BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA AMERICAN NATURAL RESOURCES, L.L.C. DRILLING AND SPACING CD UNITS

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1 BEFORE THE CORPORATION COMMISSION OF THE STATE OF OKLAHOMA APPLICANT: RELIEF SOUGHT: AMERICAN NATURAL RESOURCES, L.L.C. DRILLING AND SPACING CD UNITS LEGAL DESCRIPTION: NW/4 5W14 OF SECTION 18, TOWNSHIP 8 NORTH, RANGE 7 EAST, SEMINOLE COUNTY, OKLAHOMA AMERICAN NATURAL RESOURCES, L.L.C. F ILE D JAN COURT CLERKS OFFICE - OKC fpration COMMISSION QF QAh POOLING CD LEGAL DESCRIPTION: NW/4 SW/4 OF SECTION 18, TOWNSHIP 8 NORTH, RANGE 7 EAST, SEMINOLE COUNTY, OKLAHOMA REPORT OF THE ADMINISTRATIVE LAW JUDGE This Cause came on for hearing before Michael Porter, Administrative Law Judge for the Corporation Commission for the State of Oklahoma, on the 16th day of November, 2011, at 8:30 a.m. in the Commission's Courtroom, Jim Thorpe Building, Oklahoma City, Oklahoma, pursuant to notice given as required by law and the rules of the Commission, for the purpose of taking testimony and reporting to the Commission. CASE SUMMARY: American Natural Resources, L.L.C. filed applications seeking unit spacing and a pooling for a variety of common sources of supply. AMTEX OIL AND GAS, INC. filed protests to these applications. AMTEX OIL AND GAS, INC. claims it is a party entitled to notice in these two causes by virtue of their entitlement to production and having the right to drill in the unit. AMTEX OIL & GAS claims it did not receive notice in either cause.

2 Page 2 RECOMMENDATIONS: It is the recommendation of the ALJ that the Spacing Application of American Natural Resources, L.L.C. CD be denied. It is the further recommendation of the ALJ that the Pooling Application of American Natural Resources, L.L.C. CD be granted as to the Hunton Lime formation only. HEARING DATE: November 16, APPEARANCES: Richard J. Gore, Attorney at Law, for American Natural Resources, L.L.C. (ANR) John A. Lee III, Attorney at Law, for AMTEX Oil and Gas, Inc. (AMTEX) FINDINGS 1. Causes CD and CD are the applications of American Natural Resources, L.L.C. to space and pool the NW4 SW4 Section 18, Township 8 North, Range 7 East 2. The Commission has jurisdiction over the subject matter and notice has been given in all respects as required by law and the rules of the Commission. 3. That the Commission has issued Emergency Order Number granting ANR the authority to commence a well pending the resolution of CD That Oklahoma Corporation Commission Order Number created 40 acre spacing units for the Hunton Lime in the South half of Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma. 5. The following numbered exhibits were accepted into evidence on the 16th of November, 2011: #1. Updated Exhibit A to addresses for respondents in CD #2. Production Map showing the proposed 40-acre unit in the NW4 SW4 Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma and the Viola structure. #3. Exhibit showing the anticipated depths of various formations underlying the NW4 SW4 of Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma.

3 Page 3 #4 Results of Seismic data produced in Shows all common sources of supply present in the proposed unit with no faulting in the unit. #5. Updated respondent list for CD #6. AFE for CD showing a date of October 3, #7. Plat showing the West half of Section 18, Township 8 North, Range 7 East, Seminole County, Oklahoma and the East half of Section 13, Township 8 North, Range 6 East, Seminole County, Oklahoma with some units numbered by Arabic numerals 2, 3, and 5. AMERICAN NATURAL RESOURCES Testimony of Montee Hoffman: SUMMARIES OF TESTIMONY Direct Examination After a review of Mr. Hoffman's qualifications, Mr. Hoffman testified as a landman for ANR. Beginning with CD , spacing, he testified that ANR has the right to drill in the unit. He indicated ANR's interest was 28 acres of the 40 acre unit. He stated the parties listed on Exhibit A attached to the application were the parties entitled to shares of production from the unit. He indicated they had 15 or more days of notice of the hearing. He testified AMTEX did not have an interest in this unit. He said AMTEX did have an interest in the SW4 SW4 of Section 18. He described the efforts he undertook to locate the parties entitled to notice. He indicated he began with the county court records for Seminole County. He said they ran mineral titles to determine the parties. For parties for whom there was not a good address he used variety of sources. He said he used local phone directories, probate records and online searches for obituaries for persons with the same last names in an effort to locate some of the parties. He also used several internet resources, one of which was Accurint. Other sources he used were The White Pages and Dogpile. He stated some of the unknown parties came into title several years ago and have not been leased for several years. He agreed that even with due diligence some parties were unlocatable. He testified that Exhibit 1 updated the status of respondents found on Exhibit A to the application. He testified he had exercised due diligence to give notice to all parties entitled to proceeds from production. He agreed Notice by Publication would be appropriate for those unlocatable parties. As to the pooling application CD , he wished to dismiss Respondent 48, Leslie Lucille Milliren Wilson because he had acquired a lease from her. He then described the efforts made to locate parties whose address was unknown. He said county probate records were checked as well as mineral and surface ownership. He stated local and adjoining town phone books were gone through looking for listings for unknown parties. He testified internet sources

