REPORT OF THE COMMISSION

This cause came on for hearing before the Commission on April 17, 1989 at 8:30 a.m. in Room 101, Education Building, 201 East Colfax, Denver, Colorado, after giving Notice of Hearing as required by law, on the verified application of TXO Production Corporation for an order granting an exception to the permitted well location as provided for in Order No. 463-1 for a well to be drilled in the spacing unit consisting of the N/2 SE/4 Section 24 at a location in the NW/4 SE/4 Section 24, Township 16 South, Range 42 West, 6th P.M., 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 matter..

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 the parties interested therein, and jurisdiction to promulgate the hereinafter order.

4. On September 19, 1988 the Commission authorized Order No. 463-1 to be issued which established 80-acre drilling and spacing units for the production of oil and associated hydrocarbons underlying Second Wind Field in Cheyenne County, Colorado The units 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 with the permitted well to be located within the NE/4 or SW/4 of a quarter section and no closer than 460 feet from the boundaries of the unit tract.

5. All wells drilled and completed as producing wells at exception locations shall have a monthly production allowable of fifty percent (50%) of that allowed wells completed at designated locations.

6. The matter was heard at the Commission hearing on March 20, 1989. A protest was filed by Douglas C. McCleod d/b/a Petrogulf Energy Company. The protest was not allowed at the time of hearing, and the Hearing Officer was directed to have an administrative hearing and make a recommendation at the hearing on April 17, 1989.

7. Based on the facts stated in the verified application, and having been heard by the Director as Hearing Officer on April 13, 1989 who recommended the exception location be granted, the Commission should enter an order granting an exception for a well to be drilled in the spacing unit consisting of the N/2 SE/4 Section 24 at a location in the NW/4 SE/4 Section 24, Township 16 South, Range 42 West, 6th P.M., Second Wind Field, Cheyenne County, Colorado for the production of oil and associated hydrocarbons from the Morrow Sandstone formation.

8. Should a commercial well be completed at the above exception location, production from said well should be restricted to fifty percent (50%) that allowed at a well producing at a permitted location.

ORDER

NOW, THEREFORE, IT IS ORDERED, that an exception to the permitted well location as provided for in Order No. 463-1 is hereby granted for a well to be drilled in the spacing unit consisting if the N/2 SE/4 Section 24 at a location in the NW/4 SE/4 of Section 24, Township 16 South, Range 42 West, 6th P.M., Second Wind Field, Cheyenne County, Colorado for the production of oil and associated hydrocarbons from the Morrow Sandstone formation and that production shall be restricted to fifty percent (50%) of the volume allowed for a well at the permitted location.

IT IS FURTHER ORDERED, that the provisions contained in the above order shall be effective forthwith.

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

ENTERED 18th day of April 1989, as of April 17, 1989. OIL AND GAS CONSERVATION COMMISSION OF THE STATE OF COLORADO By Dennis R. Bidknell, Secretary -- 2 --(463-13)