----

----

**U. S.SECURITIES AND EXCHANGE COMMISSION****Washington, D. C. 20549**

**Form10-QSB**

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

**For the quarterly period ended June 30, 2001**

**[  ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT**

**For the transition period from __________to __________**

**Commission File No.                1-4766                          **

| **GATEWAY  ENERGY CORPORATION**                                    |
|--------------------------------------------------------------------|
|                                                                    |
| (Exact name of small  business issuer as specified in its charter) |
|                                                               |
| **Delaware**                                                       | **44-0651207** |
|                                                                    |  |
| (State or other  jurisdiction of  incorporation or organization)   | (IRS Employer  Identification Number) |

**500 Dallas Street, Suite 2615Houston, TX  77002**(Address of principal executive offices)

Issuer'stelephone number :  **(713) 336-0844**

             Checkwhether the issuer (1) has filed all reports required to be filed by Section 13or 15(d) of the Exchange Act during the past 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.    Yes      X          No _________

**APPLICABLE ONLY TO CORPORATE ISSUERS**

             Asof August 14, 2001, the Issuer had 15,358,640 shares of its common stockoutstanding.

Transitional Small Business DisclosureFormat:  Yes__________ No            X          

----

----

**FORM 10-QSB**

**Part  I**

| **Item  1.** | **Financial  Statements**                                                                                                    |
|-------------------|------------------------------------------------------------------------------------------------------------------------------|
|              |                                                                                                                         |
|              | Unaudited Consolidated  Balance Sheet as of June 30, 2001                                                                    |
|              |                                                                                                                         |
|              | Unaudited  Consolidated Statements of Operations for   the three months and six months ended June 30, 2001 and June 30, 2000 |
|              |                                                                                                                         |
|              | Unaudited  Consolidated Statements of Cash Flows for the six months ended June  30, 2001 and June 30, 2000                   |
|              |                                                                                                                         |
|              | Notes to  Consolidated Financial Statements                                                                                  |

**GATEWAY ENERGY CORPORATION ANDSUBSIDIARIESCONSOLIDATED BALANCE SHEETJune 30, 2001(Unaudited)**

| **ASSETS**                               |                                                                                                            |        |
|------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------|
| Current Assets                           |                                                                                                            |        |
|                                     | Cash and cash equivalents                                                                                       | $           | 141,123 |   |
|                                     | Certificates of deposit                                                                                         | 671,164     |   |
|                                     | Trade accounts receivable                                                                                       | 1,172,202   |   |
|                                     | Note receivable – current portion                                                                          | 63,356      |   |
|                                     | Inventories                                                                                                     | 58,833      |   |
|                                     | Prepaid expenses and other assets                                                                               | 166,031     |   |
|                                     |                                                                                                                 |        |
|                                     | Total current assets                                                                                            | 2,272,709   |   |
|                                     |                                                                                                                 |        |
| Property and Equipment – at cost    |                                                                                                            |        |
|                                     | Gas gathering, processing and  transportation                                                                   | 9,406,474   |   |
|                                     | Equipment and office furniture                                                                                  | 668,856     |   |
|                                     |                                                                                                                 |        |
|                                     | 10,075,330                                                                                                      |        |
|                                     | Less accumulated depreciation                                                                                   | 3,617,850   |   |
|                                     |                                                                                                                 |        |
|                                     | 6,457,480                                                                                                       |        |
|                                     |                                                                                                                 |        |
| Other Assets                             |                                                                                                            |        |
|                                     | Note receivable, less current portion                                                                           | 56,395      |   |
|                                     | Other                                                                                                           | 409,056     |   |
|                                     |                                                                                                                 |        |
|                                     | 465,451                                                                                                         |        |
|                                     |                                                                                                                 |        |
|                                     | $                                                                                                               | 9,195,640   |   |
|                                     |                                                                                                                 |        |
| **LIABILITIES AND STOCKHOLDERS' EQUITY** |                                                                                                            |        |
| Current Liabilities                      |                                                                                                            |        |
|                                     | Accounts payable                                                                                                | $           | 538,621 |   |
|                                     | Property acquisition payable                                                                                    | 566,333     |   |
|                                     | Accrued expenses and other liabilities                                                                          | 175,101     |   |
|                                     | Notes payable                                                                                                   | 19,726      |   |
|                                     | Current maturities of long-term debt                                                                            | 257,751     |   |
|                                     |                                                                                                                 |        |
|                                     | Total current liabilities                                                                                       | 1,557,532   |   |
|                                     |                                                                                                                 |        |
| Long-term Debt, less current maturities  | 1,121,442                                                                                                       |        |
|                                     |                                                                                                                 |        |
| Stockholders' Equity                     |                                                                                                            |        |
|                                     | Preferred stock -  $1.00 par value; 10,000 shares authorized;  no shares issued and outstanding            | -           |   |
|                                     | Common  stock -  $0.25 par value; 35,000,000  shares authorized; 15,358,640  shares issued and outstanding | 3,839,660   |   |
|                                     | Additional paid-in capital                                                                                      | 16,047,476  |   |
|                                     | Accumulated deficit                                                                                             | (13,370,470 | ) |
|                                     |                                                                                                                 |        |
|                                     | 6,516,666                                                                                                       |        |
|                                     |                                                                                                                 |        |
|                                     | $                                                                                                               | 9,195,640   |   |
|                                     |                                                                                                                 |        |
|                                          |                                                                                                                 |             |  |  |  |

