BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE

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1 A 7 APPLICANT: SAMSON RESOURCES COMPANY BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA RELIEF SOUGHT: INCREASED WELL CAUSE CD T DENSITY LEGAL DESCRIPTION: SECTION 24, TOWNSHIP 14 NORTH, RANGE 24 WEST, ROGER MILLS COUNTY, OKLAHOMA. APPLICANT: SAMSON RESOURCES COMPANY RELIEF SOUGHT: LOCATION WELL EXCEPTION F ILE AN 24 2i4 COURT CL8 OFP?CE TULSA CORPORATION OMN 01= OLHtMA CAUSE CD T LEGAL DESCRIPTION: SECTION 24, TOWNSHIP 14 NORTH, RANGE 24 WEST, ROGER MILLS COUNTY, OKLAHOMA. REPORT OF THE ADMINISTRATIVE LAW JUDGE This Cause came on for hearing before Curtis M. Johnson, Deputy Administrative Law Judge (hereinafter referred to as AU) for the Corporation Commission of the State of Oklahoma (hereinafter referred to as Commission) in the Commission's Courtroom, Robert S. Kerr Office Building, 440 S. Houston, Suite 114, Tulsa, Oklahoma, pursuant to notice given as required by law and rules of the Commission for the purpose of taking testimony and reporting to the Commission. HEARING DATE: December 11, APPEARANCES: At the time of the hearing, Ron M. Barnes, attorney, appeared on behalf of the Applicant, Samson Resources Company (hereinafter referred to as Samson); Charles L. Helm, attorney, appeared on behalf of Respondent, JMA Energy Company, L.L.C. (hereinafter referred to as JMA); and Richard A. Grimes, attorney, appeared on behalf of Respondents, Apache Corporation and Le Norman Operating LLC.

2 CASE SUMMARY Cause No. CD T and No. CD T, the Increased Well Density and Well Location Exception, Applications of Samson Resources Company (hereinafter referred to as Samson) seeking an additional well at the requested location for the Marmaton common source of supply Section 24, Township 14 North, Range 24 West, Roger Mills County, Oklahoma. RECOMMENDATION OF THE AU The Applicant established the Location Exception and Density Application were necessary to drain the subject Unit. The Applicant also established the offsetting unit toward which the Well is moving would not suffer any drainage. Therefore, the ALJ recommends that both Applications should be granted with no penalty.. Exhibit #1 Samson's Respondent List. EXHIBITS Exhibit #2 Samson's Marmaton B Net Sand Isopach. Exhibit #3 Samson's Horizontal Well Diagram. Exhibit #4 Samson's Estimate of Recoverable Gas Reserves. Exhibit #5 Waivers of Notice for Ward Petroleum Corporation, Encino Energy LLC, and Primary Natural Resources Ill, LLC. FINDINGS AND SUMMARY OF EVIDENCE 1. Cause No. CD T and No. CD T, the Increased Well Density and Well Location Exception, Applications of Samson seeking an additional well at the requested location for the Marmaton common source of supply Section 24, Township 14 North, Range 24 West, Roger Mills County, Oklahoma. 2. The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission. 3. Mr. Barnes began the case for Samson by calling Mr. Adam Dolinsky, a Petroleum Landman. The Witness testified about the ownership in this area. JMA does not own any interest in Section 24, but they do own 2.34% working interest in Section 23. Chesapeake owns.7.5% working interest in Section 24, and they own 40% working interest in Section 23 which they also operate. Samson owns a 3.5% working interest in Section 24 and an 89% working

3 interest in Section 23. The Witness stated the wells in both Section 23 and 24 were drilled pursuant to Emergency Orders. The Witness testified regarding the agreement between Chesapeake and Samson. This agreement limited location of welibores in Section 23 and 24 to no closer than 880 feet to the shared boundary of those Units. The Witness contends that both welibores in these Units comply with this agreement. The Witness stated notice of the Density and Location Applications was properly given to all the Respondents. For the Location Exception, the offset operators toward which we are moving were given 15 days notice of this Application. The offset operators in the Marmaton and the interest owners in Section 24 were provided 15 days notice of the Density Application. The Witness stated they had good addresses for all of the Respondents to these Applications. The Witness sponsored Exhibit #1, the Respondent List for the Density Application, as support for this assertion. 4. Mr. Helm conducted cross examination of the Witness. The Witness agreed the Marmaton in Section 24 is spaced by Order No and that spacing is non-horizontal spacing. Therefore, the legal location for a well is 1320 feet from the unit boundary. 5. Mr. Barnes called Ms. Tara Benda, a Geologist, to testify for Samson. The Witness sponsored Exhibit #2, a Marmaton B Net Sand Isopach Map. The Witness explained this Exhibit shows all the Marmaton B wells in green. The Witness contends this Exhibit illustrates the Marmaton B wells in the offsetting units to Section 24 have wells located at 900, 880, and 660 feet from their unit boundaries. The Witness further testified even though these wells were drilled at non-legal locations, these wells produce with no penalty. The Witness also testified the Applicant proposed a well for a unit west of Section 23 that will be drilled 500 feet from the unit boundary. The Witness stated there was no geologic advantage to drilling a well in any specific part of the subject Unit. The Witness sponsored Exhibit #3, the Horizontal Well Diagram for the Maxon #2-24H Welt. The Witness testified this Exhibit shows the total measured depth of the Well as 15,700 feet and the total vertical depth as 11,350 feet. The actual surface location of the Well is 200 feet from the South line, and 880 feet from the West line of the Unit. The Top of the Marniaton B sand was penetrated at a measured depth of 11,498 feet at a location 569 feet from the South boundary and 889 feet from the' West boundary. The bottom hole of the Well is located at 486 feet from the North line, and 993 feet from the West line of the Unit. 6. Mr. Barnes called Mr. Mat Twiehaus, a Petroleum Engineer, to testify for Samson. The Witness agreed with the location of the Marmaton B wells shown on Exhibit #2 and that none of those wells had a penalty placed on

