UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                  For the fiscal year ended December 31, 2007

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

                        Commission File Number: 000-30009

                            PETROL OIL AND GAS, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Nevada                                              90-0066187
 ------------------------------                               -----------------
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          11020 King Street, Suite 375
                           Overland Park, Kansas 66210
                     --------------------------------------
                    (Address of principal executive offices)

                                 (913) 323-4925
               --------------------------------------------------
              (Registrant's telephone number, including area code)


      Securities registered pursuant to Section 12(b) of the Exchange Act:
                                      None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                         Common Stock, $0.001 par value

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.        Yes      No  X
                                                        -----   -----

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act. Yes      No  X
                                                        -----   -----

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     Indicate by check mark whether the registrant is a large accelerated filer,
or a non-accelerated filer. See definition of "accelerated filer and large
accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer       Accelerated filer       Non-accelerated filer  X
                       -----                   -----                       -----

     Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes       No  X
                                                -----   -----

     As of June 30, 2007, the aggregate market value of the registrant's voting
and non-voting common equity held by non-affiliates of the registrant was
$9,094,324 based on the closing sale price of the registrant's common stock on
the over-the-counter securities market through the National Association of
Securities Dealers Automated Quotation Bulletin Board System.

     The number of shares of Common Stock, $0.001 par value, outstanding on May
12, 2008 was 29,090,926 shares.

<PAGE>


                            PETROL OIL AND GAS, INC.

                                    FORM 10-K

                   For The Fiscal Year Ended December 31, 2007

                           FORWARD-LOOKING STATEMENTS

           This document contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements
other than statements of historical fact are "forward-looking statements" for
purposes of federal and state securities laws, including, but not limited to,
any projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.

          Forward-looking statements may include the words "may," "could,"
"estimate," "intend," "continue," "believe," "expect" or "anticipate" or other
similar words. These forward-looking statements present our estimates and
assumptions only as of the date of this report. Except for our ongoing
securities laws, we do not intend, and undertake no obligation, to update any
forward-looking statement.

           Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any or our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and inherent risks and
uncertainties. The factors impacting these risks and uncertainties include, but
are not limited to:

     o    increased competitive pressures from existing competitors and new
          entrants;

     o    increases in interest rates or our cost of borrowing or a default
          under any material debt agreements;

     o    deterioration in general or regional economic conditions;

     o    adverse state or federal legislation or regulation that increases the
          costs of compliance, or adverse findings by a regulator with respect
          to existing operations;

     o    hedging risks;

     o    ability to attract and retain key personnel;

     o    inability to achieve future sales levels or other operating results;

     o    fluctuations of oil and gas prices;

     o    the unavailability of funds for capital expenditures; and

     o    operational inefficiencies in distribution or other systems.

          For a detailed description of these and other factors that could cause
actual results to differ materially from those expressed in any forward-looking
statement, please see Item 1A. Risk Factors in this document.

         In this Form 10-K references to "PETROL", "the Company", "we," "us,"
and "our" refer to PETROL OIL AND GAS, INC. and its subsidiaries.

                                       2

<PAGE>


                                     PART I

ITEM 1.       BUSINESS

         Petrol Oil and Gas, Inc. was incorporated in the State of Nevada in
March of 2000 as Euro Technology Outfitters. On August 19, 2002 we acquired
approximately 289 oil and gas mineral leases from Petrol Energy, and
concurrently changed our name to Petrol Oil and Gas, Inc. Our common stock
trades on the over-the-counter securities market through the National
Association of Securities Dealers Automated Quotation Bulletin Board System,
under the trading symbol "POIG".

         At December 31, 2007, the Company had long term debt (including the
current portion of long term debt) of approximately $26.7 million. Approximately
$15 million of this debt was utilized to develop the Coal Creek Project, which
has contributed no significant revenue to the Company. As a result, the
Company's cash position has seriously declined. On October 28, 2007, the Company
was required to make a principal payment of approximately $1.1 million on a
portion of its long term debt. The Company did not have adequate cash to make
such principal payment and is currently in default under the terms of the note
for this long term debt.

         On April 9, 2008, the Company's debt was declared in default and
accelerated by the lenders, LV Administrative Services, Inc. ("LV"),
administrative and collateral agent for Laurus Master Fund, Ltd. ("Laurus"),
Valens Offshore SPV I, Ltd. ("Valens Offshore"), Valens U.S. SPV I, LLC ("Valens
US"), Calliope Capital Corporation ("Calliope") and Pallas Production Corp.
("Pallas", and together with, Laurus, Valens Offshore, Valens US and Calliope,
the "Holders").

            On April 30, 2008, the Company entered into a Foreclosure-Related
Agreement (the "Foreclosure Agreement") with LV and the Holders. The aggregate
amount due and owing to the Holders as of April 30, 2008 was approximately $35.7
million.

            The outstanding obligations are secured by various mortgages and
other fixed and mixed assets and real and personal property pursuant to security
and other agreements covering assets or other rights to which the Company has
rights (all such assets, rights and collateral, collectively, the "Collateral"),
a portion of which are assets and rights referred to as the "Petrol-Neodesha
Project," located in Neosho and Wilson Counties, Kansas, consisting of, among
other Collateral, mortgages, and real, personal property and fixed and mixed
assets used in connection with the Petrol-Neodesha Project (the "Neodesha
Collateral").

            The Agreement allows the Holders to foreclose on the Neodesha
Collateral and governs the terms and conditions of the foreclosure. The
Agreement provides that the Company will not contest the sale of the Neodesha
Collateral, which will be conducted as a public foreclosure sale in accordance
with Kansas law. The Company has agreed to reasonably assist LV and the Holders
in the completion of the foreclosure sale. After the sale of the Neodesha
Collateral becomes final, LV and the Holders will release Petrol of all
remaining amounts owed or claims they may have, and the Holders will reassign to
Petrol their overriding royalty interests in the mineral leases located at the
Company 's Coal Creek Project.

            As part of the Agreement, the Company will cancel all outstanding
warrants for purchases of securities issued to Holders in connection with the
Outstanding Obligations and replace them with warrants to purchase 1,000,000
shares of common stock at an initial exercise price of $0.20 per share.

            The foreclosure by LV and the Holders described above will leave the
Company with far fewer assets than it currently has. There can be no assurance
that the Company will be able to continue operations and satisfy its obligations
in the future.

Business of Issuer

            We are an oil and gas exploration, development and production
company. Our properties are located in the Cherokee and Forrest Basins along the
Kansas and Missouri border. Our corporate strategy has been to build value
through the development and acquisition of gas and oil assets that exhibit
consistent, predictable, and long-lived production, with a focus on Coal Bed
Methane ("CBM") reservoirs in the central U.S. In prior periods, we have
described five separate projects of the Company. Two of those projects, the
Pomona Project and the Missouri Project have been abandoned and the leases
covering those projects have expired. We have segregated our current operations
into three separate projects, which include:

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<PAGE>


            Petrol-Neodesha Project

            Our gas producing leases known as Petrol-Neodesha, in the Neosho and
Wilson counties, account for approximately 10,000 of the Company's total of
approximately 56,000 gross leased acres. However, this project produces
substantially all of the Company's gas production. As discussed above, this
project will be subject to foreclosure by our lenders pursuant to the
Foreclosure Agreement.

            The Petrol-Neodesha Project includes over 100 CBM production wells,
8 saltwater disposal wells ("SWD Wells") wells and a fully contained and
integrated gas gathering pipeline and gas processing system. At this time, we
have suspended our development plan for the Petrol-Neodesha Project and have
discontinued lease acquisitions in the area due a shortage of funds. The
Petrol-Neodesha properties have provided us with the bulk of our revenue stream
and value in proven producing reserves and therefore represent the most valuable
group of assets of the Company. However, if we do not resume development of
these properties, we expect to see revenues decline as existing wells mature and
experience production declines.

            Coal Creek Project

            The Coal Creek Project, centered in Coffey County, Kansas, includes
leases covering about 46,000 gross acres. Leases for the Coal Creek Project
covering approximately 46,000 gross acres have recently expired. The Company has
invested approximately $15 million in the Coal Creek Project for the
construction of a gathering system and the drilling and completion of over 50
CBM wells. Of these wells, only four wells are producing natural gas, and only
one of these is producing CBM. Total production from these wells is minimal. Due
to a number of technical issues with the wells and the geology, it is doubtful
that significant production will ever be obtained from these properties. The
Company does not currently plan to drill any additional CBM wells in the Coal
Creek Project.

            The Company doubts that the Coal Creek Project will at any time in
the future contribute to the Company's revenues to any significant extent. The
Company is currently evaluating whether there are exploration and development
opportunities for oil or conventional natural gas from the leases acquired for
the Coal Creek Project.

            The Company is currently evaluating the cost of plugging and
abandoning the wells drilled on the Coal Creek Project and the salvage value of
the assets located on that project.

            Oil Field Project

            Petrol currently holds a 100% working interest in several oil
producing properties in eastern Kansas that produced approximately 4,744 barrels
of oil (bbl) during 2007 (3,819 bbl net to Petrol). The oil producing wells on
these properties and in the surrounding areas are generally defined as stripper
wells and usually produce under the influence of a water flood. Most of the
leases that comprise this project were sold in September 2007.

Gas Purchase and Sale Agreement

         To reduce our exposure to unfavorable changes in natural gas prices we
utilize energy swaps in order to have a fixed-price contract. These contracts
allow us to be able to predict with greater certainty the effective natural gas
prices to be received for hedged production and benefit operating cash flows and
earnings when market prices are less than the fixed prices provided under the
contracts. However, we will not benefit from market prices that are higher than
fixed prices in contracts for hedged production. If we are unable to provide the
quantity that we have contracted for we will have to go to the open market to
purchase the required amounts that we have contracted to provide.

         In 2005, Petrol entered into contracts with Seminole Energy Services
LLC to sell 60,000 mmbtu per month for the period of March 2005 to February 2006
at various fixed prices with the overall average price of $5.99. Additionally,
Petrol had contracts with Virginia Power to sell certain of its gas production
through March 2007 at various fixed prices with the overall average price of
$8.13.

         From April 2007 through March 2008 Petrol has agreed to sell
approximately 30,500 mmbtu at an average sales price of $7.32. The remainder of
Petrol's gas sales will be at current market price.

                                       4

<PAGE>


Governmental Regulations

         Regulation of Oil and Natural Gas Production. Our oil and natural gas
exploration, production and related operations, when developed, are subject to
extensive rules and regulations promulgated by federal, state, tribal and local
authorities and agencies. For example, some states in which we may operate
require permits for drilling operations, drilling bonds and reports concerning
operations and impose other requirements relating to the exploration and
production of oil and natural gas. Such states may also have statutes or
regulations addressing conservation matters, including provisions for the
unitization or pooling of oil and natural gas properties, the establishment of
maximum rates of production from wells, and the regulation of spacing, plugging
and abandonment of such wells. Failure to comply with any such rules and
regulations can result in substantial penalties. The regulatory burden on the
oil and gas industry will most likely increase our cost of doing business and
may affect our profitability. Although we believe we are currently in
substantial compliance with all applicable laws and regulations, because such
rules and regulations are frequently amended or reinterpreted, we are unable to
predict the future cost or impact of complying with such laws. Significant
expenditures may be required to comply with governmental laws and regulations
and may have a material adverse effect on our financial condition and results of
operations.

         Federal Regulation of Natural Gas. The Federal Energy Regulatory
Commission ("FERC") regulates interstate natural gas transportation rates and
service conditions, which may affect the marketing of natural gas produced by
us, as well as the revenues that may be received by us for sales of such
production. Since the mid-1980's, FERC has issued a series of orders,
culminating in Order Nos. 636, 636-A and 636-B ("Order 636"), that have
significantly altered the marketing and transportation of natural gas. Order 636
mandated a fundamental restructuring of interstate pipeline sales and
transportation service, including the unbundling by interstate pipelines of the
sale, transportation, storage and other components of the city-gate sales
services such pipelines previously performed. One of FERC's purposes in issuing
the order was to increase competition within all phases of the natural gas
industry. The United States Court of Appeals for the District of Columbia
Circuit largely upheld Order 636 and the Supreme Court has declined to hear the
appeal from that decision. Generally, Order 636 has eliminated or substantially
reduced the interstate pipelines' traditional role as wholesalers of natural gas
in favor of providing only storage and transportation service, and has
substantially increased competition and volatility in natural gas markets.

         The price we may receive from the sale of oil and natural gas liquids
will be affected by the cost of transporting products to markets. Effective
January 1, 1995, FERC implemented regulations establishing an indexing system
for transportation rates for oil pipelines, which, generally, would index such
rates to inflation, subject to certain conditions and limitations. We are not
able to predict with certainty the effect, if any, of these regulations on our
intended operations. However, the regulations may increase transportation costs
or reduce well head prices for oil and natural gas liquids.