The accompanying notes arean integral part of this statement.

**GATEWAYENERGY CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS****(Unaudited)**

|                              | **Three  Months Ended  June 30,**  |      | **Six  Months Ended  June 30,** |      |
|-----------------------------------|------------------------------------|-----------|---------------------------------|-----------|
|                              | ****                               |      | ****                            |      |
|                              | **2001**                           |      | **2000**                        |      | **2001** |   | **2000** |   |
|                              | ****                               |      | ****                            |      | **** |   | **** |   |
| Operating revenues                |                               |      |                            |      |   |   |   |   |
|                              | Natural gas sales                  | $         | 2,311,441                       |      | $ | 1,675,149 |   | $ | 6,317,545 |   | $ | 3,092,903 |   |
|                              | Transportation and  processing     | 290,757   |                            | 94,797    |   | 458,866 |   | 197,275 |   |
|                              | Other                              | 194,954   |                            | 21,293    |   | 262,098 |   | 44,845 |   |
|                              |                               |           |                            |           |   |  |   |  |   |
|                              | 2,797,152                          |      | 1,791,239                       |      | 7,038,509 |   | 3,335,023 |   |
| Operating costs and  expenses     |                               |      |                            |      |   |   |   |   |
|                              | Cost of natural gas  purchased     | 2,038,850 |                            | 1,440,092 |   | 5,491,750 |   | 2,554,784 |   |
|                              | Operation and  maintenance         | 345,217   |                            | 227,458   |   | 626,710 |   | 498,496 |   |
|                              | Depreciation and  amortization     | 172,242   |                            | 171,231   |   | 344,762 |   | 342,537 |   |
|                              | Dry hole cost                      | -         |                            | -         |   | 89,940 |   | - |   |
|                              | General and  administrative        | 505,484   |                            | 423,742   |   | 993,849 |   | 871,244 |   |
|                              |                               |           |                            |           |   |  |   |  |   |
|                              | 3,061,793                          |      | 2,262,523                       |      | 7,547,011 |   | 4,267,061 |   |
|                              |                                    |      |                                 |      |  |   |  |   |
| Operating loss                    | (264,641                           | )         | (471,284                        | )         | (508,502 | ) | (932,038 | ) |
|                              |                               |      |                            |      |   |   |   |   |
| Other income (expense)            |                               |      |                            |      |   |   |   |   |
|                              | Interest income                    | 11,382    |                            | 14,946    |   | 23,971 |   | 30,068 |   |
|                              | Interest expense                   | (73,206   | )                               | (30,784   | ) | (105,516 | ) | (67,024 | ) |
|                              | Equity in earnings of  partnership | -         |                            | 22,567    |   | - |   | 42,070 |   |
|                              | Other income  (expense), net       | 7,916     |                            | 106,153   |   | 31,422 |   | 275,674 |   |
|                              |                               |           |                            |           |   |  |   |  |   |
|                              | (53,908                            | )         | 112,882                         |      | (50,123 | ) | 280,788 |   |
|                              |                                    |      |                                 |      |  |   |  |   |
| Net loss                          | $                                  | (318,549  | )                               | $         | (358,402 | ) | $ | (558,625 | ) | $ | (651,250 | ) |
|                              |                                    |      |                                 |      |  |   |  |   |
| Basic and diluted loss  per share | $                                  | (0.02     | )                               | $         | (0.02 | ) | $ | (0.04 | ) | $ | (0.04 | ) |
|                              |                                    |      |                                 |      |  |   |  |   |

Theaccompanying notes are an integral part of these statements.

