Energytec (fka EYCTQ)

[sortman]

This does not look good.

PLAINTIFF'S ORIGINAL COMPLAINT Page 11
149901

rules and regulations of the Texas Railroad Commission, and/or was deliberately reckless in so doing.

41. In total, there are 23 wells that are not properly permitted, and for which Mr. Cole improperly included in Energytec’s reserves for 2004. As a direct and proximate result of Mr. Cole’s deliberate and/or reckless acts and omissions, Energytec’s reserves have been substantially overstated by virtue of, among other things, Energytec’s numerous violations of the rules and regulations of the Texas Railroad Commission. In addition, Mr. Cole improperly allowed the commingling of production from permitted and non-permitted reservoirs, and the third-party engineer engaged to prepare Energytec’s reserve report for 2005 is unable to assign reserves to both the permitted and non-permitted reservoir. As a direct and proximate result of Mr. Cole’s deliberate and/or reckless acts and/or omissions, Energytec’s reserves will be substantially understated by virtue of, among other things, Energytec’s numerous violations of the rules and regulations of the Texas Railroad Commission.

42. As a direct and proximate result of Mr. Cole’s actions and/or omissions in the Talco/Trix-Liz Field, leases were severed by the Texas Railroad Commission, resulting in a loss of income to the Company and its working interest owners and the compliance issues involving the Company’s properties were brought to a critical point, costing the Company millions of dollars in regulatory compliance costs and expenses. On the dually completed wells, Energytec was permitted to produce only from the D zone. Mr. Cole, however, dually completed these wells in the A and B zones in various wells through out this field without filing one permit, which means that the company did not have a conclusive formation test on the A and B zones. The impact to the reserves is two-fold: (i) Energytec cannot count the reserves in 2005 associated with