CONTINENTAL RESOURCES, INC, DETERIME THE VALIDITY AND EFFECTIVENESS OF POOLING ORDER NO REPORT OF THE ADMINISTRATIVE LAW JUDGE

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1 APPLICANT: FILED JUN BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA COURT CLL(S OFFICE - OK( CORPORATION COMMiSior OF OKLAHOMA CONTINENTAL RESOURCES, INC, RELIEF SOUGHT: DETERIME THE VALIDITY AND EFFECTIVENESS OF POOLING ORDER NO CAUSE CD NO LEGAL DESCRIPTION: SECTION 1, TOWNSHIP 5 NORTH, RANGE 15 EAST, PITTSBURG COUNTY, OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE This Cause came on for hearing before Michael Norris, Administrative Law Judge for the Corporation Commission for the State of Oklahoma in the Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Commission, for the purpose of taking testimony and reporting to the Commission. The Administrative Law Judge (AL!) proceeded to hear the cause and filed a report herein. CASE SUMMARY: 1. Continental Resources, Inc. (Continental) is the applicant requesting the relief of determination of the validity and effectiveness of pooling Order No This cause is protested by Antero Resources Corporation. 2. The completion of the Woodford horizontal well in this cause was delayed because Continental did not timely receive 3-D seismic data for which it had contracted. It was demonstrated that this delay was not created by Continental but by the seismic provider. The other activities and lengthy delay were all a result of the lack of timely seismic data.

2 Page 2 3. Continental demonstrated that the 3.-D seismic was critical to this area. The area is a very complex geology and it was imprudent to attempt wells without the benefit of the data. As in many difficult situations, some decisions by Continental were not successful. Other decisions and actions were beneficial and resulted in economic wells being completed. The most critical and effective decision was to not drill any wells in the area without the benefit of 3-D seismic. Continental believes that the action to delay the Hartley well until receipt of the seismic information was necessary to protect the interests of all parties involved in all the wells in the area and is the primary consideration to continue the effectiveness of this pooling order. 4. Antero rejects this depiction and stresses that the length of the delay is excessive and Continental did not diligently prosecute the completion of the Hartley well in a reasonably prudent manner. They assert that the pooling order should have expired because of the delays and lack of activity by Continental. They also believe that Continental should have filed a motion to extend the pooling order. The exigent circumstances should not be considered according to Antero. RECOMMENDATIONS: 1. The pooling order should be determined to be valid and effective. The application should be approved. 2. Continental's actions were reasonable under these circumstances. 3. A motion to extend should be considered in such pooling issues. HEARING DATE(S): November 30, December 1 and December 2, 2011 and January 25, APPEARANCES: David Pepper, Attorney, appeared on behalf of the Applicant, Continental Resources, Inc. John R. Reeves, Attorney, appeared on behalf of Antero Resources Inc.

3 Page 3 FINDINGS AND SUMMARY OF EVIDENCE. 1. The following numbered exhibits were accepted into evidence: 1. Timeline for the Hartley 1-1H well. 2. Index map 3. Order No Continental letter to Brian Kuhn concerning the Hartley 1-1H well 5. Continental letters referencing the Marilyn 1-29H well 6. from Max Green to Michael Schooley dated January 7, from Michael Schooley to Max Green, et al dated February 9, from Max Green to Michael Schooley dated May 6, Letter dated August 10, 2010 to Continental Resources, Inc. from Max Green re: Pooling Order Letter Dated August 10, 2010 to Continental Resources, Inc. from Max Green re: Pooling Order No rder Number Oklahoma Corporation Commission Permit to Drill for Section 1, Township 5 north, Range 15 east, Pittsburg County 13.Oklahoma Corporation Commission Application to Drill, Re-Complete or Reenter 14.Oklahoma Corporation Commission Amend Permit to Drill for Section 1, Township 5 north, Range 15 east, Pittsburg County 1 5.Oklahoma Corporation Commission Application to Drill Recomplete or Reenter 16.Oklahoma Corporation Commission Notification of Well Spud received November 5, Oklahoma Corporation Commission Form 1002A stamped Oklahoma Corporation Commission Permit to Deepen for Continental Resources, Inc. for Section 1, Township 5 north, Range 15 east, Pittsburg County 19.Oklahoma Corporation Commission Form 1002A for Section 1, Township 5 north, Range 15 east, Pittsburg County 20.Continental Resources oil and gas lease dated October 11, Woodford Structure Map, Emma Lou 1-32H 22.Woodford Structure Map, Mary 1-6H 23.Woodford Structure Map, Florenzano 1-36H 24.Woodford Structure Map, Ward 1-33H 25.Woodford Structure Map, Holstead 1-25H 26.Woodford Structure Map, Hartley 1-1H 27.Woodford Structure Map, Marilyn 1-29H 28.Marilyn 1-29H vertical section 29. s from Ken Ainsworth concerning status of 3D seismic

4 Page 4 30.Transcript excerpt from cause CD s concerning contract changes dated September 26, Message concerning conversation with Scissortail dated October 1, Transcript of Proceedings In Cause CD 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. Continental filed this application to determine the validity and effectiveness of pooling Order No Continental called as its first witness Mr. Michael Schooley, landman. His qualifications were accepted without objection. 4. Mr. Schooley testified that proper notice was given to all parties entitled to share in production within this unit. Pooling Order No was heard on November 7, Mr. Schooley was hired by Continental August 15, 2007 and placed upon a team. That team was responsible for the Arkoma Woodford area. He took over this prospect sometime in the middle of He is familiar with the facts and circumstances in this cause. 6. Mr. Glen Cox was the drilling manager and Mr. Ken Kerrihard was the production manager with Mr. Schooley's team. According to Mr. Schooley, Continental entered into a 3-D seismic commitment letter on July 1, This commitment was to cover approximately 52 miles of seismic. He indicated this was a very important factor to their team. 7. He testified that in October, 2007, Continental staked a location for the well. The pooling was heard November 7, The pooling had previously been protested from the application filing in June, Ultimately, St. Mary's, the protestant dropped the protest. Continental realized that it can take weeks or months to resolve a protest. In November Continental believed it might take another 6 months to obtain a pooling order. The pooling application requested one year as the commencement period. In this cause Continental had a very specific reason for requesting a one-year pooling. 8. In July, 2007, Continental contracted for 3-D seismic in this area. They were told and anticipated having the 3-D seismic data within one year. This was the main reason for the one-year time frame requested for the pooling. They expected to have the seismic data prior to the expiration of the one-year pooling. 9. Mr. Schooley further testified that Continental had decided that the seismic data was extremely important in this particular area. They deferred drilling the well until

