Notice:

The North Dakota State Water Commission is offering 40.09 net mineral acres for lease. The acreage is included in a 2,533.89 acre spacing unit consisting of Sections 4, 9, 16, & 21 T153N-R101W, McKenzie County, North Dakota.

The lease will carry a 1/5th royalty.

Continental Resources has submitted Four (4) AFE's to drill and complete four wells from a single ECO-Pad® located in Section 16 (see plat). Each of the four proposed wells has their own participation election per the orders established by the NDIC.

The proposed wells are:

Columbus Federal 2-16H - Drilled as a single lateral horizontal well to test the Three Forks formation at an approximate vertical depth of 10,607'. Surface Hole Location 2508' FNL & 222' FEL Section 16.

Columbus Federal 3-16H - Drilled as single lateral horizontal well to test the Middle Bakken formation at an approximate vertical depth of 10,543'. Surface Hole Location 2469' FNL & 199' FEL Section 16.

Tallahassee 2-16H - Drilled as single lateral horizontal well to test the Middle Bakken formation at an approximate vertical depth of 10,518'. Surface Hole Location 2547' FNL & 245' FEL Section 16.

Tallahassee 3-16H - Drilled as a single lateral horizontal well to test the Three Forks formation at an approximate vertical depth of 10,632'. Surface Hole Location 2585' FNL & 268' FEL Section 16.

Successful bidder will have option to participate in the proposed AFE's or decline to join the AFE's and be subject to the risk penalty described below. The risk penalty will not apply if the successful bidder joins the AFE. Please check the following link to view the AFE.

Continental Resources Drilling AFE's for 4 Wells

Operator Statement Regarding AFE: The winning bidder will have 30 days from the date the auction ends to make their election.

Water Commission Mineral Area Maps

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Land Documentation

Source Documentation

Title Information

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Four AFE's for 4 wells all drilled from one ECO-Pad® as follows:

Columbus Federal 2-16H
40.09 Net Mineral Acres in a 2533.89 Acre Unit made up of Sections 4, 9, 16 & 21 T153N-R101W McKenzie County, North Dakota
1.58213% Working Interest
Surface Hole Location 2508' FNL & 222' FEL Section 16
Net AFE Cost $150,244.37

Columbus Federal 3-16H
40.09 Net Mineral Acres in a 2533.89 Acre Unit made up of portions of Sections 4, 9 & 21 T153N-R101W McKenzie County, North Dakota
1.58213% Working Interest
Surface Hole Location 2469' FNL & 199' FEL Section 16
Net AFE Cost $149,595.68

Tallahassee 2-16H
40.09 Net Mineral Acres in a 2533.89 Acre Unit made up of portions of Sections 4, 9 & 21 T153N-R101W McKenzie County, North Dakota
1.58213% Working Interest
Surface Hole Location 2547' FNL & 245' FEL Section 16
Net AFE Cost $138,979.44

Tallahassee Federal 3-16H
40.09 Net Mineral Acres in a 2533.89 Acre Unit made up of portions of Sections 4, 9 & 21 T153N-R101W McKenzie County, North Dakota
1.58213% Working Interest
Surface Hole Location 2585' FNL & 268' FEL Section 16
Net AFE Cost $138,750.03

North Dakota Drilling Non-Consent Provisions

Persons interested in bidding on Leases OG-13-00307 and OG-13-00308 should become familiar with "risk penalty" provisions found in Section 38-08-08 of the North Dakota Century Code (NDCC) and Section 43-02-03-16.3 of the North Dakota Administrative Code (NDAC).

Provided certain conditions are satisfied, NDCC 38-08-08 allows the owner to impose a penalty on other interests in the well's spacing unit if those other interests decline to join in the risks and costs of drilling.

The North Dakota Industrial Commission oversees application of the risk penalty law and has adopted a rule to implement it. The rule is found in Section 43-02-03-16.3 of the NDAC.

NDCC 38-08-08 states that if the nonparticipating owner's interest is not subject to a lease, the risk penalty is 50%, and that if the nonparticipating owner's interest is derived from a lease, the risk penalty is 200%. These risk penalty percentages are applied to the nonparticipating owner's share of the reasonable actual costs of drilling and completing the well, and may be recovered only out of production from the pooled spacing unit.

In order to enforce a risk penalty, the owner, must make an unsuccessful, good faith attempt to have the unleased owner execute a lease - or - must make an unsuccessful, good faith attempt to have the leased owner join in and participate in the risk and cost of drilling. "Good faith attempt" is more fully described in NDAC 43-02-03-16.3.

As it pertains to Leases OG-13-00307 and OG-13-00308, the Commissioner of University & School Lands, cannot warrant which risk penalty will be assessed for non-participation.

The procedures and process outlined in NDCC 38-08-08 and NDAC 43-02-03-16.3 should be referenced and followed. Risk penalty disputes are decided by the North Dakota Industrial Commission. A dispute whether a risk penalty attaches to Leases OG-13-00307 and OG-13-00308 and their interests, and if so the amount of the risk penalty, would be addressed at a hearing held by the Industrial Commission.

Important Notices Pertaining to North Dakota State Water Commission Lease Auction

1. The tracts available for lease are sold on an as is basis, with no representations or warranties regarding the quality of title, ownership, or the accuracy and completeness of the information provided by the State;
2. The tracts available for lease are subject to the restrictions found in North Dakota Century Code (NDCC) Chapter 15-05, Leasing Coal, Oil, Gas, and Other Rights (www.legis.nd.gov/cencode/t15c05.pdf) and Administrative Rule Chapter 85-06-09 (www.land.nd.gov). Sample lease forms are available at www.land.nd.gov.
3. The burden of due diligence is the bidder's responsibility prior to any auction;
4. The lease execution date of all State leases is the effective date of auction as designated in the transactional documents; and
5. The successful bidder must make payment by wire transfer or automated clearing house (ACH) for all bonus, rental, and bidder's premium owed to the State within 7 days. The State will accept payment from only one bidder per tract; however, a bidder may make multiple payments in one wire or ACH, provided the bidder indicates which tracts are involved in the payment.