FI LED BEFORE THE BOARD OF OIL, GAS AND MINING

DEPARTMENT OF NATURAL RESOURCES

STATE OF UTAH

NOV 2 6 2014 SECRETARY, BOARD OF

OIL GAS & MINING

IN THE MATTER OF THE REQUEST FOR

AGENCY ACTION OF FINLEY RESOURCES

INC. FOR AN ORDER ESTABLISHING 40-

ACRE DRILLING UNITS FOR THE

PRODUCTION OF OIL, GAS AND

ASSOCIATED HYDROCARBONS FROM

THE EOCENE MIDDLE AND LOWER

GREEN RIVER AND PORTIONS OF THE

PALEOCENE WASATCH TRANSITIONAL

FORMATIONS UNDERLYING SECTIONS 13,

16, 21, 22 AND THE N1I2 OF SECTION 27,

TOWNSHIP 4 SOUTH, RANGE 1 EAST, USM, UINTAH COUNTY, UTAH, AND AUTHORIZING UP TO FOUR (4)

PRODUCING WELLS ON EACH SUCH

DRILLING UNIT SO ESTABLISHED

RESPONSE TO REQUEST FOR

AGENCY ACTION

Docket No. 2014-042

Cause No. 239-03

Respondent, Crescent Point Energy U.S. Corporation ("Crescent Point"), by and through

its attorneys of record herein, Fox Rothschild LLP, hereby submits its Response to the Request

for Agency Action (the "Request") by Finley Resources, Inc. ("Finley" or "Petitioner"), and

states as follows:

1. Crescent Point is a Delaware corporation in good standing with its principal place

of business in Denver, Colorado. Crescent Point is authorized to conduct business in the State of

Utah, and is duly bonded with all appropriate State of Utah, Indian and Federal agencies relevant

to this cause.

2. In its Request, Finley asks the Board to issue an order establishing 40-acre drilling

units with authorization to produce up to four (4) wells on each such drilling unit, with the

ACTIVE 28087716v3 11/26/2014

productive interval of any well located not closer than 330 feet to a shared drilling unit or lease

boundary, or 100 feet from a drilling unit boundary if the adjacent lands are within the same

lease with the same interest owners.

3. The lands covered by the Request all are located in Uintah County, Utah, and are

described as follows:

Township 4 South, Range 1 East, USM Section 13: All Section 16: All Section 21 : All Section 22: All Section 27: NY2

(collectively, the "Subject Lands"). The drilling units sought by Finley in the Request relate to

portions of the Eocene Middle and Lower Green River and the upper 500 feet of the Paleocene

Wasatch transitional formations.

4. Crescent Point and Newfield Production Company ("Newfield") jointly own

100% of the record title and operating rights in and to certain leases, which border on portions of

the Subject Lands and cover the following lands, among others, located in Uintah County, Utah:

Township 4 South, Range 1 East, USM Sections 8-12, 14, 15, 17, 20, 23, 24 and 29

Township 4 South, Range 2 East, USM Sections 7, 8, 17-20

See Crescent Point's Exhibit "D".

6. Finley's Request, at minimum, should be modified because, as presently

constituted, it will not adequately protect Crescent Point's correlative rights (or those of

Newfield) and may result in waste. Crescent Point further is concerned that if the Request is

granted as proposed, Crescent Point's leasehold interest may be subject to drainage.

2

ACTIVE 28087716v3 11126/2014

7. Crescent Point has reviewed and analyzed Finley's Exhibit "K" (Conceptual

Drainage Efficiency) to its Request, and believes the ellipses depicted by Finley may be

understated and may, in fact, cross unit boundaries far more significantly than represented by

Finley or as depicted on Finley's Exhibit "K", and thereby adversely impact Crescent Point's

correlative rights. See Crescent Point's Exhibit "C".

8. Crescent Point believes the Subject Lands should be drilled in a phased approach,

whereby Finley would drill on IO-acre spacing in the interior portion of the Subject Lands, where

Finley is a 100% leaseholder and there would be no concerns regarding drainage or correlative

rights. Once the data from those drilling operations are analyzed, all parties, Finley, Crescent

Point and the Board, would be in a better position to assess the viability of IO-acre spacing on

the exterior potions of the Subject Lands, and whether such spacing would protect correlative

rights and prevent waste. See Crescent Point's Exhibits "D" and "E".

9. Crescent Point has considered and studied the EUR and OOIP calculations in the

Request and, based upon its analysis, believes both amounts may be overstated by as much a two

(2) times, in which case the lO-acre spacing sought in the Request ultimately may result in waste.

10. Crescent Point currently has an increased well density project on lands adjacent to

the Subject Lands but, for the reasons articulated herein and to prevent waste and protect

correlative rights, has not requested reduced setbacks less than 460 feet from the boundary lines

of that project. See Crescent Point's Exhibit "A".