4 Page 4 were used to locate better addresses for some of the parties. He testified that Exhibit 5 updated the status of respondents found on Exhibit A to the application. He agreed Notice by Publication would be appropriate for the unlocatable parties. He testified AMTEX was not a named respondent in the case. He agreed AMTEX did not own anything in the unit. He said he mailed a proposal letter on August 22, He agreed the case was filed on September 13, He testified to the fair market value for leases in the unit. He said there were three options. One was to participate in the costs of drilling the well. The other two options were to elect $125 an acre with a one-eighth royalty or elect $100 an acre with a three-sixteenths royalty. Mr. Hoffman testified ANR had been leasing in the area for eight months, He said the last leases he took at these values were on September 16, 2011 and October 30, He said these were the highest and best values taken in this section and the eight surrounding sections. He stated if a party did not make an election, then that party would be deemed to have selection the highest cash bonus and lowest royalty that party could deliver. He indicated the respondents had 20 days, after the order is issued, to elect which option they wanted. Respondents would have 25 days from the date of issue of the order to pay their proportionate share of well costs. Finally, ANR would have 35 days from the date of the issued order to pay any bonuses to respondents who made an election to accept a bonus. He described the terms and condition for subsequent wells. He said participation in subsequent wells was contingent upon participation in the initial unit well. He said any party could make a proposal for a subsequent well. He said all regulatory work would need to be in place to be a valid proposal. He added there could be only one proposal at a time and the earliest valid proposal had priority over other proposals. He said a certified letter with an AFE would need to be sent to each participating party. The same time periods as in the initial well would be followed. Twenty days to elect, 25 days to pay their share of costs of the subsequent well and 35 days for ANR to pay any bonus due to a party. The election options would be the same as for the initial well. The subsequent well would need to be commenced within 180 days or the proposal would become null and void except for the payment of bonuses. He said the parties would be returned to the status they had before the proposal was made to them. He testified that ANR should be named operator of the well. He also said the well was already drilled. He requested ANR be named operator. He said ANR would continue prudent operations on the well. He further testified that elections should be made to ANR. ANR would be responsible for the payment of all bonuses. He also stated ANR was familiar with the escrow rules and ANR would comply with those rules. He also said ANR had a pluging bond on file with the Commission. Cross Examination Mr. Hoffman admitted he had been in the business for 30 years. He also admitted he had been an independent landman for 20 years. He said he ran court clerk records at the county courthouse. He said he noted the pending lawsuit between ANR and AMTEX. He said he did not follow up in the court clerk's office. He testified he did not go further because it did not affect the mineral interests. He testified as to his understanding of the lawsuit. He said it had to do with

5 Page 5 ANR and a well and a lease. He admitted it was about leases that were assigned or supposed to be assigned. He said it involved AMTEX who was claiming leases that were not assigned. He admitted he did not look further into the pending lawsuit he discovered. He said he asked ANR about the lawsuit. He testified they told him it was a pending lawsuit He agreed ANR did not give him any other records that would impact on the claim. He agreed Section 18 was a correction section. He marked lots two, three and four on Exhibit P. He testified the amount of acreage in Lots 3 and 4 was acres. He further testified he got the acreage amount from the original patent. He said the acreage was stated on the patent along with a statement it was a correction section. He agreed he had determined AMTEX owned an interest in a producing well, the Wayne #1. He said it was located in the Northwest, of the Northwest, of the Southwest, of the Southwest of Section 18, Township 8 North, Range 7 East. He testified he found AMTEX had an interest in the Wayne #1 from a drilling title opinion. He testified he did not see an assignment of record for the well. He also said we did not run title, on those 40 acres for the pooling, because it was held by production. He agreed he did not examine the assignment himself. He agreed he did examine the mineral ownership in Lot 3. He also examined the working interest ownership in Lot 3. He testified the leases had expired so there was no valid working interest owner of title. He said if there were leases that covered Lots 3 and 4, the leases would not be HBP (held by production) in Lot 3. He testified this was because there was an exhibit that said you could not hold anything outside of the producing unit. He said he should have looked at a lease dated December 14 [2007] from the Harrington Family Trust to Easton Enterprises. He agreed there was no attachment to it that said it would expire as to any non-producing tract outside where a well is drilled. He agreed the lease would be HBP. He said "he missed that lease." He also said he did not look at a lease between Lawrence Altman and Easton Enterprises dated December 14, He agreed there were two other leases that held Lot 4 due to the production in Lot 3. He agreed he saw the us pendens and recognized AMTEX was claiming oil and gas leasehold assignments. He agreed AMTEX was not listed in the respondent list. He agreed Commission rules require notice to everybody that has the right to production and not just everyone that has the apparent right to share in production by review of the county clerk's records. He agreed that AMTEX and others could have a claim to share in production from Lot 3. He said he saw a drilling title opinion on Lot 4 but not Lot 3. He said he examined documents outside of the courthouse records for Lot 3. He testified he reviewed the oil and gas lease we had taken in He said those leases were for Easton at that point.. He said in 2008 he was working for Easton, which he said was his company. He agreed the leases taken by Easton Enterprises were taken by him. For the spacing, he testified he looked at [his/easton] internal files and checked Pangea for wells and reviewed 1002A's [0CC form]. He agreed he did not examine the county clerks records regarding the us pendens even after seeing it in the records. He said the efforts he made were the same for the pooling as for the spacing. He further agreed he did not examine the internal records of ANR.