5 Page 5 they could have the information. They fully anticipated the receipt of the 3-D seismic data before November 27, 2008, the end of the one year pooling. With all of this information Continental contracted a spud rig, spud the well, drilled a couple thousand feet and set surface and intermediate casing in anticipation of having the 3- D seismic data by the fall of This activity is a normal process with Continental. They did this on two occasions in this area. It was done with the Hartley well and the Marilyn 1-29H well. They brought in the spud rig for the cost savings associated with it. It is Continentals practice to move the spud rig off and move the big rig on. The big rig is capable of drilling to total depth. Mr. Schooley stated that other companies also utilize this practice. 10. Continental released the spud rig in November, They ran logs in January of Continental received 3-D seismic on September 26, November 24, 2009 they moved in The Victory number 4 rig which was capable of drilling to total depth and drilled the well(hartley 1-1H). They also had a second well that was moved in to drill the Marilyn 1-29H well. More partners in the Hartley and the Marilyn wells. The Marilyn well was drilled to completion and is a producing well. It is one of Continental's best well in Pittsburg County. The Hartley well was not a successful operation. There was trouble on the well. Mr. Schooley stated that he does not have the expertise to explain what happened to the well. The Hartley well does not produce today. 11. Mr. Schooley testified that Continental had to bring in a second rig because the Victory Drilling Company went bankrupt during the drilling process. The Victory number 4 rig was released January 27, 2010 and went into bankruptcy. This occasioned another delay. Continental had to find another rig and it was moved in May 4, Mr. Schooley noted in April, 2010 Antero paid for their February, 2010 JIB. This was Antero's share of the well costs for the month of February, From this point forward Antero stopped paying their JIBS. 13. He testified that after the new rig was moved in for the Hartley well it actually drilled into the Woodford. It was drilling laterally and eventually lost the hole and a tool. Ultimately Continental had to pull out of the hole. On June 27, 2010 they gave up on the Woodford and released the rig. Continental did set pipe to cover the vertical zones and a pipeline is hooked up to the well. The well does not produce. Mr. Schooley believes that Continental may have some interest in some up hole zones at a later date. 14. Mr. Schooley testified that it is Continental's contention that this pooling order is effective until June 27, That is the date that the new rig, the Paterson 4-21 rig

6 Page 6 was released. He believes that Continental commenced the well within one year from the date of the pooling order. 15. In November, 2009 Continental sent notice to its partner or partners that they were going to resume drilling on the Hartley 1-H well. Mr. Schooley knew the seismic data had arrived but he was not a part of the evaluation process. He was instructed that the seismic had been evaluated on the Hartley and Marilyn wells and to resume operations. He then sent a letter to the partner, Antero, notifying them they intended to resume operations and continue drilling the Hartley well. The letter was addressed to Brian Kuhn, vice president of land at Antero. There were a series of letters tracking the schedules for the Marilyn and Hartley wells. There was a 9 months and 20 days delay on the Marilyn well and 10 months and 4 days on the Hartley well. The letters went to the working interest owners in the wells. Other than Antero none of the other parties complained or questioned the validity of the pooling order for the Marilyn well. He stated that in one case, the Marilyn well Continental had a great amount of success and in another, the Hartley they did not have success. 16. Mr. Schooley testified that Continental filed an application in the Marilyn well to determine the validity of the pooling order. He said that Antero originally protested this application and then withdrew it. The facts and circumstances in that cause are quite similar to this one in his opinion. 17. Mr. Schooley related a series of communications from Mr. Max Green at Antero. There were s exchanged as a result of a December 17, 2009, telephone call. Mr. Green wanted information on Marilyn and Hartley wells. Mr. Schooley sent the original spud dates for the wells and the dates that the wells were back on location. Mr. Schooley believed that he was informing Mr. Green of what the wells were doing. Mr. Green responded on January 7, 2010 inquiring if Continental believed their operations perpetuated the term of both the Marilyn and Hartley pooling orders. He also asked if everyone's participation and elections stayed the same and what was the working interest attributed to Antero in each well. Mr. Schooley called Mr. Green January 8, 2010 and discussed the Marilyn and Hartley wells. He stated that he was not told in the conversation that Antero was taking the position that both pooling orders were terminated. 18. The next conversation between Mr. Schooley and Mr. Green occurred at a restaurant in Denver, Colorado. There was no discussion that Antero was taking the position that both pooling orders were terminated. Mr. Schooley testified that he would have remembered such an important position. 19. The next contact with Antero was the exchange of s from the accounting people at Antero to the accounting people at Continental. These messages were dated February 8 and 9, This was an train discussing that Antero would not