**GATEWAY ENERGY CORPORATION ANDSUBSIDIARIES****CONSOLIDATED STATEMENTS OF CASH FLOWS****(Unaudited)**

|                                                  | **Six Months Ended June 30,**                                                |       |
|-------------------------------------------------------|------------------------------------------------------------------------------|------------|
|                                                  | ****                                                                         |       |
|                                                  | **2001**                                                                     |       | **2000** |   |
|                                                  |                                                                              |       |  |   |
| **INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**  |                                                                         |       |   |   |
| Cash flows from operating activities                  |                                                                         |       |   |   |
|                                                  | Net loss                                                                     | $          | (558,625 | ) | $ | (651,250 | ) |
|                                                  | Adjustments to reconcile net loss to net  cash used in operating activities: |       |   |   |   |
|                                                  | Equity in undistributed earnings of  partnerships                            | -          |   | 5,480 |   |
|                                                  | Depreciation and amortization                                                | 344,762    |   | 342,537 |   |
|                                                  | Gain on sale of properties                                                   | (2,500     | ) | (170,034 | ) |
|                                                  | Non-cash expenses, net                                                       | 69,524     |   | 30,875 |   |
|                                                  | Net change in cash and cash equivalents,  resulting from changes in:         |       |   |   |   |
|                                                  | Trade accounts receivable                                                    | 655,680    |   | 5,855 |   |
|                                                  | Inventories                                                                  | 959        |   | (391 | ) |
|                                                  | Prepaid expenses and other current assets                                    | (19,261    | ) | (93,779 | ) |
|                                                  | Accounts payable                                                             | (1,047,845 | ) | 242,678 |   |
|                                                  | Accrued expenses and other liabilities                                       | 71,781     |   | (299,145 | ) |
|                                                  |                                                                         |            |   |  |   |
|                                                  | Net cash used in operating activities                                        | (485,525   | ) | (587,174 | ) |
|                                                  |                                                                         |            |   |  |   |
| Cash flows from investing activities                  |                                                                         |       |   |   |
|                                                  | Capital expenditures                                                         | (102,840   | ) | (140,007 | ) |
|                                                  | Proceeds from sale of properties                                             | 2,500      |   | 910,000 |   |
|                                                  | Decrease in certificates of deposit                                          | 20,223     |   | 282,153 |   |
|                                                  |                                                                         |            |   |  |   |
|                                                  | Net cash (used in) provided by investing  activities                         | (80,117    | ) | 1,052,146 |   |
|                                                  |                                                                              |       |  |   |
| Cash flows from financing activities                  |                                                                         |       |   |   |
|                                                  | Proceeds from borrowings                                                     | 1,236,826  |   | 200,000 |   |
|                                                  | Payments on borrowings                                                       | (701,428   | ) | (628,119 | ) |
|                                                  |                                                                         |            |   |  |   |
|                                                  | Net cash provided by (used in) financing  activities                         | 535,398    |   | (428,119 | ) |
|                                                  |                                                                              |       |  |   |
| Net (decrease) increase in cash and cash  equivalents | (30,244                                                                      | )          | 36,853 |   |
| Cash and cash equivalents at beginning of  period     | 171,367                                                                      |       | 26,089 |   |
|                                                  |                                                                              |       |  |   |
| Cash and cash equivalents at end of period            | $                                                                            | 141,123    |   | $ | 62,942 |   |
|                                                  |                                                                              |       |  |   |
|                                                       |                                                                              |            |  |  |  |  |  |  |  |  |

Theaccompanying notes are an integral part of these statements.

**GATEWAY ENERGY CORPORATION ANDSUBSIDIARIESNOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

             (1)         Principles of Consolidation and Natureof Business

             Theconsolidated financial statements include the accounts of Gateway EnergyCorporation and its wholly owned subsidiary companies, Gateway PipelineCompany, Gateway Offshore Pipeline Company, Gateway Energy Marketing Company,Fort Cobb Fuel Authority, L.L.C. (“Fort Cobb”) and Gateway Processing Company,plus a small amount of activity in one joint venture.  Based on its ownership, the Company proportionally consolidatesits joint venture interest. All significant intercompany transactions have beeneliminated in consolidation.

