IN THE STATE OIL AND GAS BOARD OF MISSISSIPPI ORDER. This matter came on for hearing before the State Oil and Gas Board of Mississippi

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1 IN THE STATE OIL AND GAS BOARD OF MISSISSIPPI FILED FOR RECORD RE: PETITION OF COHO RESOURCES, INC. TO AMEND THE SPECIAL FIELD RULES FOR THE LAUREL FIELD, JONES COUNTY, MISSISSIPPI NOV S$5LSLL«ftBP f.(«walter B00NE'SUPE DOCKET NO ORDER NO. ORDER This matter came on for hearing before the State Oil and Gas Board of Mississippi on the 20th day of October, 1999, on the Petition of Coho Resources, Inc. to amend the Special Field Rules for the Laurel Field, Jones County, Mississippi, to authorize the Operator of the Laurel Rodessa Field Unit, Rodessa Sand Oil Pool, Laurel Field, Jones County, Mississippi, to implement tertiary enhanced oil recovery methods within the unitized intervals of said fieldwide unit, including but not limited to microbial enhanced oil recovery methods, and for related relief, said hearing being called for such purpose; and WHEREAS, the Board finds that due, proper and legal notice of the meeting of the Mississippi State Oil and Gas Board for the purpose of considering and taking action with respect to such matter was given in the manner and way provided by law and the Rules and Regulations of this Board; that due, legal and sufficient Proofs of Publication are on file with the Board in said matter; and that the Board has full jurisdiction of the subjectmatter to hear and determine same; and WHEREAS, pursuant to said notice a public hearing was held by the said Board in the Hearing Room of the Mississippi State Oil and Gas Board located at 500 Greymont Avenue, Suite E, Jackson, Mississippi, commencing at 9:30 o'clock, A. M. on October 20, 1999, at which hearing all persons present who desired to be heard in said matter were heard and all testimony and documentary evidence duly considered by those present at said meeting; and

2 WHEREAS, the Board having considered the Petition and the evidence, and being fully advised in the premises, is of the opinion and finds that the relief requested by the Petitioner should be and the same is hereby granted. The Board further finds and determines as follows: 1. The Board finds that the Mississippi State Oil and Gas Board has previously approved the establishment of Special Field Rules for the Laurel Field, Jones County, Mississippi. Those Special Field Rules establish the geographic limits of the Laurel Field and define various oil and gas pools within the field and prescribe spacing requirements applicable to wells drilled and completed in said pools. Those Special Field Rules were last amended by the Mississippi State Oil and Gas Board on January 21,1998 (Order No , Docket No ). 2. The Board finds that on March 16,1994 (Order No , Docket No ), the Mississippi State Oil and Gas Board approved the establishment and formation of the Laurel Rodessa Field Unit. Rodessa Sand Oil Pool. Laurel Field. Jones County. Mississippi. The Laurel Rodessa Field Unit is a compulsory fieldwide unit for the Rodessa Sand Oil Pool underlying twenty-four (24) separate drilling and production units and/or tracts of land within the Laurel Field comprising acres, more or less. 3. The Board finds that the Laurel Rodessa Field Unit (the "Unit Area") is comprised of the following described lands within the Laurel Field, Jones County, Mississippi, underlain by unitized intervals of the Rodessa Sand Oil Pool, to-wit: Township 9 North. Range 11 West Section 31: SW 1/4 of NE 1/4 of SW 1/4 and S 1/2 of SE 1/4 of NE 1/4 of SW 1/4; E 1/2 of SE 1/4 of NW 1/4 of SW 1/4 and SW 1/4 of SE 1/4 of NW 1/4 of SW 1/4; SW1/4ofSW1/4; SE1/4ofSW1/4; -2-

3 W 1/2 of SW 1/4 of SW 1/4 of SE 1/4. Township 8 North. Range 11 West Section 6: W 1/2 of W 1/2 of NW 1/4 of NE 1/4; NE1/4ofNW1/4; NW1/4ofNW1/4; SW1/4ofNW1/4; SE1/4ofNW1/4; W 1/2 of NW 1/4 of SW 1/4 of NE 1/4; NE1/4ofSW1/4; NW1/4ofSW1/4; N 1/2 of N 1/2 of SW 1/4 of SW 1/4 and S 1/2 of NW 1/4 of SW 1/4 of SW 1/4 and NW 1/4 of SW 1/4 of SW 1/4 of SW 1/4 and W 1/2 of SW 1/4 of SW 1/4 of SW 1/4 of SW 1/4. Township 8 North. Range 12 West Section 1: SE 1 /4 of SE 114; N 1/2 of SW 1/4 of SE 1/4 and SE1/4ofSW1/4ofSE1/4; NE 1/4 of NE 1/4 of SE 1/4 of SW 1/4; NE1/4ofSE1/4; E1/2ofNW1/4ofSE1/4and SW 1/4 of NW 1/4 of SE 1/4 and E 1 /2 of NW 1 /4 of NW 1/4 of SE 1/4 and SW 1/4 of NW 1/4 of NW 1/4 of SE 1/4; E 1/2 of SE 1/4 of NE 1/4 of SW 1/4; SE1/4ofNE1/4; E 1/2 of SE 1/4 of SW 1/4 of NE 1/4 and SW 1/4 of SE 1/4 of SW 1/4 of NE 1/4; E 1/2 of NE 1/4 of NE 1/4 and SW 1/4 of NE 1/4 of NE 1/4 and E 1/2 of NW 1/4 of NE 1/4 of NE 1/4. Tnwnship 9 North Range 12 West Section 36: Way All that part of the SE 1 /4 of SE 1/4 of SE 1/4 lying South of Railroad Right-of- -3-