7 Page 7 pay any more invoices from Continental because the pooling order expired prior to Continental spudding the well. Multiple individuals from each company became involved and Continental disputed this allegation. According to Mr. Schooley he sent a copy of the original pooling order and a copy of the spud report for the Hartley 1-1H well to Mr. Green at Antero. Mr. Schooley did not receive a response to this correspondence. 20. Mr. Schooley received an dated May 6, 2010, from Max Green. Mr. Green inquired about an update on the Marilyn and Hartley wells. He requested well information as to completion, flow and how the wells looked. These messages did not mention any reference that the pooling orders had terminated. 21. There was not any further communications from Antero until August, 2010, when Continental received to communications in writing. One related to the Marilyn well and one related to the Hartley well. Antero took the position that the pooling orders on each well are null and void and expired under their own terms. The letter for the Hartley well stated that Antero would not participate any further in the well and did not agree to pay their proportionate share of cost associated with the well beyond those costs incurred during the time the pooling order was in effect. Mr. Schooley testified that there was a definite dispute about the length of time of the gap in operations between the parties. Antero stated that because of Continental's lack of operations after December 1, 2009, the pooling order expired. The Hartley well did not turn out very good. At that time Continental had sent joint interest billings to Antero that totaled $584,879. Continental believes Antero's actions to be a formal notice that they consider the pooling order terminated. Continental believed they had to take some action in response to that position. 22. Continental received the same or similar type of letter on the Marilyn well. Continental believes they commenced operations properly on the Marilyn well. Antero stated that operations also ceased on the Marilyn well and the time frame is disputed. Antero indicated that the pooling order also expired in the Marilyn well but they wanted to continue to participate in the Marilyn well. Mr. Schooley stated that the Marilyn well is the best Continental well in Pittsburgh County. Antero indicated their intention to stay in the Marilyn well. After these communications there were attempts by the parties to resolve these issues. Those attempts were unsuccessful and Continental believed they must file this application. The application on the Marilyn well was heard, recommended an order issued in October. 23. Antero, through its counsel appeared in the separate application for the Marilyn well. They contended that the facts were not the same in the Marilyn and Hartley Wells. Antero stated that because of their belief offer different facts Antero continued to protest the Hartley case. Mr. Schooley stated that Continental did not see any material difference in the timeline as to the Marilyn and Hartley Wells. The only

8 Page 8 difference is that the Marilyn well is a great well and the Hartley well had mechanical failure and has not produced. Continental did the same things in both wells. They drilled down to a certain depth and waited. The gaps are similar in both cases. Continental moved back on both wells about the same time according to Mr. Schooley. The communications Continental had with Antero almost always dealt with both wells. Based upon these facts Mr. Schooley believes the wells are similar. 24. It was further noted that Antero, through its counsel, stated in the case involving the Marilyn well that Antero had initially protested the case and had concerns as to whether Continental's position was correct but because the Marilyn case was not going to impact Antero one way or another they chose not to present a protest in the Marilyn case as they deemed it unnecessary. It is noted that the actual language utilized in that order by counsel was quoted in this record. Mr. Schooley believes that the difference from the Marilyn well and the Hartley well that impacts or doesn't impact Antero is that the Marilyn well is a great well and the Hartley well is not. 25. Mr. Schooley testified that he understood that Continental could have let their pooling expire and pooled it again rather than moving off and waiting for the 3-D seismic. He stated that Continental had already paid approximately $278,000 in pooling bonuses at the time they used the spud rig in the Hartley well. At that time Continental still had the expectation of having the seismic data by the end of Continental then received information that they were not going to get the seismic data by year end However, the seismic company continued to give them the dates into 2009 and Continental had an expectation they would have the 3-D seismic data within a reasonable time. In fact, Continental went ahead and drilled a well, the Emma Lou, without the 3-D seismic. Mr. Schooley stated they now wish they had waited on the 3-D seismic for that well. 26. Continental had three partners in the Marilyn well that supported Continental's position in that cause. Nobody opposed the cause other than Antero. 27. Continental had 4 poolings within a few months of each other. These involved the Hartley well, the Marilyn well, the Florenzano well and the Emma Lou well. The Emma Lou was drilled to a total depth without 3 the seismic. The Emma Lou well is not a good well. The Florenzano well was canceled based on 3-D seismic. The Marilyn well utilized 3-D seismic and the location was changed because of the seismic data. It is the best well in Pittsburgh County for Continental. Continental also waited for the 3-D seismic on the Hartley well. This well had a lot of mechanical difficulties and as previously stated was not a good well. 28. Mr. Schooley stated that Continental's position is that pooling order for was extended and is effective to and through June 27, That is the date the rig

9 Page 9 pulled off the location and got the tools out of the whole. Continental has not done anything to this well, including the up hole zones since June, Upon cross-examination Mr. Schooley agreed that paragraph 10 of the pooling order provides for the obligation on Continental resources. He stated that paragraph 10 tells Continental resources what it must do. Continental must commence operations. The obligation is not imposed on any person other than Continental. He stated that the first part of the operative sentence is that Continental must commence operations for the drilling and other operations within one year from the date of the order. He stated that is for the Hartley well. Mr. Schooley agreed that under the order the well must have been commenced by November 27, The second part of the obligation for Continental is that they prosecute the same to completion. This must be done in a reasonable and prudent manner. If this obligation is not met then the order is null and void except for the payment of cash bonuses. 30. Mr. Schooley stated that he believed the construction of the location was an act that complied with the first obligation under the order. He testified that moving on the spud rig on October 23, 2008, was another act of compliance. Another act was moving the spudder rig off location on November 8, Further, Continental ran a log on January 20, The second obligation in the order is to prosecute the same to completion within a reasonably prudent manner. Mr. Schooley agreed that if Continental did not complete both obligations then the order goes away. Mr. Schooley believes that Continental complied with the 2nd obligation by waiting for the 3-D seismic. Mr. Schooley believes that Continental acted in a reasonably prudent manner by waiting for the 3-D seismic. From January 20, 2009 until November 24, 2009 Continental expected to receive the 3-D seismic data. Continental had decided that it was absolutely critical to have 3-D seismic. They had drilled the wells without the data that were not successful. They decided not to resume drilling operations until they had the 3-D seismic. On November 24, 2009, Continental moved in the victory number 4 rig. 32. There was extensive testimony concerning The Oklahoma Corporation Commission documents filed by Continental on the Hartley well. This testimony documented the time frames previously stated by the witness and the delays on the well. There were disputed questions and answers concerning information on these documents. This testimony did not result in further clarification of the issue. 33. Mr. Schooley testified that Continental had to make application for a second location exception because the first order had expired. It was noted that Continental could have asked for an amendment to the first location exception. However, they waited for over a year and filed a new location exception. The protestant argued that