             Theaccompanying consolidated financial statements have been prepared by theCompany, without audit.  In the opinionof management, such financial statements reflect all adjustments necessary fora fair presentation of the financial position and results of operations inaccordance with generally accepted accounting principles. The financialstatements should be read in conjunction with the financial statements and theNotes thereto included in the Company's Annual Report on Form 10-KSB for theyear ended December 31, 2000.

             TheCompany owns and operates natural gas gathering, transportation anddistribution systems and related facilities in Texas, Oklahoma and Louisiana,and offshore in Texas and federal waters of the Gulf of Mexico.  The Company also operates a natural gasdistribution company in Oklahoma.

             (2)         Earnings Per Share

             Basicearnings per share is computed by dividing net earnings or loss by the weightedaverage number of common shares outstanding during the period.  Diluted earnings per share is computed bydividing net earnings or loss by the weighted average number of sharesoutstanding, after giving effect to potentially dilutive common shareequivalents outstanding during the period. Potentially dilutive common share equivalents are not included in thecomputation of diluted earnings per share if they are anti-dilutive.  For the three-month and six-month periodsended June 30, 2001 and 2000, the diluted loss per common share is the same asbasic since the effect of potentially dilutive common shares arising fromoutstanding stock options and warrants was anti-dilutive.

             TheCompany issued 46,512 shares of common stock to its directors in May 2001 aspart of their annual compensation.  Theweighted average number of common shares outstanding used in the computation ofbasic and diluted earnings per share for the three-month periods ended June 30,2001 and 2000 and the six–month periods ended June 30, 2001 and 2000 were15,324,395, 15,312,208, 15,318,295, and 15,312,208.

(3)         Property Acquisition Payable

             AtJune 30, 2001 the Company owed $566,333 representing the remaining purchasecost, including accrued interest, of a natural gas distribution system acquiredeffective April 1994.  The purchaseagreement provided a formula to determine what, if any, amount would be due tothe seller based on achievement of certain asset performance goals.  The system achieved the specified goalsduring the three months ended June 30, 2001, and the accompanying financialstatements reflect that obligation and the related additional investment in gasgathering, processing and transportation assets.

              (4)        DryHole Cost

             Duringthe first quarter of the year, Gateway Processing Company participated as anon-operating working interest owner in the drilling of a natural gas well on aprospect in the Sacramento Basin, California. The well was expected to yield high-nitrogen natural gas reserves andemploy the Company’s licensed nitrogen rejection process to meet pipelinequality specifications.  The wellwasdetermined to be uneconomic and was abandoned.  The accompanying consolidated statement of operations for the sixmonths ended June 30, 2001 includes an impairment charge against earnings of$89,940 reflecting the abandonment of this project.

             (5)         Notes Payable

             TheCompany has an operating line of credit with a bank that provides for maximumborrowings of $500,000 through June 20, 2003. Interest is payable monthly at 5.3% per annum and principal is due ondemand, or if no demand is made, at maturity. The line is collateralized by a $500,000 certificate of deposit.

             EffectiveJune 1, 2001, Fort Cobb entered into a revolving credit agreement with a bankfor borrowings up to $250,000. Principal outstanding under the revolver accrues interest at a variablerate, based on the bank’s prime rate index plus 1.25%, with a minimum rate of8%.  The balance under the revolver isdue upon demand, or if no demand is made, at maturity at June 1, 2002, and isrenewable annually.  Costs of securingthis debt totaled $4,932 and will be charged to interest expense ratably overthe maturity period of the note.  FortCobb will use the proceeds for general working capital purposes. The agreementis collateralized with the assets of Fort Cobb, and the Company has guaranteedthe loan.

(6)         Long-term Debt

                Long-term debt as of June 30,2001 consists of the following:

| Term note                | $         | 750,000   |   |
|--------------------------|-----------|-----------|--------|
| Subordinated notes       | 629,193   |      |
|                     |           |      |
|                     | 1,379,193 |      |
| Less current  maturities | 257,751   |      |
|                     |           |      |
|                     | $         | 1,121,442 |   |
|                     |           |      |

             EffectiveJune 1, 2001, Fort Cobb borrowed $750,000 from a bank.  Principal outstanding under the note accruesinterest at a variable rate, based on the bank’s prime rate index plus 1.25%,with a minimum rate of 8%.  The note requiresmonthly payments ranging from $7,500 to $13,008, with the balance under thenote due June 1, 2008.  Costs ofsecuring this debt totaled $14,795 and will be charged to interest expenseratably over the maturity period of the note. Fort Cobb used the proceeds to refinance its borrowings.