4 All the above described lands situated in the Second Judicial District, Jones County, Mississippi. 4. The Board finds that the unitized Rodessa Sand Oil Pool (the "Unitized Formation") underlying the Laurel Rodessa Field Unit is defined as follows: Unitized Formation is the subsurface portion of the Unit Area described as those strata of the Rodessa Sand Oil Pool productive of Unitized Substances in the interval between the measured depths of 11,947 feet to 12,450 feet as indicated on the Dual Induction Focus Log of the Coho Resources, Inc. (formerly Mosbacher Energy Company) - City of Laurel 6-13 Well located in Section 6, Township 8 North, Range 11 West, Second Judicial District, Jones County, Mississippi, and including those strata productive of Unitized Substances which can be correlated with and/or in communication therewith. The Unitized Formation for the Laurel Rodessa Field Unit is correlative to and within the defined interval for the Rodessa Sand Oil Pool in the Laurel Field as stated in the Special Field Rules for the Laurel Field. 5. The Board finds that the Petitioner is the duly designated Operator of the Laurel Rodessa Field Unit and is authorized to carry out and to conduct unit operations within the unitized intervals of the Rodessa Sand Oil Pool underlying said fieldwide unit. In this connection, the Board finds that the Petitioner, as Operator, is specifically authorized to carry out and to conduct secondary recovery and/or pressure maintenance operations within the unitized intervals of the Laurel Rodessa Field Unit, including waterflooding, repressuring, cycling and combinations thereof. 6. The Board finds that secondary recovery and/or pressure maintenance operations on the Laurel Rodessa Field Unit were commenced on or about March 1994 and have continued on an uninterrupted basis since that date. The Board finds that these secondary recovery and/or pressure maintenance operations have consisted exclusively of the underground injection of saltwater and other produced fluids into the unitized intervals of the Rodessa Sand Oil Pool underlying the Laurel Rodessa Field Unit. These secondary recovery and/or pressure maintenance operations have been conducted on a fieldwide unit basis. The Board finds that the Petitioner presently operates various active Class II -4-

5 enhanced oil recovery injection wells on the Laurel Rodessa Field Unit. These Class II enhanced oil recovery injection wells are presently being actively utilized in connection with waterflooding and pressure maintenance operations on the Laurel Rodessa Field Unit. 7. The Board finds that the production of oil and other hydrocarbons ("Unitized Substances") from the Laurel Rodessa Field Unit is declining. The Board further finds that studies undertaken by the Petitioner indicate that the implementation of tertiary enhanced oil recovery methods on the Laurel Rodessa Field Unit will substantially increase the production of oil and other Unitized Substances and will significantly extend the economic life of the fieldwide unit. In this connection, the Board finds that the Special Field Rules for the Laurel Field, Jones County, Mississippi, should be amended to specifically authorize the Operator of the Laurel Rodessa Field Unit to implement tertiary enhanced oil recovery methods on said fieldwide unit, including but not limited to the utilization of microbial enhanced oil recovery methods. 9. The Board further finds that the Special Field Rules should be amended to authorize the Operator of the Laurel Rodessa Field Unit, in the implementation of the proposed tertiary enhanced oil recovery program, to drill and/or to convert wells for use as Class II enhanced oil recovery injection wells on said fieldwide unit, upon administrative permit, without hearing, upon the publication of not less than twenty (20) days notice. 10. The Board finds that Rule 6 ["LAUREL RODESSA FIELD UNIT'1 of the Special Field Rules presently establishes spacing and production allocation requirements applicable to the Laurel Rodessa Field Unit and prescribes rules governing the operation of said fieldwide unit for secondary recovery and/or pressure maintenance operations on said unit. 11. The Board finds that the Special Field Rules for the Laurel Field, Jones County, -5-

6 Mississippi, should be amended for the hereinabove specified purposes by adding thereto a new RULE 6.5 ["TERTIARY ENHANCED OIL RECOVERY METHODS"], all as more fully set forth on the attached Exhibit "A." which is incorporated herein and made a part hereof by reference. 12. Specifically, the Board finds that the Special Field Rules should be amended by adding thereto a new RULE 6.5 to read as follows: RULE TERTIARY ENHANCED OIL RECOVERY METHODS The Operator of the Laurel Rodessa Field Unit is further authorized to implement tertiary enhanced oil recovery methods and/or pressure maintenance operations within the unitized intervals of the Laurel Rodessa Field Unit (the "Unitized Formation"), including microbial enhanced oil recovery methods and such other tertiary enhanced oil recovery methods as may be approved and permitted by the Mississippi State Oil and Gas Board. In conjunction with such tertiary enhanced oil recovery operations, the Operator may use for injection purposes existing wells located on the Laurel Rodessa Field Unit which mav be converted to injection wells or wells mav be drilled on said fieldwide unit for such purposes. Any such wells drilled as injection wells or converted to injection wells by the Operator on the fieldwide unit, as a part of tertiary enhanced oil recovery operations, may be approved by the Mississippi State Oil and Gas Board upon administrative permit, without hearing, upon the Operator filing with the Board a duly executed FORM 2. the required permit fee for each such well, and all evidence and information reouired bv Statewide Rule 63 and upon not less than twenty (201 davs publication notice. In addition, existing fieldwide unit injection wells mav be converted to fieldwide unit producing wells on administrative permit. without notice and hearing, upon the Operator filing with the Board a duly executed FORM 2. the reouired permit fee for each such well, and all other evidence and information the Board mav reouire. 13. The Board further finds that the existing Rule 6.5 ["ALLOCATION OF PRODUCTION"! and the existing Rule 6.6 ["SURFACE STORAGE. MEASUREMENT AND TRANSFER SYSTEMS'1 of the Special Field Rules should be redesionated as a new Rule 6.6 and Rule 6.7, respectively. 14. The Board finds that the amendment of the Special Field Rules for the Laurel Field, Jones County, Mississippi, all as hereinafter more fully set forth on the attached Exhibit "," will promote conservation, will prevent waste, will avoid the drilling of unnecessary wells, and will fully protect the co-equal and correlative rights of all parties in interest. In addition, -6-

