HS RESOURCES INC, 10-Q, 1996-05-15

HS RESOURCES INC
10-Q, 1996-05-15
DRILLING OIL & GAS WELLS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1996
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from ________________ to ______________

Commission file number 0-18886
-------

HS RESOURCES, INC.
- - ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 94-3036864
- - ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

One Maritime Plaza, Fifteenth Floor
San Francisco, California 94111
- - ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (415) 433-5795
----------------
- - -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
--- ---

APPLICABLE ONLY TO CORPORATE ISSUERS:

Number of shares of Common Stock, $.001 par value, outstanding as of the close
of business on May 3, 1996: 10,806,703 after deducting 141,977 shares in
treasury.
<PAGE> 2
HS RESOURCES, INC.

INDEX

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
- - ------------------------------

Item 1. Financial Statements

Consolidated Financial Statements:

Consolidated Balance Sheets - March 31, 1996 (Unaudited) and
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Unaudited Consolidated Statements of Operations - For the
Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Consolidated Statements of Stockholders' Equity - For
the Year Ended December 31, 1995 and the Three Months Ended
March 31, 1996 (Unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Unaudited Consolidated Statements of Cash Flows -
For the Three Months Ended March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Note to Unaudited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 8

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

PART II. OTHER INFORMATION
- - ---------------------------

Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . 17

Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

2
<PAGE> 3
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HS RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
- - ------

CURRENT ASSETS
Cash and cash equivalents $ 2,089,542 $ 116,581
Accounts receivable
Oil and gas sales 6,225,975 6,344,672
Trade 1,077,708 1,300,244
Other 3,215,983 2,461,966
Lease and well equipment inventory, at cost 1,163,370 709,613
Prepaid expenses and other 146,970 152,569
------------- -------------
Total current assets 13,919,548 11,085,645
------------- -------------

OIL AND GAS PROPERTIES, at cost, using
the full cost method
Undeveloped acreage 31,010,689 26,778,702
Costs subject to depreciation, depletion
and amortization 388,030,147 341,382,375
Less accumulated depreciation,
depletion and amortization (95,124,927) (89,350,067)
------------- -------------
Net oil and gas properties 323,915,909 278,811,010
------------- -------------

GAS GATHERING AND TRANSPORTATION FACILITIES,
net of accumulated depreciation of $809,850 at March 31, 1996
and $739,010 at December 31, 1995 4,866,895 4,913,692
------------- -------------

OTHER ASSETS
Deferred charges and other 3,626,765 3,652,769
Office and transportation equipment and other property, net of
accumulated depreciation of $2,669,625 at March 31, 1996
and $2,457,070 at December 31, 1995 3,464,686 3,626,149
------------- -------------
Total other assets 7,091,451 7,278,918
------------- -------------
TOTAL ASSETS $ 349,793,803 $ 302,089,265
============= =============
</TABLE>

The accompanying note is an integral part of these
consolidated financial statements.

3
<PAGE> 4
HS RESOURCES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995

<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable
Trade $ 9,198,669 $ 4,638,286
Revenue 2,896,130 2,091,073
Accrued expenses
Ad valorem and production taxes 4,930,670 4,386,969
Interest 3,842,144 1,494,667
Other 1,039,615 2,159,324
Short-term note -- 12,400,000

Current portion of long term debt 30,000 30,000
------------- -------------
Total current liabilities 21,937,228 27,200,319
------------- -------------

ACCRUED AD VALOREM TAXES 8,925,679 6,574,405

LONG-TERM BANK DEBT, net of current portion 78,900,000 51,000,000

THIRD PARTY INDEBTEDNESS 23,100,000 --

9 7/8% SENIOR SUBORDINATED NOTES, due 2003,
net of unamortized discount of $448,500 and $463,125
at March 31, 1996 and December 31, 1995, respectively 74,551,500 74,536,875

DEFERRED INCOME TAXES 23,721,118 23,603,540

STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value;15,000,000 shares
authorized; none issued and outstanding at
March 31, 1996 and December 31, 1995 -- --
Common stock, $ .001 par value, 30,000,000 shares authorized;
10,948,680 shares issued and outstanding
at March 31, 1996 and December 31, 1995 10,949 10,949
Additional paid-in capital 97,717,908 97,717,908
Retained earnings 22,675,597 22,484,572
Treasury stock, at cost, 141,977 shares at March 31, 1996
and 75,077 shares at December 31, 1995, (1,746,176) (1,039,303)

------------- -------------
Total stockholders' equity 118,658,278 119,174,126
------------- -------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 349,793,803 $ 302,089,265
============= =============

</TABLE>

The accompanying note is an integral part of these
consolidated financial statements.

4
<PAGE> 5
HS RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)

<TABLE>
<CAPTION>
March 31,
---------
1996 1995
------------ ------------
<S> <C> <C>
REVENUES
Oil and gas sales $ 13,679,430 $ 15,314,381
Other gas revenues 474,063 422,253
Interest income and other 40,791 18,308
------------ ------------
Total revenues 14,194,284 15,754,942
------------ ------------

EXPENSES
Production taxes 1,064,988 1,487,757
Lease operating 2,826,323 2,540,870
Depreciation, depletion and amortization 6,107,426 7,174,919
General and administrative 862,792 1,164,212
Interest 3,024,152 2,345,412
------------ ------------
Total expenses 13,885,681 14,713,170
------------ ------------

INCOME BEFORE PROVISION
FOR INCOME TAXES 308,603 1,041,772

PROVISION FOR INCOME TAXES (117,578) (401,665)
------------ ------------

NET INCOME $ 191,025 $ 640,107
============ ============

EARNINGS PER SHARE
Earnings per common and common
equivalent share $ 0.02 $ 0.06
============ ============

Earnings per common and common
equivalent share assuming full dilution $ 0.02 $ 0.06
============ ============

WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
Weighted average number of common
and common equivalent shares 11,149,000 11,466,000
============ ============

Weighted average number of common
and common equivalent shares
assuming full dilution 11,149,000 11,466,000
============ ============
</TABLE>

The accompanying note is an integral part of these
consolidated financial statements.

5
<PAGE> 6

HS RESOURCES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995 AND
THE THREE MONTHS ENDED MARCH 31,1996

<TABLE>
<CAPTION>
Additional
----------
Common Stock Paid-In Retained Treasury Stock
------------ ------- -------- --------------
Shares Amount Capital Earnings Shares Amount
------ ------ ------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 10,948,680 $ 10,949 $ 97,713,613 $ 15,951,796 (28,913) $ (377,591)
Common stock options exercised,
including income tax benefit -- -- 5,945 -- 1,500 19,590

Purchase of treasury stock -- -- -- -- (13,500) (233,962)
Exercise of options by issuance of
treasury stock, including income
tax benefit -- -- 798 -- 600 7,854

Net income -- -- -- 6,258,620 -- --
---------- ------------ ------------ ------------ -------- ------------
Balance, December 31, 1994 10,948,680 10,949 97,720,356 22,210,416 (40,313) (584,109)
Purchase of treasury stock -- -- -- -- (63,700) (846,625)
Transfer of treasury stock to 401(k)
Plan -- -- 3,328 -- 26,536 358,287
Exercise of options by issuance of
treasury stock, including income
tax benefit -- -- (5,776) -- 2,400 33,144
---------- ------------ ------------ ------------ -------- ------------
Net income -- -- -- 274,156 -- --
Balance, December 31, 1995 10,948,680 10,949 97,717,908 22,484,572 (75,077) (1,039,303)
Purchase of treasury stock -- -- -- -- (66,900) (706,873)
Net income -- -- -- 191,025 -- --
---------- ------------ ------------ ------------ -------- ------------
Balance, March 31, 1996 (Unaudited) 10,948,680 $ 10,949 $ 97,717,908 $ 22,675,597 (141,977) $ (1,746,176)
========== ============ ============ ============ ======== ============
</TABLE>

The accompanying note is an integral part of these
consolidated financial statements.

6
<PAGE> 7
HS RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
March 31,
---------
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 191,025 $ 640,107
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation, depletion and amortization 6,107,426 7,174,919
Amortization of deferred charges
and debenture issue costs 28,641 197,350
Loss (gain) on sale of fixed assets (12,000) 7,380
Deferred income tax provision 117,578 397,878
Decrease (increase) in accounts receivable (412,784) 2,259,419
Increase in accounts payable and accrued expenses 5,527,790 4,022,332
Increase (decrease) in unearned income, net -- (503,068)
Other (448,158) 76,873
------------ ------------
Net cash provided by operating activities 11,099,518 14,273,190
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES
Exploration and development costs, including
purchase of unproved and proved properties (50,879,759) (30,354,102)
Gas gathering and transportation facilities additions (24,043) (206,951)
Other property additions (88,275) (76,643)
Proceeds from the sale of fixed assets and other property 12,000 272,816
Increase in property related payables 3,960,393 3,802,246
------------ ------------
Net cash used in investing activities (47,019,684) (26,562,634)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 27,900,000 18,000,000
Proceeds from third party indebtedness 23,100,000 --
Repayments of debt (12,400,000) (5,000,000)
Issuance of treasury stock -- --
Purchase of treasury stock (706,873) (256,650)
------------ ------------
Net cash provided by financing activities 37,893,127 12,743,350
------------ ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,972,961 453,906

CASH AND CASH EQUIVALENTS, beginning of year 116,581 657,383
------------ ------------

CASH AND CASH EQUIVALENTS, end of period $ 2,089,542 $ 1,111,289
============ ============

SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid, net of capitalized interest $ 483,934 $ 235,291
============ ============
</TABLE>

The accompanying note is an integral part of these
consolidated financial statements.

7
<PAGE> 8
HS RESOURCES, INC.
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

GENERAL

HS Resources, Inc., a Delaware Corporation (the "Company") was
organized in January 1987. The Company, directly or through subsidiaries,
acquires, develops and exploits oil and gas properties. The interim financial
data are unaudited; however, all adjustments (which are of a normal and
recurring nature) have been made which are, in the opinion of management,
necessary for a fair statement of the financial position of the Company at
March 31, 1996, and its results of operations and cash flows for the interim
periods presented. Because of various factors, results of operations for these
periods are not necessarily indicative of results to be expected for the full
year. For a more complete understanding of the Company's operations and
financial position these statements should be read in conjunction with the
audited financial statements and notes thereto included in the Company's
December 31, 1995 Annual Report on Form 10-K previously filed with the
Securities and Exchange Commission. The lower production in 1996 reflects the
impact of the Company's reduced drilling program in 1995 in response to lower
natural gas prices.

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

RESULTS OF OPERATIONS

General. During 1996 the Company continued drilling and development
activity in the Denver-Julesberg ("D-J") Basin. At March 31, 1996, the Company
owned interests in more than 1,350 producing wells (of which it operated
approximately 1,110) compared to more than 1,100 wells (of which it operated
approximately 1,000) at March 31, 1995. The Company reported a decrease in oil
and gas sales for the quarter due to a decline in production. The lower
production in 1996 reflects the impact of the Company's reduced drilling
program in 1995 in response to lower natural gas prices.

8
<PAGE> 9
Comparison of Three Months Ended March 31, 1996 and March 31, 1995

Oil and Gas Revenues. For the comparative three month periods, oil
production decreased from 485 MBbls to 295 MBbls and gas production decreased
from 5,452 MMcf to 4,962 MMcf, or 39% and 9%, respectively. Oil prices
increased by 17% from $16.12 to $18.80 per Bbl and gas prices increased by 19%
from $1.38 to $1.64 per Mcf. The net effect of these changes resulted in a
decrease in oil and gas revenues from $15,314,381 to $13,679,430 or 11%. The
Company also recognized $474,063 in other gas revenues from the sale of tax
credits with respect to the new Section 29 tax credit agreement signed December
1, 1995.

Interest Income and Other Income. Interest and other income increased
by $22,483, or 123%, for the three month comparative periods. The increase in
interest and other income was mainly due to a gain on the sale of fixed assets
recorded in 1996 compared to a loss recorded in 1995.

Production Expenses. Lease operating expenses increased by $285,453,
or 11%, for the comparative quarterly periods due to the increase in the number
of producing wells. Production taxes, which are a direct result of oil and gas
sales, decreased by $422,769, or 28%, as a result of the decrease in oil and
gas sales, as well as a reduction in the Company's effective severance tax
rate.