Environmental Matters

         Our operations and properties subject to extensive and changing
federal, state and local laws and regulations relating to environmental
protection, including the generation, storage, handling, emission,
transportation and discharge of materials into the environment, and relating to
safety and health. The recent trend in environmental legislation and regulation
generally is toward stricter standards, and this trend will likely continue.
These laws and regulations may:

o        require the acquisition of a permit or other authorization before
         construction or drilling commences and for certain other activities;

o        limit or prohibit construction, drilling and other activities on
         certain lands lying within wilderness and other protected areas; and

o        impose substantial liabilities for pollution resulting from our
         operations.

         The permits required for our operations may be subject to revocation,
modification and renewal by issuing authorities. Governmental authorities have
the power to enforce their regulations, and violations are subject to fines or
injunctions, or both. In the opinion of management, we are in substantial
compliance with current applicable environmental laws and regulations, and have

                                       5

<PAGE>


no material commitments for capital expenditures to comply with existing
environmental requirements. Nevertheless, changes in existing environmental laws
and regulations or in interpretations thereof could have a significant impact on
us, as well as the oil and natural gas industry in general.

         The Comprehensive Environmental, Response, Compensation, and Liability
Act ("CERCLA") and comparable state statutes impose strict, joint and several
liability on owners and operators of sites and on persons who disposed of or
arranged for the disposal of "hazardous substances" found at such sites. It is
not uncommon for the neighboring land owners and other third parties to file
claims for personal injury and property damage allegedly caused by the hazardous
substances released into the environment. The Federal Resource Conservation and
Recovery Act ("RCRA") and comparable state statutes govern the disposal of
"solid waste" and "hazardous waste" and authorize the imposition of substantial
fines and penalties for noncompliance. Although CERCLA currently excludes
petroleum from its definition of "hazardous substance," state laws affecting our
operations may impose clean-up liability relating to petroleum and petroleum
related products. In addition, although RCRA classifies certain oil field wastes
as "non-hazardous," such exploration and production wastes could be reclassified
as hazardous wastes thereby making such wastes subject to more stringent
handling and disposal requirements.

         The Endangered Species Act ("ESA") seeks to ensure that activities do
not jeopardize endangered or threatened animal, fish and plant species, nor
destroy or modify the critical habitat of such species. Under ESA, exploration
and production operations, as well as actions by federal agencies, may not
significantly impair or jeopardize the species or its habitat. ESA provides for
criminal penalties for willful violations of the Act. Other statutes that
provide protection to animal and plant species and that may apply to our
operations include, but are not necessarily limited to, the Fish and Wildlife
Coordination Act, the Fishery Conservation and Management Act, the Migratory
Bird Treaty Act and the National Historic Preservation Act. Although we believe
that our operations will be in substantial compliance with such statutes, any
change in these statutes or any reclassification of a species as endangered
could subject us to significant expenses to modify our operations or could force
us to discontinue certain operations altogether.

Competition

          We compete with numerous other oil and gas exploration companies. Many
of these competitors have substantially greater resources than we do. Should a
larger and better financed company decide to directly compete with us, and be
successful in its competitive efforts, our business could be adversely affected.

Personnel

         We currently have eight full time employees and three part time
employees as well as up to twelve contract personnel that support and operate
our field operations. As drilling production activities increase, we intend to
hire additional technical, operational and administrative personnel as
appropriate. None of our employees are subject to any collective bargaining
agreements.

Available Information. Our Internet website address is www.petroloilandgas.com.
Information contained on our website is not part of this report on Form 10-K.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K filed with (or furnished to) the Securities and Exchange
Commission (SEC) are available on our Internet website (in the "Investor
Relations" section), free of charge, as soon as reasonably practicable after we
file or furnish such material. Our governance documents are available in print
to any stockholder that makes a written request to the Secretary of the
Corporation at Corporate Woods, Building 51, 9393 West 110th Street, Suite 500,
Overland Park, Kansas 66210.

ITEM 1A. RISK FACTORS

Risks Associated with Laurus Funds Financing

We have substantial indebtedness to Laurus Master Fund, Ltd. which is secured by
substantially all of our assets. We are in default on the secured notes issued
to Laurus Funds, and Laurus Funds plans to foreclose on our Neodesha Project
assets, which constitute most of the valuable assets of the Company.

         On April 9, 2008, the Company's debt was declared in default and
accelerated by the Company's lenders, LV and the Holders. On April 30, 2008, the
Company entered into a Foreclosure Agreement with LV and the Holders. The
aggregate amount due and owing to the Holders as of April 30, 2008 was
approximately $35.7 million. The outstanding obligations are secured by various

                                       6

<PAGE>


mortgages and other fixed and mixed assets and real and personal property
pursuant to security and other agreements covering assets or other rights to
which Petrol has rights (all such assets, rights and collateral, collectively,
the "Collateral"), a portion of which are assets and rights referred to as the
"Petrol-Neodesha Project," located in Neosho and Wilson Counties, Kansas,
consisting of, among other Collateral, mortgages, and real, personal property
and fixed and mixed assets used in connection with the Petrol-Neodesha Project
(the "Neodesha Collateral").

            The Foreclosure Agreement allows the Holders to foreclose on the
Neodesha Collateral and governs the terms and conditions of the foreclosure. The
Agreement provides that Petrol will not contest the sale of the Neodesha
Collateral, which will be conducted as a public foreclosure sale in accordance
with Kansas law. Petrol has agreed to reasonably assist LV and the Holders in
the completion of the foreclosure sale. After the sale of the Neodesha
Collateral becomes final, LV and the Holders will release Petrol of all
remaining amounts owed or claims they may have, and the Holders will reassign to
Petrol their overriding royalty interests in the mineral leases located at
Petrol's Coal Creek Project.

         The foreclosure by LV and the Holders described above will leave the
Company with far fewer assets than it currently has. There can be no assurance
that the Company will continue operations and be able to satisfy its obligations
in the future.

Risks Associated with Oil and Gas Operations

Because we face uncertainties in estimating proven recoverable natural gas
reserves, you should not place undue reliance on such reserve information.

         This Form 10-K contains estimates of natural gas reserves, and the
future net cash flows attributable to those reserves, prepared by McCune
Engineering, our independent petroleum and geological engineer. There are
numerous uncertainties inherent in estimating quantities of proved reserves and
cash flows from such reserves, including factors beyond our control and the
control of McCune Engineering. Reserve engineering is a subjective process of
estimating underground accumulations of natural gas and oil that cannot be
measured in an exact manner. The accuracy of an estimate of quantities of
reserves, or of cash flows attributable to these reserves, is a function of the
available data; assumptions regarding future natural gas and oil prices;
expenditures for future development and exploitation activities; and engineering
and geological interpretation and judgment. Reserves and future cash flows may
also be subject to material downward or upward revisions based upon production
history, development and exploitation activities and natural gas and oil prices.
Actual future production, revenue, taxes, development expenditures, operating
expenses, quantities of recoverable reserves and value of cash flows from those
reserves may vary significantly from the assumptions and estimates in this Form
10-K. Any significant variance from these assumptions to actual figures could
greatly affect our estimates of reserves, the economically recoverable
quantities of natural gas attributable to any particular group of properties,
the classification of reserves based on risk of recovery, and estimates of the
future net cash flows. In addition, reserve engineers may make different
estimates of reserves and cash flows based on the same available data. The
estimated quantities of proved reserves and the discounted present value of
future net cash flows attributable to those reserves included in this Form 10-K
were prepared by McCune Engineering in accordance with the rules of the SEC, and
are not intended to represent the fair market value of such reserves.

         The present value of future net cash flows from our proved reserves is
not necessarily the same as the current market value of our estimated natural
gas reserves. We base the estimated discounted future net cash flows from our
proved reserves on prices and costs. However, actual future net cash flows from
our natural gas and oil properties also will be affected by factors such as:

     o    geological conditions;
     o    changes in governmental regulations and taxation;
     o    assumptions governing future prices;
     o    the amount and timing of actual production;
     o    availability of funds;
     o    future operating and development costs; and
     o    capital costs of drilling new wells.

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         The timing of both our production and our incurrence of expenses in
connection with the development and production of natural gas properties will
affect the timing of actual future net cash flows from proved reserves, and thus
their actual present value. In addition, the 10% discount factor we use when
calculating discounted future net cash flows may not be the most appropriate
discount factor based on interest rates in effect from time to time and risks
associated with us or the natural gas and oil industry in general.

         The SEC permits natural gas companies, in their filings with the SEC,
to disclose only proved reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and legally
producible under existing economic and operating conditions. The SEC's
guidelines strictly prohibit us from including "probable reserves" and "possible
reserves" in filings with the SEC. We also caution you that the SEC views such
"probable" and "possible" reserve estimates as inherently unreliable and these
estimates may be seen as misleading to investors unless the reader is an expert
in the natural gas industry. Unless you have such expertise, you should not
place undo reliance on these estimates. Potential investors should also be aware
that such "probable" and "possible" reserve estimates will not be contained in
any "resale" or other registration statement filed by us that offers or sells
shares on behalf of purchasers of our common stock and may have an impact on the
valuation of the resale of the shares. We undertake no duty to update this
information and does not intend to update the information.

Drilling wells is speculative, often involving significant costs that may be
more than our estimates, and may not result in any addition to our production or
reserves. Any material inaccuracies in drilling costs, estimates or underlying
assumptions will materially affect our business.

         Developing and exploring for natural gas and oil involves a high degree
of operational and financial risk, which precludes definitive statements as to
the time required and costs involved in reaching certain objectives. The
budgeted costs of drilling, completing and operating wells are often exceeded
and can increase significantly when drilling costs rise due to a tightening in
the supply of various types of oilfield equipment and related services. Drilling
may be unsuccessful for many reasons, including title problems, weather, cost
overruns, equipment shortages and mechanical difficulties. Moreover, the
successful drilling of a natural gas or oil well does not ensure a profit on
investment. Exploratory wells bear a much greater risk of loss than development
wells. A variety of factors, both geological and market-related, can cause a
well to become uneconomical or only marginally economic. Our initial drilling
and development sites, and any potential additional sites that may be developed,
require significant additional exploration and development, regulatory approval
and commitments of resources prior to commercial development. Any success that
we may have with these wells or any future drilling operations will most likely
not be indicative of our current or future drilling success rate, particularly,
because we intend to emphasize on exploratory drilling. If our actual drilling
and development costs are significantly more than our estimated costs, we may
not be able to continue our business operations as proposed and would be forced
to modify our plan of operation.

         Development of our reserves, when established, may not occur as
scheduled and the actual results may not be as anticipated. Drilling activity
may result in downward adjustments in reserves or higher than anticipated costs.
Our estimates will be based on various assumptions, including assumptions
required by the Securities and Exchange Commission relating to natural gas and
oil prices, drilling and operating expenses, capital expenditures, taxes and
availability of funds. The process of estimating our natural gas and oil
reserves is anticipated to be extremely complex, and will require significant
decisions and assumptions in the evaluation of available geological,
geophysical, engineering and economic data for each reservoir. Due to our
inexperience in the oil and gas industry, our estimates may not be reliable
enough to allow us to be successful in our intended business operations. Our
actual production, revenues, taxes, development expenditures and operating
expenses will likely vary from those anticipated. These variances may be
material.

Gas and Oil prices are volatile. This volatility may occur in the future,
causing negative change in cash flows which may result in our inability to cover
our capital expenditures.

         Our future revenues, profitability, future growth and the carrying
value of our properties is anticipated to depend substantially on the prices we
may realize for our natural gas and oil production. Our realized prices may also
affect the amount of cash flow available for capital expenditures and our
ability to borrow and raise additional capital.

         Natural gas and oil prices are subject to wide fluctuations in response
to relatively minor changes in or perceptions regarding supply and demand.
Historically, the markets for natural gas and oil have been volatile, and they
are likely to continue to be volatile in the future. For example, natural gas
and oil prices declined significantly in late 1998 and 1999 and, for an extended

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period of time, remained substantially below prices obtained in previous years.
Among the factors that can cause this volatility are:

          o    worldwide or regional demand for energy, which is affected by
               economic conditions;
          o    the domestic and foreign supply of natural gas and oil;
          o    weather conditions;
          o    domestic and foreign governmental regulations;
          o    political conditions in natural gas and oil producing regions;
          o    the ability of members of the Organization of Petroleum Exporting
               Countries to agree upon and maintain oil prices and production
               levels; and
          o    the price and availability of other fuels.

         It is impossible to predict natural gas and oil price movements with
certainty. Lower natural gas and oil prices may not only decrease our future
revenues on a per unit basis but also may reduce the amount of natural gas and
oil that we can produce economically. A substantial or extended decline in
natural gas and oil prices may materially and adversely affect our future
business enough to force us to cease our business operations. In addition, our
financial condition, results of operations, liquidity and ability to finance
planned capital expenditures will also suffer in such a price decline. Further,
natural gas and oil prices do not necessarily move together.