6 Page 6 Redirect Examination Upon redirect examination, he testified there is no obligation to name anybody under a pooling. He agreed it was optional as to who is named in the application. He testified the assignments in Lot 4 made from ANR to AMTEX were weilbore assignments. He agreed AMTEX did not acquire any interest in the leases from Harrington or Altman because they were weilbore assignments. He said the drilling title option, done by an attorney, indicated the assignments were welibore assignments. He said a weilbore assignment means an interest in a well not in surrounding acreage in the unit. He testified AMTEX acquired no interest in Lot 3 from those leases from Harrington and Altman. He agreed the other leases had Pugh Clauses that caused them to expire at the end of their primary term except for the productive unit they were located in. He also agreed they would be effective to Lot 4 but not Lot 3. He said the Wayne #1 was in Lot 4. He said he did not know if it had been re-worked, nor what AMTEX's elections were in the well. He agreed that because of the welibore assignments, AMTEX owned nothing in Lot 3. Re-Cross Examination Upon re-cross examination, Mr. Hoffman agreed that AMTEX does not own anything in Lot 3. He also agreed AMTEX has no record ownership as far as he could tell. He testified he could only go by what was of record. Mr. Lee was denied the opportunity to submit some leases from various parties. These documents were not exchanged between the parties and were excluded.. Mr. Lee said he wanted to use them to impeach Mr. Hoffman. Mr. Lee felt he needed to impeach the witness as he felt he had not gotten truthful testimony from the witness. Testimony of Mickey Overall: Direct Examination Mr. Overall testified for ANR. He said he was the president of ANR. He indicated he was a geologist, with a BS in Geology from Oklahoma State University. He indicated he worked for seven years for City Service Oil Company where he received training and a geophysicist interpreter. He said he spent a year with Anadarko Production Company and seven years as an exploration manager with Rick's Exploration. Finally, he explained he had been independent for about 25 years. He testified he was familiar with geophysics and seismic data. He said he had incorporated subsurface geology with seismic throughout his career. He agreed he had been allowed to testify on matters relating to geophysics. There were no objections to his qualifications as a geologist and landman. He agreed he had been allowed to testify on matters relating to geophysics He then described Exhibit 2. He said it was a production and structure map with an overlay of the seismic line. He said the productive wells were color coded. He testified the structural lines were the top of the Viola. He agreed, based on the structural lines, the Viola underlies the area. He also testified there were some shallow wells and plugged wells that were