7 the Board finds that the adoption of the proposed amendments to the Special Field Rules will facilitate the more efficient and economical operation of the Laurel Rodessa Field Unit, Rodessa Sand Oil Pool, Laurel Field, Jones County, Mississippi, and will result in the ultimate recovery of oil and/or other hydrocarbon reserves from the said fieldwide unit which would not otherwise be recovered. 15. A copy of the Special Field Rules, as amended for the hereinabove specified purposes, is attached hereto as Exhibit "A." and is made a part hereof by reference for all purposes. IT IS, THEREFORE, ORDERED AND ADJUDGED by the State Oil and Gas Board ^ of Mississippi that the Special Field Rules for the Laurel Field, Jones County, Mississippi, should be and the same are hereby amended to authorize the Operator of the Laurel Rodessa Field Unit, Rodessa Sand Oil Pool, Laurel Field, Jones County, Mississippi, to implement tertiary enhanced oil recovery methods within the unitized intervals of said fieldwide unit, including but not limited to microbial enhanced oil recovery methods, all as more fully set forth on the attached Exhibit "A." which is incorporated herein and made a part hereof by reference for all purposes. IT IS FURTHER ORDERED AND ADJUDGED that Coho Resources, Inc. shall acquire all other permits, if any, required by any other permitting authority. i " IT IS FURTHER ORDERED AND ADJUDGED that this Order shall be in force and effect from and after October 20, ORDERED AND ADJUDGED this the w AQ "~ day of October, MISSISSIPPI STATE OILAND GAS BOARD -7-

8 ORDER PREPARED BY: Howard O. Leach MB-No Armstrong, Thomas, Leach & Lampton Attorneys-at-Law 246 West Gallatin Street P. O. Box 190 Hazlehurst, Mississippi Telephone: (601) Telecopier: (601) \SssX -8-

9 EXHIBIT "A' SPECIAL FIELD RULES FOR THE LAUREL FIELD JONES COUNTY. MISSISSIPPI A. FIELDAREA: The Laurel Field, as used herein, is that geographical area consisting of the following described lands, to-wit: Township 8 North. Range 12 West Section 1: All Section 2: East Half (E 1/2) Section 12: North Half (N 1/2) Township 8 North. Range 11 West Section 6: All Section 7: Northwest Quarter (NW 1/4) Township 9 North. Range 11 West Section 31: All Township 9 North. Range 12 West Section 36: All and all lands covered by productive extensions of the hereinafter defined pools. B. POOL DEFINITIONS: 1.1 The Eutaw-Stanlev Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Eutaw Formation productive of hydrocarbons occurring between the measured depths of 6668 feet to 6793 feet on the Dual Induction Focus Log of the Mississippi Investments 1-11 Well No. 3 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and all strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 1.2 The Eutaw-Christmas Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Eutaw Formation productive of hydrocarbons occurring between the measured depths of 6903 feet to 7091 feet on the Dual Induction Log of the Mississippi

10 Investments 1-11 No. 3 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.1 The 7550' Upper Tuscaloosa Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Upper Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 7,558 feet to 7,891 feet on the Dual Induction Focus Log of the Coho Resources, Inc. - Amax-Britoil Ventures, Inc. 1-7 No. 1 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.2 The 7900* Upper Tuscaloosa Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Upper Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 7,907 feet to 7,995 feet on the Dual Induction Focus Log of the Coho Resources, Inc. - Amax-Britoil Ventures, Inc. 1-7 No. 1 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.3 The 8000' Upper Tuscaloosa Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Upper Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 8001 feet to 8074 feet on the Dual Induction Focus Log of the Amax-Britoil Ventures, Inc. 1-7 Well No. 1 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.4 The 8110' Upper Tuscaloosa Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Upper Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 8,110 feet to 8,132 feet on the -2-

11 Dual Induction Focus Log of the Coho Resources, Inc. - Amax-Britoil Ventures, Inc. 1-7 No. 1 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.5 The Lower Tuscaloosa Stringer Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Lower Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 7725 feet to 7932 feet on the Dual Induction - SFL Log of the Pan Canadian Petroleum Company - City of Laurel 6-6 No. 1 Well located in Section 6, Township 8 North, Range 11 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 2.6 The Lower Tuscaloosa Massive Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Lower Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 7932 feet to 8223 feet on the Dual Induction - SFL Log of the Pan Canadian Petroleum Company - City of Laurel 6-6 No. 1 Well located in Section 6, Township 8 North, Range 11 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.1 The 9.200' Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 9210 feet to 9300 feet on the Dual Induction Focus Log of the Central Oil Company and Zach Brooks Drilling Company - Mississippi Investments 1-11 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3 2 The 9560' Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the -3-