We may incur substantial write-downs of the carrying value of our gas and oil
properties, which would adversely impact our earnings.

         We periodically review the carrying value of our gas and oil properties
under the full cost accounting rules of the Securities and Exchange Commission.
Under these rules, capitalized costs of proved gas and oil properties may not
exceed the present value of estimated future net revenues from proved reserves,
discounted at an annual rate of 10%. Application of this "ceiling" test requires
pricing future revenue at the un-escalated prices in effect as of the end of
each fiscal quarter and requires a write-down for accounting purposes if the
ceiling is exceeded, even if prices were depressed for only a short period of
time. We may be required to write down the carrying value of our gas and oil
properties when natural gas and oil prices are depressed or unusually volatile,
which would result in a charge against our earnings. Once incurred, a write-down
of the carrying value of our natural gas and oil properties is not reversible at
a later date.

Currently the vast majority of our producing properties are located in the
Cherokee Basin of southeastern Kansas, making us vulnerable to risks associated
with having our production concentrated in one area.

         The vast majority of our producing properties are geographically
concentrated in the Cherokee Basin of southeastern Kansas. As a result of this
concentration, we may be disproportionately exposed to the impact of delays or
interruptions of production from these wells caused by significant governmental
regulation, transportation capacity constraints, curtailment of production,
natural disasters, adverse weather conditions or interruption of transportation
of natural gas produced from the wells in this basin or other events which
impact this area.

Competition in our industry is intense. We are very small and have an extremely
limited operating history as compared to the vast majority of our competitors,
and we may not be able to compete effectively.

         We intend to compete with major and independent natural gas and oil
companies for property acquisitions. We will also compete for the equipment and
labor required to operate and to develop natural gas and oil properties. The
majority of our anticipated competitors have substantially greater financial and
other resources than we do. In addition, larger competitors may be able to
absorb the burden of any changes in federal, state and local laws and
regulations more easily than we can, which would adversely affect our
competitive position. These competitors may be able to pay more for natural gas
and oil properties and may be able to define, evaluate, bid for and acquire a
greater number of properties than we can. Our ability to acquire additional
properties and develop new and existing properties in the future will depend on
our ability to conduct operations, to evaluate and select suitable properties
and to consummate transactions in this highly competitive environment. In
addition, some of our competitors have been operating in our core areas for a
much longer time than we have and have demonstrated the ability to operate
through industry cycles.

The natural gas and oil business involves numerous uncertainties and operating
risks that can prevent us from realizing profits and can cause substantial
losses.

                                       9

<PAGE>


         Our development, exploitation and exploration activities may be
unsuccessful for many reasons, including weather, cost overruns, equipment
shortages and mechanical difficulties. Moreover, the successful drilling of a
natural gas and oil well does not ensure a profit on investment. A variety of
factors, both geological and market-related, can cause a well to become
uneconomical or only marginally economical. In addition to their cost,
unsuccessful wells can hurt our efforts to replace reserves.

         The natural gas and oil business involves a variety of operating risks,
including:

         o    fires;
         o    explosions;
         o    blow-outs and surface cratering;
         o    uncontrollable flows of oil, natural gas, and formation water;
         o    natural disasters, such as hurricanes and other adverse weather
              conditions;
         o    pipe, cement, or pipeline failures;
         o    casing collapses;
         o    embedded oil field drilling and service tools;
         o    abnormally pressured formations; and
         o    environmental hazards, such as natural gas leaks, oil spills,
              pipeline ruptures and discharges of toxic gases.

         If we experience any of these problems, it could affect well bores,
gathering systems and processing facilities, which could adversely affect our
ability to conduct operations. We could also incur substantial losses as a
result of:

         o    injury or loss of life;
         o    severe damage to and destruction of property, natural resources
              and equipment;
         o    pollution and other environmental damage;
         o    clean-up responsibilities;
         o    regulatory investigation and penalties;
         o    suspension of our operations; and
         o    repairs to resume operations.

         Because we intend to use third-party drilling contractors to drill our
wells, we may not realize the full benefit of worker compensation laws in
dealing with their employees. Our insurance does not protect us against all
operational risks. We do not carry business interruption insurance at levels
that would provide enough funds for us to continue operating without access to
other funds. For some risks, we may not obtain insurance if we believe the cost
of available insurance is excessive relative to the risks presented. In
addition, pollution and environmental risks generally are not fully insurable.
If a significant accident or other event occurs and is not fully covered by
insurance, it could impact our operations enough to force us to cease our
operations.

The high cost of drilling rigs, equipment, supplies, personnel and other
services could adversely affect our ability to execute on a timely basis our
development, exploitation and exploration plans within our budget.

         Shortages or an increase in cost of drilling rigs, equipment, supplies
or personnel could delay or interrupt our operations, which could impact our
financial condition and results of operations. Drilling activity in the
geographic areas in which we conduct drilling activities may increase, which
would lead to increases in associated costs, including those related to drilling
rigs, equipment, supplies and personnel and the services and products of other
vendors to the industry. Increased drilling activity in these areas may also
decrease the availability of rigs. We do not have any contracts with providers
of drilling rigs and we cannot assure you that drilling rigs will be readily
available when we need them. Drilling and other costs may increase further and
necessary equipment and services may not be available to us at economical
prices.

Our lease ownership may be diluted due to financing strategies we may employ in
the future due to our lack of capital or due to our focus on producing leases.

         To accelerate our development efforts we plan to take on working
interest partners that will contribute to the costs of drilling and completion
and then share in revenues derived from production. In addition, we may in the

                                       10

<PAGE>


future, due to a lack of capital or other strategic reasons, establish joint
venture partnerships or farm out all or part of our development efforts. These
economic strategies may have a dilutive effect on our lease ownership and will
more than likely reduce our operating revenues.

         In addition, our lease ownership is subject to forfeiture in the event
we are unwilling or unable to continue making lease payments. Our leases vary in
price per acre and on the term period of the lease. Each lease requires payment
to maintain an active lease. In the event we are unable or unwilling to make our
lease payments or renew expiring leases, then we will forfeit our rights to such
leases. Such forfeiture would prevent us from pursuing development activity on
the leased property and could have a substantial impact on our gross leased
acreage.

We are subject to complex laws and regulations, including environmental
regulations, which can adversely affect the cost, manner or feasibility of doing
business.

         Development, production and sale of natural gas and oil in the United
States are subject to extensive laws and regulations, including environmental
laws and regulations. We may be required to make large expenditures to comply
with environmental and other governmental regulations. Matters subject to
regulation include:

         o    location and density of wells;
         o    the handling of drilling fluids and obtaining discharge permits
              for drilling operations;
         o    accounting for and payment of royalties on production from state,
              federal and Indian lands;
         o    bonds for ownership, development and production of natural gas
              and oil properties;
         o    transportation of natural gas and oil by pipelines;
         o    operation of wells and reports concerning operations; and o
              taxation.

         Under these laws and regulations, we could be liable for personal
injuries, property damage, oil spills, discharge of hazardous materials,
remediation and clean-up costs and other environmental damages. Failure to
comply with these laws and regulations also may result in the suspension or
termination of our operations and subject us to administrative, civil and
criminal penalties. Moreover, these laws and regulations could change in ways
that substantially increase our costs. Accordingly, any of these liabilities,
penalties, suspensions, terminations or regulatory changes could materially
adversely affect our financial condition and results of operations enough to
possibly force us to cease our business operations.

Our oil and gas operations may expose us to environmental liabilities.

         Any leakage of crude oil and/or gas from the subsurface portions of our
wells, our gathering system or our storage facilities could cause degradation of
fresh groundwater resources, as well as surface damage, potentially resulting in
suspension of operation of the wells, fines and penalties from governmental
agencies, expenditures for remediation of the affected resource, and liabilities
to third parties for property damages and personal injuries. In addition, any
sale of residual crude oil collected as part of the drilling and recovery
process could impose liability on us if the entity to which the oil was
transferred fails to manage the material in accordance with applicable
environmental health and safety laws.

Risks Associated with Our Business

Our auditor's report reflects the fact that without realization of additional
capital, it would be unlikely for us to continue as a going concern.

         As a result of our deficiency in working capital at December 31, 2007,
the anticipated foreclosure by our secured lenders and other factors, our
auditors have included an explanatory paragraph in their audit report regarding
substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments as a result of this
uncertainty. The going concern qualification may adversely impact our ability to
raise the capital necessary for the expansion and continuation of operations.

Our internal controls may be inadequate, which could cause our financial
reporting to be unreliable and lead to misinformation being disseminated to the
public.

         Our management is responsible for establishing and maintaining adequate
internal control over financial reporting. As defined in Exchange Act Rule
13a-15(f), internal control over financial reporting is a process designed by,

                                       11

<PAGE>


or under the supervision of, the principal executive and principal financial
officer and effected by the board of directors, management and other personnel,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and
procedures that: (i) pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of Petrol; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of Petrol are being made only in accordance with authorizations of
management and directors of Petrol, and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Petrol's assets that could have a material effect on the
financial statements.

         Effective internal controls are necessary for us to provide reliable
financial reports, prevent fraud and operate successfully as a public company.
We cannot be certain that our efforts to maintain internal controls will be
successful, that we will be able to maintain adequate controls over our
financial processes and reporting in the future or that we will be able to
comply with our obligations under Section 404 of the Sarbanes-Oxley Act of 2002.
Further, we have a limited number of personnel that are required to perform
various roles and duties as well as be responsible for monitoring and ensuring
compliance with our internal control procedures. As a result, our internal
controls may be inadequate or ineffective, which could cause our financial
reporting to be unreliable and lead to misinformation being disseminated to the
public. Any failure to develop or maintain effective internal controls or
difficulties encountered in implementing or improving our internal controls
could harm operating results or cause us to fail to meet our reporting
obligations. Ineffective internal controls also could cause our stockholders and
potential investors to lose confidence in our reported financial information,
which would likely have a negative effect on the trading price of our common
stock. In addition, investors relying upon this misinformation may make an
uninformed investment decision.

We may need additional capital in the future to finance our planned growth,
which we may not be able to raise or it may only be available on terms
unfavorable to us or our stockholders, which may result in our inability to fund
our working capital requirements and harm our operational results.

         We have had substantial capital expenditure and working capital needs
associated with the development of our Coal Creek Project. We believe that
current cash on hand and the other sources of liquidity are only sufficient
enough to fund our operations through fiscal 2007. After that time we will need
to rely on cash flow operations or raise additional cash to fund our operations,
to fund our anticipated reserve replacement needs and implement our growth
strategy, or to respond to competitive pressures and/or perceived opportunities,
such as investment, acquisition, exploration and development activities.

         If low natural gas and oil prices, operating difficulties or other
factors, many of which are beyond our control, cause our revenues or cash flows
from operations to decrease, we may be limited in our ability to spend the
capital necessary to complete our development, production exploitation and
exploration programs. If our resources or cash flows do not satisfy our
operational needs, we will require additional financing, in addition to
anticipated cash generated from our operations, to fund our planned growth.
Additional financing might not be available on terms favorable to us, or at all.
If adequate funds were not available or were not available on acceptable terms,
our ability to fund our operations, take advantage of unanticipated
opportunities, develop or enhance our business or otherwise respond to
competitive pressures would be significantly limited. In such a capital
restricted situation, we may curtail our acquisition, drilling, development, and
exploration activities or be forced to sell some of our assets on an untimely or
unfavorable basis.

         If we raise additional funds through the issuance of equity or
convertible debt securities, the percentage ownership of our stockholders would
be reduced, and these newly issued securities might have rights, preferences or
privileges senior to those of existing stockholders.

Shortages of natural gas and oil field service personnel and equipment could
adversely affect our business.

         The demand for qualified and experienced field personnel to drill wells
and conduct field operations, geologists, geophysicists, engineers and other
professionals in the oil and natural gas industry can fluctuate significantly,
often in correlation with oil and natural gas prices, causing periodic
shortages. Due to recent high natural gas and oil prices, we have experienced
shortages of drilling rigs and other equipment, as demand for rigs and equipment
has increased along with the number of wells being drilled. Higher natural gas
and oil prices generally stimulate increased demand and result in increased
prices for drilling rigs, crews and associated supplies, oilfield equipment and

                                       12

<PAGE>


services and personnel in our exploration and production operations. These types
of shortages or price increases could significantly decrease our profit margin,
cash flow and operating results or restrict or delay our ability to drill those
wells and conduct those operations that we currently have planned and budgeted.

Risk Factors Relating to Our Common Stock
-----------------------------------------

If we fail to remain current on our reporting requirements, we could be removed
from the OTC Bulletin Board which would limit the ability of broker-dealers to
sell our securities and the ability of stockholders to sell their securities in
the secondary market.