4 -a their production. Furthermore, the Witness contends these wells do not need a penalty placed on their production, because even wells located as close as 500 feet to one another still had no effect on each other. The Witness testified the best example of this is the Well located in the SE/4 of Section 14, and the Well located in the SW/4 of Section 13. The Witness contends production of the Well in Section 13 was not effected by the prior completion and production from the Well in Section 14. The Witness explained the reason Samson was seeking a Location Exception for the Maxon #2-24H Well not closer than 880 feet from the unit boundary in Section 24. The only reason to drill at this location is to provide proper well spacing, so the entire Unit can be drained by three wells. The Witness stated the reason Chesapeake drilled their Well in Section 23 further than 880 feet from the unit boundary, was to avoid a surface obstruction. The Witness sponsored Exhibit #4, Estimate of Recoverable Gas Reserves. The Witnesses calculation revealed there was 13,561 MMCF of recoverable gas in place in the Marmaton "B" in Section 24, and 3,100 MMCF of this amount is ultimately recoverable by the wells in the Unit. This leaves 10,461 MMCF unrecoverable by the existing wells. Additionally, there is 488 MBO originally recoverable from the Marmaton "B", and of this amount, 117 MBO is currently recoverable by the existing wells in the Unit. This leaves 371 MBO unrecoverable by the existing wells in the Unit. The Witness requests if the Applications are granted Samson should be named operator of the Well. The Witness also requests the Well have a shared gas allowable with the other wells in the Unit, if the Well is productive of gas, and the allowable should be set by Commission Appendix C if the Well is productive of oil. 7. Mr. Helm conducted cross examination of Mr. Twiehaus. The Witness acknowledged JMA's ownership interest in Section 23 and the Hadley #1H Well within that Unit. The Witness was questioned regarding his knowledge of the fracture stimulation technique that will be used on the Well in Section 24, the Maxon #2-24H. The Witness testified Halliburton will conduct the fracture stimulation on the Maxon #2-24H Well. The Witness did not know the length of the fracture stimulation, but he did know there would be 12 stages of the frac. The Witness was asked if he had advised Halliburton of the location of the Well. He responded that he had sent them the map showing the location of the Well. The Witness contends the Maxon Well will not have any effect on Section 23 or the Hadley Well. The Witness was asked if Samson or he could design a frac that would have an effect on Section 23 or the Hadley Well? The Witness responded, "no effect." The Witness was asked why Samson always shuts its well in when there is a frac occurring within a mile of one of their wells, if there is no effect? The Witness responded Samson does this out of an abundance of caution.