(7)              Asset Exchange

             EffectiveMay 1, 2000, the Company completed an asset exchange with another company.  The Company received 7.6 miles of six-inchpipeline that runs from Galveston Block 227 in the Texas state waters of theGulf of Mexico to Galveston Island, in exchange for approximately 5 miles ofthree-inch pipeline located onshore in the Texas City area plus $100,000 cash.

             (8)         Commitments and Contingencies

             OnJune 18, 2001, the Company announced that Gateway Processing Company enteredinto a long-term agreement with a producer to purchase non-pipeline qualitynatural gas near Madisonville, Texas. Concurrently, Gateway Processing entered into an agreement with HanoverCompression Limited Partnership, an affiliate of The Hanover Company, underwhich Hanover will treat the gas to remove impurities from the gas to enablethe gas to meet pipeline quality sales specifications.

             Ofsignificance to Gateway, Hanover will employ the state-of-the-art, patented,absorption based technology developed by Advanced Extraction Technologies,Inc., for which Gateway has the exclusive U.S. license, to remove the nitrogenfrom the gas.

             Hanover'sfacilities, designed initially to treat 18,000 Mcf per day, and the eight-inchpipeline to be installed by Gateway Pipeline Company to transport the treatedresidue gas are expected to be on stream by the end of this year.  The Company expects its capital commitmentin this project to be approximately $1.3 million.

 (9)          SupplementalDisclosures of Cash Flow Information

             Cashpaid for interest was $49,771 and $55,217 during the six months ended June 30,2001 and 2000.

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

                The following management'sdiscussion and analysis contains trend analysis and other forward-lookingstatements within the meaning of Section 27A of the Securities Act of 1933, asamended, and Section 21E of the Securities Exchange Act of 1934, asamended.  Actual results could differmaterially from those projected in the forward-looking statements throughout thisdocument as a result of the risk factors set forth below in the sectionentitled *FactorsAffecting Future Results* and elsewhere in this document.

**Resultsof Operations**

*General*

             TheCompany evaluates each of its activities based on the operating margin itproduces.  The Company defines operatingmargin as revenues, less the cost of purchased gas and operating andmaintenance expenses.  Managementreviews and evaluates the operations of three main segments – Onshoreoperations, Offshore operations and Fort Cobb operations.  The Company continues to actively pursueopportunities in all three segments.

**Three Months Ended June 30, 2001 Compared to June 30, 2000**

*Total Operations*

             Thefollowing table sets forth information for the three months ended June 30, 2001and 2000:

|              | **2001** |      | **2000** |   |
|-------------------|----------|-----------|----------|--------|
|              | ****     |      | ****     |   |
| Revenues          | $        | 2,797,152 |     | $      | 1,791,239 |   |
| Operating margins | 413,085  |      | 123,689  |   |
| Depreciation      | 172,242  |      | 171,231  |   |
|                   |          |           |          |        |  |  |

             Operatingmargins for the three months ended June 30, 2001 increased $289,000 compared tothe same period of the prior year. Offshore operating margins increased $253,000, Fort Cobb operatingmargins increased $31,000, and Onshore operating margins increased $5,000.  These segments are discussed individuallybelow in greater detail.

*Onshore Operations*

             Thefollowing table sets forth information for the three months ended June 30, 2001and 2000:

|              | **2001** |      | **2000** |   |
|-------------------|----------|-----------|----------|--------|
|              | ****     |      | ****     |   |
| Revenues          | $        | 2,169,099 |     | $      | 1,602,140 |   |
| Operating margins | 203,568  |      | 198,552  |   |
| Depreciation      | 88,473   |      | 96,411   |   |
|                   |          |           |          |        |  |  |

             Operatingmargins for Onshore operations increased in the second quarter by $5,000 fromthe same period of the prior year, mainly due to the return to service of theCompany’s Leleux system in Louisiana, partially offset by a net decline invarious other systems.

*Offshore Operations*

             Thefollowing table sets forth information for the three months ended June 30, 2001and 2000:

|              | **2001** |    | **2000** |   |
|-------------------|----------|---------|----------|--------|
|              | ****     |    | ****     |   |
| Revenues          | $        | 399,359 |     | $      | 62,219 |   |
| Operating margins | 260,034  |    | 7,280    |   |
| Depreciation      | 34,322   |    | 33,346   |   |
|                   |          |         |          |        |  |  |

             Operatingmargins for Offshore operations increased in the second quarter by $253,000over the same period of the prior year. The increase was primarily due to theadditional natural gas and liquids volumes transported for producers in thearea of Galveston Blocks 144L, 190L and 213L, and High Island Block 98L.