7 Page 7 not shown on Exhibit 2 as they were not germane. He also said there were some old wells that did not have log data to use for the map. He testified Exhibit 3 was the approximate top of the formations ANR was attempting to have spaced in this cause. He said the relevance of Exhibit 4 was it showed the crossings of the seismic line to the spaced formations in Commission Order He testified the seismic profile shows the all of the zones are continuous and throughout the area spaced under Commission Order and the area to be spaced in this application. He also said it showed there were no faults separating the existing spacing units and the proposed spacing unit. He said he anticipated the formations would be productive of oil and casing head gas. He testified he was asking for regular 40 acre spacing with a well location no closer than 330 feet from the unit boundary. The unit is to be in the Northwest quarter of the Southwest quarter of Section 18. He testified that Emergency Order was obtained to drill the well. He said Exhibit 6 was an AFE and because the well was drilled, it showed actual costs where available and estimates for other items. He agreed it was an accurate estimate of costs for the well. He said the well was drilled to the Second Wilcox. ANR asked to dismiss the McLish, Oil Creek and Arbuckle formations from the pooling application. Cross Examination Mr. Overall admitted ANR was a limited liability company in Oklahoma and that he was the only owner. He also admitted he owned all the units in the limited liability company. He testified the name of the well drilled was the Forest and Mary18-1. He testified it has not been completed. When asked the location of the well, Mr. Overall stated it was approximately the Northwest of the Southwest of Section 18. He could not remember the footages from the boundaries except to say the well was at a legal location if a 40 acre spacing unit were formed. He agreed it was at least 330 feet from any boundary. He could not remember when the well spudded, but that ANR called the Commission when the well spudded. He said he believed ANR filed a spudding report with the Commission. He said the well was spudded after the emergency order was issued. He said the well was drilled 30 days ago. He could not remember the exact day because he did not bring those documents with him. He admitted that nowhere on Exhibit 2 was there an indication that it was a Viola structure map. As to Exhibit 3, he said he did not get the tops from Exhibit 4. He stated the source of the data was surrounding control. He stated surrounding control meant surrounding wells. He said he used the Wayne 1 well to establish the tops. He said the Wayne produces from the First Wilcox. He said it has not produced from the Second Wilcox. He testified the well located in Lot 4 on Exhibit 2 was a plugged Hunton producer. He said he didn't drill it or know its name. He also testified there was a disposal well in Lot 4. He said it was the Wayne 2. He also stated they had tried to complete the well. He testified he drilled the well and attempted a completion, but it never produced commercially. He said they completed it initially in the First Wilcox and tested the Cromwell. He stated the disposal interval was the Cromwell and it had been shut down. He then testified the well named 18-1 was a new disposal well.

8 Page 8 He admitted he had seismic training while at Cities Service between 1970 and He testified his training in the subject since then has been on the job training. He stated as a geologist he has shot 3D [sic] and assisted in statics [sic], interpreting 3D, and tying seismic with the 3D. He admitted he did not do it himself, and that he only assisted. Upon questioning about Exhibit 4, he stated the information was purchased from a public source. He said Jordan Oil and Gas did the shot. As far as he knew it was shot in July 1985.He said he placed the formation names and depths on the exhibit. He also stated he purchased the tapes processed by Jordan. He said those tapes would print out the entire seismic line and that this was only part of that line. He admitted the tapes contained processed data. He said he did not process the data himself. He could not say what the exact travel time was used. He testified there was a synthetic seismogram of an elog in the vicinity. He stated reflectors appear to be those from a nearby sonic log of a well nearby. He could not remember the name of the well he got the synthetic seismogram, but stated it was about 10 miles away. He added the reflectors are very uniform in the area. He said the log was done eight to ten years ago. He said it was from one of his wells and that he logged it. He said he could not remember the name of the well even though he had logged it because he had drilled 130 wells in Seminole County. He testified other synthetic seismograms were prepared. These were prepared as part of a regional geologic and seismic workup. The work was done by a geophysicist and a company ANR worked with to confirm the tops. He explained a computer program is available to convert a density log into a synthetic seismogram. He testified the well he ran a sonic log on was within the four township adjacent area. He stated this was an area where a geologic study was preformed. He said he could tell which wells were studied or where the seismic lines were for the study. He added seismic lines with 3 synthetic lines were incorporated in the review of the geology in the area. He testified the area had faults in it. He could not say there were any faults separating the seismic line in this case from the synthetic seismogram. He said he would have look at his maps and could not give an answer without checking his documents. He indicated there could be substantial changes in travel times seismic lines if there was a fault between the two lines, but it depended on other factors. First he testified an unconformity could affect travel times. He identified an unconformity at the top of the Hunton and the Cromwell. He said those were the primary unconformities. He said the well they got the synthetic seismogram from penetrated the Hunton and Cromwell. He said it could have affected the travel time or it may not have affected travel time. He implied surface velocity difficulties can affect travel times, but that did not happen in this case. He finally agreed he knew of nothing that would have affected the travel time between the synthetic seismogram and seismic line. He testified the depths were what the seismic was intended to show. He said the depths were approximate and that there were no fault separation or permeability barriers within the formations. He agreed it was his testimony the formations are continuous and uninterrupted going from Lot 4 into Lot 3. He testified the Wayne 1 well was drilled in either late 2008 or early He said it was been in continuous production since it was completed. He could not say how much it has