10 Page 10 this changed the nature of the well and was not a diligent prosecution. The second location exception modified the location and therefore changed the nature of the well. 34. It was noted that it was 2 years from the date of the order until Continental resumed operations. There was a shut down operations for about a year except for the running of the log. From January 20, 2009 to November 28, there was no activity on the Hartley 1-1 well. Continental was waiting on the 3D seismic and nothing was done on the well during that time frame. The witness admitted that if Continental had not taken any action for the 2 year period they would not have been in compliance with the pooling order. He noted that this was a completely different scenario than the activities that occurred. 35. On November 17, 2009, the date of the 1002A filing, (Exhibit 17) Continental was not aware that there was an issue with Antero about the continued effectiveness of the pooling order. 36. Mr. Schooley testified that he was aware that Antero stopped paying their bills on the well. The JIBX for December, 2009 were not paid. Also the March, April, and May, 2010, JIBX were not paid. The February, 2010, JIB was paid. Mr. Schooley did not know why the February payment was made. 37. Continental did not contact Antero prior to the November, 2009, letter to inform Antero of their actions concerning the Hartley well. This letter stated that Continental intended to continue drilling the Hartley well. Mr. Schooley admitted that the parties involved in the well might be affected by the operation of Continental under the pooling order. Mr. Schooley testified that Continental did not file a motion to extend the pooling order because they still expected to have the 3-D seismic data. 38. Continental attempted to renew leases that were expiring between July 5, 2009, and October 26, They paid cash bonuses for these renewals. Continental renewed acres. Mr. Schooley stated that these leases contained 90 day cessation of operations language. There was further extensive testimony about Continental leases and renewal activity. This testimony further documented the time frames previously noted. It did not elicit new facts or additional evidence relevant to the issue. It was noted that there is no direct correlation between the 90 day cessation of operations language in a lease and the language in the pooling order. The witness stated that he did not believe there is any specific language in the pooling order, in particular paragraph 10 that specifically says waiting on 3-D seismic preserves or continues the pooling order. He did believe that the reasonable and prudent development language might take into account the waiting period for 3-D seismic. Mr. Schooley stated that if you look at the language of the order, you may have other operations being conducted, but you don't have drilling and other operations being conducted during the period from November 27, 2008 to November 24, 2009.

11 Page Upon redirect examination Mr. Schooley stated that from looking at the Exhibit 18 it appears that the location exception order did not expire but was modified to change the entry points, bottom hole and to add perforations. He believes that there was one well drilled. It is had a straight whole and an attempted horizontal leg. He testified that every horizontal well that Continental drills has a straight whole and a horizontal part. 40. Mr. Schooley does not know how many, if any, separate 1002A forms on the straight hole part and separate 1002A forms on the horizontal part of wells drilled by Continental. There were no other questions for Mr. Schooley. 41. Mr. Kenneth Ainsworth, geophysical manager, was called as a witness for the applicant. His qualifications were accepted without objection as he is responsible for all the seismic related activity of Continental in the Arkoma and Anadarko basins. He has been the manager from the beginning of Continental's involvement in the areas. 42. Mr. Ainsworth stressed that 3-D seismic is much better than 2-D. In 3-D seismic data the receivers and sources are spread out over an area rather than in a line so you are much more likely to put back the energy to its actual subsurface sampling point. This is particularly good in complicated areas. He believes that the Pittsburgh County portion of the Arkoma basin is a complex or complicated geological environment. He testified that there has been faulting of different sorts throughout the geologic history and you have a minor block and thrust faulting at a depth overridden by a thrust system on top of that. The subsurface is very complex. He is not aware of anything on the market now that's better than 3-D seismic for exploring. 43. According to Mr. Ainsworth Continental has drilled to Wells using only 2-D seismic and both of them have been less than successful. He explained that he does not have anything to do with applications, notices, hearings or orders. His role is to try to find and predict locations on which to drill wells. 44. He recalled that the first well that was drilled was the Mary. It is located immediately east of the Hartley well. Continental had a 2-D seismic line on the Mary well. He stated he believes the Mary well was drilled in the spring of At the same time Continental had concluded they wanted to conduct their own seismic operation in this area or participate in a group seismic operation. An agreement to participate in the seismic survey was signed in August, Wilson geophysical managed and coordinated the seismic shoot. Continental has participated in these types of operations approximately 40 to 50 times over the years. They have included different zones and other parts of the country.

12 Page After Continental signed the contract for the seismic operation they were told they could expect the data within 9 months to a year. Based upon Mr. AinswortWs experience that was a reasonable time frame. 46. When Continental drilled the Mary well in the Spring/Summer of 2007 they only had 2-D seismic. The Mary well was not a good well and Mr. Ainsworth believes it will not ever pay out. They had a poor depth interpretation for the target formation in the Mary well. As a consequence they landed in the Hunton and continued to try to turn up in the lateral to get out of the Hunton. The dips interpreted from the 2D data were inaccurate and say were at the end of the well bore before it actually turned up and got into the Woodford. They basically ended with a Hunton well. 47. Mr. Ainsworth testified that if he had been given a choice they would have drilled the Mary with 3-D seismic data. It was not available to Continental at that time. Continental also drilled the Emma Lou well in 2008 without 3-D seismic. 48. Throughout 2007 and 2008 Mr. Ainsworth was contacting the coordinator or manager attempting to determine how things were going with the 3-D seismic shoot. Throughout 2007 and into the spring and summer of 2008 Continental was assured things were going fine. Mr. Ainsworth was beginning to get a little nervous because the promise of the data was being extended from summer into fall and then into the winter of Mr. Ainsworth stated that a decision was made to drill the Emma Lou well without the 3-D seismic. Continental had some 2-D seismic data in this area that they considered was pretty good. The Emma Lou well was less than successful and was cut short. The well ran into what they believed was a fault and got lost. They could not see that fault on the 2-D seismic. 49. At the end of 2008, Mr. Ainsworth contacted the 3-D seismic people and was told they were not getting the data in Another geophysicist, Melissa Callaway, who works for Mr. Ainsworth was also calling about the data. The inquiries they made were no longer cordial. Sometime after that Continental discovered that 100 square miles had been added to the seismic project and it was being started away from Continental's area. It was learned that another entity had underwritten the entire survey and they were more interested in data to the eastern side of the survey area. Continental did not know this when they signed their contract. 50. In 2009, Mr. Ainsworth discussed with the lead geologist, Bruce McPherson, about acquiring a proprietary data. Because of the financial commitment already paid Continental did not proceed with plans of conducting their own operation. Continental had already paid approximately three million dollars under the seismic contract. A new operation managed by Continental would cost more than that. Mr. Ainsworth testified that he had never seen a seismic operation go this bad. This was one of the longest times Continental has ever had to wait for seismic information.