*Fort Cobb Operations*

             Thefollowing table sets forth information for the three months ended June 30, 2001and 2000:

|              | **2001** |    | **2000** |   |
|-------------------|----------|---------|----------|--------|
|              | ****     |    | ****     |   |
| Revenues          | $        | 228,694 |     | $      | 126,880 |   |
| Operating margins | (50,517  | )       | (82,143  | )      |
| Depreciation      | 49,447   |    | 41,474   |   |
|                   |          |         |          |        |  |  |

             Operatingmargins for Fort Cobb operations increased in the second quarter by $31,000from the same period of the prior year due to slightly higher sales volumes andthe impact of the general rate increase which was effective December 28, 2000.  Fort Cobb’s business peaks in the third andfourth quarters because a significant portion of its load comes from supplyingirrigation and crop-drying customers.

*Operations Support*

             Thefollowing table sets forth information for the three months ended June 30, 2001and 2000:

|                               | **2001** |    | **2000** |   |
|------------------------------------|----------|---------|----------|--------|
|                               | ****     |    | ****     |   |
| General and  administrative        | $        | 505,484 |     | $      | 423,742 |   |
| Interest income                    | 11,382   |    | 14,946   |   |
| Interest expense                   | (73,206  | )       | (30,784  | )      |
| Equity in earnings of  partnership | -        |    | 22,567   |   |
| Other income  (expense), net       | 7,916    |    | 106,153  |   |
|                                    |          |         |          |        |  |  |

             Generaland administrative expenses for the quarter are 19% higher than for the sameperiod of last year, due primarily to non-cash compensation expense of repricedemployee stock options, and higher legal and professional fees.

             Interestincome varies directly with the balance on deposit in the Company’scertificates of deposit and short-term money market accounts.

             Interestexpense for the three months ended June 30, 2001 includes $43,000 related tothe property acquisition payable. Otherwise, it fluctuates directly with the amount of outstandinglong-term debt and the amount of borrowings under the Company’s operating lineof credit and revolving credit agreement.

             Equityin earnings of partnership for the prior year relates to a partnership interestthat was sold effective October 31, 2000.

             Otherincome for the prior year is comprised mainly of an adjustment to legal feeswhich were recognized in prior periods.

**Six Months Ended June 30, 2001 Compared to June 30, 2000**

*Total Operations*

             Thefollowing table sets forth information for the six months ended June 30, 2001and 2000:

|              | **2001** |      | **2000** |   |
|-------------------|----------|-----------|----------|--------|
|              | ****     |      | ****     |   |
| Revenues          | $        | 7,038,509 |     | $      | 3,335,023 |   |
| Operating margins | 920,049  |      | 281,743  |   |
| Depreciation      | 344,762  |      | 342,537  |   |
|                   |          |           |          |        |  |  |

             Operatingmargins for the six months ended June 30, 2001 increased $638,000 compared tothe same period of the prior year. Onshore operating margins increased $158,000, Offshore operating marginsincreased $377,000, and Fort Cobb operating margins increased $103,000.  These segments are discussed individuallybelow in greater detail.

*Onshore Operations*

             Thefollowing table sets forth information for the six months ended June 30, 2001and 2000:

|              | **2001** |      | **2000** |   |
|-------------------|----------|-----------|----------|--------|
|              | ****     |      | ****     |   |
| Revenues          | $        | 5,382,522 |     | $      | 2,771,834 |   |
| Operating margins | 549,419  |      | 391,743  |   |
| Depreciation      | 176,495  |      | 192,742  |   |
|                   |          |           |          |        |  |  |

             Operatingmargins for onshore operations increased $158,000 in the six months ended June30, 2001 from the same period of the prior year, mainly due to additionalvolumes on the Waxahachie distribution system in Waxahachie, Texas and the returnto service of the Company’s Leleux system in Louisiana.