Depreciation, Depletion and Amortization. Depreciation, depletion and
amortization decreased $1,067,493, or 15%, for the comparative quarterly
periods due to production decreases which were partially offset by an increase
in the depletion rate from $4.92 per Boe to $5.15 per Boe. The increase in the
depletion rate reflects the rate determined for the fourth quarter of 1995
which was based on the Company's December 31, 1995 engineering study.

General and Administrative Expense. General and administrative
expense reflects costs incurred net of administrative costs directly
attributable to drilling and well operations. Such costs are included in lease
operating expenses or are capitalized. General and administrative expenses
decreased $301,420, or 26%, for the comparative quarterly periods. The
decrease is primarily attributable to a staff reduction and realignment which
occurred in November 1995.

Interest Expense. Interest expense increased $678,740, or 29%, for
the comparative quarterly periods. The increase is due to interest incurred on
the $78.9 million in borrowings on the Company's senior bank debt.

9
<PAGE> 10

CAPITAL COMMITMENTS, LIQUIDITY AND CAPITAL RESOURCES

Capital Commitments. The Company's primary activities involve the
acquisition, development, and exploitation of oil and gas properties. Whenever
possible, the Company structures its operating activities so as to minimize
long term operational commitments and, thus, retain maximum flexibility to
respond to changes in its cash flows. The Company's ongoing capital expenditure
program assumes certain economic factors, including current and projected oil
and gas prices, and can be adjusted from time to time to respond to changing
economic conditions.

In 1994, the Company entered into a D-J Basin exploration agreement
with Union Pacific Resources Company ("UPRC"), pursuant to which it committed
to spend (or cause to be spent) $9.25 million during the two years ending June
1996, and to meet certain other minimum obligations. All such commitments have
been met. In 1995, the Company added an additional 35,000 acres to that
exploration agreement. On that additional acreage the Company is obligated to
spend at least $1.35 million for the two years ending June 1997, of which
$10,000 must be spent by June 1996. The Company has entered into a number of
other standard industry arrangements which require the drilling of wells or
other activities. The Company believes that it will meet its obligations under
these arrangements which individually and in the aggregate are not material.

The Company's development program generally involves three principal
components of capital expenditures. First, the Wattenberg development project
continues to be an active area for the Company. During the three months ended
March 31, 1996, the Company incurred approximately $8 million in capital
expenditures for drilling and recompleting wells and building gathering
systems, compared to $10.6 million in 1995. The 1996 amount also includes
costs incurred on wells in progress at December 31, 1995. To further
consolidate the Company's Wattenberg Field position, the Company acquired a
portion of Basin Exploration, Inc.'s ("Basin") D-J Basin oil and gas properties
as of March 1996 for $38 million and entered into an arrangement involving a
third-party purchase of approximately $23 million of such assets. (which sale
is not recognized for financial reporting purposes pursuant to generally
accepted accounting principles and reporting requirements promulgated by the
Securities and Exchange Commission, discussed below).

The second component of the Company's capital expenditure program, the
Greater D-J project, involves expanding its base of reserves and production in
the D-J Basin beyond the Wattenberg development project. For the three months
ended March 31, 1996, the Company incurred $400,000 in capital expenditures.

The third component of the Company's capital expenditure program is to
identify longer term exploration and development opportunities both within and
outside the D-J Basin. The Company owns approximately 350,000 gross acres in
the Williston Basin and has drilled ten

10
<PAGE> 11
wells; six producers, three dry holes and one water disposal well. On its
Hugoton Embayment acreage, the Company drilled a six well pilot program to
evaluate approximately 129,000 gross acres. In the Greater Green River Basin,
the Company owns approximately 245,000 gross acres and has drilled two wells.

In November 1995, the Company formed SouthTech Exploration, L.L.C.
("SouthTech"), a joint venture with Aspect Resources Limited-Liability Company
to develop onshore exploration prospects in the Gulf Coast region using
advanced 3-D seismic and coherence technology. The Company funded approximately
$2 million under the SouthTech agreement in 1995 for seismic, leasehold and
overhead costs. In 1996, the Company is committed to spend $2.9 million for
similar costs and for drilling, of which $575,000 was funded as of March 31,
1996.

Prior to taking into account the 1996 Acquisitions (defined below), the
Company has planned a capital expenditure program of $45 million in 1996. In the
D-J Basin, the Company has planned capital expenditures of $38 million including
the drilling of approximately 150 wells in the Wattenberg development project.
In addition, the Company anticipates expenditures of $2.9 million attributable
to SouthTech and an aggregate of $4.1 million for other projects. These
estimates are preliminary and may change depending on a number of factors,
including the 1996 acquisitions, other acquisitions, seismic survey results and
product prices.

The Company is reviewing its planned capital expenditure programs in
light of the 1996 Acquisitions. Any current estimate of the Company's ultimate
capital commitments after giving effect to the 1996 Acquisitions is necessarily
preliminary. However, the Company anticipates a 1996 capital expenditure
program of approximately $70 million following its acquisitions of the Basin
properties and the merger with Tide West.

In May 1995, the Company was named as one of several respondents by
the United States Environmental Protection Agency ("EPA") in an administrative
order brought by it against a third-party evaporation pit owner and operator.
The Company does not believe that its share of reclamation costs will have a
material impact on its financial position or results of operations. See Part
II - Other Information - Legal Procedings and Environmental Issues.

Liquidity and Capital Resources. In November 1993, the Company completed two
financings with aggregate net proceeds of $96.1 million, of which $24.2 million
was from the sale of 1,195,000 shares of the Company's common stock and $71.9
million was from the issuance of 9 7/8% ten-year senior subordinated notes. The
proceeds of these offerings were initially used for the repayment of $75.9
million of senior bank debt with the remainder added to working capital to be
used to fund the Company's ongoing development drilling program.

As of March 31, 1996, the Company had total capital expenditures of
$50.9 million, funded with $11.1 million of net cash provided by operating
activities and working capital and $15.5 million from net borrowings under the
Company's bank credit facility and $23.1 million from proceeds from Third Party
Indebtedness.

11
<PAGE> 12
In August 1995, the Company amended the terms of its $125 million
revolving and term senior credit facility with The Chase Manhattan Bank, N.A.
("Chase"), Wells Fargo Bank, N.A., Midland Bank plc and Bank of Montreal
(collectively, the "Banks"). Under the terms of the amended credit facility,
no principal payments are required until April 30, 1997, assuming the Company
maintains a borrowing base sufficient to support the outstanding loan balance.
The borrowing base, currently $110 million, is determined by the Banks and is
based on the underlying value of the Company's oil and gas properties. This
facility bears interest at prime plus 0% to 1/4% or, at the Company's option,
LIBOR plus 1 1/8% to 1 1/2% depending upon the principal amount outstanding.
The Company is currently negotiating with Chase the terms of a new, unsecured
revolving credit facility of up to $375 million.

During the second quarter of 1995, the Company entered into an
interest rate exchange agreement with a financial institution to hedge its
interest rate on $40 million of the Company's borrowings at 7.76% through May
2002. Under the terms of the agreement, the difference between the Company's
fixed rate of 7.76% and the three month LIBOR rate plus 1.125% is received or
paid by the Company.

In August 1995, the Company signed a Term Sheet with TCW covering a
proposed $90 million non-recourse, volumetric overriding royalty monetization
financing facility (the "TCW volumetric overriding royalty monetization
facility "). The facility may be used by the Company for a variety of
corporate purposes, including acquisitions of new properties, exploration and
development drilling, or the monetization of existing corporate properties,
with the proceeds being used substantially at the Company's discretion,
including repayment of bank debt.

Without taking into account the 1996 Acquisitions, the Company
anticipates that its available borrowing capacity of $31.1 million, at March
31, 1996, combined with its operating cash flow and its TCW volumetric
overriding royalty monetization facility provide the Company with the financial
resources and flexibility to fund current and ongoing development activities
and to meet other financial obligations. The nature of the Company's Wattenberg
development project and other activities provide the Company with considerable
flexibility in terms of the timing and magnitude of its capital expenditures.
The Company has developed its capital expenditure programs based on its
currently available financial resources and expected cash flow from operations.
If the 1996 Acquisitions are consummated, or if the Company experiences
unforeseen changes in its working capital position or capital resources,
management will revise the capital expenditure program accordingly or
alternatively supplement the capital position through the issuance of
additional debt or equity securities or entering into joint venture
arrangements. As noted above, the Company is studying the impact of the 1996
Acquisitions on its capital expenditure program and, based on a preliminary
review, the Company estimates that approximately $70 million will be required
to fund its 1996 capital expenditure program, including anticipated
expenditures attributable to properties to be acquired in the 1996
Acquisitions.

12
<PAGE> 13
In January 1996, the Company entered into a letter agreement with
Chase providing for a $25 million sale- leaseback financing arrangement
pursuant to which the Company may sell certain production equipment and surface
facilities to a Chase affiliate and enter into a lease agreement for the
continued use of such equipment (the "Chase sale-leaseback arrangement"). The
arrangement is subject to various conditions prior to closing. If such a
financing arrangement is ultimately consummated, enabling the Company to
effectively monetize certain undervalued assets, the Company contemplates that
the lease will be treated as an operating lease for financial reporting
purposes.

On February 26, 1996, the Company announced three major transactions
involving Tide West Oil Company ("Tide West") and Basin, collectively referred
to as the "1996 Acquisitions." The transaction with Tide West will be effected
as a merger for stock and cash valued at $190 million on the date the merger
agreement was executed. If the merger is consummated, each Tide West
shareholder will receive $8.75 in cash and 0.6295 shares of the Company's
common stock for each Tide West share, subject to adjustment in certain
circumstances. Tide West has approximately 9.8 million shares outstanding;
therefore it is currently estimated that a total of $84.9 million in cash will
be needed to effect the merger. As part of the merger, the Company will assume
(and refinance under its senior credit facility) $39.6 million of Tide West
debt. The Tide West transaction is subject to approval by the shareholders of
both companies. The Company is currently preparing a Proxy Statement which was
initially filed with the Securities and Exchange Commission on March 27, 1996.
If the transaction is approved by the Company's and Tide West's shareholders,
it is expected to close on or before June 30, 1996.

In two separate transactions, the Company will acquire all of Basin's
D-J Basin oil and gas properties for cash totaling $125.5 million. In March
1996, the Company completed the first transaction acquiring a portion of such
assets for $38 million in cash, using cash on hand and borrowings under its
existing senior credit facility. Effective March 29, 1996, the Company sold a
portion of the assets acquired in the first transaction valued at approximately
$23 million to a limited liability company (the "Third Party") formed for the
purpose of facilitating the sale, (the "Chase Asset Monetization Arrangement").
In the second transaction, the Company will acquire Basin's remaining D-J Basin
properties for $87.5 million in cash. The second acquisition is subject to
approval by Basin's shareholders and, if approved, is expected to close on or
before June 30, 1996. The Company anticipates utilizing the Chase Asset
Monetization Arrangement for the sale of approximately $59 million of the
second Basin transaction.

In connection with the Chase Asset Monetization Arrangement, the Third
Party assumed debt of the Company in the amount of approximately $23 million.
If the Chase Asset Monetization Arrangement is utilized in connection with the
second Basin acquisition, the Third Party would assume approximately $59
million of Company debt. The Company would have no obligation, direct or
indirect, with respect to such assumed indebtedness ("Third Party
Indebtedness"). Under generally accepted accounting principles and the
reporting requirements promulgated by the Securities and Exchange Commission,
the financial statements of the Company are required to be consolidated with
the financial statements of the Third Party.

13
<PAGE> 14
Accordingly, not withstanding (a) the sale of the assets to the Third Party,
(b) the assumption of the Third Party Indebtedness by the Third Party, and (c)
the fact that the Company has no obligation, direct or indirect, with respect
to the Third Party Indebtedness, the assets sold and the Third Party
Indebtedness must be included in the consolidated balance sheet of HSR and the
operations related thereto must be reflected in the Company's consolidated
income statement.