          Companies trading on the OTC Bulletin Board, such as us, must be
reporting issuers under Section 12 of the Securities Exchange Act of 1934, as
amended, and must be current in their reports under Section 13, in order to
maintain price quotation privileges on the OTC Bulletin Board. More
specifically, NASD has enacted Rule 6530, which determines eligibility of
issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in
its filings with the Commission. Pursuant to Rule 6530(e), if we file our
reports late with the Commission three times in a two-year period or our
securities are removed from the OTC Bulletin Board for failure to timely file
twice in a two-year period then we will be ineligible for quotation on the OTC
Bulletin Board. As a result, the market liquidity for our securities could be
severely adversely affected by limiting the ability of broker-dealers to sell
our securities and the ability of stockholders to sell their securities in the
secondary market.

Because our common stock is deemed a low-priced "Penny" stock, an investment in
our common stock should be considered high risk and subject to marketability
restrictions.

         Since our common stock is a penny stock, as defined in Rule 3a51-1
under the Securities Exchange Act, it will be more difficult for investors to
liquidate their investment even if and when a market develops for the common
stock. Until the trading price of the common stock rises above $5.00 per share,
if ever, trading in the common stock is subject to the penny stock rules of the
Securities Exchange Act specified in rules 15g-1 through 15g-10. Those rules
require broker-dealers, before effecting transactions in any penny stock, to:

         o    Deliver to the customer, and obtain a written receipt for, a
              disclosure document;
         o    Disclose certain price information about the stock;
         o    Disclose the amount of compensation received by the broker-dealer
              or any associated person of the broker-dealer;
         o    Send monthly statements to customers with market and price
              information about the penny stock; and
         o    In some circumstances, approve the purchaser's account under
              certain standards and deliver written statements to the customer
              with information specified in the rules.

         Consequently, the penny stock rules may restrict the ability or
willingness of broker-dealers to sell the common stock and may affect the
ability of holders to sell their common stock in the secondary market and the
price at which such holders can sell any such securities. These additional
procedures could also limit our ability to raise additional capital in the
future.

NASD sales practice requirements may also limit a stockholder's ability to buy
and sell our stock.

           In addition to the "penny stock" rules described above, the National
Association of Securities Dealers (NASD) has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer's financial status, tax status, investment objectives and
other information. Under interpretations of these rules, the NASD believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. The NASD requirements make it more
difficult for broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and have an
adverse effect on the market for our shares.

We could be subject to class action litigation due to stock price volatility,
which, if occurs, could result in substantial costs or large judgments against
us.

                                       13

<PAGE>


           The market for our common stock may experience extreme price and
volume fluctuations, which may be unrelated or disproportionate to our operating
performance or prospects. In the past, securities class action litigation has
often been brought against companies following periods of volatility in the
market prices of their securities. We may be the target of similar litigation in
the future. Securities litigation could result in substantial costs and divert
our management's attention and resources, which could have a negative effect on
our business, operating results and financial condition.

Our common stock is an unsecured equity interest.

         As an equity interest, our common stock will not be secured by any of
our assets. Therefore, in the event of our liquidation, the holders of the
common stock will receive a distribution only after all of our secured and
unsecured creditors have been paid in full. There can be no assurance that we
will have sufficient assets after paying our secured and unsecured creditors to
make any distribution to the holders of the common stock.

Our Articles of Incorporation authorize our Board of Directors to issue up to
10,000,000 shares of preferred stock, which could adversely affect the voting
power of our common stock holders.

         Our Board of Directors is authorized, without further approval of our
stockholders, to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences, and any other
rights, preferences, privileges and restrictions applicable to our preferred
stock. The issuance of such stock could adversely affect the voting power of the
holders of Common Stock and, under certain circumstances, make it more difficult
for a third party to gain control of Petrol, discourage bids for the common
stock at a premium, or otherwise adversely affect the market price of the common
stock.

Provisions in Nevada law could delay or prevent a change in control, even if
that change would be beneficial to our stockholders.
         Certain provisions of Nevada law may delay, discourage, prevent or
render more difficult an attempt to obtain control of Petrol, whether through a
tender offer, business combination, proxy contest or otherwise. The provisions
of Nevada law are designed to discourage coercive takeover practices and
inadequate takeover bids. These provisions are also designed to encourage
persons seeking to acquire control of Petrol to first negotiate with our board
of directors.

         The Nevada Revised Statutes (the "NRS") contain two provisions,
described below as "Combination Provisions" and the "Control Share Act," that
may make more difficult the accomplishment of unsolicited or hostile attempts to
acquire control of Petrol through certain types of transactions.

         Restrictions on Certain Combinations Between Nevada Resident
Corporations and Interested Stockholders. The NRS includes the Combination
Provisions prohibiting certain "combinations" (generally defined to include
certain mergers, disposition of assets transactions, and share issuance or
transfer transactions) between a resident domestic corporation and an
"interested stockholder" (generally defined to be the beneficial owner of 10% or
more of the voting power of the outstanding shares of the corporation), except
those combinations which are approved by the board of directors before the
interested stockholder first obtained a 10% interest in the corporation's stock.
There are additional exceptions to the prohibition, which apply to combinations
if they occur more than three years after the interested stockholder's date of
acquiring shares. The Combination Provisions apply unless the corporation elects
against their application in its original articles of incorporation or an
amendment thereto. Our articles of incorporation do not currently contain a
provision rendering the Combination Provisions inapplicable.

         Nevada Control Share Act. Nevada's Control Share Act imposes procedural
hurdles on and curtails greenmail practices of corporate raiders. The Control
Share Act temporarily disenfranchises the voting power of "control shares" of a
person or group ("Acquiring Person") purchasing a "controlling interest" in an
"issuing corporation" (as defined in the NRS) not opting out of the Control
Share Act. In this regard, the Control Share Act will apply to an "issuing
corporation", unless the articles of incorporation or bylaws in effect on the
tenth day following the acquisition of a controlling interest provide that it is
inapplicable. Our articles of incorporation and bylaws do not currently contain
a provision rendering the Control Share Act inapplicable.

         Under the Control Share Act, an "issuing corporation" is a corporation
organized in Nevada which has 200 or more stockholders of record, at least 100
of whom have addresses in that state appearing on the company's stock ledger,
and which does business in Nevada directly or through an affiliated company. Our

                                       14

<PAGE>


status at the time of the occurrence of a transaction governed by the Control
Share Act (assuming that our articles of incorporation or bylaws have not
theretofore been amended to include an opting out provision) would determine
whether the Control Share Act is applicable. We currently conduct business in
Nevada through an executive office located in Las Vegas, Nevada.

         The Control Share Act requires an Acquiring Person to take certain
procedural steps before he or it can obtain the full voting power of the control
shares. "Control shares" are the shares of a corporation (1) acquired or offered
to be acquired which will enable the Acquiring Person to own a "controlling
interest," and (2) acquired within 90 days immediately preceding that date. A
"controlling interest" is defined as the ownership of shares which would enable
the Acquiring Person to exercise certain graduated amounts (beginning with
one-fifth) of all voting power of the corporation in the election of directors.
The Acquiring Person may not vote any control shares without first obtaining
approval from the stockholders not characterized as "interested stockholders"
(as defined below).

         To obtain voting rights in control shares, the Acquiring Person must
file a statement at the principal office of the issuer ("Offeror's Statement")
setting forth certain information about the acquisition or intended acquisition
of stock. The Offeror's Statement may also request a special meeting of
stockholders to determine the voting rights to be accorded to the Acquiring
Person. A special stockholders' meeting must then be held at the Acquiring
Person's expense within 30 to 50 days after the Offeror's Statement is filed. If
a special meeting is not requested by the Acquiring Person, the matter will be
addressed at the next regular or special meeting of stockholders.

         At the special or annual meeting at which the issue of voting rights of
control shares will be addressed, "interested stockholders" may not vote on the
question of granting voting rights to control the corporation or its parent
unless the articles of incorporation of the issuing corporation provide
otherwise. Our articles of incorporation and bylaws do not currently contain a
provision allowing for such voting power.

If full voting power is granted to the Acquiring Person by the disinterested
stockholders, and the Acquiring Person has acquired control shares with a
majority or more of the voting power, then (unless otherwise provided in the
articles of incorporation or bylaws in effect on the tenth day following the
acquisition of a controlling interest) all stockholders of record, other than
the Acquiring Person, who have not voted in favor of authorizing voting rights
for the control shares, must be sent a notice advising them of the fact and of
their right to receive "fair value" for their shares. Our articles of
incorporation and bylaws do not provide otherwise. By the date set in the
dissenter's notice, which may not be less than 30 nor more than 60 days after
the dissenter's notice is delivered, any such stockholder may demand to receive
from the corporation the "fair value" for all or part of his shares. "Fair
value" is defined in the Control Share Act as "not less than the highest price
per share paid by the Acquiring Person in an acquisition."

         The Control Share Act permits a corporation to redeem the control
shares in the following two instances, if so provided in the articles of
incorporation or bylaws of the corporation in effect on the tenth day following
the acquisition of a controlling interest: (1) if the Acquiring Person fails to
deliver the Offeror's Statement to the corporation within 10 days after the
Acquiring Person's acquisition of the control shares; or (2) an Offeror's
Statement is delivered, but the control shares are not accorded full voting
rights by the stockholders. Our articles of incorporation and bylaws do not
address this matter.

ITEM 1B. UNRESOLVED STAFF COMMENTS

         None.


ITEM 2.  PROPERTIES


Production

         The following table shows the results of operations from our oil and
gas producing activities during the years presented in the financial statements.
Results of operations from these activities have been determined using
historical revenues, production costs, depreciation, depletion and amortization
of the capitalized costs subject to amortization. General and administrative
expenses and interest expense have been excluded from this determination.

                                       15

<PAGE>
<TABLE>
<CAPTION>


                                           ----------------------------------------------
                                                       Years Ended December 31,
                                           ----------------------------------------------
                                                 2007            2006            2005
                                           ----------------------------------------------
<S>                                           <C>             <C>            <C>
Production revenues                         $ 5,488,673     $ 6,532,798     $ 5,244,806
Production and pipeline costs                (2,605,257)     (3,819,432)     (3,315,438)
Depreciation and depletion                   (1,387,300)     (1,793,788)       (808,138)
Income tax (allocated on gross profits
based on statutory rates)                      (509,000)       (285,000)       (345,000)
                                           ----------------------------------------------
Results of operations for producing
activities                                    $ 987,116       $ 634,578      $  776,230
                                           ==============================================

Executive and Field Offices

         In April 2006 we relocated our principal executive offices to Kansas.
The address of our headquarters is 11020 King Street, Suite 375, Overland Park,
Kansas 66210.


ITEM 3.           LEGAL PROCEEDINGS

         Petrol is and may become involved in various routine legal proceedings
incidental to its business. However, to Petrol's knowledge as of the date of
this report, there are no material pending legal proceedings to which Petrol is
a party or to which any of its property is subject.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

(a) Market Information

          Since March 4, 2004, we have been eligible to participate in the
over-the-counter securities market through the National Association of
Securities Dealers Automated Quotation Bulletin Board System, under the trading
symbol "POIG". The following table sets forth the quarterly high and low bid
prices for our Common Stock during our last two fiscal years, as reported by a
Quarterly Trade and Quote Summary Report of the OTC Bulletin Board. The
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission, and may not necessarily represent actual transactions.

         ---------------------------------------------------------------------
                                    2007                          2006
         ---------------------------------------------------------------------
                            High            Low           High           Low
         ---------------------------------------------------------------------
         1st Quarter
                           0.5795          0.43           2.19           1.55
         ---------------------------------------------------------------------
         2nd Quarter        0.45           0.27           1.89           1.20
         ---------------------------------------------------------------------
         3rd Quarter        0.30           0.065          1.39           0.44
         ---------------------------------------------------------------------
         4th Quarter        0.13           0.027          0.78           0.43
         ---------------------------------------------------------------------

(b) Holders of Common Stock

         As of May 12, 2008, we had approximately 90 stockholders of record of
the 29,090,926 shares outstanding. As of May 12, 2008, the closing price of our
shares of common stock was $0.14 per share. (c) Dividends

         We have never declared or paid dividends on our Common Stock. We intend
to follow a policy of retaining earnings, if any, to finance the growth of the
business and do not anticipate paying any cash dividends in the foreseeable
future. The declaration and payment of future dividends on the Common Stock will
be the sole discretion of the Board of Directors and will depend on our
profitability and financial condition, capital requirements, statutory and
contractual restrictions, future prospects and other factors deemed relevant.

                                       16
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


(d) Securities Authorized for Issuance under Equity Compensation Plans

2002/2003 Stock Option Plan

           Effective December 16, 2002, we adopted a 2002/2003 Stock Option
Plan. The maximum number of shares that may be issued pursuant to the plan is
3,000,000 shares. As of December 31, 2007, all 3,000,000 options have been
granted under this plan.