9 Page 9 produced. He also could not say how many dollars it has produced as he didn't have an accounting before him. He did testify the Wayne well has paid out and cost about $1,000,000 to drill. He testified the pay-out was probably not 2 to 1. He testified the cost of drilling the Wayne 2 has nearly been paid out by the Wayne 1 well. He could not say it has or hasn't but that it was very close to being paid out. He also testified the Wayne 2 well has made the production in the area commercial on a daily, monthly and yearly basis. He agreed there has been sufficient production from the Wayne 1 well to equate to $2,000,000. He agreed that would be to the working interest. He stated that was not an exact number because he did not have the numbers to look at and it was a ballpark number. He agreed with Mr. Hoffman that AMTEX only has a welibore interest in the Wayne 2. - He then testified about the AFE. In particular, he was asked about the line item called "DRILLING-Limited Turnkey to logging". He agreed it was a flat fee to the participants in the well. He stated he thought it was a reflection of the reasonable and necessary costs. He testified the participants would be paying actual costs on all other items of the AFE. He testified participants would be paying the costs as per the turnkey, as a flat number. He admitted there could be several thousand dollars in profit for ANR. He did not agree that the line item drilling limited turnkey was not an estimate of reasonable and necessary costs. He also testified he did not have all the bills in for drilling the well. He said the AFE did not show actual costs and that was a reasonable estimate. He admitted notice was not given to AMTEX for the pooling. He also admitted Manage Petroleum did not receive notice of the pooling. He testified Mange Petroleum was not a working interest owner in Lot 3 or Lot 4. He said Manage Petroleum had elected out of Lot 4. He also stated notice was given to Texas Oil and Gas Inc. He said Texas Oil and Gas Inc. was not a working interest owner in Lot 3 or Lot 4. He said Texas Oil and Gas Inc. had elected out under a letter agreement. He could not say how many days it took to get the well down in Lot 3. He said he did not have the drilling schedule with him. He could say it was under 15 days to drill it down. He could not remember the day rate ANR paid Akerman Drilling. He indicated he had a drilling contract with Ackerman Drilling for the well in this pooling. He stated he could not remember what the day rate was for the well. He said he did keep more than one of Akerman's rigs going at once. He said he did not believe he had more than one Akerman rig going while drilling the Forest and Mary well. He said he could not say whether or not it was a day work contract without looking at it. He did say he was sure it was a day work contract and not a footage contract. He said he had not done a footage contract in quite a while. He also said the Akerman contract was not a turnkey contract. Re-Cross Examination He testified the AFE said the total well cost is $1,036,685. He said that was reasonable estimate of actual costs. He admitted actual costs is what the pooled parties would pay to participate. He testified what was paid to Akerman to drill the well was actual costs.

10 Page 10 AMTEX OIL AND GAS Testimony of Mr. Mickey Overall: Direct Examination Mr. Overall was called a witness by AMTEX. He admitted he had testified at the Commission in land matters in his capacity as president of ANR. He said he was familiar with acquiring oil and gas leases. He said there were other agreements in the oil and gas business. He said there were general business contracts. He testified he had some experience in writing those agreements. He said he would draft the agreement and have an attorney finalize the document. He said the estimated cost of $1,036,685 included the turnkey cost of $372,500. He said 15 days was average number days to drill the well. He added he had seen it vary from 12 to 18 days, so 15 days was an average. He testified if $372,500 was divided by 15 days it would be $24,800 per day. He said the APE is based on 18 drilling days. He said the day rate would be $18,000 not including bits and fuel. He was asked if $18,000 per day was a reasonable rate. He answered by saying it depended on what services were included in the contract or not. He agreed this contract did not include bits and fuel, mud, drilling fluids and miscellaneous chemicals. He stated a rig would supply daily supervision, observation and drilling consulting on the rig. These items were in addition to the rig itself and its crew. He said he wasn't going to go through it all because he did not have the contract with him. He agreed with Mr. Hoffman's testimony about leases in Lots 3 and 4. He agreed those leases had been assigned to ANR. He also agreed AMTEX had no interest in those oil and gas leases. He stated he still did not know how much the Wayne 1 has produced. He said during the lunch break he had lunch and did not find out how much the Wayne 1 produced. He was asked if the Forest and Mary well was similar to the Wayne 1. Mr. Overall replied by saying he thought all wells in the area would perform better than they have in the past because there was a disposal well that was capable of handling the fluids the wells produce. Cross Examination Mr. Overall agreed that if a party elects to participate under the pooling order, they will pay their share of the actual costs. Testimony of Patty Abney: Direct Examination Ms. Abney testified she was the manager of AMTEX. She said it was a Texas corporation. Ms. Abney testified she had a Bachelor of Science degree in Geology. She testified she did graduate work in Geophysics that included instruction in seismic, gravity, and magnetic exploration. She said she did not complete her Masters in Geophysics. She said she has worked in the oil and gas business since She explained she had been an exploration geologist. She said she examined seismic, subsurface, and sample data. From her examination of this data she