The aggregate cash consideration needed and net liabilities to be
assumed in connection with the Tide West and the second Basin acquisitions is
$218.5 million, with $131 million needed with respect to the Tide West merger
and $87.5 million to acquire the second group of properties from Basin. In
light of these requirements (including the anticipated transaction fees and
expenses associated with the proposed 1996 acquisitions) and the anticipated
increase in capital expenditures associated with such acquisitions, the Company
has had discussions with Chase to expand its senior bank credit facility.
Chase has provided the Company a letter of intent indicating its interest in
providing, on a syndicated basis, an unsecured revolving credit facility of up
to $375 million (the "proposed 1996 senior credit facility"), which the Company
believes will be sufficient to (i) finance the cash portion of the
consideration paid to Basin and to the Tide West shareholders, (ii) absorb the
Company's current outstanding senior indebtedness ($78.9 million at March 31,
1996 excluding the indebtedness in the amount of approximately $23 million
assumed by the purchaser in the Chase Asset Monetization Arrangement) and the
$39.6 million in new debt to be assumed in connection with the Tide West
merger, (iii) pay the Company's transaction costs incurred with respect to the
proposed 1996 acquisitions, and (iv) provide the Company with an adequate
cushion of additional borrowing availability for its 1996 activities. The
proposed 1996 senior credit facility is subject to due diligence, final
engineering, negotiation of definitive documentation and other conditions, and
there can be no assurance that the financing will be completed.

Prior to consummating the proposed 1996 acquisitions, the Company
plans to determine the most appropriate utilization of (i) the proposed 1996
senior credit facility, (ii) the Chase Asset Monetization Arrangement, (iii)
the TCW facility, (iv) the Chase sale-leaseback arrangement, (v) other
off-balance sheet financing arrangements, (vi) divestitures of non-core assets
of the Company, including assets acquired in connection with the proposed 1996
acquisitions, and/or (vii) possible issuances of new debt or equity securities
of the Company. If the Company were to consummate the Tide West merger
(assuming a stock price of $13.00) and second Basin acquisition utilizing only
borrowings under the proposed 1996 senior credit facility, its long-term debt
(including its $75 million senior subordinated notes) would increase from
approximately $153.4 million at March 31, 1996, to approximately $313.9
million (in each case including the debt assumed by the Third Party pursuant to
the Chase Asset Monetization Arrangement). The Company is committed to reducing
its long-term debt to a more acceptable level and is studying the various means
by which it can do so. The Company believes that it will be able to arrange a
favorable combination of financings to provide necessary capital to consummate
the Tide West and Basin transactions, to fund its ongoing capital requirements
and to achieve an acceptable level of leverage.

14
<PAGE> 15
STATEMENTS MADE IN THIS 10-Q AS TO FUTURE EVENTS OR PLANS ARE
UNCERTAIN AND SUBJECT TO CHANGE. MANY FACTORS MAY AFFECT THE COMPANY'S
EXPECTATIONS AND PLANS. CAPITAL EXPENDITURE AND FINANCING PLANS MAY CHANGE IN
CONNECTION WITH THE CONSUMMATION OF THE PROPOSED 1996 ACQUISITIONS, THE SUCCESS
OF DRILLING ACTIVITIES, THE GENERAL AVAILABILITY OF CAPITAL, INTEREST RATES,
AND CASH FLOW AVAILABLE FROM OPERATIONS. CASH FLOW AVAILABLE FROM OPERATIONS
MAY CHANGE DEPENDING ON COSTS OF MATERIALS AND SERVICES, REGULATORY BURDENS AND
COMMODITY PRICES.

THE COMPANY'S EXPECTATIONS AND PLANS DEPEND SIGNIFICANTLY ON FUTURE
PRODUCT PRICES. OIL AND NATURAL GAS PRICES ARE VOLATILE, AND THERE ARE SEVERAL
POTENTIALLY SIGNIFICANT ADVERSE EFFECTS TO THE COMPANY WHICH CAN RESULT IF
PRODUCT PRICES DECLINE MATERIALLY. FIRST, LOWER PRODUCT PRICES WILL ADVERSELY
IMPACT THE COMPANY'S CASH FLOW AND COULD CAUSE THE COMPANY TO (A) CURTAIL ITS
CAPITAL PROGRAM, (B) BORROW ADDITIONAL AMOUNTS UNDER ITS REVOLVING CREDIT
AGREEMENT, OR (C) ISSUE ADDITIONAL DEBT OR EQUITY SECURITIES. SECOND, LOWER
PRODUCT PRICES COULD CAUSE THE BORROWING BASE UNDER THE COMPANY'S BANK CREDIT
AGREEMENT TO BE REDUCED AND CERTAIN COVENANT TESTS TO BE ADVERSELY AFFECTED.
THIRD, UNDER RULES PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION,
COMPANIES THAT FOLLOW THE FULL COST ACCOUNTING METHOD ARE REQUIRED TO MAKE
QUARTERLY "CEILING TEST" CALCULATIONS. USING MARCH PRICES THE COMPANY WOULD
HAVE A CEILING WRITE-DOWN. HOWEVER, THE SEC GUIDELINES ALLOW FOR THE
RECOMPUTATION OF THE CEILING IF INCREASED PRICES BETWEEN THE PERIOD END DATE
AND THE FILING DATE ARE SIGNIFICANT AND ARE MORE THAN SUFFICIENT TO COVER
CAPITALIZED COSTS. MAY PRICES IN THE CEILING CALCULATION RESULT IN A CUSHION
AND, THEREFORE, THE COMPANY HAS NOT REPORTED A CHARGE AGAINST EARNINGS FOR THE
PERIOD. IF PRODUCT PRICES REMAIN LOW OR DECLINE FURTHER, AND CANNOT BE OFFSET
BY ADDITIONAL RESERVES, THE COMPANY COULD BE REQUIRED TO WRITE DOWN ITS OIL AND
GAS PROPERTIES IN A FUTURE PERIOD.

15
<PAGE> 16
PART II - OTHER INFORMATION

Item 1. Legal Proceedings & Environmental Issues

Legal Proceedings. During 1994, the Company and three other
companies were named as defendants in an action brought by certain landowners
in Colorado and filed in Weld County District Court, Colorado (Civil Action No.
94-S- 2118). The action challenges certain mineral reservations of the
Company's assignor in its original surface conveyance involving two small
tracts of the Company's minerals.

In February 1995, the Company was named as one of many defendants in
a suit brought in the District Court of Yuma County, Colorado (Case No.
95-CV-5) by several royalty owners in northeast Colorado seeking royalty
payment on certain deductions from gas sales.

While the Company cannot predict the ultimate outcome of these
matters, based on facts presently known to it, the Company does not believe
adverse resolution of any or all such actions will have a material impact on
its financial condition or results of operations.

The Company is involved in no other material litigation, however,
the Company may be involved from time to time in various claims and lawsuits
incidental to its business.

Environmental Issues. The owner of an oil field waste disposal
facility, a major oil company and the Company were named as respondents by the
EPA in an administrative order brought by the EPA against Weld County Waste
Disposal, Inc. ("WCWDI") under section 7003 of the Resource Conservation and
Recovery Act ("RCRA") on May 11, 1995. WCWDI operated and continues to own an
evaporation pit in Colorado for the disposal of non-hazardous production
wastes. The EPA order requires that work be performed to abate a perceived
endangerment to health or the environment. The respondents are working
together with the EPA to develop interim plans and characterization studies and
have permanently closed the facility.

The Company has utilized this facility in past years to dispose of
its production and flowback water. The Company believed that the facility was
operating in compliance with all applicable legal requirements and, along with
other oil and gas operators, paid a fee to WCWDI for using this disposal
facility. There were a number of other significant contributors to the
facility during the period reviewed by the EPA (1988 through 1994) and
additional contributors during the period from 1977, when it was constructed,
through 1988. The Company and the major oil company were named because they
were deemed the major contributors of waste volumes to the facility for the
period reviewed by the EPA. Certain other contributors are participating in
their share of the reclamation costs.

16
<PAGE> 17
Based on the Company's current knowledge and its expectation of
proportionate reimbursement from other parties who utilized the facility, the
Company does not believe that its share of the reclamation costs will have a
material impact on its financial condition or results of operations. While
technically the Company's liability in connection with this reclamation project
is joint and several, based on the financial capability of the major oil
company and its similar legal position to the Company's, the Company believes
it is highly unlikely that its liability for the project will exceed 50%.
Furthermore, based on the Company's current knowledge concerning the project,
even 100% of the costs thereof would not have a material impact on the
Company's financial condition or results of operations.

Item 2. Changes in Securities. None.

Item 3. Defaults Upon Senior Securities. None.

Item 4. Submission of Matters to a Vote of Security Holders. None.

Item 5. Other Information. None.

Item 6. Exhibits and Reports on Form 8-K.

The Company filed two Forms 8-K. The first one is dated February
28, 1996, as amended by HSR's Current Report on Form 8-K/A (Amendment No. 1),
dated March 12, 1996 and the second one is dated March 11, 1996.

a. List of Exhibits.

17
<PAGE> 18
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS

2.1 Amended and Restated Agreement and Plan of Merger, dated as
of April 29, 1996, among, HSR, Merger Sub and Tide West
(attached as Annex A to the Joint Proxy Statement/Prospectus
forming a part of this Registration Statement).

3.1 Amended and Restated Certificate of Incorporation of HSR
(incorporated by reference to Exhibit 3.1 to HSR's Form S-1,
No. 33-52774, filed on October 2, 1992 (the "HSR 1992 Form
S-1")).

3.2 Second Amended and Restated By-Laws of HSR (incorporated by
reference to Exhibit 3.2 to the HSR 1992 Form S-1).

4.7 Form of Indenture dated December 1, 1993 entered into between
the Company and the Trustee. (Incorporated by reference as
Exhibit 4.7 to Amendment No.3 to the Company's Registration
Statement on Form S-3 (file no. 33-70354), filed November 23,
1993).

10.1 Amended Note and Warrant Purchase Agreement dated January 15,
1991, among NGP, Resolute Resources, Inc., and the Company.
(Incorporated by reference as Exhibit 4.4.1 to the Company's
quarterly report on Form 10-Q for the quarter ended December
31, 1990, filed February 14, 1991.)

10.1.1 Amendment No. 1 to Note and Warrant Purchase Agreement dated
June 28, 1991, between the Company and NGP. (Incorporated by
reference as Exhibit 4.4.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1991, filed
September 30, 1991.)

10.1.2 Second Amendment to Note and Warrant Purchase Agreement dated
August 17, 1992, between the Company and NGP. (Incorporated
by reference as Exhibit 4.2.2 as Exhibit to Amendment No. 2
to the Company's Registration Statement on Form S-1 (file no.
33-52774), filed November 19, 1992).

10.1.3 Third Amendment to Note and Warrant Purchase Agreement dated
October 21, 1993, between the Company and NGP. (Incorporated
by reference as Exhibit 4.1.3 to Amendment No. 3 to the
Company's Registration Statement on Form S-3 (file no.
33-70354), filed November 23, 1993).

10.2 Amended and Restated Warrant Agreement dated January 15,
1991, between NGP and the Company. (Incorporated by
reference as Exhibit 4.5.1 to the Company's quarterly report
on Form 10-Q for the quarter ended December 31, 1990, filed
February 14, 1991.)

10.3 Amended Warrant No. W-1, dated January 15, 1991, and issued
by the Company to NGP. (Incorporated by reference as
Exhibit 4.6.1 to the Form 8, Second Amendment to Form 10
filed April 8, 1991.)

18
<PAGE> 19
10.3.1 Amendment No. 1 to Amended Warrant No. W-1, dated December
30, 1991, and issued by the Company to NGP. (Incorporated by
reference as Exhibit 4.6.2 to the Company's quarterly report
on Form 10-Q for the quarter ended December 31, 1991, filed
on February 14, 1991.)

10.4 Assumption and Credit Agreement dated June 24, 1992, among
the Company, Sansome Limited Partnership and Chase.
(Incorporated by reference as Exhibit 4.12 to the Company's
current report on Form 8-K, filed on July 9, 1992.)

10.5 Form of Warrant No. W-10, dated January 28, 1992, and issued
by the Company to NGP. (Incorporated by reference as exhibit
4.16 to Amendment No. 1 to the Company's Registration
Statement on Form S-1 (file no. 33-52774), filed November 9,
1992).

