BEFORE THE OIL AND GAS CONSERVATION COMMISSION

OF THE STATE OF COLORADO

IN THE MATTER OF THE PROMULGATION                                             )                     CAUSE NO. 471

AND ESTABLISHMENT OF FIELD RULES TO                                        )

GOVERN OPERATIONS IN THE JACE FIELD,                                        )                     ORDER NO. 471-7

KIOWA COUNTY, COLORADO                                                                   )

                        The Commission finds as follows:

                        1. Citation Oil & Gas Corporation ("Citation"), 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 pursuant to the Oil and Gas Conservation Act.

                        4. On August 24, 1998, the Commission issued Order No. 471-1, which among other things, established 80-acre drilling and spacing units, for certain lands, including Section 6, Township 18 South, Range 41 West, 6^th P.M., and Sections 1 and 2, Township 18 South, Range 42 West, 6^th P.M. for the production of oil and associated hydrocarbons from the Morrow Sandstone Formation.

                        5. On July 19, 1993, amended on September 5, 1993, the Commission entered Order No. 471-4, which among other things, established the Morrow V-7 Sandstone Formation as a common source of supply of oil, gas and associated hydrocarbons in Sections 1 and 2, Township 18 South, Range 42 West, 6^th P.M., and established 80-acre drilling and spacing units for the Morrow V-7 Formation, with the permitted well to be located no closer than 600 feet from the boundaries of the unit and no closer than 1200 feet from another well producing in the same formation.

                        The proposed plan of unit operations for which Commission authorization is requested is established by the Jace Morrow Sand Unit Agreement and the Jace Morrow Sand Unit Operating Agreement.

                        NOW, THEREFORE IT IS ORDERED, that the unit operation and development of the Morrow Sandstone Formation is hereby approved, for the lands described below:

                        IT IS FURTHER ORDERED, that the formation to be unitized (the "Unitized Formation") is defined as the Morrow Sand V-5, being the stratigraphic equivalent of the interval found between 5,095 feet and 5,119 feet, and the Morrow Sand V-7 section described as the stratigraphic equivalent of the interval found between 5,148 feet to 5,169 feet, in the Dual Induction Log run on May 17, 1991 for the Schneider 34-1 #3 Well located in the SW¼ SE¼ of Section 1, Township 18 South, Range 42 West, 6^th P.M.

                        IT IS FURTHER ORDERED, that the Unit Agreement and Unit Operating Agreement are hereby effective on the first day of August 2006.

                        ENTERED this__________day of July, 2006, as of July 10, 2006.

                                                            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

July 28, 2006