12 measured depths of 9560 feet to 9614 feet on the Dual Induction Log of the Mississippi Investments 1-11 Well No. 2 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and all strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.3 The 9700' Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 9660 feet to 9908 feet on the Dual Induction Focus Log of the Central Oil Company and Zach Brooks Drilling Company-Mississippi Investments 1-11 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.4 The Southwest 9700' Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 9716 feet to 9753 feet on the Dual Induction Focus Log of the Mississippi Investments 1-11 Well No. 2 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.5 The Upper Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 9820 feet to 10,030 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field Unit 1-1 Well No. 2 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.6 The Lower Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 10,030 feet to 10,455 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field Unit 1-1 Well No. 2 located in Section 1, Township 8 North, -4-

13 Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 3.7 The ' Lower Paluxv Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Paluxy Formation productive of hydrocarbons occurring between the measured depths of 10,455 feet to 10,780 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field Unit 1-1 No. 2 Well located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata which can be correlated therewith and are in communication therewith. 4.1 The Rodessa Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Rodessa Formation productive of hydrocarbons occurring between the measured depths of 11,947 feet to 12,450 feet (11,877 feet to 12,347 feet true vertical depth) on the Dual Induction Focus Log of the Mosbacher Energy Company City of Laurel 6-13 Well located in Section 6, Township 8 North, Range 11 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith. 5.1 The Sliao Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Sligo Formation productive of hydrocarbons occurring between the measured depths of 12,370 feet and 12,770 feet (12,220 feet and 12,620 feet true vertical depth) on the Dual Induction Focus Log of the Pan Canadian Petroleum Company - City of Laurel 6-4 No. 1 Well located in Section 6, Township 8 North, Range 11 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith. 6.1 The Upper Hosston Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Hosston Formation productive of oil and hydrocarbons encountered between the measured depths of 12,582 feet to 13,092 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field Unit 1-1 No. 1 Well (true vertical depth of 12,450 feet to 12,934 feet) located on the reformed 80-acre unit consisting of the -5-

14 N 1/2 of NE 1/4 of Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and all horizons correlative therewith. 6.2 The Middle Hosston Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Hosston Formation productive of oil and hydrocarbons encountered between the measured depths of 13,092 feet to 13,508 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field Unit 1-1 No. 1 Well (true vertical depth of 12,934 feet to 13,336 feet) located on the reformed 80-acre unit consisting of the N 1/2 of the NE 1/4 of Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and all horizons correlative therewith. 7.1 The Moorinasport Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Mooringsport Formation productive of hydrocarbons occurring between the measured depths of 10,780 feet to 11,598 feet on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field 1-1 Well No. 2 located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 8.1 The Washita-Fredericksburg Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Washita-Fredericksburg Formation productive of hydrocarbons occurring between the measured depths of 8,453 feet to 9,134 feet on the Dual Induction Focus Log of the Coho Resources, Inc. - Laurel Field Unit 1-7 No. 4 Well (now redesignated as the Laurel Field Unit 1-1 No. 6 Well) located in Section 1, Township 8 North, Range 12 West, Jones County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith. 9.1 The Southwest Fault Block Lower Tuscaloosa Stringer Sand Oil Pool in the Laurel Field shall be construed to mean those strata of the Lower Tuscaloosa Formation productive of hydrocarbons occurring between the measured depths of 7732 feet to 7912 feet on the Dual Induction Long-Spaced Sonic Log of the Coho Resources, Inc. - Laurel Field Unit 1-9 No. 2 Well located in Section 1, Township 8 North, Range 12 West, Jones -6-

15 County, Mississippi, and including those strata productive of hydrocarbons which can be correlated therewith and are in communication therewith The Productive Sands in the Laurel Field are located within the City of Laurel, Mississippi, in a developed area where residential houses, streets, highways, businesses, and commercial structures are located. Most of the wells to be drilled hereafter in the Laurel Field must be drilled as intentionally deviated wells from a surface location where sites are available to the desired bottomhole location in order to encounter the productive formations under the field. In the interest of conservation and for the protection of the coequal and correlative rights of all parties in interest, these Special Field Rules provide for the spacing of oil wells and authorize the directional drilling of wells to the formations defined above. C. RULES: RULE 1 - SPACING OF OIL WELLS: 1.1 As to each well drilled to and productive from the Eutaw-Stanley Sand Oil Pool, the Eutaw-Christmas Sand Oil Pool, the 7550* Upper Tuscaloosa Sand Oil Pool, the 7900' Upper Tuscaloosa Sand Oil Pool, the 8,000' Upper Tuscaloosa Sand Oil Pool, the 8110' Upper Tuscaloosa Sand Oil Pool, the Lower Tuscaloosa Stringer Sand Oil Pool, the Lower Tuscaloosa Massive Sand Oil Pool, the Washita-Fredericksburg Sand Oil Pool, the 9,200' Paluxy Sand Oil Pool, the 9560' Paluxy Sand Oil Pool, the 9700' Paluxy Sand Oil Pool, the Southwest 9700' Paluxy Sand Oil Pool, the Upper Paluxy Sand Oil Pool, the Lower Paluxy Sand Oil Pool, the 10,375' Lower Paluxy Sand Oil Pool, the Mooringsport Sand Oil Pool, the Rodessa Sand Oil Pool and the Southwest Fault Block Lower Tuscaloosa Stringer Sand Oil Pool: (a) The well shall be located on a drilling unit consisting of 40 contiguous surface acres, or a governmental quarter-quarter section containing not less than 36 acres or more than 44 acres, upon which no other drilling or producible well is located. (b) Any drilling unit not composed of a governmental quarter-quarter section must be completely encompassed by -7-