10.7 Amended Employment Agreement between the Company and Nicholas
J. Sutton. (Incorporated by reference as exhibit 10.1.1 to
Amendment No. 1 to the Company's Registration Statement on
Form S-1 (file no. 33-52774), filed November 9, 1992).

10.8 Amended Employment Agreement between the Company and P.
Michael Highum. (Incorporated by reference as exhibit 10.1.2
to Amendment No. 1 to the Company's Registration Statement on
Form S-1 (file no. 33-52774), filed November 9, 1992).

10.9 Amended and Restated Employee Stock Incentive Plan.
(Incorporated by reference as Exhibit 10.2.1 to Amendment No.
1 to the Company's Registration Statement on Form S-1 (file
no. 33- 52774), filed November 9, 1992).

10.10 Common Stock Purchase Warrant dated July 12, 1990 by the
Company to James E. Duffy. (Incorporated by reference as
Exhibit 10.5 to the Form 8, Second Amendment to Form 10 filed
April 8, 1991.)

10.11 Indemnity Agreement dated July 12, 1990, between the Company
and James E. Duffy. (Incorporated by reference as Exhibit
10.5.1 to the Form 8, Second Amendment to Form 10 filed April
8, 1991.)

10.12 HS Resources, Inc. Rule 701 Compensatory Benefit Plan.
(Incorporated by reference as Exhibit 10.5.2 to the Form 8,
Second Amendment to Form 10 filed April 8, 1991.)

19
<PAGE> 20
10.14 Sansome Limited Partnership Agreement dated June 24, 1992,
between the Company, as general partner, and State Street
Boston Leasing Company, Inc., as limited partner.
(Incorporated by reference as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed July 9, 1992.)

10.15 1992 Directors' Stock Option Plan. (Incorporated by
reference as Exhibit 10.10 to Amendment No. 1 to the
Company's Registration Statement on Form S-1 (file no.
33-52774), filed November 9, 1992).

10.15.1 1993 Directors' Stock Option Plan. (Incorporated by reference
as Exhibit 10.8.1 to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993, filed March 31,
1994 (as amended by Form 10-K/A-1 on April 8, 1994)).

10.16 Form of Indemnification Agreement for Directors of the
Company. (Incorporated by reference as Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, filed March 25,1996).

10.17 Credit Agreement dated as of July 15, 1994, among the Company
and Chase Manhattan Bank, N.A. ("Chase"), as Agent and the
Bank's signatory thereto. (Incorporated by reference as
Exhibit 10.10 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994, filed August 12, 1994).

10.18 Amendment No. 1 to Credit Agreement effective as of September
1, 1995, among the Company, Chase and the Banks signatory
thereto. (Incorporated by reference as Exhibit 10.11 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995, filed November 14, 1995).

10.19 Lease Agreement dated October 6, 1993, between the Company and
JMB Group Trust IV and Endowment and Foundation Realty,
Ltd.--JMB III for the premises at One Maritime Plaza, San
Francisco, California. (Incorporated by reference as Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, filed March 31, 1994 (as
amended by Form 10-K/A-1 on April 8, 1994)).

10.20 Stock Purchase Agreement dated July 30, 1993, between the
Stockholders of BMR Corporation, as Sellers, and the Company,
as Buyer. (Incorporated by reference to Exhibit 2.1 to the
Company's current report on Form 8-K, filed August 13, 1993.)

20
<PAGE> 21
10.22 Interest exchange agreement between Chase and the Company
dated May 9, 1995. (Incorporated by reference as exhibit
10.19 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, filed August 14, 1995).

10.23 Agreement and Plan of Merger, dated as of February 25, 1996,
among the Company, HSR Acquisition, Inc. and Tide West.
(Incorporated by reference to Exhibit A to the Company's
Schedule 13D filed on March 6, 1996.)

10.24 Agreement for Purchase and Sale of Assets (Monetization),
dated as of February 24, 1996, among the Company, Basin
Exploration, Inc. ("Basin") and Orion Acquisition, Inc.
("Orion"). (Incorporated by reference to Exhibit 2.3 to the
Company's Form 8-K filed on March 12, 1996.)

10.25 Agreement for Purchase and Sale of Assets, dated as of
February 24, 1996, among the Company, Orion and Basin.
(Incorporated by reference to Exhibit A to the Company's
Schedule 13D filed on March 6, 1996.)

10.26 Purchase and Sale Agreement, dated December 1, 1995, between
the Company and Wattenberg Gas Investments, LLC.
(Incorporated by reference as Exhibit 10.26 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995, filed March 25, 1996).

10.27 Rights Agreement, dated as of February 28, 1996, between the
Company and Harris Trust Company of California as Rights
Agent. (Incorporated by reference as Exhibit 1 to HSR's Form
8-A filed on March 11, 1996.)

10.28@ Purchase and Sale Agreement dated March 25, 1996 between
Orion Acquisition, Inc., the Company and Wattenberg
Resources, L.L.C.

27@ Financial Data Schedule
___________________________________

@ Filed herewith.
<PAGE> 22

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, HS Resources, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

HS RESOURCES, INC.

Dated: May 12, 1996 By: /s/ JAMES E. DUFFY
-------------------
James E. Duffy
Vice President and
Chief Financial Officer

By: /s/ ANNETTE MONTOYA
--------------------
Annette Montoya
Vice President and Principal
Accounting Officer

<PAGE> 23

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS

3.1 Amended and Restated Certificate of Incorporation of HSR
(incorporated by reference to Exhibit 3.1 to HSR's Form S-1,
No. 33-52774, filed on October 2, 1992 (the "HSR 1992 Form
S-1")).

3.2 Second Amended and Restated By-Laws of HSR (incorporated by
reference to Exhibit 3.2 to the HSR 1992 Form S-1).

10.3 Amended Warrant No. W-1, dated January 15, 1991, and issued
by the Company to NGP. (Incorporated by reference as
Exhibit 4.6.1 to the Form 8, Second Amendment to Form 10
filed April 8, 1991.)
<PAGE> 24
10.3.1 Amendment No. 1 to Amended Warrant No. W-1, dated December
30, 1991, and issued by the Company to NGP. (Incorporated by
reference as Exhibit 4.6.2 to the Company's quarterly report
on Form 10-Q for the quarter ended December 31, 1991, filed
on February 14, 1991.)

10.10 Common Stock Purchase Warrant dated July 12, 1990 by the
Company to James E. Duffy. (Incorporated by reference as
Exhibit 10.5 to the Form 8, Second Amendment to Form 10 filed
April 8, 1991.)

10.11 Indemnity Agreement dated July 12, 1990, between the Company
and James E. Duffy. (Incorporated by reference as Exhibit
10.5.1 to the Form 8, Second Amendment to Form 10 filed April
8, 1991.)

10.12 HS Resources, Inc. Rule 701 Compensatory Benefit Plan.
(Incorporated by reference as Exhibit 10.5.2 to the Form 8,
Second Amendment to Form 10 filed April 8, 1991.)

10.13 Put Subordination Agreement, dated June 24, 1992, among
Sansome Limited Partnership, the Company, State Street Boston
Leasing Company, Inc., Chase and NGP. (Incorporated by
reference as Exhibit 10.8 to the Company's Current Report on
Form 8-K, filed July 9, 1992.)
<PAGE> 25
10.14 Sansome Limited Partnership Agreement dated June 24, 1992,
between the Company, as general partner, and State Street
Boston Leasing Company, Inc., as limited partner.
(Incorporated by reference as Exhibit 10.9 to the Company's
Current Report on Form 8-K, filed July 9, 1992.)

10.19 Lease Agreement dated October 6, 1993, between the Company
and JMB Group Trust IV and Endowment and Foundation Realty,
Ltd.--JMB III for the premises at One Maritime Plaza, San
Francisco, California. (Incorporated by reference as Exhibit
10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, filed March 31, 1994 (as
amended by Form 10-K/A-1 on April 8, 1994)).

10.21 Lease Agreement dated March 28, 1994, between the Company and
1999 Broadway Partnership for the premises at 1999 Broadway,
Denver, Colorado. (Incorporated by reference as Exhibit
10.15 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, filed August 12, 1994).
<PAGE> 26
10.22 Interest exchange agreement between Chase and the Company
dated May 9, 1995. (Incorporated by reference as exhibit
10.19 to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, filed August 14, 1995).

10.28@ Purchase and Sale Agreement dated March 25, 1996 between
Orion Acquisition, Inc., the Company and Wattenberg
Resources, L.L.C.

27@ Financial Data Schedule
___________________________________

@ Filed herewith.

<PAGE> 1
EXHIBIT 10.28

PURCHASE AND SALE AGREEMENT

BETWEEN

ORION ACQUISITION, INC.

AND

HS RESOURCES, INC.
(COLLECTIVELY, "SELLER")

AND

WATTENBERG RESOURCES LAND, L.L.C.
("BUYER")

DATED: MARCH 26, 1996
<PAGE> 2
TABLE OF CONTENTS

1. Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. The Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Leases, Mineral Interests, Overrides and Wells . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Incidental Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

5. Apportionment of Production, Revenues, Taxes and other Expenses . . . . . . . . . . . . . . . . . . . . . 2

6. Buyer's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.4 Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.5 Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
6.6 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

7. Seller's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.1 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.2 Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.3 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.4 Execution and Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
7.5 Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.6 Reserve Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.7 SEC Reports and Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.8 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.9 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.10 Preferential Purchase Rights and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.11 No Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.12 Gas Balancing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.13 Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.14 Operations in Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.15 Hydrocarbon Sales Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.16 Proceeds of Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.17 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.18 Bills in the Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.19 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.20 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7.21 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

</TABLE>

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7.22 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.23 Tax Partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.24 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

8. Certain Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1 Treatment of Production Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

9. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.1 Cooperation and Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
9.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

10. Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.1 Seller's Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10.2 Buyer's Closing Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

11. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.1 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.2 Section 15.2 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.3 Notice of Preferential Rights and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.4 Assignment; Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11.5 Non-Foreign Ownership Affidavits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.6 Gas Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.7 Evidence of Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.8 Seller's Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.9 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.10 Buyer's Manager's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.11 Opinions on Behalf of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.12 Management Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11.13 Additional Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

12. Post-Closing Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.1 Files and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12.2 Sales Taxes and Recording Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.3 Purchase Price Rebates for Defective Interests . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.4 Purchase Price and Other Rebates for Exercised Preferential Purchase Rights, Failure to
Obtain Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.5 Allocation of Commingled Production and Costs . . . . . . . . . . . . . . . . . . . . . . . . . 14
12.6 Performance of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

13. Apportionment of Liabilities and Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.1 Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
13.2 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>

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14. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.1 Buyer's Indemnification of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
14.2 Seller's Indemnification of Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
14.3 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
15.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
15.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.5 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.6 Assignment; Rights of Lender under Credit Agreement . . . . . . . . . . . . . . . . . . . . . . 18
15.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.8 Complete Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.9 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
15.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

</TABLE>

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<PAGE> 5
LIST OF EXHIBITS

<TABLE>
<S> <C>
Exhibit A Leases
Exhibit B Wells (showing WI and NRI)
Exhibit C Form of Wellbore Assignment of Oil and Gas Leases with Reservations of Production Payment and
Reversion Interest
Exhibit D Form of Option Agreement
Exhibit E Reserve Report
Exhibit F Preferential Purchase Rights and Consents
Exhibit G Prepayments
Exhibit H Gas Imbalances
Exhibit I Operations in Progress
Exhibit J Hydrocarbon Sales Contracts
Exhibit K Legal Proceedings
Exhibit L Tax Partnerships [RESERVED FOR POST-CLOSING DELIVERY AS PER Section 8.2]
Exhibit M Form of Non-Foreign Ownership Affidavits
Exhibit N [Reserved]
Exhibit O Form of Seller's Officer's Certificate
Exhibit P Forms of Opinion of Seller's Counsel
Exhibit Q Form of Buyer's Manager's Certificate
Exhibit R Forms of Opinions on Behalf of Buyer
Exhibit S Form of Management Agreement
Exhibit T Form of Subordinated Note
</TABLE>

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<PAGE> 6
PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement ("AGREEMENT"), dated March
26, 1996, is between HS Resources, Inc., a Delaware corporation ("HS") and its
wholly-owned subsidiary, Orion Acquisition, Inc. (collectively, "SELLER") and
Wattenberg Resources Land, L.L.C., a Delaware limited liability company
("BUYER").