2006 Stock Option Plan

           Effective December 21, 2005, we adopted a 2006 Stock Option Plan. The
maximum number of shares that may be issued pursuant to the plan is 3,000,000
shares. As of December 31, 2007, 610,000 options have been granted under this
plan.

         Officers (including officers who are members of the board of
directors), directors (other than members of the stock option committee to be
established to administer the stock option plans) and other employees and
consultants and its subsidiaries (if established) will be eligible to receive
options under the stock option plans. The committee will administer the stock
option plans and will determine those persons to whom options will be granted,
the number of options to be granted, the provisions applicable to each grant and
the time periods during which the options may be exercised. No options may be
granted more than ten years after the date of the adoption of the stock option
plans.

         Non-qualified stock options will be granted by the committee with an
option price equal to the fair market value of the shares of common stock to
which the non-qualified stock option relates on the date of grant. The committee
may, in its discretion, determine to price the non-qualified option at a
different price. In no event may the option price with respect to an incentive
stock option granted under the stock option plans be less than the fair market
value of such common stock to which the incentive stock option relates on the
date the incentive stock option is granted.

           Each option granted under the stock option plans will be exercisable
for a term of not more than ten years after the date of grant. Certain other
restrictions will apply in connection with the plans when some awards may be
exercised. In the event of a change of control (as defined in the stock option
plans), the date on which all options outstanding under the stock option plans
may first be exercised will be accelerated. Generally, all options terminate 90
days after a change of control.

           The following table sets forth information as of December 31, 2007
regarding outstanding options granted under the plans, warrants issued to
consultants and options reserved for future grant under the plan.

--------------------------------------  -------------------------  -------------------------  ------------------------
                                                                                                 Number of shares
                                                                                               remaining available
                                                  Number                                       for future issuance
                                              of shares to be                                      under equity
                                           issued upon exercise        Weighted-average         compensation plans
                                             of outstanding           exercise price of          (excluding shares
                                            options, warrants        outstanding options,       reflected in column
                                                and rights           warrants and rights               (a))
Plan Category                                      (a)                       (b)                       (c)
--------------------------------------  -------------------------  -------------------------  ------------------------
<S>                                                    <C>                            <C>                   <C>
Equity compensation plans
approved by stockholders                                    --                        $ --                       --

Equity compensation plans not
approved by stockholders                                 760,000                      $2.12                 5,240,000
--------------------------------------  -------------------------  -------------------------  ------------------------

Total                                                    760,000                      $2.12                 5,240,000
                                        =========================  =========================  ========================

                                            17
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


           These plans are intended to encourage directors, officers, employees
and consultants to acquire ownership of common stock. The opportunity so
provided is intended to foster in participants a strong incentive to put forth
maximum effort for its continued success and growth, to aid in retaining
individuals who put forth such effort, and to assist in attracting the best
available individuals to the Company in the future.

Issuer Purchases of Equity Securities

           Petrol did not repurchase any of its equity securities during the
years ended December 31, 2007 or 2006.

Recent Sales of Unregistered Securities

          On January 30, 2007, we issued 6,329 shares of our restricted common
stock to ECON Investor Relations, Inc., as final payment for the services
performed pursuant to its consulting agreement dated June 15, 2004. We believe
that the issuance of the shares was exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).
The recipient of the shares was afforded an opportunity for effective access to
files and records of Petrol that contained the relevant information needed to
make its investment decision, including Petrol's financial statements and 34 Act
reports. We reasonably believe that the recipient, immediately prior to issuing
the shares, had such knowledge and experience in its financial and business
matters that it was capable of evaluating the merits mad risks of its
investment. The recipient had the opportunity to speak with our president and
directors on several occasions prior to its investment decision.

ITEM 6.           SELECTED FINANCIAL DATA

         The following table sets forth summary financial data derived from our
financial statements. The data should be read in conjunction with the financial
statements, related notes and other financial information included in this Form
10-K.

                                                                Year Ended December 31,
                                                                       (Audited)
                                    --------------------------------------------------------------------------------
                                          2007           2006          2005         2004       2003        2002
                                    --------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>           <C>           <C>           <C>
Revenue
Oil and gas activities                 $5,488,673     $6,532,798    $5,244,806    $866,924    $      -    $       -

Expenses:
   Direct costs                         2,605,257      2,908,693     3,084,494     221,339           -            -
   Pipeline costs                         856,814        910,739       230,944           -           -            -
   General and administrative           1,814,211      2,664,473     2,115,019   1,000,029     343,941       63,737
   Professional and consulting fees       766,683      1,957,177     2,577,970   1,906,036   1,374,754      639,508
   Impairment of oil and gas
   properties and pipeline             15,564,184              -             -           -           -            -
   Depreciation, depletion and
amortization                            2,338,490      2,811,185     1,392,342     213,475           -            -
   Acquisition costs                            -              -             -     654,000           -            -
                                    --------------------------------------------------------------------------------
     Total expenses                    23,945,639     11,252,267     9,400,769   3,994,879   1,718,695      703,245
                                    --------------------------------------------------------------------------------

Net operating (loss)                  (18,456,966)    (4,719,469)   (4,155,963) (3,127,955) (1,718,695)    (703,245)
                                    --------------------------------------------------------------------------------

Other income (expense):
   Interest expense                    (4,478,425)    (3,075,739)   (1,807,833) (1,395,952)    (15,089)            -
                                    --------------------------------------------------------------------------------

Net (loss)                            (22,935,390)  $ (7,795,208) $ (5,963,796)$(4,523,907)$(1,733,784)   $ (703,245)
                                    ================================================================================
Weighted average number of common
shares outstanding - basic and
fully diluted                          29,090,926     28,777,494    25,632,220  20,647,542  14,721,438    8,338,208
                                    ================================================================================
Net (loss) per share - basic and
fully diluted                              $(0.79)       $ (0.27)      $ (0.23)    $ (0.22)    $ (0.12)     $ (0.08)
                                    ================================================================================

                                                         18
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                          As of December 31,
                                                              (Audited)
Balance Sheet Data:
                   -------------------------------------------------------------------------------------------------
                         2007             2006             2005             2004            2003          2002
                   -------------------------------------------------------------------------------------------------
<S>                      <C>             <C>              <C>              <C>            <C>             <C>
Total Assets             $11,502,462     $ 36,487,244     $ 26,927,034     $ 17,832,354   $ 2,577,447     $ 444,792
Total Liabilities         27,836,491       29,221,792       18,448,458        7,803,727       373,810       134,969
Stockholders'          $(16,334,029)      $ 7,265,453      $ 8,478,576     $ 10,028,627   $ 2,203,637     $ 309,823
Equity
                   -------------------------------------------------------------------------------------------------

                                                         19
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION

OVERVIEW AND OUTLOOK

         We are an oil and gas exploration, development and production company.
Our properties are located in the Cherokee and Forrest Basins along the Kansas
and Missouri border. Following the expected foreclosure by our secured lenders,
we will have significantly fewer assets and will not have substantial producing
properties.

Results of Operations for the Fiscal Years Ended December 31, 2007 and 2006.

       The following table summarizes selected items from the statement of
operations at December 31, 2007 compared to December 31, 2007. INCOME:
                                                      Fiscal Year Ended
                                                        December 31,
                                          ------------------------------------------
                                                 2007                  2006               Increase / (Decrease)
                                          --------------------  --------------------  -------------------------------
                                                Amount                Amount                   $              %
                                          --------------------  --------------------  -------------------------------
<S>                                                 <C>                   <C>                 <C>              <C>
  Revenues                                          5,488,673             6,532,798           (1,044,125)      (16%)
                                          ====================  ====================  ===============================

Revenues

         Revenues for the fiscal year ended December 31, 2007 were $5,488,673
compared to revenues of $6,532,798 in the fiscal year ended December 31, 2006.
This resulted in a decrease of $1,044,125 or 19%, from the same period one year
ago. The decrease in revenues primarily resulted of the expiration of a
favorable gas hedge, declining production and the sale of a substantial portion
of our oil production.

EXPENSES:

                                                       Fiscal Year Ended
                                                         December 31,
                                            ----------------------------------------
                                                   2007                 2006               Increase / (Decrease)
                                            -------------------  -------------------   ------------------------------
                                                  Amount               Amount                  $              %
Expenses:
    Direct Costs                                 $   2,605,257         $  2,908,693             (303,436)       10.4
    Pipeline costs                                     856,814              910,739              (53,925)        6.0
    General and administrative                       1,814,211            2,664,473             (850,262)       31.9
    Professional and consulting                                                                 1,190,494       60.8
      Fees                                             766,683            1,957,177
    Impairment of oil & gas                                                                    15,564,184        n/a
     properties and pipelines                       15,564,184                   --
                                            -------------------  -------------------   ------------------------------
    Depreciation, depletion and                                                                 (472,695)       16.8
      amortization                                   2,338,490            2,811,185
                                            -------------------  -------------------   ------------------------------
        Total expenses                              23,945,639           11,252,267            12,693,372      112.8
                                            -------------------  -------------------   ------------------------------

Net operating (loss)                              (18,456,966)          (4,719,469)          (13,737,497)      291.1
                                            -------------------  -------------------   ------------------------------

Other income (expense):
    Interest expense                               (4,478,425)          (3,075,739)           (1,402,686)       45.6
                                            -------------------  -------------------   ------------------------------

Net loss                                          (22,935,390)         $(7,795,208)          (15,140,182)      194.2
                                            ===================  ===================   ==============================

                                                         20
</TABLE>

<PAGE>


Direct Costs

           Direct costs are the costs associated with operating producing wells,
and transporting the oil and natural gas to the market for sale. Direct cost for
the fiscal year ended December 31, 2007 was $2,605,257, a decrease of $303,436,
or 10.4%, from $2,908,693 for the fiscal year ended December 31, 2006. The
decrease over the prior period is directly attributable to our reduction in
costs related to work-overs, repairs and modification to the Neodesha wells and
pipeline system that we had previously experienced during the same period in the
previous year. We do not anticipate maintenance and work-over costs to that
extent in the future and our current direct operating costs are more indicative
of our overall production costs.

Pipeline Costs

          Pipeline costs for the fiscal year ended December 31, 2007 were
$856,814, a decrease of $53,925, or 6%, from $910,739 for the fiscal year ended
December 31, 2006. The decrease in pipeline costs was primarily the result of
changes to our compression system, resulting in reduced compressor rentals.

General and Administrative Expenses

           General and administrative expenses for the fiscal year ended
December 31, 2007 were $1,814,211, a decrease of $850,262 or 31.9%, from
$2,644,473 for the fiscal year ended December 31, 2006. The decrease was
primarily the result of the elimination of compensation and benefits for our
former Chief Executive Officer and rationalization of expenditures.

Professional and Consulting Fees

         Professional and consulting fees for the fiscal year ended December 31,
2007 was $766,683, a decrease of $1,190,494, or 60.8% from $1,957,177 for the
fiscal year ended December 31, 2006. The decrease in professional and consulting
fees was a result of an overall reduction in the use of consultants and levels
of accounting and legal services as well as general cost cutting.

Impairment of Oil & Gas Properties and Pipelines

         During 2007, we have impaired our oil and gas properties and pipeline
assets by $15,564,184 based on our reserve study of the present value of future
cash flows discounted by 10% and the determination that the pipeline assets had
fair market value of zero because these facilities will not be used and are not
saleable.

Depreciation, Depletion, and Amortization Expense

           Depreciation, depletion, and amortization expense for the fiscal year
ended December 31, 2007 was $2,338,490, a decrease of $472,695, or 16.8%, from
$2,811,185 for the fiscal year ended December 31, 2006.

Net Operating (Loss)

           The net operating loss for the fiscal year ended December 31, 2007
was $18,456,966, versus a net operating loss of $4,719,469 for the fiscal year
ended December 31, 2006, a change in net reduction of $13,737,497 or 291.1%.

Other Income (Expense)

Interest expense

           Interest expense for the fiscal year ended December 31, 2007 was
$4,478,425, an increase of $1,402,686, or 45.6%, from $3,075,739 for the fiscal
year ended December 31, 2006. The increase in interest expense is the result of
the increased amount of debt financing received from Laurus Funds.

Net Loss

         Our net loss for the fiscal year ended December 31, 2007 was
$22,935,390, an increased loss of $15,140,182, or 194.2%, from a net loss of
$7,795,208 for the fiscal year ended December 31, 2006.