11 Page 11 formed opinions as to the viability of drilling prospects. Her qualifications as a geologist were accepted. She explained her duties as North American Operations Manager for AMTEX. She said her duties included practicing geology, managing Joint Operating Agreements (JOA) and leases and finding drilling participation opportunities for AMTEX. She said she makes sure AMTEX has all the copies and information it needs. She ensures the JOAs are signed and that there are leases and lease assignments. She testified she was familiar with oil and gas leases. She said she checks the JOAs to ensure nothing has been marked out and makes sure the non-consent clause is correct. She said she does not read the JOA from beginning to end. She said it is a standard AAPL 1989 form. She testified there is a JOA with ANR. She said it was on the AAPL form. She said it has been modified. She said AMTEX has participated with ANR in 10 or 11 wells located in Seminole County, Oklahoma. She agreed with Mr. Hoffman that AMTEX has an interest in the Wayne 1. She said AMTEX got its interest from ANR because it entered into an agreement with ANR to drill multiple wells. She said the contract between AMTEX and ANR titled Business Opportunities Contract (BOC). She said there were multiple business opportunities contracts between AMTEX and ANR. She testified there was one that applied to Section 18, Township 8 North, Range 7 East and is the contract that AMTEX participated in the Wayne 1. She said it included other wells in addition to the Wayne 1. She said this contract included an Area of Mutual Interest (AMI). She agreed that when AMTEX paid money to ANR they were buying leases and opportunity to participate in wells. She agreed that AMTEX had participated in 10 wells with ANR. She said there were two AM Is in the BOC. She testified one AMI covered Sections 13, and 24 of Township 8 North, Range 7 east. The Other AMI covered Section 24 and 25 of Township 8 North, Range 6 East. These covered more than the 40 acres in Southwest quarter of Section 18. She indicated it covered all of Section 18. She testified the BOC specified the interests purchased by AMTEX. She said AMTEX got a 60% working interest. She testified the interest would be assigned to AMTEX at the actual Net Revenue Interest (NRI). She said this was 60% of all leases including those in Section 18. She agreed AMTEX bought a 60% working interest in the wells drilled. She agreed the Wayne 1 was drilled under the agreement She indicated there were other wells drilled in other sections under the agreement. She testified that Texas Oil and Gas Inc (TOG) was a subsidiary of AIVITEX. She said TOG also owned an interest under the BOC. She said she also oversaw the interests of TOG. She said TOG participated under the BOC with ANR. She testified she knew about Manage Petroleum. She said they participated in the beginning of the wells but later got out. She testified as manger of AMTEX that AMTEX did not agree to own only a well bore interest in the Wayne 1. She said AMTEX agreed to purchase leasehold interests when they bought into the project. She testified there was also a JOA executed by AMTEX and ANR. She said the JOA referred to the High Dome Project and the East Bowleg Project both of which are covered by the BOC. She testified the High Dome Project is in Sections 13, 18, 19 and 24 of Township 8 North, Range 7 East. She agreed the High Dome Project was covered by both the BOC and JOA.. She said AMTEX never got notice that ANR was planning on drilling a well in

12 Page 12 Lot 3. She did not recall the well being proposed to AMTEX or that ANR intended to space Lot 3. She indicated there was District Court case where AMTEX wanted ANR removed as operator and AMTEX as majority working interest owner designated as operator. She said ANR was not the only operator with whom they participate in wells. She said AMTEX has interests in Kansas, Texas, Wyoming, Louisiana, and Oklahoma. She testified that in addition to ANR, AMTEX participates in wells with Pathfinder Exploration and Transpro. She said there were wells in Seminole County where AMTEX had purchased a working interest in those wells. She said she had seen the AFEs associated with those wells. She said the wells had been drilled within the past year. She stated she had personal knowledge of the estimated totals for completion of those wells. She said for a vertical well the total AFE was $570,000. She said the total depth was 4,400 feet. She said the day rate was $9,000 a day. She said that did not include the cost of fuel. She said for the entire well, the cost of fuel was $11,500. She said the well took about 11 days to drill. She stated there was not a line item for bits, so she thought it might be in the tangibles. She said the total cost for move in, move out day work, and fuel and fuel was $107,000. She testified the costs for this well were reasonable. She said this well was in Section 29, Township 6 North, Range 5 East, Seminole County, about 20 miles away. She testified that based on her experience with wells in Oklahoma she believes the reasonable and necessary costs for the Forest and Mary well, shown by the AFE, are excessive for a 4,600 foot well. She testified AMTEX has paid $650,000 for the Wayne 1. She agreed this was for AMTEX's 60% interest. She testified she had access to the revenue information from the Wayne 1 well. She said the Wayne 1 has not paid out. She said AMTEX has received $136,273 from the Wayne 1. She agreed it was towards AMTEX's 60% working interest. She did not believe the Wayne 1 well would pay out. She said she has not seen any financial data from the Forest and Mary well. She said she has visited the Forest and Mary well site. She stated she saw the casing sticking out of the ground about 18 inches. She said there was no wellhead or anything else on it, not even a cap. She said she also visited the Wayne 1 site. She said it appears to be a producing well. She stated she was unable to determine the exact date of spud for the Forest and Mary well. The best the 0CC District office could tell her it was spud between the October 1 and October 10, She testified she had seen geological and petrophysical data from the Wayne 1 well. She also testified she had seen and evaluated logs from in the area that have penetrated the Wilcox. She agreed they appeared from a geologic standpoint that all the common sources of supply are continuous and uninterrupted between Lots 3 and 4. She said she did not know the cumulative production on the Wayne 1. She said it has been producing since September Cross Examination Upon cross-examination, Ms. Abney testified she no evidence either way as to whether or not a 40-acre spacing was appropriate for the unit. She said AMTEX was protesting because they had not received notice. She said they were also protesting because the Wayne 1 has not paid out and AMTEX did not think it prudent to drill another well. She said AMTEX did not

