RULES FOR OAK RIDGE FIELD, WARREN AUG COUNTY, MISSISSIPPI, AND TO OBTAIN RELATED

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1 BEFORE THE STATE OIL AND GAS BOARD OF MISSISSIPPI ^ RE: AMENDED PETITION OF PAR MINERALS CORPORATION TO AMEND THE SPECIAL FIELD RULES FOR OAK RIDGE FIELD, WARREN AUG COUNTY, MISSISSIPPI, AND TO OBTAIN RELATED RELIEF STATE OIL AND GAS BOARD WALTER BOONE, SUPERVISOR DOCKET NO ORDER NO.35S ORDER On August 15, 2001, this matter came on for hearing before the Board on the Amended Petition of PAR Minerals Corporation ("Petitioner") requesting amendment of the Special Field Rules for the Oak Ridge Field (the "Field") to expand the geographic limits of the Rodessa Formation, to define the Rodessa "F" Sand Oil Pool of the Rodessa Formation, to establish spacing for said pool, and for related relief. Whereas, the Board has full and complete jurisdiction to hear and determine the matters presented by the Amended Petition at this time; and, Whereas, a public hearing was held by the Board in its hearing room at 500 Greymont Avenue, Suite E, Jackson, Mississippi commencing at 9:30 a.m. on Wednesday, August 15,2001, at which time the Board heard testimony and evidence from all persons present who desired to be heard regarding the relief requested by Petitioner in this docket; and Whereas, the Board, having fully considered this matter and the evidence and ^ recommendations made at said hearing, is of the opinion, and finds, that all of the relief requested by Petitioner in its Amended Petition should be, and the same is hereby, granted. The Board further finds and determines as follows:

2 1. Permanent Special Field Rules were adopted for the Field in Order No , and were last amended by Order No The Special Field Rules define the Rodessa "A", "B" "C" "D" and "E" Sand Gas Pools of the Rodessa Formation and establish the geographic limits for said pools as Sections 16,18,19,20,29 and 30, Township 17 North, Range 5 East, Warren County, Mississippi, and all productive extensions thereof. 2. Petitioner operates the Lawco-Anderson Tully 15-5 Well No. 1 located in Section 15, Township 17 North, Range 5 East (the "Well"), on a gas drilling unit composed of all of said Section 15. The Well has test produced natural gas from an interval correlative of the Rodessa "E" Sand Gas Pool of the Rodessa Formation in the Field. The Well also has test produced oil from a separate, lower interval of the Rodessa Formation. No oil pools of the Rodessa Formation are defined in the Field. 3. The geographic limits of the Field for the development and production of natural gas and oil from the Rodessa Formation should be expanded to include all of Sections 15,16,18,19,20,29 and 30 of Township 17 North, Range 5 East, Warren County, Mississippi. 4. The Special Field Rules should be amended to define the Rodessa "F" Sand Oil Pool of the Rodessa Formation as follows: "Rodessa "F" Sand Oil Pool-The Rodessa "F" Sand Oil Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of oil in the measured depth interval on the electric log (Dual Induction-Acoustilog) between 11,853 feet and 11,892 feet as found in the PAR

3 Minerals Corporation-Lawco-Anderson Tully 15-5 Well No. 1, and all sands correlative of these strata productive of oil, said Well having a surface location 2,918 feet from the North line and 3,257 from the West line of Section 15, Township 17 North, Range 5 East, and a bottom hole location 1,980 feet from the North line and 330 feet from the West line of Section 15, Township 17 North, Range 5 East, Warren County, Mississippi." 5. The Rodessa "F" Sand Oil Pool is a separate and distinct pool which is not in communication with any other defined pool in the Field. 6. Spacing for wells drilled to the Rodessa "F" Sand Oil Pool of the Rodessa Formation should be established to promote its orderly and efficient development. Every well drilled in the Field to the Rodessa "F" Sand Oil Pool of the Rodessa Formation: A. Shall be located on a drilling unit of four (4) contiguous quarter-quarter sections containing not less than 144 acres nor more than 176 acres upon which no other well drilling to or producing from the same pool is located. B. Any drilling unit not composed of four (4) contiguous quarter-quarter sections shall contain 160 surface acres which must be completely encompassed by the perimeter of a rectangle 2,640 feet by 3,500 feet provided, however, that no unit shall be permitted which will create island acreage. C. Each well shall be located at least 1,500 feet from every well drilling to or producing from the same pool, and not less than 750 feet from every exterior boundary of the drilling unit. 7. Spacing for wells drilled to each defined gas pool within the expanded geographic limits for