11. Accordingly, Crescent Point believes the proper setbacks from a shared drilling

unit or lease boundary should be 460 feet, not 330 feet. Further Crescent Point believes the

minimum allowable distance between wells at the producing interval where there already is an

existing well in the center of a 40-acre drilling unit and where there is not an existing well in the

3

ACTIVE 28087716v3 11126/2014

center of a 40-acre drilling unit should be established consistent with the testimony and evidence.

WHEREFORE, Crescent Point respectfully requests that the Board:

1. Deny Finley's Request as currently proposed on the grounds that it would not

adequately protect correlative rights or prevent waste;

2. Modify the Request to provide that the setbacks from a shared drilling unit or

lease boundary be 460 feet, not 330 feet as currently requested;

3. Modify the Request to establish the minimum allowable distance between wells at

the producing interval where there is already an existing well in the center of a 40-acre drilling

unit and where there is not an existing well in the center of a 40-acre drilling unit consistent with

the testimony and evidence;

4. Make such findings and orders in connection with this Response as it deems

necessary; and

5. Provide for such other and further relief as may be just and equitable under the

circumstances

Dated: November 26,2014

ACTIVE 28087716v3 11126/2014

ca� JACK R. L LLEN(UTBaf#i 0880)

4

BRENT D. CHICKEN (UT Bar # 14927) Fox ROTHSCHILD LLP 1225 1 ih Street, Suite 2200 Denver, CO 80202 Phone: (303) 446-3843 Fax: (303) 292-1300 Email: jluellen@foxrothschild.com Email: bchicken@foxrothschild.com

Attorneys for Respondent

CERTIFICATE OF SERVICE

I hereby certify that on November 26,2014, a true and accurate copy of the foregoing RESPONSE TO REQUEST FOR AGENCY ACTION was filed and served via email to the following:

MacDonald & Miller Mineral Legal Services, PLLC Frederick M. MacDonald, Esq. Seth A. Loughmiller, Esq. 7090 S. Union Park Avenue, Suite 400 Salt Lake City, UT 84047 fred@macmillerlegal.com seth@macmillerlegal.com

ACTIVE 28087716v3 11126/2014

5

CRESCENT POINT ENERGY U.S. CORP 555 1 ih St, Suite 1800

Denver, CO 80202 720-880-3610

Objection to Cause No. 293-03 Uintah County, Utah

State of Uta h

Division of Oil, Gas & Mining

Board Hearing - December 10, 2014

Docket No. 2014-042 Cause No. 293-03

l"Exhibit A"I

Objection to Cause No. 293-03 Uintah County, Utah

Leland Bench Regional Locator

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Crescent Point's 4 Section Waterflood Project Area

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I . -tt '_ : �' ",-:---,-'-.!..'. __

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Crescent Point has an increased well density project adjacent to Finley's requested Cause No. 239-03. Crescent Point has not requested reduced setbacks less than 460' from its project boundary lines.

"Exhibit 8" Objection to Cause No. 293-03 Uintah County, Utah

Areas of leasehold drainage concern by setbacks reduced to 330' from exterior section lines

8

11 16

20 21

29 28

Cause No. 293-03 Application Lands

D Crescent Point leasehold (100% or partial)

T4S .. RlE 10

22

21

[= = � Potentially drained Crescent Point leasehold (100% or partial)

11

14

23

26

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T4S-R2E 7 8

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24' 19 20

25 30 29

Scale = 1 mile

N

t

Objection to Cause No. 293-03 Uintah County, Utah

l"Exhibit COl I

This Exhibit indicates that Crescent Point leasehold will be drajned with 330' unit boundary setbacks.

Crescent Point believes that these ellipses could be understated and may cross unit boundaries more significantly

than depicted here.

IDFINLEY r e s 0 u r c C 5

�� :KlODT- .lXi:tr-

40 acre drainage

(2) (2) 8

(2) 8 (2)

G G C2)

(2) G �

Conceptual Drainage Efficiency

(2)

�

C2)

G Applying drainage ellipses with historical fracture orientation gives insight to resource optimization. The

40 acre drainage illustration implies that a significant amount of oil and gas is not recovered whereas the

10 acre illustration indicates more efficient drainage and an increase in gross resource recovery.

Exhibit K

..... 'E •

1-11+IE •

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9-,'+IE

"Exhibit D" Recommended Phased Approach (Section 13, T4S-R1E example)

12 1'-'2+1E

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Objection to Cause No.

293-03

Uintah County, Utah

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12-9-4-2E 11-9-4-211 • •

The interior portion of the section is 100% Finley leasehold i 13-9-4-2E

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• where there is no concern for drainage or correlative rights infringement

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Current producer

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• • Stage 1, 10 acre potential locations.