13 Page 13 know ANR was going to drill the Forest and Mary. She indicated AMTEX was not forced to participate in the Forest and Mary, but would to protect itself if the Forest and Mary were to drain what is available to the Wayne 1. She admitted she had no idea what either well is draining. She also admitted she did not know AMTEX did not pay for some submersible pumps or that AMTEX's interest was netted and money taken out of the runs. She agreed AMTEX claims ownership through various means such as the BOC and JOA in the Northwest of the Southwest of Section 18. She agreed when ANR's landman checked the county records he did not find any record title ownership for AMTEX. She added when AMTEX's landman checked the records, he found AMTEX's ownership. She also pointed out ANR's landman admitted during his testimony "he missed it". Ms. Abney was asked a series of questions regarding the District Court litigation. She agreed several issues are before that forum will not be decided by this court. She agreed AMTEX would get to ride the well [Forest and Mary] for free if the District Court decides AMTEX has an ownership interest. Re-Direct Examination On re-direct Ms. Abney stated one of the objections to the pooling is ANR as operator. She indicated AMTEX wants it or a designate to be the operator. She also agreed AMTEX claims a 60% interest. She admitted she did not know if ANR had a claim in the area that they have not sold off. CD SPACING CONCLUSIONS AND RECOMMENDATIONS The parties to this cause are in absolute agreement that AMTEX did not receive notice as required by Oklahoma Corporation Commission rule 165: However, the purpose of notice requirement is to alert persons or governmental entities, which have the right to participate in production from the proposed, that a unit is to be formed or modified. This alert, to the parties, is so that they can timely protect whatever interests they may have in the unit. This protection of their interest would include having time to prepare an adequate answer to an application or prepare to contest the application. The parties also agree, there is District Court quiet title litigation pending which will determine what the ownership interests. The application requesting the formation of a drilling and spacing unit in the NW4 SW4 of Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma was filed September 13, The cause was set for a hearing on October 10, 2011 at the time of filing via a Notice of Hearing filed on September 13, On October 10, 2011, ANR filed a Motion to Set on Protest Docket. In the body of the Motion to Set on Protest Docket filed by ANR, it indicates on or around the date of the initial filing, (September 13, 2011) AMTEX entered an appearance and a protest in the CD and There is no written filing in the Court file to show the appearance and protest of the application by AMTEX that is dated or

14 Page 14 about September 13, There is an Entry of Appearance and Notice of Protest filed on October 17, 2011 by AMTEX. There is also a Pre-Hearing Conference agreement dated October 16, 201 land filed October 18, 2011 showing the appearance of AMTEX. Strangely, in the Emergency order entered October 20, 2011, AMTEX was not shown as a respondent in spite of the filed Notice of Appearance and Pre-Hearing Conference agreement. The Motion to Set on Protest Docket was dismissed by the Commissioners on October 24, It appears AMTEX was somehow alerted that ANR was attempting to do something in the NW4 SW4 of Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma.. AMTEX did not enter a special appearance in the cause and submitted itself to the jurisdiction of the court by its actions. AMTEX fully participated in the hearing held on November 16, AMTEX did extensive cross-examination of ANR's land and geologic witnesses regarding the spacing and pooling applications. The ALJ finds ANR was deficient in the notice it was required to give to persons/entities entitled to notice. However, AMTEX had actual notice rather than mailed notices and/or publication. There was no showing that AMTEX was prejudiced by not receiving the notice required by Commission rules. The lack of notice to AMTEX was the main thrust of the protest by AMTEX. The evidence, though dated, shows the formations are present in the proposed unit. AMTEX did challenge Mr. Overall's opinion through a thorough cross-examination. It is the opinion of the AU that substantial evidence was shown of the presence of the formations in the proposed unit. Mr. Overall testified he anticipated the formations to be productive of oil and casing head gas. The exhibits show oil symbols on the existing wells. It is reasonable to postulate that wells in the proposed unit would also produce oil as the hydrocarbon. The evidence production would be oil was not challenged by AMTEX. The ALJ finds there was substantial evidence produced by testimony and exhibits to indicate the primary hydrocarbon to be produced would be oil. Mr. Overall also testified he used surrounding wells to establish the tops of the formations. Primarily he used the Wayne 1 well for the formation data. The testimony offered indicated the formations were relatively flat with little change in elevation across Section 18. It is reasonable to assume that wells in the proposed unit would be a similar depths as wells in the adjoining unit. AMTEX, as participant in the Wayne 1 well would have access to formation data and would have challenged the depths if they were not as Mr. Overall testified. The evidence regarding the depths of the tops of the formations was not challenged by AMTEX. The AU finds there is substantial evidence to accept the tops of the formations as shown on Exhibit 2. After taking into consideration all the facts, circumstances, testimony and evidence presented in this cause the ALJ recommends the application in CD be denied. The ALJ believes that notice given was not given properly to all parties who have the right to production from the proposed unit.