13 Page In 2009, Mr. Ainsworth recommended that Continental not drill any more wells without the benefit of 3-D seismic. Continental accepted that recommendation. It is Mr. AinswortWs opinion that you increase the odds of drilling a successful well with the 3-D seismic data. 52. In late September, 2009, Continental finally received the 3-D seismic data. They promptly moved to analyze it and map it. 53. The area was mapped based on the 3-D seismic. This data showed that there were thick faults in the structure of the Emma Lou well. These faults could not be seen on the 2-D seismic. If the 3-D seismic had been available, Continental would have changed the path of the Emma Lou well. With 3-D seismic the Mary well would have had much better depth representation which would have facilitated intersecting the Woodford instead of the Hunton. It will give a better chance in drilling horizontal Woodford Wells in the future. 54. A review of the Florenzano well based upon the 3-D seismic data indicated that the surface location was wrong. There is a fault that could not be crossed or gotten through successfully. If the surface location was on the other side of the fault Continental could have only drilled a horizontal well in half of the section. It would not have been drilled if Continental had gotten the 3-D seismic data. This well had been plugged. 55. Continental drilled the Ward well with the benefit of the 3-D seismic. It was a successful well. 56. The Holstead well was reviewed after receipt of the 3-D seismic. Continental decided this was another well that could not be drilled successfully. Antero and Continental both had the opportunity to drill this well and both declined to do so. 57. The Hartley well was drilled with the benefit of 3-D seismic. It was not a successful well. Mr. Ainsworth believes that the seismic interpretation did not have anything to do with the problems of that well. He believes the 3-D seismic gave Continental the best opportunity to have a successful well. 58. Mr. Ainsworth testified that there were many discussions about the Marilyn well. He stated that they changed the direction of this well when they got the 3D seismic data. They were able to drill and intentionally miss a fault that was shown on the 3-D seismic. Without this information he believes they would have intersected that fault and gone into the up thrown part of the well and may never have been able to turn it up in time to get back into the Woodford. This well has been one of the better Continental Wells in Pittsburgh County. Mr. Ainsworth testified that without 3-D

14 Page 14 seismic they would have turned one of the better Wells in Pittsburgh County into an unsuccessful well. He stated that all that was no one before and all that is known after the 3D seismic data it was extremely prudent and important to drill wells with 3- D seismic information. The well results bear that out. That is why he recommended not drilling these Wells until Continental had the 3-D seismic data. Continental accepted that recommendation. 59. One of the problems with 2-D seismic, according to Mr. Ainsworth, is you can have problems determining your depth and formation. These problems are less severe with 3-D seismic. It is not right every time but it is the best technology available. This seismic information benefits everyone in the well because it benefits everyone if you drill a good well. Because all the 3-D seismic they were able to better steer the well and successfully stay in zone in the Woodford for the Marilyn well. To the seismic would not have been nearly as reliable. 60. Upon cross-examination Mr. Ainsworth restated that in his opinion no one should try to drill a horizontal Woodford well without 3-D seismic information. He expressed that opinion to Continental when they first started buying leases in 2006 in Pittsburgh County. Mr. Ainsworth testified that the entire lower Paleozoic section is complicated. He has known that since working in the area before the days when 3-D seismic was available. He believes from a geophysical standpoint this is common knowledge. This would include the Woodford formation. 61. Mr. Ainsworth testified that he received the commitment letter for the 3D seismic project on approximately July 7, The last possible date the contract could have been finalized was August 15, The waiting period for the 3-D seismic data was from August 15, 2007 to September 26, During this period Mr. Ainsworth made calls to the seismic coordinator, Mr. Bait Wilson. There was an contact on October 16, This that Continental was not going to have the data by the end of Mr. Ainsworth is certain that he made other phone calls concerning the 3-D seismic data but he does not remember the dates. Mr. Ainsworth corrected the date of the to be August 8, The stated that Continental could plan on having the data sent in June and July, It would be broken into two segments, A and B. Continental was interested in the phase B data. The provider also stated that their deadline for phase B was December 29, This was obviously inconsistent with the June and July, 2009 dates. Continental received the phase B data in September, 2009 not December, Mr. Ainsworth replied that Continental needed the information. He was not happy at all with these dates. As a non-owner of the data a participant in a portion of the data Mr. Ainsworth made phone calls and asserted for a fast track of the processed data and other than that he had no control over the crew activities. Continental talked about doing their own acquisition but practically speaking they did not believe they could have gotten a crew out there shot the data and processed it any faster. They had to wait for the seismic to come.