RECITALS

Seller is the owner of certain oil and gas leasehold
interests, mineral interests and overriding royalty interests, as more
specifically described below in Section 2, which Seller desires to sell and
Buyer desires to purchase pursuant to the terms and conditions of this
Agreement.

AGREEMENT

IN CONSIDERATION of the Purchase Price set forth below in
Section 4, the reservations of the "PRODUCTION PAYMENT" and the "REVERSION
INTEREST" and the grant of the "OPTION" (as such terms are defined below), and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Seller and Buyer agree as follows:

1. PURCHASE AND SALE. Seller agrees to convey the
Assets to Buyer and Buyer agrees to purchase the Assets from Seller, all
pursuant to the terms and conditions of this Agreement. Seller will convey the
Assets subject to (i) a production payment (the "PRODUCTION PAYMENT"), a
reversionary interest (the "REVERSION INTEREST"), and other reservations and
obligations as specifically set forth in the Wellbore Assignment of Oil and Gas
Leases With Reservations of Production Payment and Reversion Interest in a form
substantially similar to Exhibit C (the "ASSIGNMENT"), and (ii) the Option
Agreement to be granted to Seller in a form substantially similar to Exhibit D
(the "OPTION").

2. THE ASSETS. The "ASSETS" shall be all of the
following, subject to the interests covered by clauses (i) and (ii) under
Section 1 above:

2.1 LEASES, MINERAL INTERESTS, OVERRIDES AND
WELLS. Seller's right, title and interest in and to the oil and gas leases and
mineral interests described in Exhibit A, including any and all overriding
royalty interests owned by Seller in such leases, but insofar and only insofar
as said leases and mineral interests cover the right to produce the wells
described in Exhibit B from the intervals identified in Exhibit B in such wells
as of the Effective Date (the above described interest in such leases being
herein called the "LEASES" and the above described interest in such wells being
herein called the "WELLS"), and subject to any restrictions,

<PAGE> 7
exceptions, reservations, conditions, limitations, burdens, contracts,
agreements and other matters applicable to such Leases and Wells as set forth
herein;

2.2 INCIDENTAL RIGHTS. All of Seller's right,
title and interest in and to the following insofar and only insofar as same are
attributable to the Leases and the Wells:

(a) UNITIZATION AND POOLING AGREEMENTS.
All presently existing and valid oil, gas or mineral unitization, pooling,
operating and communitization agreements, declarations and orders affecting the
Leases and Wells, and in and to the properties covered and the units created
thereby;

(b) PERSONAL PROPERTY. The personal
property and fixtures that are appurtenant to the Wells, including all wells,
casing, tubing, pumps, separators, tanks, lines and other personal property and
oil field equipment appurtenant to such Wells;

(c) AGREEMENTS. All presently existing
and valid oil and gas sales, purchase, gathering and processing contracts and
operating agreements, joint venture agreements, partnership agreements, rights-
of-way, easements, permits, surface leases and other contracts, agreements and
instruments, but specifically excluding the "OPERATIVE DOCUMENTS" (as defined
to collectively refer to this Agreement, the Assignment, the Management
Agreement (defined in Section 11.12), and the Option (defined in Section 11.4).

Seller shall remain co-owner of any "AGREEMENTS," "PERSONAL PROPERTY" and
"UNITIZATION AND POOLING AGREEMENTS" to the extent they pertain to any property
or formation subject to the Reversion Interest, reacquired by the Seller
pursuant to the Option or other otherwise owned by Seller that is not
exclusively part of the Assets.

The interests in the Leases and the Wells set forth in Section
2.1 and the incidental rights set forth in Section 2.2, to the extent
associated with the Leases and the Wells, shall collectively be referred to as
the "INTERESTS."

3. EFFECTIVE DATE. The purchase and sale of the Assets
shall be effective, for all purposes, including allocation of revenue, expenses
and taxes, as of March 29, 1996 at 7:00 a.m. local time at the site of the
Assets (the "EFFECTIVE DATE").

4. PURCHASE PRICE. The purchase price for the Assets
shall be $23,850,000 (the "PURCHASE PRICE"). Buyer shall pay the Purchase
Price to Seller by assuming $23,100,000 of debt under HS's Credit Agreement
with The Chase Manhattan Bank, N.A., as agent for itself and the banks as are
signatory thereto (the "HS/CHASE CREDIT AGREEMENT"), and by issuing to Seller a
$750,000 promissory note in substantially the form of Exhibit T (the
"Subordinated Note"), which Note is subordinate to the Superior Obligations and
the Production Payment.

5. APPORTIONMENT OF PRODUCTION, REVENUES, TAXES AND
OTHER EXPENSES. Buyer shall be entitled to revenue from the sale of
hydrocarbons produced from the Assets on or after the Effective Date. Buyer
shall pay for costs and expenses incurred with respect to the Assets on or
after the Effective Date. Seller shall be entitled to revenue from the sale of

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<PAGE> 8
hydrocarbons produced from the Assets before the Effective Date, and shall pay
for costs and expenses incurred with respect to the Assets prior to the
Effective Date. Taxes relating to the Assets, including ad valorem, property,
production, severance and other taxes (other than income taxes) shall be
allocated in the same manner as other expenses. Taxes that are measured by or
that relate to production shall be treated as expenses in connection with such
production regardless of the period for which such taxes are assessed.

6. BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer makes
the following representations and warranties as of the date of this Agreement:

6.1 EXISTENCE. Buyer is a limited liability
company, duly organized, validly existing and formed under the laws of the
State of Delaware, and Buyer is duly qualified to carry on its business, and is
duly qualified and in good standing, in each of the states in which the nature
of its business and activities requires it to be so qualified.

6.2 POWER AND AUTHORITY. Buyer has all requisite
power and authority to carry on its business as presently conducted, to enter
into this Agreement and each of the documents contemplated to be executed by
Buyer at Closing, and to perform its obligations under this Agreement and under
such documents. The consummation of the transactions contemplated by this
Agreement and each of the documents contemplated to be executed by Buyer at
Closing will not violate, nor be in conflict with, (i) any provision of Buyer's
organizational or governing documents, (ii) any agreement or instrument to
which Buyer is a party or is bound, or (iii) any judgment, decree, order,
statute, rule or regulation applicable to Buyer.

6.3 AUTHORIZATION. The execution, delivery and
performance of this Agreement and each of the documents contemplated to be
executed by Buyer at Closing and the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite action on the
part of Buyer.

6.4 EXECUTION AND DELIVERY. This Agreement has
been duly executed and delivered on behalf of Buyer, and at the Closing all
documents and instruments required hereunder to be executed and delivered by
Buyer shall have been duly executed and delivered. This Agreement does, and
such documents and instruments shall, constitute legal, valid and binding
obligations of Buyer enforceable in accordance with their terms, subject to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application with respect to creditors, (ii) general principles
of equity and (iii) the power of a court to deny enforcement of remedies
generally based upon public policy.

6.5 SECURITIES LAWS. Buyer is purchasing the
Assets for Buyer's own account, not for public distribution thereof, and Buyer
shall not sell or transfer all or any part of, or any interest in, the Assets
in violation of the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or the securities laws of any state.

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<PAGE> 9
6.6 BROKERS' FEES. Buyer has incurred no
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which Seller shall have any
responsibility whatsoever.

7. SELLER'S REPRESENTATIONS AND WARRANTIES. Seller
makes the following representations and warranties as of the date of this
Agreement:

7.1 EXISTENCE. Seller is a corporation duly
organized and validly existing under the laws of the State of Delaware, and
Seller is duly qualified to carry on its business, and is in good standing in
the States of Colorado and California and in each jurisdiction in which the
failure to so qualify would have a material adverse impact on the Assets or the
transaction contemplated by this Agreement.

7.2 POWER AND AUTHORITY. Seller has all
requisite corporate power and authority to carry on its business as presently
conducted, to enter into this Agreement and each of the documents contemplated
to be executed by Seller at Closing, and to perform its obligations under this
Agreement and under such documents. The consummation of the transactions
contemplated by this Agreement and each of the documents contemplated to be
executed by Seller at Closing will not violate, nor be in conflict with, (i)
any provision of Seller's certificate of incorporation, bylaws or governing
documents, (ii) any material agreement or instrument to which Seller is a party
or is bound, or (iii) any judgment, decree, order, statute, rule or regulation
applicable to Seller; provided that, the representations and warranties
contained in clauses (ii) and (iii) of this Section 7.2 are subject to (a)
consents of or filings with the United States Department of Interior or the
applicable state agencies or authorities in connection with the assignment of
any federal or state leases or any interest therein to the extent such consents
are typically received or filings typically made subsequent to such assignment
("GOVERNMENTAL CONSENTS"), (b) preferential rights to purchase all or any
portion of the Assets and consent to or notices of assignment necessary to
convey all or any portion of the Assets which are not Governmental Consents,
and (c) any violation of any maintenance of uniform interest provision in any
applicable operating agreement.

7.3 AUTHORIZATION. The execution, delivery and
performance of this Agreement and each of the documents contemplated to be
executed by Seller at Closing and the transactions contemplated hereby and
thereby have been duly and validly authorized by all requisite corporate action
on the part of Seller.

7.4 EXECUTION AND DELIVERY. This Agreement has
been duly executed and delivered on behalf of Seller, and all documents,
instruments and schedules required hereunder to be executed and delivered by
Seller have been, where appropriate, duly executed and will be delivered on the
Effective Date. This Agreement does, and such documents and instruments shall,
constitute legal, valid and binding obligations of Seller enforceable in
accordance with their terms, subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application with
respect to creditors, (ii) general principles of equity and (iii) the power of
a court to deny enforcement of remedies generally based upon public policy.

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<PAGE> 10
7.5 BROKERS' FEES. Seller has incurred no
liability, contingent or otherwise, for brokers' or finders' fees relating to
the transactions contemplated by this Agreement for which Buyer shall have any
responsibility whatsoever.

7.6 RESERVE REPORT. The term "RESERVE REPORT"
shall mean the reserve report prepared by Seller and dated as of the Effective
Date, which is based on reserves as of December 31, 1995, as adjusted by
estimated production from January 1, 1996 through the Effective Date, and
attached hereto as Exhibit E. To Seller's best knowledge, the average price
for sales of hydrocarbons (based on contract prices for existing effective
contracts, adjusted for regional transportation costs), historical costs of
operations, production volumes, and payout data used by Seller in the
preparation of the Reserve Report were, on the dates so used, accurate in all
material respects.

7.7 SEC REPORTS AND FINANCIAL INFORMATION. To
the best of Seller's knowledge, HS Resources, Inc. has filed with the
Securities and Exchange Commission ("SEC") all required forms, reports,
schedules and proxy statements ("SEC REPORTS"). To the best of Seller's
knowledge, as of their respective dates, the SEC Reports complied in all
material respects with applicable securities laws and the rules and regulations
promulgated thereunder. To the best of Seller's knowledge, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statement
made therein, in the light of the circumstances under which they were made, not
misleading. The statements contained in the SEC Reports regarding Seller's
financial status (collectively, the "FINANCIAL STATEMENTS") have been prepared
from, and are in accordance with, the books and records of Seller and the
Financial Statements represent fairly the financial position of Seller as of
the dates or for the periods presented in conformity with generally accepted
accounting principles applied on a consistent basis during the periods
involved, except as noted therein (due to changes in accounting).