15 Page 15 The ALJ does not believe ANR exercised due diligence in developing its Exhibit A to the application. Had they done so, the interests of AMTEX would have been discovered. This would have been before cross-examination brought out Mr. Hoffman's admissions. Twice he missed certain critical attachments to leases his own company had taken from other parties. He also admitted he did not personally look at an assignment. He was aware of that assignment from a title opinion. He even admitted that he only reviewed leases taken by his company, Easton Enterprises, from 2008 forward. He further admitted he did not examine the court clerk's records concerning the lawsuit filed by AMTEX. The ALJ is not convinced with substantial evidence that the respondent list, Exhibit A to the application, is complete. The lack of due diligence casts doubt that ANR ensured all the proper parties were notified. Based on the lack of a thorough examination of the records other necessary parties may not have been made aware of these proceedings. It should be noted, if the recommendation to deny this applications is not affirmed, there is potential conflict between the requested spacing and Oklahoma Corporation order number regarding the spacing Hunton Lime in the unit. CD POOLING The spacing requested in this cause is recommended for denial. Without the spacing requested, the pooling application would fail as well except for one formation. Oklahoma Corporation Commission order number spaced 40 acre units for the Hunton Lime in the South half of Section 18 Township 8 North, Range 7 East, Seminole County, Oklahoma. This spacing order is still in effect. As in the spacing, all parties agree AMTEX did not receive notice in the pooling cause. ANR claims it does not need to provide notice as AMTEX does not have an interest in the unit. Alternatively, ANR claims, if AMTEX does have the right to drill, ANR does not have to include all owners of the right to drill in the notice. This is based on the ruling in Marathon Oil Co. v. Corporation Commission, 651 P.2d 1051 (Okl. 1982). The ALJ finds that AMTEX was not a named respondent and there is no legal duty for ANR to name them in the pooling application. Thus, AMTEX was owed no duty under the Commission's rules to be noticed in this cause. There was considerable testimony regarding the AFE submitted by ANR. AMEX countered with testimony regarding costs associated with wells about 20 miles away. It is not necessary to address the AFE at this time. No named respondent protested the amount of the expenses. The costs associated with this well are similar to wells drilled in the immediate vicinity. These costs do not appear to be excessive at this time. However, if named parties find the costs are unreasonable and unnecessary, the Commission retains jurisdiction to determine the costs upon proper application.

16 Page 16 There was no dispute regarding the value of $125 and a one-eighth royalty or $100 and a three-sixteenths royalty options instead of participation in the unit. There also was no dispute regarding 20 days to make an election, 25 days for participants to pay costs, or ANR having 35 days to pay the bonuses to those who elect or are deemed to elect not to participate in the initial well. There was no disagreement with subsequent well provisions requiring an election, from participants in the initial well within 20 days of the receipt of a certified letter containing an AFE and a proposal for a subsequent well. There was no dispute with a party having 25 days from the date of receipt of the proposal to pay costs, or ANR having 35 days to pay bonuses to those who elect or are deemed to have elected not to participate in the subsequent well. Any subsequent well would need to commence with 180 days of the date of the proposal or the parties are restored to their prior positions. AMTEX asked that it or a designee be named operator of the well. AMTEX has participated in many wells but, ANR currently operates several wells in and around Seminole County. After taking into consideration all the facts, circumstances, testimony and evidence presented in this cause the ALJ recommends the application in CD be granted but only for the Hunton Lime, spaced under Oklahoma Corporation order number ANR should be named operator for the unit well in the Hunton Lime. RESPECTFULLY SUBMITTED THIS 19 th day of January, Michael J. Porter Administrative Law Judge cc: Richard J. Gore John A. Lee III Michael Decker Oil-Law Records Commission File Office of General Counsel