16 the perimeter of a rectangle 1,810 feet by 1,445 feet. Provided, however, no unit shall be permitted which will create island acreage. (c) The well shall be located at least 230 feet from every other drilling well or well completed in or producing from the same pool located in conformity with the Rule. (d) The well shall be located not less than 165 feet from every exterior boundary of the unit. (e) On all wells drilled closer than 200 feet to an exterior boundary of the unit, a directional survey shall be made prior to setting of production casing and a certified copy thereof filed with the Board no later than thirty (30) days) thereafter. 1.2 As to each well drilled to and productive from the Sligo Sand Oil Pool, the Upper Hosston Sand Oil Pool, and the Middle Hosston Sand Oil Pool: (a) The well shall be located on a drilling unit consisting of eighty (80) contiguous surface acres, or two (2) governmental quarter-quarter sections containing not less than seventy-two (72) acres or more than eighty-eight (88) acres, upon which no other drilling or producible well is located. (b) Any drilling unit not composed of two (2) governmental quarter-quarter sections must be completely encompassed by the perimeter of a rectangle 1600 feet by 2725 feet. Provided, however, no unit shall be permitted which will create island acreage. (c) The well shall be located at least 500 feet from every other drilling well or well completed in or producing from the same pool located in conformity with this Rule. (d) The well shall be located at least 250 feet from every exterior boundary of the drilling unit. (e) On all wells drilled closer than 200 feet to an exterior boundary of the unit, a directional survey shall be made prior to setting of production casing and a certified copy thereof filed with the Board no later than thirty (30) days thereafter. RIM F 9 - DIRECTIONS DRILLING WELLS: 2.1 Wells may be permitted by the supervisor of the State Oil and Gas Board within the Laurel Field Area. 2.2 The"Supervisor is authorized to issue permits approving the directional drilling of wells from available sites within the City of Laurel or from developed areas within the -8-

17 Laurel Field outside the City of Laurel to a bottomhole location to penetrate any of the productive formations in the Laurel Field, including approval of the crossing of unit lines, if the location of the well bore at the producing horizons of those pools defined in Paragraph B, Sections 1.1 through 4.1 and 7.1 through 9.1, is at least 165 feet from any exterior unit boundary, and if the location of the well bore at the producing horizon of the pool defined in Paragraph B, Section 5.1, 6.1 and 6.2 is at least 250 feet from any exterior unit boundary. 2.3 The application for permit for directionally drilling well shall be accompanied by a survey plat showing the surface location, the bottomhole location, and the drilling unit assigned to the well. 2.4 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 30 days thereof. RULE 3 - LAUREL MOORINGSPORT FIELD UNIT 3.1 The Laurel Mooringsport Field Unit is that portion of the following described lands lying within the Laurel Field underlain by the unitized portion of the Mooringsport Sand Oil Pool (Unitized Formation") and described as follows: Township 9 North. Range 12 West Section 36: All that part of the SE 1/4 of SE 1/4 lying South of the Railroad Right-of-Way. Township 8 North. Range 12 West Section 1: W 3/4 of NE 1/4 of NE 1/4; E 1/2 of NW 1/4 of NE 1/4; SE1/4ofSE1/4ofNW1/4; SW1/4ofNE1/4; W3/4ofSE1/4ofNE1/4; NW1/4ofNE1/4ofSE1/4; NW1/4ofSE1/4; E1/2ofNE1/4ofSW1/4; NE 1/4 of SE 1/4 of SW 1/4; and NW1/4ofSW1/4ofSE1/4. All the above described lands situated in the Second Judicial District, Jones County, Mississippi. -9-

18 3.2 Unitized Formation is the subsurface portion of the Unit Area described as those strata of the Mooringsport Sand Oil Pool productive of Unitized Substances in the interval between the measured depths of 11,182 feet to 11,276 feet as indicated on the Dual Induction Log of the Coho Resources, Inc. - Laurel Field 1-7 Well No. 4 located in Section 1, Township 8 North, Range 12 West, Second Judicial District, Jones County, Mississippi, and including those strata productive of Unitized Substances which can be correlated with and/or In communication therewith. The Unitized Formation for the Laurel Mooringsport Field Unit is within the defined interval for the Mooringsport Sand Oil Pool in the Laurel Field as stated in the Special Field Rules for the Laurel Field. 3.3 SPACING OF WELLS IN LAUREL MOORINGSPORT FIELD UNIT (A) Notwithstanding any other provisions contained in these Special Field Rules, the location of injection and production wells in the Laurel Mooringsport Field Unit shall be selected by the operator and shall be governed by the standards of geology and petroleum engineering designed to promote the greatest ultimate recovery of hydrocarbons contained in the pool. However, no well may be drilled, injected into or produced from said pool nearer than 165 feet from any exterior boundary of the fieldwide unit, except upon permit issued by the Mississippi State Oil and Gas Board, after notice and hearing. (B) The operator may drill either injection or producing wells utilizing directional or horizontal drilling techniques designed to increase the ultimate recovery of hydrocarbons contained in the pool without notice and hearing; provided, however, that (1) no portion of the well bore located within the unitized interval or horizon of any such well so drilled shall be nearer than 165 feet from any exterior boundary of the Laurel Mooringsport Field Unit, except upon permit issued by the Mississippi State Oil and Gas Board, after notice and hearing, and (2) the operator shall file a directional survey and other information required by rule or written policy of the Board after completion. (C) Furthermore, the operator may drill either injection or producing wells on the Laurel Mooringsport Field Unit utilizing directional or horizontal drilling techniques as -10-

