold and the proceeds applied to the payment of such costs;

f. The provision for the supervision and conduct of the unit operations, in respect to which person shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against the interest of such person; and

g. The time when the unit operations shall commence, and the manner in which, and the circumstances under which the unit operations shall terminate.

7. At the time of the administrative hearing before the Commission, Walsh Production, Inc. indicated that those persons having 99.9% of the cost-bearing interests and 96.8% of the non-cost bearing interests had approved in writing the provisions of the Unit Agreement and the Unit Operating Agreement. In addition, those persons owning 100% of the surface rights have also approved the plan of unit operations.

8. The effective date of the unit should be the first day of the first month after approval of the Unit Agreement and Unit Operating Agreement by the Bureau of Land Management.

9. Based on the facts stated in the verified application, having received no protests, and having been recommended for approval by the Hearing Officer, the Commission should enter an order approving the Lilli Field Unit Agreement and Unit Operating Agreement.

ORDER

NOW, THEREFORE, IT IS ORDERED, that:

1. The Lilli Field Unit Agreement and Unit Operating Agreement, covering lands in the Lilli Field, which agreements are attached to, and made a part of the original order of this Commission on file in the office of the Commission, are approved as being in the public interest for conservation.

2. The "D" Sand Formation defined as the stratigraphic interval between the depths of 6,293 feet and 6,373 feet as found on the DIL log of the Federal Sooner No. 4-9 Well located in the NW1/4 NW1/4 of Section 9, Township 8 North, Range 58 West, 6th P.M., is a common source of supply and has been defined and determined by drilling to be productive underlying the following described lands in the Lilli Field:

Township 8 North, Range 58 West, 6th P.M. Section 1: Lot 4, SW1/4NW1/4, W1/2SW1/4 Sections 2 - 11: All Section 12: W1/2NW1/4, NW1/4SW1/4 Section 14: NW1/4, W1/2SW1/4 Section 15: N1/2, SE1/4, E1/2SW1/4 Section 16: N1/2N1/2 Section 17: N1/2N1/2, SW1/4NW1/4 Section 18: NE1/4, E1/2NW1/4, Lot 1

Township 8 North, Range 59 West, 6th P.M. Section 1: All Section 2: Lots 1, 2, S1/2NE1/4, SE1/4 Section 11: E1/2 Section 12: All Section 13: N1/2N1/2

Township 9 North, Range 58 West, 6th P.M. Section 32: S1/2SW1/4 Section 34: S1/2 Section 35: S1/2

Township 9 North, Range 59 West, 6th P.M. Section 36: S1/2SE1/4

3. The provisions contained in said Unit Agreement and Unit Operating Agreement as they pertain to 34-60-118, C.R.S., as amended, of the Oil and Gas Conservation Act are just and reasonable, and are incorporated herein as the Commission's plan of involuntary unit operations for such lands.

4. Any injection well to be located in the Unit Area shall be approved by the Director in accordance with the rules and regulations of the Commission.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall become effective the first day of the first month after approval of the Unit Agreement and the Unit Operating Agreement by the Bureau of Land Management and that the Unit Operator shall submit all documentation required including Form 10, Certificate of Clearance, for each well, and further that the Unit Operator shall advise the Commission in writing as to the termination of t he unit.

IT IS FURTHER ORDERED, that the Commission expressly reserves it rights, after notice and hearing, to alter, amend or repeal any and/or all of the above orders.

ENTERED this day of , 1995, as of November 21, 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 December 7, 1995 ??

(451#23)

(384-3)