*Offshore Operations*

             Thefollowing table sets forth information for the six months ended June 30, 2001and 2000:

|              | **2001** |    | **2000** |   |
|-------------------|----------|---------|----------|--------|
|              | ****     |    | ****     |   |
| Revenues          | $        | 571,937 |     | $      | 112,556 |   |
| Operating margins | 307,861  |    | (69,163  | )      |
| Depreciation      | 69,437   |    | 66,100   |   |
|                   |          |         |          |        |  |  |

             Operatingmargins for Offshore operations increased $377,000 in the six months ended June30, 2001 from the same period of the prior year.  The increase was primarily due to the additional natural gas andliquids volumes since February and March 2001 transported for producers in thearea of Galveston Blocks 144L, 190L and 213L, and High Island Block 98L.  Additionally, the prior year included anon-recurring maintenance expenditure totaling $62,000.

*Fort Cobb Operations*

             Thefollowing table sets forth information for the six months ended June 30, 2001and 2000:

|              | **2001** |      | **2000** |   |
|-------------------|----------|-----------|----------|--------|
|              | ****     |      | ****     |   |
| Revenues          | $        | 1,084,050 |     | $      | 450,633 |   |
| Operating margins | 62,769   |      | (40,837  | )      |
| Depreciation      | 98,830   |      | 83,695   |   |
|                   |          |           |          |        |  |  |

             Operatingmargins for Fort Cobb operations increased $103,000 in the six months endedJune 30, 2001 from the same period of the prior year, due to increases involumes delivered and the impact of the general rate increase which waseffective December 28, 2000.

*Operations Support*

             Thefollowing table sets forth information for the six months ended June 30, 2001and 2000:

|                               | **2001** |    | **2000** |   |
|------------------------------------|----------|---------|----------|--------|
|                               | ****     |    | ****     |   |
| General and  administrative        | $        | 993,849 |     | $      | 871,244 |   |
| Interest income                    | 23,971   |    | 30,068   |   |
| Interest expense                   | (105,516 | )       | (67,024  | )      |
| Equity in earnings of  partnership | -        |    | 42,070   |   |
| Other income  (expense), net       | 31,422   |    | 275,674  |   |
|                                    |          |         |          |        |  |  |

             Generaland administrative expenses increased 14% in the six months ended June 30, 2001compared to the same period of the prior year. The increase was primarily due to non–cash compensation expense ofrepriced employee stock options, and higher legal and professional fees.

             Interestincome varies directly with the balance on deposit in the Company’scertificates of deposit and short-term money market accounts.

             Interestexpense for the six months ended June 30, 2001 includes $43,000 related to theproperty acquisition payable. Otherwise, it fluctuates directly with the amount of outstandinglong-term debt and the amount of borrowings under the Company’s operating lineof credit and revolving credit agreement.

             Equityin earnings of partnership for the prior year relates to a partnership interestthat was sold effective October 31, 2000.

             Otherincome for the prior year includes gain on the sales of Catarina and Zwollesystems and an adjustment to legal fees recognized in prior periods.

**Liquidity and Capital Resources**

             Netcash used in operating activities totaled $486,000 for the six months endedJune 30, 2001, compared to $587,000 used in operating activities for the sameperiod last year.  The change was due tothe increase in operating margins between the two periods which is discussed bysegment in the preceding section, partially offset by changes in current assetand liability accounts of $194,000 and lower other income.

             TheCompany has cash and cash equivalents and certificates of deposit totaling$812,000 at June 30, 2001.

             TheCompany’s operating line of credit agreement with a bank provides for maximumborrowings of $500,000, through June 20, 2003, and is collateralized with acertificate of deposit for the same amount. There were no borrowings outstanding as of June 30, 2001.  Effective June 1, 2001, Fort Cobb borrowed$750,000 from a bank to refinance borrowings. Principal outstanding under the term loan accrues interest at a variablerate, based on the bank’s prime rate index plus 1.25%, with a minimum rate of8%.  The balance under the term loan isdue June 1, 2008.  Fort Cobb also enteredinto a revolving credit agreement with a bank for borrowings up to $250,000.  At June 30, 2001, there was $230,000available under the agreement.  Thebalance under the revolving credit agreement is due upon demand, or if nodemand is made, at maturity at June 1, 2002, and is renewable annually.  The term loan and the revolving creditagreement are collateralized with the assets of Fort Cobb, and the Company hasguaranteed the loans.

             Asdiscussed in Note 8 to the financial statements, Gateway Processing enteredinto long-term agreements with a producer and with Hanover Compression LimitedPartnership, an affiliate of The Hanover Company, under which the Companyexpects to invest approximately $1.3 million. The funds for this commitment are expected to come from available cashand from outside financing.