19 hereinabove described regardless of whether the surface location of such wells is within or outside the unit boundaries of the fieldwide unit. 3.4 PRESSURE MAINTENANCE AND SECONDARY RECOVERY PROGRAM AUTHORIZED Coho Resources, Inc., as operator of the Laurel Mooringsport Field Unit, is hereby authorized to conduct and carry out secondary recovery, pressure maintenance, repressuring operations, cycling operations, water flooding operations, and the injection of extraneous substances in the Laurel Mooringsport Field Unit, and any combination thereof, or any other form of joint effort calculated to substantially increase the ultimate recovery of oil or gas, or both, from the fieldwide unit as is authorized by the Plan of Unitization placed into effect by the Mississippi State Oil and Gas Board. The operator may use for injection purposes existing wells located in said Laurel Mooringsport Field Unit which may be converted to injection wells or wells may be drilled on said fieldwide unit for such purposes. Any such wells drilled as injection wells or converted to injection wells by operator on the fieldwide unit as a part of pressure maintenance and/or secondary recovery operations may be approved by the Mississippi State Oil and Gas Board on administrative permit, without notice and hearing, upon the operator filing with the Board a duly executed FORM 2, the required permit fee for each such well, and all evidence and information required under Statewide Rule 63. In addition, existing fieldwide unit injection wells may be converted to fieldwide unit producing wells on administrative permit, without notice and hearing, upon the operator filing with the Board a duly executed FORM 2, the required permit fee for each such well, and all other evidence and information the Board may require. 3.5 ALLOCATION OF PRODUCTION The allowable for the Laurel Mooringsport Field Unit shall be established by the Mississippi State Oil and Gas Board. The allowable production of the said fieldwide unit may be produced from any well or wells on said fieldwide units provided, however, that no well shall be operated in such a manner as to cause waste as defined by the Laws of the -ll-

20 State of Mississippi. 3.6 SURFACE STORAGE. MEASUREMENT AND TRANSFER SYSTEMS (A) The Operator of the Laurel Mooringsport Field Unit may maintain such separators, stock tanks, metering devices, connections and storage facilities as it deems necessary to accurately measure the total production from the fieldwide unit. Separate measurement or storage for the wells and leases within the fieldwide unit shall not be required. (B) Automatic custody transfer systems which automatically test, sample, measure and transfer the production from the Operator to the purchaser are hereby authorized in said fieldwide unit. Such systems will be equipped with a sampling device which will take a representative sample of the total production passing through the system in order that the specific gravity and basic sediment and water content can be determined. Each custody transfer system will be equipped with a volume displacement type metering device which registers the volume of oil passed through it in barrels or multiples thereof. RULE 4 - MAXIMUM EFFICIENT RATE OF PRODUCTION/OIL ALLOWABLE FOR PRODUCTION FROM LOWER TUSCALOOSA STRINGER SAND OIL POOL The maximum efficient rate of production for wells producing from the Lower Tuscaloosa Stringer Sand Oil Pool is such that any well completed or recompleted in and producing therefrom shall be granted a maximum daily production allowable not to exceed 500 barrels of oil per day (BOPD) for each such well, subject to the adjustments pursuant to Statewide Rule 35-A. RULE 5 - MAXIMUM EFFICIENT RATE OF PRODUCTION/OIL ALLOWABLE FOR PRODUCTION FROM LOWER TUSCALOOSA MASSIVE SAND OIL POOL The maximum efficient rate of production for wells producing from the Lower Tuscaloosa Massive Sand Oil Pool is such that any well completed or recompleted in and producing therefrom shall be granted a maximum daily production allowable not to exceed 500 barrels of oil per day (BOPD) for each such well, subject to the adjustments pursuant -12-

21 to Statewide Rule 35-A. RULE 6 - LAUREL RODESSA FIELD UNIT 6.1 The Laurel Rodessa Field Unit is that portion of the following described lands lying within the Laurel Field underlain by the unitized Rodessa Sand Oil Pool ("Unitized Formation") and described as follows: Township 9 North. Range 11 West Section 31; SW 1/4 of NE 1/4 of SW 1/4 and S 1/2 of SE 1/4 of NE 1/4 of SW 1/4; E 1/2 of SE 1/4 of NW 1/4 of SW 1/4 and SW 1/4 of SE 1/4 of NW 1/4 of SW 1/4; SW1/4ofSW1/4; SE1/4ofSW1/4; W 1/2 of SW 1/4 of SW 1/4 of SE 1/4. Township 8 North. Range 11 West Section 6: W 1/2 of W 1/2 of NW 1/4 of NE 1/4; NE1/4ofNW1/4; NW1/4ofNW1/4; SW1/4ofNW1/4; SE1/4ofNW1/4; W 1/2 of NW 1/4 of SW 1/4 of NE 1/4; NE1/4ofSW1/4; NW1/4ofSW1/4;. N 1/2 of N 1/2 of SW 1/4 of SW 1/4 and S 1/2 of NW 1/4 of SW 1/4 of SW 1/4 and NW 1/4 of SW 1/4 of SW 1/4 of SW 1/4 and W 1/2 of SW 1/4 of SW 1/4 of SW 1/4 of SW 1/4 Township 8 North. Range 12 West Section 1: SE 1/4 of SE 1/4; N 1/2 of SW 1/4 of SE 1/4 and SE1/4ofSW1/4ofSE1/4; -13-