7.8 LIENS. Except for the burdens and
obligations created by or arising under the Leases and except for Permitted
Encumbrances, the Assets are free and clear of all Encumbrances. As used
herein, the term "ENCUMBRANCES" shall mean all royalties, overriding royalties,
production payments, debts, liens, mortgages, security interests, and
encumbrances. As used herein, the term "PERMITTED ENCUMBRANCES" shall mean the
following:

(i) the burdens, encumbrances and
obligations attributable to mortgages and liens held on or
against the Assets, or any portion thereof, as of the
Effective Date arising under or created pursuant to that
certain Credit Agreement dated as of March 25, 1996 between
Buyer and The Chase Manhattan Bank, N.A., for itself and as
agent on behalf of those banks that are or become a party
thereto (as it may be amended or supplemented from time to
time, the "CREDIT AGREEMENT");

(ii) the burdens, encumbrances and
obligations created by or arising under the Wells and other
agreements affecting the Assets, and all royalties, overriding
royalties, net profits interests, carried interests,
reversionary interests, back-in rights and other burdens taken
into account in computing the net

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<PAGE> 11
revenue interests ("NRI") and working interests ("WI") set
forth on Exhibit B for the Wells;

(iii) all rights to consent by, required
notices to, filings with, or other actions by governmental
entities in connection with the sale or conveyance of the
Assets if the same are customarily obtained subsequent to such
sale or conveyance;

(iv) rights of reassignment upon
surrender of the Leases held by predecessors in interest to
Seller;

(v) easements, rights-of-way,
servitudes, permits, licenses, surface leases and other rights
in respect of surface use to the extent these do not
materially interfere with operations or production on or from
the Assets;

(vi) rights and regulatory powers
reserved to or vested in any municipality or governmental,
statutory or public authority;

(vii) all Material Contracts to the extent
same do not reduce Seller's interest in the production from
the Wells to less than the NRI set forth on Exhibit B or
increase the Seller's obligations in respect of costs to
greater than the WI set forth on Exhibit B;

(viii) any (x) undetermined or inchoate
liens or charges constituting or securing the payment of
expenses which were incurred incidental to maintenance,
development, production or operation of the Assets or for the
purpose of developing, producing or processing oil, gas or
other hydrocarbons therefrom or therein and (y) materialman's,
mechanics', repairman's, employees', contractors', operators'
or other similar liens, security interests or charges for
liquidated amounts arising in the ordinary course of business
incidental to construction, maintenance, development,
production or operation of the Assets or the production or
processing of oil, gas or other hydrocarbons therefrom, that
are not delinquent and that will be paid in the ordinary
course of business or, if delinquent, that are being contested
in good faith;

(ix) any liens for taxes not yet
delinquent or, if delinquent, that are being contested in good
faith in the ordinary course of business;

(x) any liens or security interests
created by law or reserved in Leases for royalty, bonus or
rental or for compliance with the terms of the Leases;

(xi) any prohibitions or restrictions
similar to the Maintenance of Uniform Interest Provisions
contained in Article VIII.D. of the A.A.P.L. Form 610-1982
Model Form Operating Agreement and any contribution

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<PAGE> 12
obligations under provisions similar to Article VII.B of such
Model Form Operating Agreement;

(xii) all preferential rights to purchase
all or any portion of the Assets and consents to or notices of
assignment necessary to convey all or any portion of the
Assets set forth on Exhibit F or which are not described in
item (iii) of this definition of Permitted Encumbrances;

(xiii) all agreements and obligations set
forth on Exhibit H relating to imbalances with respect to the
production, transportation or processing of gas or calls or
purchase options on oil or gas production;

(xiv) all agreements and obligations
relating to gathering, transportation or processing of gas or
oil production;

(xv) all treating, processing, sales or
marketing agreements set forth on Exhibit J which have a fee
based on a percentage of proceeds or an obligation to transfer
certain volumes of gas or oil production in-kind;

(xvi) all obligations set forth on Exhibit
G by virtue of a prepayment, advance payment or similar
arrangement under any contract for the sale of gas production,
including by virtue of "take or pay" or similar provisions, to
deliver gas produced from or attributable to the Assets after
the Effective Date without then or thereafter being entitled
to receive full payment therefor;

(xvii) all liens, charges, encumbrances,
contracts, agreements, instruments, obligations, defects,
irregularities and other matters affecting any Asset which
individually or in the aggregate will not interfere materially
with the operation, value or use of such Asset;

(xviii) the burdens, encumbrances and
obligations created by or arising under this Agreement, the
Assignment, Option, Management Agreement or Gas Purchase
Agreement.

7.9 TITLE. Seller has Defensible Title to the
Interests. The term "DEFENSIBLE TITLE" means such title of Seller in the
Leases that, subject to and except for the Permitted Encumbrances, entitles
Seller to receive an interest in production from the Wells not less than the
respective NRIs in the Wells as set forth on Exhibit B, and entitles Seller to
own the respective WIs in the Wells as set forth on Exhibit B under applicable
state law and for federal income tax purposes. Any Well or Lease for which
Seller has less than Defensible Title as of the date of this Agreement shall be
called a "DEFECTIVE INTEREST." Buyer's exclusive remedy for Seller's breach of
this representation and warranty is set forth in Section 12.3.

7.10 PREFERENTIAL PURCHASE RIGHTS AND CONSENTS.
To Seller's best knowledge, except as set forth in Exhibit F, there do not
exist any preferential rights to purchase all or any portion of the Assets. To
Seller's best knowledge, except for consents from its lender

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<PAGE> 13
banks, Governmental Consents and other matters as set forth in Exhibit F, there
are no consents or waivers necessary to convey any material portion of the
Assets pursuant to this Agreement. Buyer's exclusive remedy for Seller's
breach of this representation and warranty (other than for consents from the
lender banks) is set forth in Section 12.4.

7.11 NO PREPAYMENTS. To Seller's best knowledge,
except as set forth in Exhibit G, Seller is not obligated, by virtue of a
prepayment arrangement, a "take or pay" arrangement, a production payment,
hedging or any other arrangement, to deliver any material portion of
hydrocarbons produced from the Wells at some future time without then or
thereafter receiving full payment therefor. Buyer's exclusive remedy for
Seller's breach of this representation and warranty shall be treated the same
as a Defective Interest as set forth in Section 12.13.

7.12 GAS BALANCING. To Seller's best knowledge,
except as set forth in Exhibit H, no material portion of hydrocarbons produced
from the Wells are subject to a gas imbalance or other arrangement requiring
delivery of hydrocarbons after the Effective Date without receiving full
payment therefor. Buyer's exclusive remedy for Seller's breach of this
representation and warranty shall be treated the same as a Defective Interest
as set forth in Section 12.13.

7.13 LEASES. To Seller's best knowledge, all
royalties, rentals and other payments due by Seller under the Leases have been
properly and timely paid except where the failure to pay same will not have a
material adverse effect on the value of the particular Asset. To Seller's best
knowledge, all Leases are presently in full force and effect. To Seller's best
knowledge, Seller has not received a written notice of material default under
any Lease that could result in cancellation of the Lease. Any Lease which is
not presently in full force and effect, or for which Seller has not paid all
royalties, rentals or other payments due by Seller, or for which Seller is in
material default as of the date of this Agreement shall be treated as a
Defective Interest. Buyer's exclusive remedy for Seller's breach of this
representation and warranty is set forth in Section 12.3.

7.14 OPERATIONS IN PROGRESS. Except for
operations disclosed on Exhibit I and normal daily operating expenses, as of
the date of this Agreement there are no operations in progress with respect to
the Assets which are reasonably expected to exceed $35,000 in cost net to
Seller's interest and which shall be payable in whole or in part on or after
the Effective Date.

7.15 HYDROCARBON SALES CONTRACTS. Except as
specifically indicated in Exhibit J and for calls on production, options to
purchase or similar rights with respect to production from the Wells, no
material portion of the hydrocarbons produced from the Wells is subject to a
sales contract or other agreement relating to the production, gathering,
transporting, processing, treating or marketing of hydrocarbons except those
which can be terminated by Seller upon not more than three months notice.

7.16 PROCEEDS OF PRODUCTION. To Seller's best
knowledge, Seller is currently receiving from all purchasers of production from
the Wells at least the NRI set forth

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in Exhibit B without suspense or any indemnity other than the normal division
order warranty of title, except where the failure to receive same would not
have a material adverse effect on the value of the Well in question.

7.17 MATERIAL CONTRACTS. To Seller's best
knowledge, and subject to the execution of new contracts in the ordinary course
of business if a contract has expired or has been terminated, all contracts
material to the Assets are in full force and effect (the "MATERIAL CONTRACTS").
Seller has not received written notices of material default under the Material
Contracts that remain uncured.

7.18 BILLS IN THE ORDINARY COURSE. In the
ordinary course of business and to Seller's best knowledge, Seller is current
on its payments for all costs and expenses pertaining to the Assets, except
where such payments are being contested in good faith.

7.19 LEGAL PROCEEDINGS. Except as set forth on
Exhibit K, no suit, action or other proceeding is pending against Seller or, to
Seller's best knowledge, threatened in writing against Seller before any court,
governmental agency, arbitrator or other panel that relates to the Assets or
the transaction contemplated by this Agreement that might (i) impair Seller's
ability to consummate the transaction contemplated by this Agreement or (ii)
cause the impairment or loss of Seller's title to any material portion of the
Assets or the value thereof or (iii) hinder or impede the operation or
enjoyment of the Leases in any material respect insofar as they relate to the
Assets.

7.20 COMPLIANCE WITH LAWS. To Seller's best
knowledge, all laws, rules, regulations, ordinances and orders (of all
governmental and regulatory bodies having authority over the Assets) material
to the operation of the Assets have been complied with in all material
respects.

7.21 ENVIRONMENTAL MATTERS. To Seller's best
knowledge, no conditions exist on the Assets that would subject Seller or Buyer
to any damages, remedial action, injunctive relief or other liability under any
Environmental Laws, including without limitation, all costs associated directly
or indirectly with cleanup, removal, closure or other response actions;
provided that Seller or Buyer may be subject to such matters which are (i)
routine in the operation of the Assets and (ii) in the aggregate not material
to the value of the Assets as a whole. Seller and its predecessors have
obtained and are in material compliance with all material permits, licenses and
approvals affecting the Assets and required under Environmental Laws.

As used herein, the term "ENVIRONMENTAL LAWS" shall
mean any and all laws, statutes, ordinances, rules, regulations, orders, or
determinations of any governmental authority pertaining to health or the
environment in effect in any and all jurisdictions where the Assets are
located, or where any hazardous substances generated by or disposed of by
Seller are located, including without limitation, the Oil Pollution Act of 1990
("OPA"), the Clean Air Act, as amended, the Comprehensive Environmental,
Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the
Federal Water Pollution Control Act, as amended, the Occupational Safety and
Health Act of 1970, as amended, the Resource Conservation and

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<PAGE> 15
Recovery Act of 1976 ("RCRA"), as amended, the Safe Drinking Water Act, as
amended, the Toxic Substances Control Act, as amended, the Superfund Amendments
and Reauthorization Act of 1986, as amended, and other environmental
conservation or protection laws. The terms "HAZARDOUS SUBSTANCE," "RELEASE"
and "THREATENED RELEASE" have the meanings specified in CERCLA, and the terms
"SOLID WASTE" and "DISPOSAL" (or "DISPOSED") have the meanings specified in
RCRA and the term "OIL" shall have the meaning specified in OPA; provided,
however, in the event either CERCLA, RCRA or OPA is amended so as to broaden
the meaning of any term defined thereby, such broader meaning shall apply
subsequent to the effective date of such amendment with respect to all
provisions of this Agreement, and provided further that, to the extent the laws
of the state in which any Asset is located established a meaning for "HAZARDOUS
SUBSTANCE," "RELEASE," "SOLID WASTE" or "DISPOSAL" which is broader than that
specified in either CERCLA, RCRA, or OPA, such broader meaning shall apply.

7.22 PAYMENT OF TAXES. To Seller's best
knowledge, all ad valorem, property, production, severance, excise and similar
taxes and assessments based on or measured by the ownership of property or the
production of hydrocarbons or the receipt of proceeds therefrom on the Assets
which are currently due and payable have been properly and timely paid, except
to the extent such taxes are being contested in good faith in the ordinary
course of business.