5 8. Mr. Barnes conducted cross examination of the Witness. The Witness testified Samson always notifies offsetting operators when they are fracture simulating a well, so those operators can take action they deem appropriate. The Witness agreed when the Well was drilled in the W/2 W/2 of Section 14, after the Well was producing in the E/2 E12 of Section 13, those wells had no effect on one other. Furthermore, when an additional Well was drilled in the center of Section 14, this Well also experienced no effects from the earlier wells. Additionally, the Well in E/2 E12 of Section 15 was fraced after the Well was producing in W12 of Section 14. This well did not suffer any ill effect from the earlier completed wells. At this point in the proceeding the Applicant rested its Cause. 9. Mr. Helm began the Cause for JMA by calling Mr. Michael Glenn Davis, a Petroleum Engineer, to testify for JMA. The Witness testified he had reviewed Applicant's Exhibit #2, the Marmaton B Net Sand Isopach. The Witness stated Chesapeake and Samson had apparently agreed to locate their wells no closer than 880 feet from the common boundary. The Witness said when he reviewed the survey for the Hadley Well in Section 23 and the Maxon Well in Section 24, the Hadley Well was 903 feet from the boundary, while the Maxon well was only 880 feet from that boundary. From these measurements, the Witness concluded these Wells were not at equal distances for the common unit boundary. Based upon this difference, the Witness made a polygon calculation to estimate the area between these weilbores and the common boundary. The Witness estimated the area between the Maxon weflbore and the boundary to be acres, while the same calculation for the Hadley Well was acres. The Witness then subtracted these two figures, and arrived at the Hadley Well having 15.1 acres more area between its wellbore and the unit boundary. Therefore, the Hadley Well should have a fully allowable, and the Maxon well should be penalized. The amount of the penalty should be a ratio of the additional acreage the Hadley well is located from the boundary. The Witness calculated that ratio to be 12.5%. Therefore, the Witness requests the Maxon Well have a 12.5% penalty placed upon it's allowable to compensate for this Well being closer to the boundary than the Hadley Well. 10. Mr. Barnes conducted cross examination of Mr. Davis. The Witness understood the agreement between Chesapeake and Samson was to drill the respective wells at a distance no closer than 880 feet to their common unit boundary. The Witness stated Chesapeake was under no obligation to drill at exactly 880 feet from the Unit boundary, but just no closer than 880 feet to the unit boundary. The Witness did not know if JMA owned an interest in the unit that had a well in the offset 500 feet from the boundary. The Witness stated JMA did not ask him to review that Section. The Witness was also not aware of the nearest well operated by JMA. The Witness did not know if the well in Section 15 was closer to the unit boundary with Section 14 than the Samson

6 Mason #2-24 is to Section 23. The Witness did not disagree there was no penalty on the Well drill in Section 19. The Witness was not aware if the Well drilled in the E/2 of Section 24 had a penalty. The Witness did agree the Wells drilled in Section 23 did not have any penalty, The Witness contends there is not enough information available at this time to determine if these wells will drain outside the Unit. The Witness agreed there was no reason to have a penalty if the Maxon Well would not drain outside the Unit. 11. Mr. Helm conducted cross examination of Mr. Davis. The Witness contends the agreement between Samson and Chesapeake had no effect on JMA's rights. At this point in the proceeding the Respondent rested its Cause. 12. Mr. Barnes recalled Mr. Adam Dolinsky for the sole purpose of introducing Exhibit #5, the Waivers of Notice for Ward Petroleum Corporation, Encino Energy LLC, and Primary Natural Resources III, LLC. These Waivers of Notice are from the working interest owners in Section 13, which did not receive notice of the Location Exception. The ALJ then took the Cause under advisement. RECOMMENDATIONS. CONCLUSIONS AND FINDINGS 1. After taking into consideration all the facts, evidence, Exhibits and arguments of Counsel, it is the recommendation of the ALJ in Cause CD No T and CD No T, the Increased Well Density and Well Location Exception, Applications of Samson seeking an additional well at the requested location for the Marmaton common source of supply Section 24, Township 14 North, Range 24 West, Roger. Mills County, Oklahoma, should be recommended. 2. The ALJ contends "substantial evidence" presented to establish the Maxon #2-24H Well will not present any drainage threat to the Hadley #1H or Section 23. The Applicant offered evidence which proved that wells drilled in much closer proximity to one another, than the Hadley and Maxon Well, showed no adverse effect upon one another. The Applicant also established by undisputed testimony that if the Applications were not granted oil and gas reserves "would be left in the ground" resulting in underground waste of those reserves. See Haymaker v. Oklahoma Corp. Com'n, 731 P.2d 1008 (1986) and Exhibit #4 ' Samson's Estimate of Recoverable Gas Reserves. 3. The only argument offered by the Respondent to counter the Applicants Cause was the Maxon Well was located 23 feet closer to the unit boundary than the Hadley Well. This distance resulted in 15.1 acres less acreage between the Maxon wellbore and the unit boundary, than the Hadley Well. The Respondent's Witness did not conclude from this calculation that the Maxon Well would drain reserves from under Section 23. The only conclusion

7 he arrived at was the Maxon Well was located closer to the unit boundary. If the ALJ were to accept this logic, every well that is drilled closer to the unit boundary than offsetting wells should be penalized. The ALJ contends this is clearly not a reasonable basis for imposing a penalty on a well. The AU asserts the reason for penalizing a well is to protect correlative rights by preventing drainage. The ALJ contends since no drainage will occur, no penalty is needed to protect correlative rights. Therefore, the ALJ contends the Location Exception Application should be recommended with no penalty. 4. Thus, the ALJ recommends the Applications of Samson in Cause CD No T and CD No T, the Increased Well Density and Well Location Exception, seeking an additional well at the requested location for the Marmaton common source of supply Section 24, Township 14 North, Range 24 West, Roger Mills County, Oklahoma, should be recommended. Respectfully submitted this 24th day of January, CURT18 MöHNSON Deputy Administrative Law Judge