22 NE 1/4 of NE 1/4 of SE 1/4 of SW 1/4; NE1/4ofSE1/4; E 1/2 of NW 1/4 of SE 1/4 and SW 1/4 of NW 1/4 of SE 1/4 and E 1/2 of NW 1/4 of NW 1/4 of SE 1/4 and SW 1/4 of NW 1/4 of NW 1/4 of SE 1/4; E 1/2 of SE 1/4 of NE 1/4 of SW 1/4; SE 1/4 of NE 1/4; E 1/2 of SE 1/4 of SW 1/4 of NE 1/4 and SW 1/4 of SE 1/4 of SW 1/4 of NE 1/4; E 1/2 of NE 1/4 of NE 1/4 and SW 1/4 of NE 1/4 of NE 1/4 and E 1/2 of NW 1/4 of NE 1/4 of NE 1/4. Township 9 North. Range 12 West Section 36: All that part of the SE 1/4 of SE 1/4 of SE 1/4 lying South of the Railroad Right of Way. All the above described lands situated in the Second Judicial District, Jones County, Mississippi. 6.2 Unitized Formation is the subsurface portion of the Unitized Area described as those strata of the Rodessa Sand Oil Pool productive of Unitized Substances in the interval between the measured depths of 11,947 feet to 12,450 feet as indicated on the Dual Induction Focus Log of the Coho Resources, Inc. (formerly Mosbacher Energy Company) - City of Laurel 6-13 Well located in Section 6, Township 8 North, Range 11 West, Second Judicial District, Jones County, Mississippi, and including those strata productive of Unitized Substances which can be correlated with and/or in communication therewith. The Unitized Formation for the Laurel Rodessa Field Unit is correlative to and within the defined interval for the Rodessa Sand Oil Pool in the Laurel Field as stated in the Special Field Rules for the Laurel Field. 6.3 SPACING OF WELLS IN LAUREL RODESSA FIELD UNIT (A) Notwithstanding any other provisions contained in these Special Field Rules, the location of injection and production wells in the Laurel Rodessa Field Unit shall be -14-

23 selected by the operator and shall be governed by the standards of geology and petroleum engineering designed to promote the greatest ultimate recovery of hydrocarbons contained in the pool. However, no well may be drilled, injected into or produced from said pool nearer than 165 feet from any exterior boundary of the fieldwide unit, except upon permit issued by the Mississippi State Oil and Gas Board, after notice and hearing. (B) The operator may drill either injection or producing wells utilizing directional or horizontal drilling techniques designed to increase the ultimate recovery of hydrocarbons contained in the pool without notice and hearing; provided, however, that (1) no portion of the wellbore located within the unitized interval or horizon of any such well so drilled shall be nearer than 165 feet from any exterior boundary of the Laurel Rodessa Field Unit, except upon permit issued by the Mississippi State Oil and Gas Board, after notice and hearing, and (2) the operator shall file a directional survey and other information required by rule or written policy of the Board after completion. (C) Furthermore, the operator may drill either injection or producing wells on the Laurel Rodessa Field Unit utilizing directional or horizonal drilling techniques as hereinabove described regardless of whether the surface location of such wells is within or outside the unit boundaries of the fieldwide unit. 6.4 PRESSURE MAINTENANCE AND SECONDARY RECOVERY PROGRAM AUTHORIZED Coho Resources, Inc., as operator of the Laurel Rodessa Field Unit, is hereby authorized to conduct and carry out secondary recovery, pressure maintenance, repressuring operations, cycling operations, water flooding operations, and the injection of extraneous substances in the Laurel Rodessa Field Unit, and any combination thereof, or any other form of joint effort calculated to substantially increase the ultimate recovery of oil or gas, or both, from the fieldwide unit as is authorized by the Plan of Unitization placed into effect by the Mississippi State Oil and Gas Board. The operator may use for injection purposes existing wells located in said Laurel Rodessa Field Unit which may be converted to injection wells or wells may be drilled on said fieldwide unit for such purposes. -15-

24 Any such wells drilled as injection wells or converted to injection wells by the operator on the fieldwide unit as a part of pressure maintenance and/or secondary recovery operations may be approved by the Mississippi State Oil and Gas Board on administrative permit, without notice and hearing, upon the operator filing with the Board a duly executed FORM 2, the required permit fee for each such well, and all evidence and information required under Statewide Rule 63. In addition, existing fieldwide unit injection wells may be converted to fieldwide unit producing wells on administrative permit, without notice and hearing, upon the operator filing with the Board a duly executed FORM 2, the required permit fee for each such well, and all other evidence and information the Board may require TERTIARY ENHANCED OIL RECOVERY METHODS The Operator of the Laurel Rodessa Field Unit is further authorized to implement tertiary enhanced oil recovery methods and/or pressure maintenance operations within the unitized intervals of the Laurel Rodessa Field Unit (the "Unitized Formation"), including microbial enhanced oil recovery methods and such other tertiary enhanced oil recovery methods as may be approved and permitted by the Mississippi State Oil and Gas Board. In conjunction with such tertiary enhanced oil recovery operations, the Operator may use for injection purposes existing wells located on the Laurel Rodessa Field Unit which may be converted to injection wells or wells may be drilled on said fieldwide unit for such purposes. Any such wells drilled as injection wells or converted to injection wells by the Operator on the fieldwide unit, as a part of tertiary enhanced oil recovery operations, may be approved by the Mississippi State Oil and Gas Board upon administrative permit, without hearing, upon the Operator filing with the Board a duly executed FORM 2, the required permit fee for each such well, and all evidence and information required by Statewide Rule 63 and upon not less than twenty (20) days publication notice. In addition, existing fieldwide unit injection wells may be converted to fieldwide unit producing wells on administrative permit, without notice and hearing, upon the Operator filing with the Board -16-