                                       21

<PAGE>
<TABLE>
<CAPTION>



Contractual Obligations

         Future payments due on our contractual obligations as of December 31,
2007 are as follows:
                                   Total              2008            2009-2010       2011-2010       Thereafter
<S>                           <C>                       <C>                 <C>               <C>           <C>
Asset Retirement Obligations  $        511,000                                                     $        511,000
Notes Payable                           40,474             40,474                --            --                --
Derivatives                             77,800             77,800                --            --                --
                              --------------------------------------------------------------------------------------
Total                         $        629,274  $         118,274  $             --    $       --  $        511,000
                              ======================================================================================
(1)  Laurus Funds has declared all indebtedness owed to them by the Company in
     default and accelerated such indebtedness by a letter dated April 9, 2008.
     As of April 30, 2008, the aggregate amount due and owing Laurus was
     approximately $35.7 million.

Results of Operations for the Fiscal Years Ended December 31, 2006 and 2005.
       The following table summarizes selected items from the statement of
operations at December 31, 2006 compared to December 31, 2005.

INCOME:
                                                      Fiscal Year Ended
                                                        December 31,
                                          ------------------------------------------
                                                 2006                  2005               Increase / (Decrease)
                                          --------------------  --------------------  -------------------------------
                                                Amount                Amount                   $              %
                                          --------------------  --------------------  -------------------------------
  Revenues                                          6,532,798             5,244,806             1,287,992        25%
                                          ====================  ====================  ===============================

Revenues

         Revenues for the fiscal year ended December 31, 2006 were $6,532,798
compared to revenues of $5,244,806 in the fiscal year ended December 31, 2005.
This resulted in an increase of $1,287,992 or 25%, from the same period one year
ago. The increase in revenues is a result of increases in overall gas production
and sales as well as higher hedged prices of our gas and higher daily spot gas
prices for the first 8 months of 2006.

EXPENSES:

                                                       Fiscal Year Ended
                                                         December 31,
                                            ----------------------------------------
                                                   2006                 2005               Increase / (Decrease)
                                            -------------------  -------------------   ------------------------------
                                                  Amount               Amount                  $              %
Expenses:
    Direct Costs                                     2,908,693            3,084,494            $(175,801)       (6%)
    Pipeline costs                                     910,739              230,944               679,795       294%
    General and administrative                       1,649,028            1,616,334                32,694       (2%)
    Professional and consulting
      Fees                                           1,957,177            2,577,970             (620,793)      (24%)
    Salaries and wages                                 262,436              264,049               (1,613)          -
    Salaries and wages - related
      party                                            753,009              234,636               518,373       221%
    Depreciation, depletion and
      amortization                                   2,811,185            1,392,342             1,418,843       102%
                                            -------------------  -------------------   ------------------------------
        Total expenses                              11,252,267            9,400,769             1,851,498        20%
                                            -------------------  -------------------   ------------------------------

Net operating (loss)                               (4,719,469)          (4,155,963)               563,506        14%
                                            -------------------  -------------------   ------------------------------

Other income (expense):
    Interest expense                               (3,075,739)          (1,807,833)             1,267,906        70%
                                            -------------------  -------------------   ------------------------------

Net loss                                          $(7,795,208)         $(5,963,796)            $1,831,412        31%
                                            ===================  ===================   ==============================

                                                         22
</TABLE>

<PAGE>


Direct Costs

          Direct costs are the costs associated with operating producing wells,
and transporting the oil and natural gas to the market for sale. Direct cost for
the fiscal year ended December 31, 2006 was $2,908,693, a decrease of $175,801,
or 6%, from $3,084,494 for the fiscal year ended December 31, 2005. The decrease
over the prior period is directly attributable to our reduction in costs related
to work-overs, repairs and modification to the Neodesha wells and pipeline
system that we had previously experienced during the same period in the previous
year. We do not anticipate maintenance and work-over costs to that extent in the
future and our current direct operating costs are more indicative of our overall
production costs.

Pipeline Costs

          Pipeline costs for the fiscal year ended December 31, 2006 were
$910,739, an increase of $679,795, or 294%, from $230,944 for the fiscal year
ended December 31, 2005. The increase in pipeline costs in the current period
was partially the result of the addition of our Coal Creek Pipeline as well as
additional maintenance costs required in order to maintain in a fully
operational status.

General and Administrative Expenses

          General and administrative expenses for the fiscal year ended
December 31, 2006 were $1,649,028, an increase of $32,694 or 2%, from $1,616,334
for the fiscal year ended December 31, 2005. The minimal increase in general and
administrative expenses is attributable to additional office and administrative
costs associated with increased field operations.

Professional and Consulting Fees

          Professional and consulting fees for the fiscal year ended December
31, 2006 was $1,957,177, a decrease of $620,793, or 24% from $2,577,970 for the
fiscal year ended December 31, 2005. The decrease in professional and consulting
fees in the current period was a result of decreased investor relations and
accounting fees to our prior CFO.

Salaries and Wages

          Salaries and wages for the fiscal year ended December 31, 2006 was
$262,436, a decrease of $1,613, or 0.02% from $264,049. As expected, we did not
intend to increase staffing levels during our project development stage. Our
project managers and support staff for the development of our Coal Creek project
were placed during 2005.

Salaries and Wages - Officer

          Salaries and wages - Officer, for the fiscal year ended December 31,
2006 was $753,009 compared to $234,636 in 2005. The increase in the amount of
$518,373 or 221% is primarily due to the amortization of options granted
pursuant to his employment agreement of October
 2005. In addition, a bonus in the amount of $100,000 was granted by the Board
of Directors for the efforts of our CEO in connection with our financing
agreements.

Depreciation, Depletion, and Amortization Expense

           Depreciation, depletion, and amortization expense for the fiscal year
ended December 31, 2006 was $2,811,185, an increase of $1,418,843, or 102%, from
$1,392,342 for the fiscal year ended December 31, 2005. The increase in
depreciation, depletion and amortization expense was a result of increased
depletion on each unit of production due to our increase in capital expenditures
and a decline in reserves.

Net Operating (Loss)

           The net operating loss for the fiscal year ended December 31, 2006
was $4,719,469, versus a net operating loss of $4,155,963 for the fiscal year
ended December 31, 2005, a change in net loss of $563,506 or 14%. The increase
in net operating loss is attributable to our increase in depletion which was
offset slightly by our decrease in professional fees.

                                       23

<PAGE>
<TABLE>
<CAPTION>


Other Income (Expense)

Interest expense

           Interest expense for the fiscal year ended December 31, 2006 was
$3,075,739, an increase of $1,267,906, or 70%, from $1,807,833 for the fiscal
year ended December 31, 2005. The increase in interest expense is the result of
the increased amount of debt financing received from Laurus Funds, including
$1,295,726 attributable to the accretion of warrants issued to Laurus.

Net Loss

         Our net loss for the fiscal year ended December 31, 2006 was
$7,795,208, an increase of $1,831,412, or 31%, from $5,963,796 for the fiscal
year ended December 31, 2005. The increase in net loss is the net result of
increased interest expense and operating expense partially offset by increased
revenues.


Liquidity and Capital Resources

         The following table summarizes total assets, accumulated deficit,
stockholders' equity and working capital at December 31, 2007 compared to
December 31, 2006.


                                                     December 31,                     Increase / (Decrease)
                                                                              ---------------------------------------
                                                2007              2006                 $                  %
                                         ----------------------------------------------------------------------------
<S>                                              <C>                <C>              <C>                       <C>
Current Assets                                   $1,156,560         $6,580,774       $(5,424,214)              (82%)
                                         ============================================================================

Current Liabilities                             $27,325,491        $15,085,966        $12,239,525                81%
                                         ============================================================================

Working Capital (deficit)                      $(26,168,931)       $(8,505,192)      $(17,663,739)             (207%)
                                         ============================================================================

         Financing. On October 28, 2004, we entered into agreements with Laurus
Master Fund, Ltd., a Cayman Islands corporation. Under the terms of the Laurus
Funds agreements we issued a Secured Convertible Term Note (the "Note") in the
aggregate principal amount of $8,000,000 and a five-year warrant (the "Warrant")
to purchase 3,520,000 shares of our common stock at $2.00 per share and
1,813,333 shares of our common stock at $3.00 per share. On June 2, 2006, Laurus
transferred the 5,333,333 warrants to Pallas Production Corp. ("Pallas"). The
Note is convertible into shares of our common stock at a fixed conversion price
of $1.50 per share. The Note has a three-year term and bears an interest rate
equivalent to the "prime rate" published by the Wall Street Journal from time to
time plus 3%, subject to a floor of 7.5% per annum.

         On January 28, 2005, we amended the Laurus Note and the Registration
Rights Agreement. Laurus agreed to move five months of principal payments
(January through May of 2005) to be paid on the Maturity Date (October 28,
2007). Additionally, Laurus agreed to extend certain filing and effectiveness
dates under the registration rights agreement. In consideration for the
amendment, we issued an additional common stock purchase warrant to Laurus to
purchase up to 1,000,000 shares of our common stock at $2.50 per share for the
first 666,667 shares and $3.00 per share for the remaining 333,333 shares. On
June 20, 2006, Laurus transferred the 1,000,000 warrants to Pallas. Further,
pursuant to the amendment agreement executed on April 28, 2004, we have agreed
to file semi-annual registration statements to register shares of our common
stock issued to Laurus for the conversion of interest under the Note.

         As of December 31, 2006, Laurus has converted $2,283,823 of principal
payments into 1,522,550 shares of our common stock and $779,352 of accrued
interest into 519,568 shares of our common stock (2,042,118 shares in total).
The conversion of principal and accrued interest allowed us additional cash to
use in our operations.

         On October 31, 2005, we entered into another financing agreement with
Laurus, under which $10,000,000 was funded into an escrow account and was
disbursed to us in November 2005 after finalization of certain closing

                                       24
</TABLE>

<PAGE>


requirements. We issued a three-year Secured Term Note in the aggregate
principal amount of $10,000,000 and a five-year warrant to purchase 1,000,000
shares of our common stock at $2.00 per share. The note bears an interest rate
equivalent to the "prime rate" published by the Wall Street Journal from time to
time plus 3.25%, subject to a floor of 10% and a ceiling of 14% per annum. In
addition, Laurus, in their sole discretion, may purchase additional notes from
us in an aggregate principal amount of up to $40,000,000 pursuant to
substantially similar terms of the initial note dated October 31, 2005.

         On March 31, 2006, we entered into agreements with Laurus to draw down
an additional $5,000,000 under the credit facility provided by Laurus in October
2005. Under the terms of the Laurus agreements we issued a Secured Term Note in
the aggregate principal amount of $5,000,000 and a five-year warrant to purchase
200,000 shares of our common stock at $1.80 per share. On June 20, 2006, Laurus
transferred the 200,000 warrants to Pallas. The Note has a three-year term and
bears an interest rate equivalent to the "prime rate" published by the Wall
Street Journal from time to time plus 3.25%, subject to a floor of 10% and a
ceiling of 14% per annum. Concurrently with the agreements listed above, we
amended and restated our previous $10,000,000 Secured Term Note dated October
31, 2005 with Laurus.

          On April 7, 2006, the funds were released from Escrow. Net proceeds to
Petrol from the financing, after payment of fees and expenses to Laurus and its
affiliates, were $4,806,688. The proceeds are being utilized by Petrol for
drilling activities on our Coal Creek Project.

         On May 31, 2006, we entered into agreements with Laurus to draw down an
additional $10,000,000 under the credit facility provided by Laurus in October
2005. Under the terms of the Laurus agreements we issued a Secured Term Note in
the aggregate principal amount of $10,000,000 and a five-year warrant to
purchase 400,000 shares of our common stock at $1.65 per share. The Note has a
three-year term and bears an interest rate equivalent to the "prime rate"
published by the Wall Street Journal from time to time plus 3.25%, subject to a
floor of 10% and a ceiling of 14% per annum. Concurrently with the execution of
the new Laurus Funds agreements, Petrol amended and restated its previous
$10,000,000 Secured Term Note dated October 31, 2005 and the $5,000,000 Secured
Term Note dated March 31, 2006 with Laurus Funds.

         On June 2, 2006, the funds were released from Escrow. Net proceeds to
Petrol from the financing, after payment of fees and expenses to Laurus Funds
and its affiliates, were $9,629,679. The proceeds will be utilized by Petrol for
drilling activities on Petrol's Coal Creek Project.

         At December 31, 2007, the Company had long term debt (including the
current portion of long term debt) of approximately $26.7 million. Approximately
$15 million of this debt was utilized to develop the Coal Creek Project, which
has contributed no significant revenue to the Company. As a result, the
Company's cash position has seriously declined. On October 28, 2007, the Company
was required to make a principal payment of approximately $1.1 million on a
portion of its long term debt. The Company did not have adequate cash to make
such principal payment and is currently in default under the terms of the note
for this long term debt.

         On April 9, 2008, the Company's debt was declared in default and
accelerated by Laurus.

            On April 30, 2008, the Company entered into a Foreclosure-Related
Agreement (the "Foreclosure Agreement") with Laurus. The aggregate amount due
and owing to Laurus as of April 30, 2008 was approximately $35.7 million.