7.23 TAX PARTNERSHIPS. Within 60 days from the
Effective Date, Seller will prepare and deliver to Buyer an Exhibit L, setting
forth the extent to which any portion of the Assets (i) has been contributed to
and is currently owned by a tax partnership; (ii) is subject to any form of
agreement (whether formal or informal, written or oral) deemed by any state or
federal tax statute, rule or regulation to be or to have created a tax
partnership; or (iii) otherwise constitutes "PARTNERSHIP PROPERTY" (as that
term is used throughout Subchapter K of Chapter 1 of Subtitle A of the Internal
Revenue Code of 1986, as amended (the "CODE")) of a tax partnership. In
addition to all other remedies available to Buyer, Seller agrees to indemnify
Buyer for all costs, losses, damages, penalties or expenses incurred by Buyer
as a result of any of the Assets having been contributed to or currently owned
by a tax partnership, and Buyer may elect, with a proportionate rebate in the
Purchase Price in accordance with the procedures of Section 12.3 and the
provisions of Section 12.4, to reassign such Assets to Seller. For purposes of
this Section 7.23, a "TAX PARTNERSHIP" is any entity, organization or group
deemed to be a partnership within the meaning of Section 761 of the Code or any
similar state or federal statute, rule or regulation, and that is not excluded
from the application of the partnership provisions of Subchapter K of Chapter 1
of Subtitle A of the Code and of all similar provisions of state tax statutes
or regulations by reason of elections made, pursuant to Section 761(a) of the
Code and all such similar state or federal statutes, rules and regulations, to
be excluded from the application of all such partnership provisions. With
respect to any tax partnership that may be identified on Exhibit L, Seller and
Buyer shall cooperate to ensure that they elect a basis adjustment under
Section 754 of the Code in connection with the transaction contemplated by this
Agreement, and to the effect that the consummation of the transaction
contemplated by this Agreement will not result in a termination of such tax
partnership.

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<PAGE> 16
7.24 HSR ACT. Seller has determined in good faith
that the conveyance of the Assets to Buyer pursuant to this Agreement and the
Assignment does not require disclosure under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.

8. CERTAIN TAX MATTERS.

8.1 TREATMENT OF PRODUCTION PAYMENT. Seller and
Buyer intend that the Production Payment reserved by Seller in the Assignment
will be treated as a mortgage loan under Section 636 of the Code and not as an
"ECONOMIC INTEREST" in the Assets.

9. COVENANTS.

9.1 COOPERATION AND ACCESS. Seller shall fully
cooperate with Buyer's post-Closing due diligence efforts, both at Seller's
offices and at the site of the Assets.

9.2 INSURANCE. At or prior to the Closing Date,
Seller shall cause Buyer to be named as an additional insured on all insurance
policies Seller has that pertain in any way to the ownership and operation of
the Assets. On the Closing Date, Seller will provide Buyer with Certificates
of Insurance naming Buyer as an additional insured, or other evidence,
satisfactory to Buyer, of compliance with this Section 9.2.

10. CLOSING CONDITIONS.

10.1 SELLER'S CLOSING CONDITIONS. The obligation
of Seller to consummate the transactions contemplated hereby is subject, at the
option of Seller, to the satisfaction on or prior to the Closing Date of all of
the following conditions:

(a) REPRESENTATIONS, WARRANTIES AND
COVENANTS. The (1) representations and warranties of Buyer contained in this
Agreement shall be true and correct in all respects on and as of the Closing
Date, and (2) covenants and agreements of Buyer to be performed on or before
the Closing Date in accordance with this Agreement shall have been duly
performed in all respects.

(b) CLOSING DOCUMENTS. Buyer shall have
executed and delivered the documents which are contemplated to be executed and
delivered by it pursuant to Section 11 hereof prior to or on the Closing Date.

(c) NO ACTION. On the Closing Date, no
suit, action or other proceeding (excluding any such matter initiated by Seller
or any of its affiliates) shall be pending or threatened before any court or
governmental agency or body of competent jurisdiction seeking to enjoin or
restrain the consummation of this Agreement or recover damages from Seller
resulting therefrom.

10.2 BUYER'S CLOSING CONDITIONS. The obligation
of Buyer to consummate the transactions contemplated hereby is subject, at the
option of Buyer, to the satisfaction on or prior to the Closing Date of all of
the following conditions:

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<PAGE> 17
(a) REPRESENTATIONS, WARRANTIES AND
COVENANTS. The (1) representations and warranties of Seller contained in this
Agreement shall be true and correct in all respects on and as of the Closing
Date, and (2) covenants and agreements of Seller to be performed on or before
the Closing Date in accordance with this Agreement shall have been duly
performed in all respects.

(b) CLOSING DOCUMENTS. Seller shall
have executed and delivered the documents which are contemplated to be executed
and delivered by it pursuant to Section 11 hereof prior to or on the Closing
Date.

(c) NO ACTION. On the Closing Date, no
suit, action or other proceeding (excluding any such matter initiated by Buyer
or any of its affiliates) shall be pending or threatened before any court or
governmental agency or body of competent jurisdiction seeking to enjoin or
restrain the consummation of this Agreement or recover damages from Buyer
resulting therefrom.

11. CLOSING. The consummation of the transactions
contemplated hereby (the "CLOSING") shall occur, either in person or by
facsimile, at the offices of Davis, Graham & Stubbs LLP on or before March 26,
1996 (the "CLOSING DATE") or at such other time and place as the parties may
agree to in writing. At Closing, the following events shall occur, each being
a condition precedent to the others and each being deemed to have occurred
simultaneously with the others (except where the documents involved indicate
otherwise):

11.1 PAYMENT OF PURCHASE PRICE. Buyer (i) does
hereby assume, pursuant to this Agreement, $23,100,000 of debt under the
HS/Chase Credit Agreement; (ii) shall execute and deliver to Seller the
Subordinated Note in the principal amount of $750,000.

11.2 SECTION 15.2 PAYMENT. Seller shall pay to
Buyer, in cash or its equivalent, the amount due pursuant to Section 15.2, if
any, as reimbursement for the expenses incurred in connection with this
transaction.

11.3 NOTICE OF PREFERENTIAL RIGHTS AND CONSENTS.
Seller shall deliver to Buyer a copy of the notices sent to third parties
regarding preferential rights to purchase and consents affecting the Assets
with respect to the transactions contemplated by this Agreement.

11.4 ASSIGNMENT; OPTION. Seller and Buyer shall
execute and deliver the Assignment and the Option. In addition, Seller shall
prepare and Seller and Buyer shall execute such other conveyances on official
forms and related documentation necessary to transfer the Assets to Buyer in
accordance with requirements of governmental regulations; provided, however,
that any such separate or additional conveyances required pursuant to this
Section 11.4 or pursuant to Section 15.1 shall evidence the conveyance and
assignment of the Assets made or intended to be made in the Assignment, (ii)
shall not modify or be deemed to modify any of the terms, reservations,
covenants and conditions set forth in the Assignment, and (iii) shall be deemed
to contain all of the terms, reservations and provisions of the Assignment, as
though the same were set forth at length in such separate or additional
conveyance.

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<PAGE> 18
11.5 NON-FOREIGN OWNERSHIP AFFIDAVITS. Seller
shall deliver to Buyer the affidavits of non-foreign ownership substantially in
the form of Exhibit M, one stating that Seller is a non-foreign entity for
federal income tax purposes, and the other stating that there is no obligation
for Colorado withholding tax under C.R.S. Section 39-22-604.5.

11.6 [RESERVED]

11.7 EVIDENCE OF INSURANCE. Seller shall provide
Buyer with certificates from Seller's insurers or other evidence that Buyer has
been named an additional insured on Seller's policies affecting the Assets.

11.8 SELLER'S OFFICER'S CERTIFICATE. Seller shall
execute and deliver to Buyer the Officer's Certificate, substantially in the
form attached as Exhibit O.

11.9 OPINION OF SELLER'S COUNSEL. Seller shall
deliver to Buyer the opinion of Seller's counsel, Davis, Graham & Stubbs LLP,
substantially in the form of opinion set forth in Exhibit P.

11.10 BUYER'S MANAGER'S CERTIFICATE. Buyer shall
execute and deliver to Seller the Manager's Certificate substantially in the
form attached as Exhibit Q.

11.11 OPINIONS ON BEHALF OF BUYER. Buyer shall
deliver to Seller the opinion of Richards, Layton & Finger (regarding existence
and authority under Delaware law), substantially in the form set forth in
Exhibit R:

11.12 MANAGEMENT AGREEMENT. Seller and Buyer shall
execute and deliver the Management Agreement (the "MANAGEMENT AGREEMENT") and
Memorandum of Management Agreement and Power of Attorney substantially in the
forms set forth in Exhibit S.

11.13 ADDITIONAL INSTRUMENTS. Seller and Buyer
shall execute, acknowledge and deliver to each other such additional
instruments as are reasonable and customary to accomplish the purposes of this
Agreement.

12. POST-CLOSING MATTERS.

12.1 FILES AND RECORDS. Following Closing, Seller
shall retain physical possession of all lease files, land files, division order
files, production marketing files and production records in Seller's possession
relating to the Assets (the "RECORDS"). However, except to the extent that
Buyer's inspection thereof would violate legal constraints or legal
obligations, Buyer shall have the right to inspect the Records in Seller's
offices at any reasonable time. At Buyer's request in writing (which written
request may be delivered by facsimile), to the extent that Seller's delivery
thereof would not violate legal constraints or legal obligations, Seller shall
make copies of the Records or materials in the Records at Seller's expense and
shall deliver said copies to Buyer at Seller's expense.

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12.2 SALES TAXES AND RECORDING FEES. Seller shall
be responsible for making the payment to the proper authorities of all taxes
and fees occasioned by the sale of the Assets, including without limitation,
any transfer fees and sales taxes and any documentary, filing and recording
fees required in connection with the filing and recording of any assignments or
conveyances delivered hereunder in the appropriate county, federal and/or state
records.

12.3 PURCHASE PRICE REBATES FOR DEFECTIVE
INTERESTS. At any time and from time to time if Buyer discovers that Seller
breached the representation and warranty set forth in Section 7.9, 7.11, 7.12
or 7.13, Buyer may give Seller a Notice of Defective Interests, which notice
shall describe the Defective Interest and the basis for the Defective Interest.
Buyer shall be entitled to rebate in the Purchase Price for a Defective
Interest which shall equal the difference between the Purchase Price and the
product of the Purchase Price multiplied by a fraction, the numerator of which
is the volume of reserves (net to Buyer) allocated to the Wells not affected by
the Defective Interest and the denominator of which is the total volume of
reserves (net to Buyer) allocated to all of the Wells in the Reserve Report;
provided, however, that if the Defective Interest does not remain in effect
during the entire productive life of the subject Well, such fact shall be taken
into account in determining the amount of the rebate in the Purchase Price.

The rebate of the Purchase Price calculated above
shall be paid from Seller to Buyer. In addition to rebating a portion of the
Purchase Price on account of Defective Interests, Buyer and Seller agree that
all express gas volumes set forth in the Assignment shall each be decreased, as
appropriate, by multiplying such volume by a fraction, the numerator of which
is the aggregate volume of reserves associated with the Assets without such
Defective Interest and the denominator of which is the total volume of reserves
allocated to all of the Assets.

12.4 PURCHASE PRICE AND OTHER REBATES FOR
EXERCISED PREFERENTIAL PURCHASE RIGHTS, FAILURE TO OBTAIN CONSENTS. If the
holder of any preferential purchase right exercises such right and Seller
cannot validly convey the affected Asset to Buyer, or if a required consent
(except for Governmental Consents) to assign is not obtained or deemed obtained
on or before the Closing Date and the affected Asset cannot be validly conveyed
to Buyer, a portion of the Purchase Price shall be rebated for the value of
such affected Asset and such affected Asset shall be excluded from the Assets
conveyed to Buyer pursuant to the terms hereof (collectively the "EXCLUDED
ASSETS"). The amount of the rebate in the Purchase Price for an Excluded Asset
shall be determined in accordance with the provisions of Section 12.3. In
addition to rebating a portion of the Purchase Price on account of Excluded
Assets, Buyer and Seller agree that all express gas volumes set forth in the
Assignment shall each be decreased, as appropriate, for the Excluded Assets in
accordance with the provisions of Section 12.3. Upon written request from
Seller, Buyer shall reconvey to Seller all Excluded Assets, free and clear of
any burdens, liens and encumbrances created by, through or under Buyer.

12.5 ALLOCATION OF COMMINGLED PRODUCTION AND COSTS
AND EXPENSES. Whether by the Seller's exercise of the Option or otherwise,
Seller may have interests in the lands covered by the Leases that are not part
of the Assets ("SELLER'S INTERESTS"), which are producing hydrocarbons into a
Well and such hydrocarbons are commingled with the

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hydrocarbons produced from the Assets. Seller shall use reasonable efforts to
ensure that hydrocarbon production from the Wells is allocated between Seller's
Interests and the Assets on a reasonable basis, consistent with industry
standards and in accordance with procedures, if any, that have been approved by
appropriate state and federal agencies. Costs and expenses shall be allocated
between the Seller's Interests and the Assets in accordance with the allocation
of production between the Seller's Interests and the Assets; provided that
costs and expenses directly attributable to Seller's Interests shall be
allocated to such Seller's Interests, and costs and expenses directly
attributable to the Assets shall be allocated to and debited against the Net
Profits Account under the Assignment.