15 Page Upon redirect examination Mr. Ainsworth stated that Bart Wilson is with Wilson geophysical. They were the coordinators of the 3-D seismic survey. Mr. Ainsworth testified that he does not get angry very often. When he wrote the to Mr. Wilson he was angry. His anger was a result of all the things that happened prior to the time of the Mr. Ainsworth reiterated that since 2006 he recommended to Continental that they not drill without the benefit of 3-D seismic. Continental has somewhat of a reputation as a risk taker. They sometimes drill wells not based on Mr. Ainsworth's recommendation. In fact Continental drilled to Wells without 3-D seismic. He stated they are now listening to his recommendation. Continental has now made a conscious decision to not drill wells without the 3-D seismic. 64. Mr. Ainsworth stated that he indicated that he and his assistant Melissa made numerous phone calls about the delay is in the 3-D seismic. He stands by that testimony. He did not write down the phone calls but most of the communications were by telephone. 65. Upon recross examination Mr. Ainsworth stated that he had a telephone call from Mr. Wilson within the last 3 weeks. They discussed the number of times that Mr. Ainsworth and Melissa called Mr. Wilson. Mr. Wilson stated that each of them called between 6 and 10 times. So between Mr. Ainsworth and Melissa there were between 12 and 20 phone calls. 66. Mr. Ainsworth testified that the drilling of the Mary well reinforced his opinion that Continental should not drill any well without 3-D seismic. He believes that may be the time where he got Continental's attention about not drilling. 67. Mr. Ainsworth has told Mr. Wilson that Continental could not sponsor or support any further venture for 3-D seismic data. Mr. Ainsworth believes that the 3-D seismic activities in this matter were less than standard for the industry. He stated that it would not have been feasible to attempt to contract with another company. As a practical matter with a speculative survey already in place for this area no other company would have considered taking on a comparable survey. There were no further questions of Mr. Ainsworth. 68. Ms. Susan Forman was called as a witness. She is the manager of natural gas marketing for Continental. Her qualifications were accepted without objection. Ms. Forman testified that she is responsible for any well that Continental drills that produces gas. When Continental drills a well that they think will produce gas she tries to get started looking for pipelines in the area before the well is spud. Once she finds a pipeline she negotiates a contract for a purchase arrangement and a transportation

16 Page 16 arrangement. These negotiations can take months to complete. Ms. Forman stated she does not have a role in the drilling of wells, does not have anything to do with picking locations and does not have anything to do with the regulatory process at the Oklahoma Corporation Commission. 69. Ms. Forman stated she is on a team at Continental along with Mr. Ainsworth, Mr. Schooley and others. Gas marketing is in the meetings to pretty much learn about where the next well will be drilled. The most important things to gas marketing are when are they going to split it, when are they going to frac it and when they estimate the first gas sales will occur? Continental study that this area in There were a couple of pipelines in the area. These were not right next to the wells so they had to make arrangements for pipelines to be built to the wells. Continental chose a company and many meaningful capital expense items had to be considered. This company paid for all that based upon Continental's representations that they would drill the wells. 70. She learned about the because of some delays in the spud dates of wells. Spud dates had to be communicated to the pipeline company and she learned the delays occurred because Continental was waiting on 3-.D seismic on a number of wells. The pipeline company built facilities based upon the representations of Continental. Continental initially told the pipeline company that wells were scheduled in July and October of Ms. Forman believes that the seismic delay was known within her team. She learned of the spud dates and the fact that Continental stopped drilling in the team meetings. There were discussions with the pipeline company about the particular Wells not been drilled and when they could be turned on line. She was talking to them all through 2007, 2008, 2009, and During cross-examination Ms. Forman testified that her activities with the pipeline company in connection with the Hartley well consisted primarily of telephone conversations and s. She also wrote letters and read letters from pipeline company. Her negotiations resulted in the pipeline company constructing equipment for the pipeline. 72. Ms. Forman learned that Continental should not be drilling Wells without 3D seismic to the Woodford in this area in September of She started looking for pipelines in the area in the spring of As of September 26, 2007 she was fully aware that Continental was waiting on 3-D seismic before they spud another well in the area. When she started conversations with the pipeline company she was not aware of the admonition not to drill wells to the Woodford in this area without 3-D seismic. Sometime between the spring of 2007 and September 26, 2007 she became aware of the situation. There was lengthy cross-examination that involved discussion of the pipeline contract negotiations, the great recession, gas prices and the laying of the pipeline to the Hartley well. This resulted in the fact that Continental was not

17 Page 17 going to drill the Hartley well in the Woodford until they had sustained testing on the Mary well and they received the 3-D seismic information. After a brief redirect examination Ms. Forman was excused. 73. Mr. Kenneth J. Kerrihard, production manager for Continental was called as a witness. He is responsible for designing the completion of a well, where the perforations are and how they are going to treat it. He is responsible for deciding what equipment is set, monitors the production and makes sure they get the full capability of the well. From the initial reading spud down to its release it is the responsibility of someone else. He evaluates the production from the wells. 74. In 2007, Mr. Kerrihard knew there was a seismic shoot requested by Continental. He was involved with the completion of the Mary and Emma Lou wells. They were two very disappointing wells and did not produce the way Continental had hoped. From the studies they have conducted the Mary and Emma Lou will never pay out. 75. The other wells that were drilled with 3-D seismic have also been analyzed. Mr. Kerrihard was aware that Continental made the decision after the Emma Lou and Mary were drilled and completed that all future wells would be drilled with the 3-D seismic. They felt the 3-D seismic would give a better chance of mitigating any drilling hazards, faults and landing the lateral in the proper zone. 76. Continental has drilled five wells with the 3-D seismic that do produce. They also drilled the Hartley that did not produce. All five wells will pay out. A further analysis of the type of production that you can expect from the wells with 3-D seismic and the wells without it has been conducted. The two wells drilled prior to the seismic the Emma Lou and Mary has averaged 505 Mcfd and 265 Mcfd respectively. The 5 wells drilled with 3-D seismic have averaged from 1.8 Mcfd on the low side to 3.4 Mcfd on the high side. All of these wells will pay out. Mr. Kerrihard has concluded that 3-D seismic is vital in this area. Mr. Kerrihard can understand waiting for the 3-D seismic in terms of economic circumstances. Continental drilled two wells prior to the 3-D seismic that were on economic. The wells drilled since the 3-D seismic have been economic. To him waiting on 3-D could be considered economic circumstances. 77. Mr. Kerrihard testified that the Hartley well was one well. The horizontal section of this well was drilled or attempted to be drilled from the straight hole that had already been drilled. Every horizontal well that Continental drills has a portion of it as a straight hole. The Hartley well was always intended to be a horizontal Woodford well. 78. Upon cross-examination Mr. Kerrihard reiterated that he supervises the two engineers that are responsible for evaluating the zone drilled, the cement integrity, where perforations are placed, how the well is treated, how it is flowed back, what