4 the Rodessa Formation should be maintained under the existing Special Field Rules for the Field as provided in Order No A copy of the Special Field Rules for the Field, as amended, is attached as Exhibit "A" and incorporated by this reference. SO ORDERED AND ADJUDGED, Ms^JjLay of August, MISSISSIPPI STATE OIL AND GAS BOARD CHAIRMAN Submitted by: E. O. Spencer, III (MSB No. 7733) E. O. SPENCER, III PLLC North, Suite 100 Jackson, Mississippi Phone: (601) Fax: (601) ATTORNEY FOR PETITIONER PAR Order wpd

5 SPECIAL FIELD RULES FOR OAK RIDGE FIELD, WARREN COUNTY, MISSISSIPPI I. Oak Ridge Field, as used herein, is that area consisting of the following described lands, towit: A. Rodessa "A". "B". "C. "D" and "E" Sand Gas Pools of the Rodessa Formation - Sections 15,16,18,19,20,29 and 30, Township 17 North, Range 5 East, Warren County, Mississippi, including all productive extensions thereof underlain by the Rodessa "A", "B", "C", "D" and "E" Sand Gas Pools as below described. B. Rodessa "F" Sand Oil Pool of the Rodessa Formation - Sections 15,16,18, 19, 20, 29 and 30, Township 17 North, Range 5 East, Warren County, Mississippi, w including all productive extensions thereof underlain by the Rodessa "F" Sand Oil Pool as below described. C. Hosston Sand Gas Pool of the Hosston Formation - Section 20, Township 17 North, Range 5 East, Warren County, Mississippi, including all productive extensions thereof underlain by the Hosston Sand Gas Pool as below described. D. Cotton Valley Sand Gas Pool of the Cotton Valley Formation - Sections 20,21, 22,27,28 and 29 of Township 17 North, Range 5 East, Warren County, Mississippi, including all productive extensions thereof underlain by the Cotton Valley Sand Gas Pool as below described. E. Mooringsport Sand Gas Pool of the Mooringsport Formation - Sections 16,17, 18,19,20,21,28,29 and 30, Township 17 North, Range 5 East, Warren County, Exhibit "A"

6 Mississippi, including all productive extensions thereof underlain by the Mooringsport Sand Gas Pool as below described. II. (A) (i) Rodessa "A" Sand Gas Pool - The Rodessa "A" Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of gas and condensate in the interval between the electric log depth (Dual Induction-SFL) of 11,186 feet and 11,238 feet as found in the Jetta Production Company, Inc. - Billy R. Brown No. 1 Well, as indicated on the electric log (Dual Induction-SFL) of said well, and all sands correlative of these strata productive of gas, said well being located 2,496 feet from the west line and 2,329 feet from the south line of Section 20, Township 17 North, Range 5 East, Warren County, Mississippi. (ii) Rodessa "B" Sand Gas Pool - The Rodessa "B" Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of gas and condensate in the interval between the electric log depth (Dual Induction-SFL) of 11,248 feet and 11,286 feet as found in the Jetta Production Company, Inc. - Billy R. Brown No. 1 Well, as indicated on the electric log (Dual Induction-SFL) of said well, and all sands correlative of these strata productive of gas, said well being located 2,496 feet from the west line and 2,329 feet from the south line of Section 20, Township 17 North, Range 5 East, Warren County, Mississippi. (iii) Rodessa "C" Sand Gas Pool - The Rodessa "C" Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of gas and condensate in the interval between the electric log depth (Dual Induction-Density Neutron) of 11,191 feet and 11,211 feet as found in the Ensign Operating Co. - Board of Education No. 1 Well, as indicated on the electric logs (Dual Induction-Density Neutron) of said well, and all sands correlative