            The outstanding obligations are secured by various mortgages and
other fixed and mixed assets and real and personal property pursuant to security
and other agreements covering assets or other rights to which the Company has
rights (all such assets, rights and collateral, collectively, the "Collateral"),
a portion of which are assets and rights referred to as the "Petrol-Neodesha
Project," located in Neosho and Wilson Counties, Kansas, consisting of, among
other Collateral, mortgages, and real, personal property and fixed and mixed
assets used in connection with the Petrol-Neodesha Project (the "Neodesha
Collateral").

            The Agreement allows Laurus to foreclose on the Neodesha Collateral
and governs the terms and conditions of the foreclosure. The Agreement provides
that the Company will not contest the sale of the Neodesha Collateral, which
will be conducted as a public foreclosure sale in accordance with Kansas law.
The Company has agreed to reasonably assist Laurus in the completion of the
foreclosure sale. After the sale of the Neodesha Collateral becomes final,
Laurus will release Petrol of all remaining amounts owed or claims they may
have, and Laurus will reassign to Petrol their overriding royalty interests in
the mineral leases located at the Company 's Coal Creek Project.

                                       25

<PAGE>


            As part of the Agreement, the Company will cancel all outstanding
warrants for purchases of securities issued to Laurus in connection with the
Outstanding Obligations and replace them with warrants to purchase 1,000,000
shares of common stock at an initial exercise price of $0.20 per share.

         The foreclosure by Laurus described above will leave the Company with
far fewer assets than it currently has. There can be no assurance that the
Company will be able to continue operations and satisfy its obligations in the
future.

          Cash Flows. Since inception, we have financed cash flow requirements
through debt financing, the issuance of common stock and revenues generated from
the sale of oil and gas. As we expand operational activities, we may experience
net negative cash flows from operations, pending receipt of sales or development
fees, and may be required to obtain additional financing to fund operations
through common stock offerings and debt borrowings to the extent necessary to
provide working capital.

Off-Balance Sheet Arrangements

         We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results or operations,
liquidity, capital expenditures or capital resources that is material to
investors.

Derivatives

         To reduce our exposure to unfavorable changes in natural gas prices we
have entered into an agreement to utilize energy swaps in order to have a
fixed-price contract. This contract allows us to be able to predict with greater
certainty the effective natural gas prices to be received for hedged production
and benefit operating cash flows and earnings when market prices are less than
the fixed prices provided under the contracts. However, we will not benefit from
market prices that are higher than the fixed prices in our contracts for hedged
production. If we are unable to provide the quantity that we have contracted for
we will have to go to the open market to purchase the required amounts that we
have contracted to provide.

        The following table summarizes our fixed price contracts as of December
31, 2007:
                                                          Year Ending
                                                          December 31,
                                                       ------------------
                                                              2008
                                                       ------------------
                Gas
                Contract volume                             90,000
                Weighted-average price                       $7.23

                Oil
                Contract volume                                 --
                Weighted-average price                          --

                Fair value asset (liability)                77,800

          On October 9, 2006, we entered into a "Fixed Price Contract" to sell
1,000.0 DTH per day of our natural gas productions at a fixed price of $7.32 per
DTH. The contract period begins April 1, 2007 and expires on March 31, 2008.

Critical Accounting Policies and Estimates

         Our accounting estimates include bad debts on our receivables, amount
of depletion of our oil and gas properties subject to amortization, the asset
retirement obligation and the value of the options and warrants that we issue.
Our trade receivables have been fully collectible since inception and we only
have sales to a small base of customers. We believe that all of our receivables
are collectible. The depletion of our oil and gas properties is based in part on
the evaluation of our reserves and an estimate of our reserves. We obtain an
evaluation of the proved reserves from a professional engineering company and on

                                       26

<PAGE>


a quarterly basis we review the estimates and determine if any adjustments are
needed. If the actual reserves are less than the estimated reserves we would not
fully deplete our costs. The asset retirement obligation relates to the plug and
abandonment costs when our wells are no longer useful. We determine the value of
the liability by obtaining quotes for this service and estimate the increase we
will face in the future. We then discount the future value based on an intrinsic
interest rate that is appropriate for Petrol. If costs rise more than what we
have expected there could be additional charges in the future however we monitor
the costs of the abandoned wells and we will adjust this liability if necessary.
The value we assign to the options and warrants that we issue is based on the
fair market value as calculated by the Black-Scholes pricing model. To perform a
calculation of the value of our options and warrants we determine the volatility
of our stock. We believe our estimate of volatility is reasonable and we review
the assumptions used to determine this whenever we have an equity instrument
that needs a fair market value. Although the offset to the valuation is in paid
in capital were we to have an incorrect material volatility assumption our
expenses could be understated or overstated. The preparation of our financial
statements requires us to make assumptions and estimates that affect the
reported amounts of assets, liabilities, revenues and expenses as well as the
disclosure of contingent assets and liabilities. We base our assumptions and
estimates on historical experience and other sources that we believe to be
reasonable at the time. Actual results may vary from our estimates due to
changes in circumstances, weather, politics, global economics, mechanical
problems, general business conditions and other factors.

Effects of Inflation and Pricing

         The oil and natural gas industry is very cyclical and the demand for
goods and services of oil field companies, suppliers and others associated with
the industry puts extreme pressure on the economic stability and pricing
structure within the industry. Material changes in prices impact revenue stream,
estimates of future reserves, borrowing base calculations of bank loans and
value of properties in purchase and sale transactions. Material changes in
prices can impact the value of oil and natural gas companies and their ability
to raise capital, borrow money and retain personnel. We anticipate the increased
business costs will continue while the commodity prices for oil and natural gas,
and the demand for services related to production and exploration, both remain
high (from a historical context) in the near term.

ITEM 7A.         QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Commodity Price Risk

         Our major market risk exposure is in the pricing applicable to our oil
and gas production. Realized pricing is primarily driven by the prevailing
worldwide price for crude oil and spot prices applicable to natural gas
production. Historically, prices received for oil and gas production have been
volatile and unpredictable and price volatility is expected to continue.

         Monthly oil price realizations ranged from a low of approximately
$40.73 per barrel to a high of approximately $64.00 per barrel during 2005 and
as high as $56.00 per barrel during the year ended December 31, 2006. Gas price
realizations ranged from a monthly low of approximately $4.24 per Mcf to a
monthly high of approximately $9.37 per Mcf during the same period.

         Since new well development is an ongoing program, management expects
revenue to grow in the foreseeable future. In order to reduce natural gas price
volatility, we have entered into hedging transactions.

         Normal hedging arrangements have the effect of locking in for specified
periods the prices we would receive for the volumes and commodity to which the
hedge relates. Consequently, while hedges are designed to decrease exposure to
price decreases, they also have the effect of limiting the benefit of price
increases.

Interest Rate Risk

         Our long term debt with Laurus Funds has a floating interest rate of
prime plus 3% to 3.25%, with a floor of 7.5% to 14%. Therefore, interest rate
changes will impact future results of operations and cash flows.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

          See Index to Financial Statements and Financial Statement Schedules
appearing on page F-1 of this Form 10-K.

                                       27

<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

         Petrol has had no disagreements with its independent auditors on
accounting or financial disclosures.

Item 9T.  Controls and Procedures

         We carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) as of December 31, 2007. This evaluation was
carried out under the supervision and with the participation of our sole
executive officer, Chief Executive Officer, Loren Moll and with the assistance
of our company accountant. Based upon that evaluation, they concluded that, as
of December 31, 2007, our disclosure controls and procedures have not been
identified and we have not yet tested their effectiveness. Because of this lack
of identification and testing, we cannot assure the effectiveness of the
controls and procedures. There have been no significant changes in our internal
controls over financial reporting during the year ended December 31, 2007 that
have materially affected or are reasonably likely to materially affect such
controls.

         Disclosure controls and procedures are controls and other procedures
that are designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act are recorded, processed,
summarized and reported, within the time periods specified in the SEC's rules
and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that information required to be
disclosed in our reports filed under the Exchange Act is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.

         The Company has established disclosure controls and procedures to
ensure that information disclosed in this MD&A and the related financial
statements was properly recorded, processed, summarized and reported to the
Company`s Board of Directors. A control system, no matter how well conceived or
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met.

         There has been no change in the Company's disclosure controls during
2007 that has materially affected or is likely to materially affect its control
over financial reporting.

Management's Report on Internal Control over Financial Reporting
----------------------------------------------------------------

         The CEO of the Company acknowledges that he is responsible for
designing internal controls over financial reporting or causing them to be
designed under their supervision in order to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with Rule 240.13a-15(f)
or Rule 240.15d-15(f). This report shall not be deemed to be filed for purposes
of Section 18 of the Exchange Act or otherwise subject to the liabilities of
that section.

         Management and the Board of Directors work to mitigate the risk of a
material misstatement in financial reporting, however, there can be no assurance
that this risk can be reduced to less than a remote likelihood of a material
misstatement.

         Management has not yet identified the critical disclosure controls and
procedures associated with the Company's internal control over financial
reporting for the fiscal year ending December 31, 2007 and has not yet tested
the effectiveness of these disclosure controls and procedures and, therefore,
cannot yet deem these controls to be effective. Therefore, the Company has
determined that a material weakness exists related to the lack of identification
and testing of disclosure controls and procedures associated with the Company's
internal control over financial reporting for the fiscal year ending December
31, 2007. This material weakness could materially affect the Company's control
over financial reporting.

Limitations on the Effectiveness of Internal Controls
-----------------------------------------------------

Our management does not expect that our disclosure controls and procedures or
our internal control over financial reporting will necessarily prevent all fraud
and material error.

Weaver & Martin LLC, the Company's independent registered public accounting
firm, was not required to and has not issued a report concerning the
effectiveness of the Company's internal control over financial reporting as of
December 31, 2007.

ITEM 9B. OTHER INFORMATION

         None.

                                       28

<PAGE>
<TABLE>
<CAPTION>


                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

          The members of our board of directors serve for one year terms and are
elected at the next annual meeting of stockholders, or until their successors
have been elected. The officers serve at the pleasure of the board of directors.

Directors

         Information as to our current directors and executive officers is as
follows:
         Name
                           Age    Title               Term                Independent       Committees
                           ---    -----               ----                -----------       ----------
         <S>                <C>   <C>                 <C>                        <C>             <C>
         Loren Moll          51   President, CEO,     Since 2002                  No              None
                                  Director
         Robert H. Kite      53   Director            Since December 2006        Yes           Nominating

Duties, Responsibilities and Experience

         Loren W. Moll, age 51, is Chairman of Petrol, has been a member of the
law firm of Caldwell & Moll, L.C. in Overland Park, Kansas since its
establishment in November 1996. Mr. Moll concentrates his practice in all areas
of real estate law, including commercial real estate transactions, breach of
contract, escrow and title disputes, commercial leasehold disputes, real estate
broker liability, and oil and gas. Mr. Moll holds a B.A. degree from the
University of Kansas (1983) and his Juris Doctor degree, Order of the Coif, from
the University of Kansas School of Law (1986) where he was Research Editor for
the University of Kansas Law Review. Mr. Moll was formerly a partner of the real
estate law firm Lewis, Rice & Fingersh from 1986 to 1994 and was associated with
the international law firm Bryan Cave LLP from 1994 to 1996.

         Robert H. Kite, age 53, has been director of Petrol since December 8,
2006. Since 1991, Mr. Kite has served on the Board of Directors, and Audit
Committee Member, of National Energy Group, Inc., a management company engaged
in the business of management, development, production and operations of oil and
natural gas properties, primarily located in Texas, Oklahoma, Arkansas, and
Louisiana (both onshore and in the Gulf of Mexico). Since 1981, Mr. Kite has
served as the President and Chief Operating Officer of KFC Inc., the managing
general partner of KFT LLP, a family-owned company with operations that include
real estate development, investments and medical MRI clinics. Since 1982, Mr.
Kite has also served as President and CEO of Roamin' Korp. Inc., a private
holding company involved in real estate, equities, and other investments. Since
2002, Mr. Kite has served on the Board of Directors of E-2020, a private
educational resource company, and has also served on the Board of Directors,
Governance Committee and is a Member of the Audit Committee of ANTs software,
inc. In addition, since 2005, Mr. Kite has served on the Board of Directors of
Jardinier Corporation. Between 1995 and 2005, Mr. Kite served on the Board of
the FBI Citizens Academy Charter Board of Phoenix, Arizona and served as the
Board's President in 1998. From 1998 to present, Mr. Kite has served on the
Board of Directors of Child Help USA, a non-profit organization. Mr. Kite earned
a B.S. Degree in Psychology and Political Science with a minor in Business from
Southern Methodist University.