18 Page 18 production equipment to set and how to produce and monitor the well to make sure it's producing to its full potential. He was not involved with the spudder rig or intermediate pipe because operations were not complete. In his opinion it would have been imprudent for Continental to proceed any further with the Hartley well until they got the 3-D seismic data. It was his understanding that when Continental wanted to reenter this well the Conservation Division required a new permit. To obtain a new permit Continental was required to file a completion report on the previously drilled portion of the well. He admitted that Continental referred to this portion of the well as the straight hole on the completion report. However, it was always the intention of Continental to drill a horizontal well from this hole. Mr. Kerrihard testified that from October 2, 2007, through June 27, 2010, he did not have any involvement with this well. There were no other questions of this witness. 79. Mr. Glenn Cox, projects drilling manager at Continental Resources was called to testify. His qualifications as a petroleum engineer were accepted without objection. It was established that Mr. Cox wasn't involved in any of the circumstances of this cause except for the wells that he drilled and in particular the Hartley well. The first horizontal Woodford well that he drilled in Pittsburgh County for Continental was the Mary. From a drilling standpoint it wasn't really obvious what happened with the well. It ended up with the lateral landing below the Woodford in the Hunton and the bulk of that lateral was drilled into the Hunton. They barely broke back up into the Woodford toward the tail end of the lateral. At that point they got stuck for some period of time, worked loose from that and set pipe shallow in the well. 80. The Emma Lou well was a similar situation. They landed low on it also. They did get it back up into the zone for some portion of the lateral and then crossed a fault at the tail and drilled out of zone again. 81. As a drilling engineer the decision to not drill other Wells in this area until 3-D seismic had been acquired did not surprise him. This area is pretty challenging geologically and it's quite useful to have the seismic information to know exactly where the zone is going to be when he lands the well bore. He thought this decision was a good idea. 82. Because of the 3-D seismic information he recalls being instructed to change the direction of the Marilyn well. The Marilyn well bore was nudged in the vertical section to get across a fault prior to getting into the curve. From that point on there were not any issues with the Marilyn well. In his view the seismic helps save money because they are not worried about a drilling risk. They are worried about being efficient in the drilling process. 83. Based upon the 3-D seismic Mr. Cox was instructed to change the direction on the Hartley well also. It was a different technique to avoid a fault that was indicated

19 Page 19 on the seismic data. They were trying to drill around the fault. They landed the curve without significant issues and drilled about 1,400 feet of lateral. At that point there were problems with a down hole motor and in an attempt to swap out the motor the drill string became stuck. They attempted fishing operations and after 2 weeks plug the well back and released the rig. Continental came back in May, 2010, within other rig and drilled a sidetrack of the plugged hole. They again had the drill string become stuck and after 2 or 3 weeks had to finally give up on the sidetrack. Continental then made the decision to run 5 1/2 inch casing in the vertical, terminate the efforts in the Woodford and look at the possibility of a completion in and uphold zone. Mr. Cox stated that the Hartley well is the only well in Pittsburgh County that they have had to leave the Woodford. They have drilled 5 or 6 additional wells since the Hartley. Based upon these operations he would still endorse using 3-D seismic. 84. On cross-examination Mr. Cox stated that he did not know when he became aware of the decision concerning 3-1) seismic. He believes it was some time alter the intermediate casing was set with the spudder rig. This was sometime after November 8, Mr. Cox is not aware of what uphole zone Continental might propose in the Hartley well. There were some gas shows as they drilled the vertical. After the 5 1/2 inch Casing was set Continental could have identified the zone, perforate that zone and do whatever completion operation was necessary. The casing was set in June, He stated that the well has sat for a year and a half and nothing has been going on. Mr. Cox stated upon redirect examination that he would not normally be involved with any rig at that point. The applicant did rest. 86. The protestant did call Mr. Max Green, landmen with Antero as a witness. His qualifications were accepted without objection. Mr. Green stated he is familiar with this cause and of the activities that have taken place. Antero signed a pooling ratification agreement with Continental and agreed to be bound by the terms of the pooling order and waive any notice requirements. That agreement is dated October 1, Continental had made Antero aware that they planned to build a location and spud a well in the very near future. They actually started building a location the next day, October 2, During this time period he does not believe that Continental mentioned 3-D seismic to Antero. Continental did not state that they were going to hold off on drilling the well until they received 3-D seismic. Antero expected that Continental would spud a well and continuously drill that well to completion. That was a horizontal Woodford well. In Mr. Greene's opinion the activities of Continental were not in compliance and the order should have expired. 87. Mr. Green believes the order expired on April 20, 2009, when Continental did not diligently prosecute operations to completion. This date is 90 days after the last known activity on the Hartley well which was running the gamma ray and neutron

