Mackenzie

Mackenzie # 1 Well

This well was completed just prior to entry of the Receivership Orders.  Gates also operates the adjacent Jamie No. 1-21 Salt Water Disposal Well, operated solely to dispose of the substantial quantities of salt water produced from the Mackenzie well.  As such, expenses associated with operating the disposal well will be charged to the Mackenzie well.  The Receiver has paid for a division order title opinion (“DOTO”) which reflects Gates’ collective working interest  in the well (which includes investor working interest) at approximately 86% (or approximately 64.5% Net Revenue Interest).

The Receiver has transferred well operations to Magnum Energy, Inc.  Magnum has agreed to operate the well on a competitive basis.

After all liens and lienable claims against the well are resolved (currently ~$65,000.00), the Receiver will assign investors with documented investment their pro rata share in the wellbore.  Magnum will disburse, net expenses, production revenue to all owners.  Initial checks will include all distributable income accrued and held in suspense since date of first production.

Currently, the well is shut in.  The Oklahoma Corporation Commission has red-tagged the well due to multiple violations of Corporation Commission rules and regulations by Jimmy Gray-owned or controlled entities.  The Receiver is working with the Oklahoma Corporation Commission to resolve these issues so that the well can be turned back on.

No production revenue from the Mackenzie Well will be commingled with Gates’ other funds or income.  The Receiver will make every effort to protect the investors from creditor claims against Gates other than claims related solely for the Mackenzie well.  The Receiver plans to utilize revenue attributable to Gates’ interest in the Mackenzie well to pay creditor claims against Gates.

PLEASE TAKE NOTICE THAT IF YOU BELIEVE YOU HAVE A RIGHT TO A WORKING INTEREST IN THE MACKENZIE #1 WELL, YOU MUST SUBMIT DOCUMENTATION OF THE SAME TO THE RECEIVER’S ATTORNEY NO LATER THAN AUGUST 5, 2014.

© Gates Oil & Gas, LTD 2013