7 of these strata productive of gas, said well being located 2,559 feet from the south line and 1,776 feet from the east line of Section 16, Township 17 North, Range 5 East, Warren County, Mississippi. (iv) Rodessa "D" Sand Gas Pool - The Rodessa "D" Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of gas and condensate in the interval between the electric log depth (Dual Induction-Density Neutron) of 11,23 0 feet and 11,251 feet as found in the Ensign Operating Co. - Board of Education No. 1 Well, as indicated on the electric logs(dual Induction-Density Neutron) of said well, and all sands correlative of these strata productive of gas, said well being located 2,559 feet from the south line and 1,776 feet from the east line of Section 16, Township 17 North, Range 5 East, Warren County, Mississippi. (v) Rodessa "E" Sand Gas Pool - The Rodessa "E" Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of gas and condensate in the interval between the electric log depth (Dual Induction-Density Neutron) of 11,320 feet and 11,332 feet as found in the Ensign Operating Co. - Board of Education No. 1 Well, as indicated on the electric logs (Dual Induction-Density Neutron) of said well, and all sands correlative of these strata productive of gas, said well being located 2,559 feet from the south line and 1,776 feet from the east line of Section 16, Township 17 North, Range 5 East, Warren County, Mississippi. (B) Rodessa "F" Sand Oil Pool - The Rodessa "F" Sand Oil Pool in the Oak Ridge Field shall be construed to mean those strata of the Rodessa Formation productive of oil in the measured depth interval on the electric log (Dual Induction-Acoustilog) between 11,853 feet and 11,892 feet as found in the PAR Minerals Corporation Lawco-Anderson Tully 15-5 Well No. 1, and all sands correlative of these strata productive of oil, said Well having a surface location 2,918 feet from the 3

8 North line and 3,257 from the West line of Section 15, Township 17 North, Range 5 East, and a bottom hole location 1,980 feet from the North line and 330 feet from the West line of Section 15, Township 17 North, Range 5 East, Warren County, Mississippi. (C) Hosston Sand Gas Pool - The Hosston Sand Gas Pool in the Oak Ridge Field shall be construed to mean those strata of the Hosston Formation productive of gas and gas condensate in the interval between the electric log depth (Dual Induction-SFL) of 12,359-15,087 feet as found in Union Oil Company of California's Billy R. Brown Well No. 2, as indicated on the electric log (Dual Induction-SFL) of said well and all sands correlative of these strata productive of gas, said well being located 2,315 feet from the South line and 2,510 feet from the West line of Section 20, Township 17 North, Range 5 East, and whose bottomhole location is 2,354 feet from the South line and 2,487 feet from the West line of Section 20, Township 17 North, Range 5 East, Warren County, Mississippi. (D) Cotton Vallev Sand Gas Pool - The Cotton Valley Sand Gas Pool of the Oak Ridge Field shall be considered those strata productive of gas and condensate in the interval between the depth of 15,013 and 17,710 feet as indicated on Dual Induction-SFL for Mobil Oil, No. 2 Anderson-Tully 28-7 Well and all correlative stratigraphic equivalent intervals in communication therewith, said well being located 2,550 feet from the North line and 1,865 feet from the East line of Section 28, Township 17 North, Range 5 East, drilled as a straight hole in Warren County, Mississippi. (E) Mooringsport Sand Gas Pool - The Mooringsport Sand Gas Pool of Oak Ridge Field shall be considered those strata productive of gas and condensate in the interval between the depth of 10,500 feet and 10,915 feet as indicated on the Dual Induction-SFL log for the Jetta Production Company, Inc. - Billy Brown No. 1 Well, and all correlative stratigraphic equivalent intervals 4

9 in communication therewith, said well being located 2,496 feet from the West line and 2,329 from the South line of Section 20, Township 17 North, Range 5 East, Warren County Mississippi. in. The above-described gas pools are separate and distinct reservoirs, which are not in communication with any other reservoir or producing formation, pool or horizon. The characteristics of the Rodessa "A", MBM, "C", "D" and "E" Sand Gas Pools of the Rodessa Formation in Oak Ridge Field are such that a well located upon a drilling unit containing approximately 640 contiguous surface acres, conforming to the requirements of the rules herein contained, will efficiently and economically drain and produce the recoverable hydrocarbons from such units in said pools without avoidable waste. IV. The above described oil pool is an separate and distinct reservoir, which is not in communication with any other reservoir or producing formation, pool or horizon. The characteristics of the Rodessa "F" Sand Oil Pool of the Rodessa Formation in Oak Ridge Field are such that a well located upon a drilling unit containing approximately 160 contiguous surface acres, conforming to the requirements of the rules herein contained, will efficiently and economically drain and produce the recoverable hydrocarbons from such units in said pool without avoidable waste. Rule 1 - Spacing of Gas Wells. (A) Rodessa "A", "B", "C", "D" and "E" Sand Gas Pools - Every well drilled as a gas well: (a) Shall be located on a drilling unit consisting of six hundred forty (640) contiguous surface acres; or A governmental section containing not less than six hundred forty (640) acres or more than 5