25 a duly executed FORM 2, the required permit fee for each such well, and all other evidence and information the Board may require. 6.6 ALLOCATION OF PRODUCTION The allowable for the Laurel Rodessa Field Unit shall be established by the Mississippi State Oil and Gas Board. The allowable production of the said fieldwide unit may be produced from any well or wells on said fieldwide unit; provided, however, that no well shall be operated in such a manner as to cause waste as defined by the Laws of the State of Mississippi. 6.7 SURFACE STORAGE. MEASUREMENT AND TRANSFER SYSTEMS (A) The operator of the Laurel Rodessa Field Unit may maintain such separators, stock tanks, metering devices, connections and storage facilities as it deems necessary to accurately measure the total production from the fieldwide unit. Separate measurement or storage for the wells and leases within the fieldwide unit shall not be required. (B) Automatic custody transfer systems which automatically test, sample, measure and transfer the production from the operator to the purchaser are hereby authorized in said fieldwide unit. Such systems will be equipped with a sampling device which will take a representative sample of the total production passing through the system in order that the specific gravity and basic sediment and water content can be determined. Each custody transfer system will be equipped with a volume displacement type metering device which registers the volume of oil passed through it in barrels or multiples thereof. RULE 7 - LAUREL SLIGO FIELD UNIT 7.1 The Laurel Sligo Field Unit is that portion of the following described lands lying within the Laurel Field underlain by the unitized Sligo Sand Oil Pool ("Unitized Formation") and described as follows: Township 9 North. Range 11 West Section 31: SW 1/4 of NE 1/4 of SW 1/4 and S 1/2 of SE 1/4 of NE 1/4 of SW 1/4; E 1/2 of SE 1/4 of NW 1/4 of SW 1/4 and -17-

26 SW 1/4 of SE 1/4 of NW 1/4 of SW 1/4; SW1/4ofSW1/4; SE1/4ofSW1/4; W 1/2 of SW 1/4 of SW 1/4 of SE 1/4. Township 8 North. Range 11 West Section 6: W 1/2 of W 112 of NW 1/4 of NE 1 /4; NE1/4ofNW1/4; NW1/4ofNW1/4; SW1/4ofNW1/4; SE1/4ofNW1/4; W1/2ofNW1/4ofSW1/4ofNE1/4; NE1/4ofSW1/4; NW1/4ofSW1/4; N 1/2 of N 1/2 of SW 1/4 of SW 1/4 and S 1/2 of NW 1/4 of SW 1/4 of SW 1/4 and NW 1/4 of SW 1/4 of SW 1/4 of SW 1/4 and W 1/2 of SW 1/4 of SW 1/4 of SW 1/4 of SW 1/4 Township 8 North. Range 12 West Section 1: SE 1/4 of SE 1/4; N 1/2 of SW 1/4 of SE 1/4 and SE1/4ofSW1/4ofSE1/4; NE 1/4 of NE 1/4 of SE 1/4 of SW 1/4; NE1/4ofSE1/4; E 1/2 of NW 1/4 of SE 1/4 and SW 1/4 of NW 1/4 of SE 1/4 and E 1/2 of NW 1/4 of NW 1/4 of SE 1/4 and SW 1/4 of NW 1/4 of NW 1/4 of SE 1/4; E 1/2 of SE 1/4 of NE 1/4 of SW 1/4; SE1/4ofNE1/4; E 1/2 of SE 1/4 of SW 1/4 of NE 1/4 and SW 1/4 of SE 1/4 of SW 1/4 of NE 1/4; -18-

27 E 1/2 of NE 1/4 of NE 1/4 and SW 1/4 of NE 1/4 of NE 1/4 and E 1/2 of NW 1/4 of NE 1/4 of NE 1/4. Township 9 North. Range 12 West Section 36: All that part of the SE 1/4 of SE 1/4 of SE 1/4 lying South of the Railroad Right of Way. All the above described lands situated in the Second Judicial District, Jones County, Mississippi. 7.2 Unitized Formation is the subsurface portion of the Unit Area described as those strata of the Sligo Sand Oil Pool productive of Unitized Substances in the interval between the measured depths of 12,370 feet to 12,770 feet as indicated on the Dual Induction Focus Log of the Coho Resources, Inc. (formerly Pan Canadian Petroleum Company) - City of Laurel 6-4 No. 1 Well located in Section 6, Township 8 North, Range 11 West, Second Judicial District, Jones County, Mississippi, and including those strata productive of Unitized Substances which can be correlated with and/or in communication therewith. The Unitized Formation for the Laurel Sligo Field Unit is correlative to and within the defined interval of the Sligo Sand Oil Pool in the Laurel Field as stated in the Special Field Rules for the Laurel Field. 7.3 SPACING OF WELLS IN LAUREL SLIGO FIELD UNIT (A) Notwithstanding any other provisions contained in these Special Field Rules, the location of injection and production wells in the Laurel Sligo Field Unit shall be selected by the operator and shall be governed by the standards of geology and petroleum engineering designed to promote the greatest ultimate recovery of hydrocarbons contained in the pool. However, no well may be drilled, injected into or produced from said pool nearer than 250 feet from any exterior boundary of the fieldwide unit, except upon permit issued by the Mississippi State Oil and Gas Board, after notice and hearing. (B) The operator may drill either injection or producing wells utilizing directional or horizontal drilling techniques designed to increase the ultimate recovery of hydrocarbons contained in the pool without notice and hearing; provided, however, that (1) no portion of -19-