20 Page 20 logs January 20, It is Mr. Green's opinion that the obligation to keep this order in full force and effect is set out in paragraph 10 of the pooling order as previously discussed. He believes the obligation is for Continental to commence a well within the one year period that's granted under the pooling order and diligently prosecute the same. He believes this must be done in a reasonably prudent manner to completion of the well or the pooling order expires on its own terms. The order states it will be null and void. 88. He sees this as 2 different obligations. In terms of the first part the one-year time period would end November 27, The 2nd obligation is that Continental must be acting diligently and in a reasonably prudent manner in drilling and other operations to completion. After objection and discussion Mr. Green read testimony from the hearing concerning this order and noted that there was no reference to 3-D seismic as a reason for requesting one year to commence operations. Mr. Green believes that if Continental knew that the 3-D seismic data would not be available until December of 2009 and it would take 60 days to evaluate the data then a reasonable expectation to drill a well would be February, Therefore, he believes that Continental's action of commencing the spudder well on October 25, 2008 was not a reasonable expectation of completing the well within the one-year requirement. 89. Mr. Green testified that as the acting land man at and Terrell during this period he did not hear anything from Continental until the letter dated November 11, Mr. Green asserted the language in the initial 1002A on the Hartley well described a straight hole well. He also noted that the comments did not mention 3-D seismic as a reason for the drilling interruption. He believes that Continental complied with the first portion of their obligation under paragraph 10 of the pooling order and that they did not comply with the second portion of the paragraph. It is his opinion that Continental did not diligently prosecute anything. They failed their obligation under the pooling order by delaying too long. He further stated that the spud date of the horizontal hole is indicated as December 8, 2009, which is well beyond the November 27, 2008, expiration date of the pooling order. 90. Mr. Green explained that his reference to the order expiring 90 days after the January 20, 2009, log was based on customs and practices of the industry. He stated that Antero has always gone by a 90 day rule as a reasonable time for cessation of operations. He also examined standard lease forms that are used in this particular section by Continental, Antero and St. Mary's. These leases contained clauses that the lease shall expire if operations cease for a period of time greater than 90 days. He believes these terms are analogous to a pooling order situation. Mr. Green's opinion is that the one-year time in the pooling order is analogous to the primary term of a lease. He further testified that any cessation of operations longer than 90 days would not be reasonably prudent in his opinion.

21 Page Mr. Green did not agree with Continental's position that the operations started in November, 2009, would have saved Continental leases under the 90 day provision. He thought it was wise that Continental did go ahead and obtain new leases. Those parties that were pooled and relinquished their interest under the pooling order were affected because they were not afforded any of the bonus consideration that the parties that got new leases were given. Mr. Green stated that if he was in the same situation he would have filed a motion to extend the period of time for the pooling order. In his opinion it gives Continental an opportunity to state a case and obtain additional time. He understands that Continental chose not to do that. Continental did not discuss filing a motion with Antero. It is Antero's position that Continental did not diligently prosecute the drilling and other operations of this well to completion. 92. During cross examination Mr. Green stated that he was not contradicting any of the Continental witnesses about the testimony that the 3-D seismic enhanced production was extremely important before drilling and that Continental supported the decision. He admitted that Mr. Robert Tucker, geologist for Antero would not testify as noted on the witness list. He would not offer testimony in opposition to the opinions about 3-D seismic being important. 93. Mr. Green admitted that there was not a Commission rule about his idea of a 90 days cessation of operations standard for pooling orders. He is not aware of a Commission Order wherein a 90 day time frame was entered. He is aware that the Marilyn well also had more than 90 days cessation of operations after the primary term. It was probably as long as this well. He agreed that the Marilyn was a good well. He understands that Antero did not lose money on the Marilyn well. He distinguished the two wells as the Marilyn well was not a contested case and the Hartley well is a contested case. Antero was involved with both wells. They withdrew the protest in the Marilyn well cause. Antero disagreed with both of them. Mr. Green agreed that the Marilyn is a producing well and the Hartley is not. He agreed that these same facts would have come out and made known in the Marilyn well cause if it had remained protested. 94. Antero participated in the 3-D seismic project. Mr. Green does not believe that they were involved in this section. Antero was aware that seismic was being shot in this general area. He believes that the seismic was very beneficial to the Marilyn well. Antero participated in the Marilyn well. Antero is making money on the Marilyn well as far as Mr. Green knows. He believes it was imprudent to wait for seismic beyond the one year period of the pooling order. However, Antero does not take the position that Continental should have drilled the wells without the 3-D seismic. He admitted that he was aware from the testimony that if Continental had filed a motion to extend it would have cost Continental $288, He knows that impacted Continental's thinking on the motion.

22 Page Mr. Green stated that Antero did get some benefits from the two agreements with Continental in October, 2008, and September, He stated that Continental and Antero both received benefits from the agreements. 96. Mr. Green agreed with the evidence that Continental decided that they would not drill any more wells without 3-D seismic after the Mary and Emma Lou wells. Antero did not dispute Continental's actions in terms of the science and drilling involved. He agreed that Antero's theory of prudence was that Continental should have filed a motion to extend. 97. Antero received the certified mail advising them that Continental was resuming operations on the Hartley well. Mr. Green stated that they had to consider the facts on the well after receipt of the letter to determine what their position would be. Antero was a participant in the Hartley well and the Marilyn well. Antero received a letter on both wells. He admitted that the only time Antero formally notified Continental that Antero believed the poolings had expired was after all the operations had been completed on both wells. This was is August, Mr. Green testified that he believes that where a pooling order does not specifically define time lines or other matters that they are required to rely on customs and practices. They can utilize leases that are taken within the area. He also believes that the Commission can make rulings based on industry customs and practices. He admitted that the Commission did not make rulings based on customs and practices in the Marilyn case. 99. There was testimony that Mr. Green recalled concerning the recession in He agreed that Continental drilled the wells anyway. Continental did not say oh, we are in recession let's not drill these wells. Mr. Green testified that between the time that Continental did spud the Hartley well in 2008 and then recommenced it in 2009, he did not inquire about the status of the Marilyn or Hartley wells. He further stated that this hearing was the first time Antero has proposed the 90 day cessation of operations idea. He testified that Antero can agree that Continental was waiting on seismic and that Continental was waiting on seismic before they drilled the Marilyn and Hartley wells. Antero agrees that Continental processed the seismic in a reasonable time after it was received and then drilled the Marilyn and Hartley wells. They will agree that Continental presented three experts that said it was prudent to wait on the seismic Upon redirect examination Mr. Green testified that Continental could not have waited on 3-D seismic and done nothing else and been able to preserve the order in his opinion. He also recalled that Continental did not file a motion to extend the time to commence operations because they did not want to pay another $287, under the pooling. There was additional redirect testimony and re-cross examination. The resultant effect was that many of the opinions, positions, arguments and conclusions