             AtJune 30, 2001, the Company’s long-term debt to total capitalization wasapproximately 15%, which should still allow opportunity for the Company toutilize conventional long-term financing to fund acquisitions or constructionprojects.

             Absentacquisitions or significant development projects, the Company will continue tofund its operations through internally generated funds and available cash andthe certificates of deposit, plus available bank borrowings.  The Company believes its cash flows fromoperations and other available cash will be sufficient to fund its ongoingoperations for the foreseeable future. Any significant property acquisitions or development projects willrequire outside project financing.

**Factors Affecting Future Results**

             TheCompany’s strategies for enhancing stockholder value include, among otherthings: (i) focusing on gathering, transporting, distributing and treatingnatural gas; (ii) expanding the Company’s asset base in core geographic areas;(iii) participating in the development of sub-quality natural gas reserves tocreate demand for our services, and; (iv) acquiring or constructing propertiesin one or more new core areas.

             TheCompany must provide services to its customers, primarily producers, atcompetitive prices. Therefore, in order to be successful the Company mustcontain its costs in line with industry competitors. The Company's access toreasonably priced long-term capital will have a significant effect on itsability to acquire additional properties to increase operating marginssufficiently to cover its fixed overhead costs. The Company believes that itslow debt, available cash reserves and experienced operating management willallow the Company to access capital and find properties which can provideattractive returns. However, there can be no assurance that the Company will besuccessful in this endeavor.

             TheCompany’s ability to generate long-term value for the common stockholder isdependent upon the enhancement of its core assets and the successfulacquisition or development of additional midstream assets. There are manycompanies participating in the midstream segment of the natural gas industry,many with resources greater than the Company. Greater competition forprofitable operations can increase prices and make it more difficult to acquireassets at reasonable multiples of cash flow. The Company believes that it will be able to compete in this environmentand will be able to find attractive investments which compliment its existingproperties; however, it is not possible to predict competition or the effectthis will have on the Company's operations.

             TheCompany's operations are also significantly affected by factors which areoutside the control of the Company. Gas gathering and processing is dependenton throughput volume. Throughput on the Company's systems is significantlydependent on natural gas production which is affected by natural gas prices asprices affect the willingness of producers to invest the required capital toobtain geological and geophysical information, drill development or exploratorywells, and to rework or maximize production on existing wells. Natural gasprices are at levels which should provide adequate incentive to producers;however, there is no assurance that such prices will remain at current levels, andthat producers will continue to react positively to the current prices.

             TheCompany's revenues, particularly from its retail operations, are also affectedby weather. Much of the retail demand is for crop irrigation and drying. Heavyprecipitation in the spring and summer growing season and hot, dry weather inthe fall can significantly reduce demand for natural gas in the Company’sretail service areas.

**Part II**

| **Item  1.** | **Legal  Proceedings**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Item  2.** | **Changes  in Securities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|         | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Item  3.** | **Defaults  Upon Senior Securities**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Item  4.** | **Submission  of Matters to a Vote of Security Holders**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         | **Increase  Authorized Shares of Common Stock**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|         | The  Company’s Board of Directors passed a resolution recommending that the  stockholders adopt an amendment to Section Fourth of the Company’s Restated  Certificate of Incorporation in order to increase the authorized number of  shares of the Company’s Common Stock from 17,500,000 to 35,000,000.  In the annual meeting of stockholders held  in Houston, Texas on May 23, 2001, there were 9,090,610 votes cast in favor  of, 1,616,578 votes cast against, and shares representing 200,868 votes  abstained from voting on the proposal.   Since the majority of shares present voted in favor of the proposal,  the amendment was approved. |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Item  5.** | **Other  Information**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|         | None                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| **Item  6.** | **Exhibits  and Reports on Form 8-K.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|         | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Exhibits: |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | None |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |
|         | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Reports  on Form 8-K: |
|         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | None |

 

**SIGNATURES**

Pursuant to the requirements of Section13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

|             | GATEWAY  ENERGY CORPORATION            |
|------------------|----------------------------------------|
|             |                                   |   |
|             | /s/  Michael T. Fadden                 |   |
|             |                                        |   |
|             | President  and Chief Executive Officer |   |
|             |                                   |   |
|             |                                   |   |
|             | /s/  Scott D. Heflin                   |   |
|             |                                        |   |
|             | Chief  Financial Officer and Treasurer |   |
|             |                                   |   |
|             |                                   |   |
| August  14, 2001 |                                   |   |
|                  |                                   |   |
| (Date)           |                                   |   |