10 six hundred eighty (680), or Sixteen (16) contiguous governmental quarter-quarter sections whose total acreage is not less W than six hundred (600) acres or more than six hundred eighty (680) acres. In any case, no other well producing from the same pool shall be located on any such unit. (b) Any gas drilling unit formed under Section l(a) of this rule must be completely encompassed by the perimeter of a rectangle 5,580 feet by 6,245 feet; provided, however, no unit shall be permitted which will create island acreage. (c) The well shall be located at least 3,000 feet from every other drilling well or well completed in or producing from the same pool located in conformity with this rule; and (d) The well shall be located not less than 1,500 feet from every exterior boundary of the drilling unit. W (B) Hosston Sand Gas Pool - The above listed spacing rules shall apply also to the Hosston Sand Gas Pool. (C) Cotton Vallev Sand Gas Pool - The above listed spacing rules shall apply to the Cotton Valley Sand Gas Pool. (D) Mooringsport Sand Gas Pool - The above listed spacing rules shall apply to the Mooringsport Sand Gas Pool. Rule 2 - Spacing of Oil Wells (A) Rodessa "F" Sand Oil Pool - Every well drilled as an oil well: (a) Shall be located on a drilling unit of four (4) contiguous quarter-quarter sections containing not less than 144 acres nor more than 176 acres upon which no other well drilling to or producing from the same pool is located.

11 (b) Any drilling unit not composed of four (4) contiguous quarter-quarter sections shall contain 160 surface acres which must be completely encompassed by the perimeter of a rectangle 2,640 feet by 3,500 feet provided, however, that no unit shall be permitted which will create island acreage. (c) Each well shall be located at least 1,500 feet from every well drilling to or producing from the same pool, and not less than 750 feet from every exterior boundary of the drilling unit. Rule 3 - Directional Drilling of Wells. (A) Rodessa "A". "B". "C". "D" and "E" Sand Gas Pools androdessa "F" Sand Oil Pool (a) Wells may be permitted by the Supervisor of the State Oil and Gas Board where the nature of the topography is such that it would be impractical, inefficient and uneconomical to construct a drilling site over the desired bottomhole location. (b) The Supervisor is authorized to issue permits approving the directional drilling of wells in the above circumstance to bottomhole locations under Oak Ridge Field without notice and hearing of same, but not including approval of the crossing of unit lines. (c) The application for permits for directionally drilled wells shall be accompanied by a survey plat showing the surface location, the bottomhole location and the drilling unit assigned to the well. All such survey plats must show that the bottomhole location is a regular location under the spacing requirements of these special field rules, and be accompanied by the sworn affidavit of a qualified engineer stating that the above-stated conditions exist. (d) A directional survey shall be conducted on each deviated hole prior to setting of production casing and a certified copy thereof furnished to the State Oil and Gas Board within thirty (30) days. 7

12 (B) Hosston Sand Gas Pool - The rule concerning directional drilling of wells above shall also be applicable to the Hosston Sand Gas Pool. (C) Cotton Vallev Sand Gas Pool - The rule concerning directional drilling of wells above shall also be applicable to the Cotton Valley Sand Gas Pool. (D) Mooringsport Sand Gas Pool - The rule concerning directional drilling of wells above shall also be applicable to the Mooringsport Sand Gas Pool. Rule 4 - Applicability of Statewide Rules. (A) Rodessa "A". "B". "C", MDf f and "E" Sand Gas Pools and Rodessa "F" Sand Oil Pool (a) All rules and regulations contained in Statewide Order No , and any amendments thereto, not specifically covered in the foregoing special field rules are hereby adopted and shall apply to said field. (b) The Board expressly reserves the right after notices and hearing to alter, amend or repeal any and all of the foregoing rules and regulations. (B) Hosston Sand Gas Pool - The rules concerning applicability of Statewide Rules above shall also be applicable to the Hosston Sand Gas Pool. (C) Cotton Vallev Sand Gas Pool - The rules concerning applicability of Statewide Rules above shall also be applicable to the Cotton Valley Sand Gas Pool. (D) Mooringsport Sand Gas Pool - The rules concerning applicability of Statewide Rules above shall also be applicable to the Mooringsport Sand Gas Pool. PAR Field Rules Amended 6 27 Ol.wpd