Inner portion of section Although we agree that 10 acre spacing is an exciting opportunity to explore, we feel it is very much

untested and should be approached with a staged program

Once positive results have been analyzed from 10 acre density on the inner core of the section and

20 acre density on the exterior portion of the section, the 10 acre density could then be applied to

the outer edges of the section after sufficient review of the data

Crescent Point, as operator of the offsetting leasehold, has a duty to protect our lessors mineral

rights from drainage and waste

•

•

Stage 1,20 acre potential locations. Exterior portion of section with

460' setbacks from section lines

Stage 2, 10 acre potential locations.

Exterior portion of section with

option for reduced setbacks

(pending results of stage 1)

IIExhibit E" Objection to Cause No.

293-03

Finley's proposed 10 acre spacing

13-3A-4-1 13-2A-4-� 13-1 C • 13-4A-4-1 • • • •

• • Fr<LEY •

FM.EY F�'L.EY F'NLEv

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:� • • • • • • • •

13-5A-4-1 13-6A-4- 13-7A-4- 13-SA-4-1

• • • • • • • • flULf)' fINLEy F"'LEY FINLEy

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• • - 1_- • • •

13�12A=4-1 13-11A14!V 13-1�11 13-9A-4-1 •

FINLEY • • • • • FINLEY FINLEY FINLEY

12-1

• • I

- • - • • •

- -

• • • • • • • • 13-15A-4-1 13-16A-4-1 , 13-1

13-13A-4-1 13-14A-411 • •

• • FINLEY FU·LEY FINLt:V • • F�IlEY • • •

With staged approach: Stage 1 allows 12 additional 10

acre locations and 12 additional 20 acre locations (24

additional locations; 40 total locations in the section)

Once data is collected from these 40 stage 1 wells and proves that

drainage is less than 330', the remaining 10 acre wells can be

drilled along the outer edges of the section totaling 64 locations in

a section

Uintah County, Utah

Current 40 acre spacing example ..

1. CPE CPE ,

-j -

13-1 C

I • 1-18-4-2E FINLEY 2-18-4-2E

4-18-4-2E 3-18;4-2E • •

• CPE CPE

• cPf, CPE I

\ A·4·' ! • <L£y 8-18-4-2E

5·1871·2E 6·18+4·2E 7·181*·2E • I

• • • CPE CPE CPE CPE

1�8 - J

9A-4-1 1

• FI<L£y 9-18-4-2E

12-18-4-2E 11-18-4-2E 10-18.4-2E •

• • • CPE CPE CPE CPE

I' I

I 1

... 6A-4-1 13-1 a:.4-2E 14-18r4-2E 15-1&4-2E 16-18-4-2E

• ,� • • •

t-ll.EV CPE CPE CPI:

r I

�

,

16 wells per section • Current producer

.. Stage 1, 10 acre potential locations.

Inner portion of section

• Stage 1, 20 acre potential locations.

Exterior portion of section with

460' setbacks from section lines

• Stage 2, 10 acre potential locations.

Exterior portion of section with

option for reduced setbacks

(pending results of stage 1)

EUR and OOIP 0 0

Comparison 13-3A-4-1-

1-14-4-1E 13-4A-4-1

0 e • 45 83

13-6A-4-1

8-14-4-1E

e 0 1-

30

13-12A-4-1 13-11A-4-1

9-14-4-1E

e • Finley quotes an average

EUR of 87 mbbl, while ePG 76 47

calculates an average EUR 13-1 SWD

on 57 mbbl in Section 13, 14-13

for example. 13-13A-4-1 13-14A-4-1

• ' . 4l�4-4-1E

10. 3�24-4-1E 23-1A-4-1

0 0

- ... � ,,-,-, . ,,, ,, ,, ,

OOIP calculation· Finley Area 640 acres Net Pay 271 feet Porosity 0.088 Water Saturation 0.318 Oil Formation Factor 1.2

OOIP 67 mmbbl

•

0 •

- 13�2A-4-1

e 80

13-7A-4-1

e 20

13-10A-4-1

e 31

13-15A-4-1

• 62

2-24-4-1E

0

0

1l-1C 13-18*1

e 52

13-8A-4-1

e I 55

13-9A-4-1 I e

35

1-24-4-1 E

0

13-7-4-2E

e II "Exhibit F"

II Objection to Cause No.

16 293-03 Uintah County, Utah

4-18-4-2E

e 23

a lii Since we are all still in the

learning phase, we recommend

� to drill downspaced wells in a 139 II I staged approach.

FEel

OOIP calculation· Crescent Point Area 640 acres Net Pay 95 feet Porosity 0.07 Water Saturation 0.43 Oil Formation Factor 1.18

OOIP 16 mmbbl