12.6 PERFORMANCE OF BUYER. Each party shall be
entitled to the remedy of specific performance of the other party's obligations
under this Agreement in order to be assured of the benefits contemplated under
the Operative Documents.

13. APPORTIONMENT OF LIABILITIES AND OBLIGATIONS.

13.1 BUYER. Subject to Seller's exercise of the
Option and to the terms of the Management Agreement and the Reversion Interest,
Buyer shall assume and pay for all costs, expenses, liabilities and obligations
accruing or relating to the owning, operating or maintaining of the Assets or
the producing, transporting and marketing of hydrocarbons from the Assets,
relating to periods on and after the Effective Date, including without
limitation, environmental obligations and liabilities, off-site liabilities
associated with the Assets, the obligation to plug and abandon all Wells and
reclaim all Well sites and all obligations arising under agreements covering or
relating to the Assets (collectively, the "BUYER'S LIABILITIES").

13.2 SELLER. Seller shall retain, assume and pay
for all costs, expenses, liabilities and obligations accruing or relating to
the owning, operating or maintaining of the Assets or the producing,
transporting and marketing of hydrocarbons from the Assets, relating to periods
before the Effective Date, with respect to any Assets repurchased pursuant to
the Option, relating to periods after such repurchase, and with respect to the
Reversion Interests, relating to the period after the effective date of such
reversion, including without limitation, environmental obligations and
liabilities, the obligation to plug and abandon wells (to the extent relating
to periods prior to the Effective Date), off site liabilities associated with
the Assets, and all obligations arising under agreements covering or relating
to the Assets (collectively, the "SELLER'S LIABILITIES").

14. INDEMNIFICATION. For the purposes of this Agreement,
"LOSSES" shall mean any actual loss, cost and expense (including reasonable
fees and expenses of attorneys, technical experts and expert witnesses),
liability, and damage (including those arising out of demands, suits, sanctions
of every kind and character); provided, however, that in no event shall
"LOSSES" be deemed to include consequential damages of a party to this
Agreement.

14.1 BUYER'S INDEMNIFICATION OF SELLER. Subject
to the terms of and the indemnification obligations contained in the Management
Agreement, Buyer shall indemnify and hold harmless Seller, its officers,
directors, shareholders, employees, representatives, agents, successors and
assigns, forever, from and against all Losses and interest thereon which

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arise from or in connection with (i) the Buyer's Liabilities, and (ii) Buyer's
breach of its representations, warranties and covenants in this Agreement.

14.2 SELLER'S INDEMNIFICATION OF BUYER. Subject
to the terms of and the indemnification obligations contained in the Management
Agreement, Seller shall indemnify and hold harmless Buyer; its officers;
directors; members; employees; representatives; agents; successors and assigns;
and the employees, representatives, agents, successors and assigns of such
members forever, from and against all Losses and interest thereon which arise
from or in connection with (i) the Seller's Liabilities, and (ii) Seller's
breach of its representations, warranties and covenants in this Agreement
regardless of Seller's knowledge if such representations or warranties are
knowledge qualified; provided that the matters contemplated in (ii) above shall
not apply to the representations set forth in Section 7.6.

14.3 THIRD PARTY CLAIMS. If a claim by a third
party is made against Seller or Buyer (an "INDEMNIFIED PARTY"), and if such
party intends to seek indemnity with respect thereto under this Section 14,
such Indemnified Party shall promptly notify Buyer or Seller, as the case may
be (the "INDEMNITOR"), of such claims. The Indemnitor shall have 30 days after
receipt of such notice to undertake, conduct and control, through counsel of
its own choosing and at its own expense, the settlement or defense thereof, and
the Indemnified Party shall cooperate with it in connection therewith; provided
that the Indemnitor shall permit the Indemnified Party to participate in such
settlement or defense through counsel chosen by such Indemnified Party,
however, the fees and expenses of such counsel shall be borne by such
Indemnified Party. So long as the Indemnitor, at Indemnitor's cost and
expense, (1) has undertaken the defense of, and assumed full responsibility for
all Losses with respect to, such claim, and (2) is reasonably contesting such
claim in good faith, by appropriate proceedings, the Indemnified Party shall
not pay or settle any such claim. Notwithstanding compliance by the Indemnitor
with the preceding sentence, the Indemnified Party shall have the right to pay
or settle any such claim, provided that in such event it shall waive any right
to indemnity therefor by the Indemnitor for such claim. If, within 30 days
after the receipt of the Indemnified Party's notice of a claim of indemnity
hereunder, the Indemnitor does not notify the Indemnified Party that it elects,
at Indemnitor's cost and expense, to undertake the defense thereof and assume
full responsibility for all Losses with respect thereto, or gives such notice
and thereafter fails to contest such claim in good faith, the Indemnified Party
shall have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.

15. MISCELLANEOUS.

15.1 FURTHER ASSURANCES. Seller and Buyer shall
execute, acknowledge and deliver or cause to be executed, acknowledged and
delivered such instruments and take such other action as may be reasonably
necessary or advisable to carry out the purposes and intents of this Agreement
and any document, certificate or other instrument delivered pursuant hereto.

15.2 EXPENSES. Seller shall pay the costs, taxes
and fees associated with the negotiation and closing of the transaction
contemplated by this Agreement. Seller agrees to

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pay the reasonable costs and expenses of Williamson Petroleum Consultants, Inc.
incurred in connection with this transaction.

15.3 NOTICES. All notices under this Agreement
shall be in writing and addressed as set forth below. Any communication or
delivery hereunder shall be deemed to have been duly made and the receiving
party charged with notice (i) if personally delivered or telecopied, when
received, (ii) if mailed, three business days after mailing, certified mail,
return receipt requested, or (iii) if sent by overnight courier, one day after
sending. All notices shall be addressed as follows:

If to Seller:

HS Resources, Inc.
1 Maritime Plaza, 15th Floor
San Francisco, California 94111
Attn: Chief Financial Officer
Telephone: (415) 433-5795
Fax: (415) 433-5811

with a copy to:

HS Resources, Inc.
1999 Broadway, Suite 3600
Denver, Colorado 80202
Attn: General Counsel
Telephone: (303) 296-3600
Fax: (303) 296-3601

If to Buyer:

Wattenberg Resources Land, L.L.C.
c/o David G. Stolfa, Manager
3300 South Columbia Circle
Englewood, Colorado 80110
Telephone: (303) 762-9990
Fax: (303) 762-9992

with a copy to:

The Chase Manhattan Bank
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Rick Betz
Telephone: (212) 552-2680
Fax: (212) 552-1687

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Any party may, by written notice so delivered to the other party, change the
address or individual to which delivery shall thereafter be made.

15.4 SURVIVAL. The representations, warranties,
covenants, agreements and indemnities included or provided in this Agreement
shall survive the Effective Date. The doctrine of merger shall not cause any
representation, warranty, covenant, agreement or indemnity under this Agreement
to terminate as a result of Buyer and Seller entering into the Assignment,
Option or any other instrument contemplated hereunder.

15.5 CONFIDENTIALITY. Buyer and Seller shall keep
this Agreement confidential except to the extent each may be required to
disclose the contents hereof by recording the Assignment, Option, and
Memorandum of Management Agreement and Power of Attorney in the real property
records in the counties where the Assets are located or filing the official
forms of conveyances covering the Assets with appropriate governmental
authorities, the IRS or to the extent required in the operation of the Assets,
pursuant to the Management Agreement, by law, regulation or order, in
connection with obtaining third party consents and waivers of preferential
purchase rights and other matters, or in connection with any public
announcement issued in accordance with Section 15.6 hereof.

15.6 ASSIGNMENT; RIGHTS OF LENDER UNDER CREDIT
AGREEMENT. Neither Buyer nor Seller may assign its rights or delegate its
duties or obligations under the terms of this Agreement without the prior
written consent of the other party; provided, however, that Buyer may grant an
interest in the Operative Documents to secure its obligations under any Credit
Agreement it enters into in order to refinance the debt assumed by Buyer
pursuant to this Agreement (the "LLC CREDIT AGREEMENT"). Seller and Buyer
agree that Buyer's right to take any action, grant any consent or waiver in
connection with any Operative Document may be subject to the prior consent of
the lender banks under such LLC Credit Agreement.

15.7 BINDING EFFECT. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
successors and, subject to Section 15.7 hereof, their assigns.

15.8 COMPLETE AGREEMENT. When executed by the
authorized representative of Seller and Buyer, this Agreement, the Exhibits
hereto and the documents to be delivered pursuant hereto shall constitute the
complete agreement between the parties. This Agreement may be amended only by
a writing signed by both parties.

15.9 KNOWLEDGE. As used in this Agreement, the
term "KNOWLEDGE," "BEST KNOWLEDGE" or any variations thereof shall mean the
actual knowledge of any fact, circumstance or condition by the officers or
employees at a manager or higher level of the party involved as such knowledge
has been obtained in the performance of their duties in the ordinary course of
business after making reasonable and appropriate inquiries.

15.10 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF

-18-
<PAGE> 24
COLORADO WITHOUT REFERENCE TO THE CONFLICT OF LAWS PROVISIONS THEREOF.

15.11 COUNTERPARTS. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
instrument, and shall become effective when one or more counterparts have been
signed by each party and delivered to the other party.

[THIS SPACE INTENTIONALLY LEFT BLANK]

-19-
<PAGE> 25
EXECUTED as of the date first above mentioned.

BUYER:

WATTENBERG RESOURCES LAND, L.L.C.

By: Its Manager, David G. Stolfa

By: /s/ DAVID G. STOLFA
-------------------------
David G. Stolfa, Manager

SELLER:

HS RESOURCES, INC.

By: /s/ NAME: JAMES E. DUFFY
-------------------------------
Name: James E. Duffy
Title: Vice President

ORION ACQUISITION, INC.

By: /s/ NAME: JAMES E. DUFFY
-------------------------------
Name: James E. Duffy
Title: Vice President

-20-
<PAGE> 26
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

The foregoing instrument was acknowledged before me this 26th
day of March, 1996 by David G. Stolfa in his capacity as Manager of Wattenberg
Resources Land, L.L.C., a Delaware limited liability company on behalf of the
company.

Witness my hand and official seal.

My commission expires: 3-26-98

[SEAL]
/s/ COLLEEN RICHARDS
---------------------
Notary Public

STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

The foregoing instrument was acknowledged before me this 26th
day of March, 1996 by James E. Duffy, as Vice President of HS Resources, Inc.,
a Delaware corporation on behalf of the corporation.

Witness my hand and official seal.

My commission expires: 3-26-98

[SEAL]
/s/ COLLEEN RICHARDS
---------------------
Notary Public

-21-
<PAGE> 27
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )

The foregoing instrument was acknowledged before me this 26th
day of March, 1996 by James E. Duffy, as Vice President of Orion Acquisition,
Inc., a Delaware corporation on behalf of the corporation.

Witness my hand and official seal.

My commission expires: 3-26-98

[SEAL]
/s/ COLLEEN RICHARDS
---------------------
Notary Public

-22-

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,089,542
<SECURITIES> 0
<RECEIVABLES> 10,519,666
<ALLOWANCES> 0
<INVENTORY> 1,310,340
<CURRENT-ASSETS> 13,919,548
<PP&E> 419,040,836
<DEPRECIATION> (95,124,927)
<TOTAL-ASSETS> 349,793,803
<CURRENT-LIABILITIES> 21,937,228
<BONDS> 176,551,500
<COMMON> 10,949
0
0
<OTHER-SE> 118,647,329
<TOTAL-LIABILITY-AND-EQUITY> 349,793,803
<SALES> 13,679,430
<TOTAL-REVENUES> 14,194,284
<CGS> 0
<TOTAL-COSTS> 10,861,529
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,024,152
<INCOME-PRETAX> 308,603
<INCOME-TAX> (117,578)
<INCOME-CONTINUING> 191,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 191,025
<EPS-PRIMARY> .02
<EPS-DILUTED> .02

</TABLE>