Limitation of Liability of Directors
------------------------------------

         Pursuant to the Nevada General Corporation Law, our Articles of
Incorporation exclude personal liability for our Directors for monetary damages
based upon any violation of their fiduciary duties as Directors, except as to
liability for any breach of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, or
any transaction from which a Director receives an improper personal benefit.
This exclusion of liability does not limit any right which a Director may have
to be indemnified and does not affect any Director's liability under federal or
applicable state securities laws. We have agreed to indemnify our directors
against expenses, judgments, and amounts paid in settlement in connection with
any claim against a Director if he acted in good faith and in a manner he
believed to be in our best interests.

                                       29
</TABLE>

<PAGE>


Election of Directors and Officers.
-----------------------------------

         Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and qualified.

Involvement in Certain Legal Proceedings

         No Executive Officer or Director of the Corporation has been the
subject of any Order, Judgment, or Decree of any Court of competent
jurisdiction, or any regulatory agency permanently or temporarily enjoining,
barring suspending or otherwise limiting him/her from acting as an investment
advisor, underwriter, broker or dealer in the securities industry, or as an
affiliated person, director or employee of an investment company, bank, savings
and loan association, or insurance company or from engaging in or continuing any
conduct or practice in connection with any such activity or in connection with
the purchase or sale of any securities.

         No Executive Officer or Director of the Corporation has been convicted
in any criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.

Change in Control Arrangements

         Pursuant to our financing agreements with Laurus Master Fund, Ltd., the
occurrence of a change of control in the controlling ownership of Petrol would
be a default under the agreements. A change in control (as defined below) shall
occur with respect to Petrol, unless Laurus shall have expressly consented to
such change of control in writing. A "Change of Control" shall mean any event or
circumstance as a result of which (i) any "Person" or "Group" (as such terms are
defined in Sections 13(d) and 14(d) of the Exchange Act), other than Laurus, is
or becomes the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under
the Exchange Act), directly or indirectly, of 35% or more on a fully diluted
basis of the outstanding voting equity interest of Petrol, (ii) the Board of
Directors of Petrol shall cease to consist of a majority of Petrol's board of
directors at the time of the execution of the Laurus Agreements (Paul Branagan,
Loren Moll and Suzanne Herring were the only board members at the time of the
execution of the Laurus Agreements subject to this provision), as amended or
ratified, or (iii) Petrol or any of its Subsidiaries merges or consolidates
with, or sells all or substantially all of its assets to, any other person or
entity.

Section 16(a) Beneficial Ownership Reporting Compliance

         Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than ten percent of our common stock, to file initial
reports of ownership and reports of changes in ownership with the SEC. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish us with copies of all Section 16(a) forms they
file. Based upon a review of the copies of such forms furnished to us and
written representations from our executive officers and directors, we believe
that as of the date of this filing they were all current in there filings.

Code of Business Conduct and Ethics

         On November 18, 2005, we adopted a Code of Business Conduct and Ethics
that applies to our Directors, officers and employees. A copy of the Code of
Business Conduct and Ethics is attached as Appendix A to the proxy filed with
the SEC on November 22, 2005 and is also available on our website at
www.petroloilandgas.com.

Corporate Governance

The Company currently has only two directors, one of which, Loren Moll, is
acting as President and CEO of the Company on an interim basis. Due to the
limited size of the Board, it is not now operating the various committees that
were established at an earlier time.

ITEM 11. EXECUTIVE COMPENSATION

                        Overview of Compensation Program

           The Board of Director's (the "Board") has responsibility for
establishing, implementing and continually monitoring adherence with Petrol's
compensation philosophy. The Board ensures that the total compensation paid to
the Executives is fair, reasonable and competitive. We do not currently have a
Compensation Committee. At this time, the Company has only one executive

                                       30

<PAGE>
<TABLE>
<CAPTION>


officer, Loren Moll, who is also a director. Mr. Moll did not receive any
compensation from the Company with respect to the services he provided as
President and CEO, but continued to receive director compensation during 2007.

Director Compensation

         Directors of Petrol receive compensation of $1,000 for each meeting of
the board, as well as travel expenses if required. From time to time, certain
directors who are not employees may receive grants of options to purchase shares
of our common stock.

----------------------------------------------------------------------------------------------------------------------
                                                DIRECTOR COMPENSATION
----------------------------------------------------------------------------------------------------------------------
                                                                                  Non-
                                                                  Non-Equity     Qualified
                            Fees                                   Incentive     Deferred
                           Earned       Stock                        Plan        Compensa-      All Other
                         or Paid in     Awards        Option       Compensa-    ion Earnings     Compensa
     Name                Cash ($)        ($)        Awards ($)     tion ($)         ($)         -tion ($)     Total ($)
      (a)                   (b)          (c)            (d)           (e)           (f)            (g)           (j)
----------------------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>          <C>            <C>           <C>             <C>    <C>
Loren Moll (1)             $17,000          -0-          -0-            -0-           -0-             -0-     $17,000
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
Robert Kite                 20,000          -0-          -0-            -0-           -0-             -0-      20,000
----------------------------------------------------------------------------------------------------------------------


ITEMS 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

         The following table presents information, to the best of our knowledge,
about the beneficial ownership of our common stock on April 9, 2007, held by
those persons known to beneficially own more than 5% of our capital stock and by
our directors and executive officers. The percentage of beneficial ownership for
the following table is based on 29,090,926 shares of common stock outstanding as
of April 9, 2007.

         Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and does not necessarily indicate beneficial
ownership for any other purpose. Under these rules, beneficial ownership
includes those shares of common stock over which the stockholder has sole or
shared voting or investment power. It also includes (unless footnoted) shares of
common stock that the stockholder has a right to acquire within 60 days after
April 9, 2007 through the exercise of any option, warrant or other right. The
percentage ownership of the outstanding common stock, however, is based on the
assumption, expressly required by the rules of the Securities and Exchange
Commission, that only the person or entity whose ownership is being reported has
converted options or warrants into shares of our common stock.

------------------------------------------------------------------   ------------------  ---------------------------

                                                                                           Percent of Outstanding
Name of Beneficial Owner (1)                                              Number             Shares of Common
                                                                         of Shares               Stock (2)
------------------------------------------------------------------   ------------------  ---------------------------
Loren Moll, President, CEO and Director                                      3,100,000              11%
11020 King Street, Suite 375
Overland Park, KS 66210
------------------------------------------------------------------
Robert Kite, Director                                                            7,142               *
------------------------------------------------------------------   ------------------  ---------------------------
Directors and Officers as a Group (2 persons)                                3,107,142              11%
--------------------------------------------------------------------------------------------------------------------
(1)      As used in this table, "beneficial ownership" means the sole or shared
         power to vote, or to direct the voting of, a security, or the sole or
         shared investment power with respect to a security (i.e., the power to
         dispose of, or to direct the disposition of, a security).
(2)      Figures are rounded to the nearest whole percent. * represents less
         than 1%.

                                       31
</TABLE>

<PAGE>


ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

         On June 30, 2006, we expensed a subscription receivable in the amount
of $75,000 for one of our shareholders in exchange for public relation services
rendered.

         During the year ended December 31, 2007 and 2006, we paid fees to
Caldwell & Moll, LLC totaling $163,715 and $100,091, respectively for legal
services provided in connection with current litigation. An Officer of the
Company is a member of the service provider. As of December 31, 2006 the balance
owed to Caldwell & Moll was $20,384.

         During the year ended December 31, 2007 and 2006, we paid fees to
Accuity Financial Services, Inc. totaling $47,100 and $82,500, respectively for
services provided in connection with preparation of our quarterly financial
statements. A Director (resigned in 2007) of the Company is an officer of the
service provider. As of December 31, 2006 the balance owed to Accuity Financial
Services, Inc. was $18,000

Director Independence

         The Board of Directors has analyzed the independence of each director
and has concluded that Robert Kite is considered an independent Director in
accordance with the director independence standards of the American Stock
Exchange, and has determined that he does not have a material relationship with
Petrol which would impair his independence from management or otherwise
compromise his ability to act as an independent director.

Review, approval or ratification of transactions with related persons

         Transactions between related persons (including directors and executive
officers of Petrol and their immediate family members) and Petrol or their
affiliates are subject to approval by the board of directors. Petrol has no
written policy setting forth the procedures for the review and approval of
related party transactions. Officers and directors will be regularly reminded of
their obligation to seek board approval of any related party transaction or
potential conflict of interest. The board will consider all factors that it
deems relevant, including the nature of the related party's interest in the
transaction, whether the terms are no less favorable than could be obtained in
arms-length dealings with unrelated third parties, and the materiality of the
transaction to Petrol.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1) AUDIT FEES
         The aggregate fees billed for professional services rendered by Weaver
& Martin, LLC, for the audit of our annual financial statements and review of
the financial statements included in our Form 10-QSB or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for fiscal years 2007, 2006 and 2005 were $ 108,605,
$120,737 and $105,702, respectively.

(2) AUDIT-RELATED FEES

         None. (3) TAX FEES

          The aggregate fees to be billed by Weaver & Martin LLC for
professional services to be rendered for tax fees for fiscal years 2007, 2006
and 2005 were $ 15,860, $13,650 and $10,250, respectively.

(4) ALL OTHER FEES
           The aggregate fees for professional services for audit related
services relating to the Registration Statement on Form SB-2 for fiscal years
2007, 2006 and 2005 were $0, $33,725 and $30,750 respectively. There were no
other fees to be billed by Weaver & Martin LLC for the fiscal years 2007, 2006
and 2005 other than the fees described herein and above.

                                       32

<PAGE>


(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
         We do not have an audit committee.
(6) If greater than 50 percent, disclose the percentage of hours expended on the
principal accountant's engagement to audit the registrant's financial statements
for the most recent fiscal year that were attributed to work performed by
persons other than the principal accountant's full-time, permanent employees.

         Not applicable.

                                       33

<PAGE>
<TABLE>
<CAPTION>


                                     PART IV

ITEM 15.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES

         (a)      Exhibits. The following documents are filed as a part of this report:

                  (1)  The consolidated financial statements of Petrol Oil and
                       Gas, Inc. are listed on the Index to this report, page
                       76.

                  (2)  Financial statement schedules have been omitted because
                       they are not required, not applicable or the
                       information is included in the Petrol's consolidated
                       financial statements.

---------------------------------------------------------------------------------------------------------------------
                                                                             Incorporated by reference
---------------------------------------------------------------------------------------------------------------------
Exhibit                                             Filed                     Period                      Filing
number      Exhibit description                   herewith       Form         ending      Exhibit          date
                                                                                          No.
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
<C>         <C>                                                 <C>                           <C>         <C>
2           Asset Purchase Agreement between                     SB-2                         2           1/22/03
            Petrol Energy, Inc. and Euro
            Technology Outfitters, August 19,
            2002
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
3i(a)       Certificate of Amendment of                          SB-2                         3(i)(a)     1/22/03
            Articles of Incorporation
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
3i(b)       Articles of Incorporation                            SB-2                         3(i)(b)     1/22/03
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
3ii         Bylaws                                               SB-2                         3(ii)       1/22/03
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
10.1        2002 Master Stock Option Plan                        SB-2                         10.9        1/22/03
---------------------------------------------------------------------------------------------------------------------

---------------------------------------------------------------------------------------------------------------------
10.2        Securities Purchase Agreement for                    SB-2                         10.21       2/7/05
            Laurus
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.3        Registration Rights Agreement for                    SB-2                         10.22       2/7/05
            Laurus
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.4        Subscription and Registration                        SB-2                         10.23       2/7/05
            Rights Agreement for Unit Offering
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.5        Warrant Agreement for Unit                           SB-2                         10.24       2/7/05
            Offering
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.6        Amendment No. 1 to the Secured                       SB-2                         10.25       2/7/05
            Convertible Term Note &
            Registration Rights Agreement with
            Laurus, dtd 1/28/05
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.7        Common Stock Purchase Warrant of                     SB-2                         10.26       2/7/05
            Laurus, dated 01/28/05
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------

                                                         34
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


---------------------------------------------------------------------------------------------------------------------
                                                                             Incorporated by reference
---------------------------------------------------------------------------------------------------------------------
Exhibit                                             Filed                     Period                      Filing
number      Exhibit description                   herewith       Form         ending      Exhibit          date
                                                                                          No.
---------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
<C>         <C>                                                 <C>                           <C>          <C>
10.8        Letter Amendment Agreement with                      SB-2                         10.27       5/12/05
            Laurus, dated 04/28/05
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.9        Amendment No. 1 to October 2004                      SB-2                         10.29       12/1/05
            Securities Purchase Agreement
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.10       Securities Purchase Agreement                        SB-2                         10.30       12/1/05
            dated October 31, 2005
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.11       Secured Term Note dated October                      SB-2                         10.31       12/1/05
            31, 2005
--------------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------
10.12       Common Stock Purchase Warrant                        SB-2                         10.32       12/1/05
            dated October 31, 2005
--------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
10.13       Registration Rights Agreement                        SB-2                         10.33       12/1/05
            dated October 31, 2005
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
10.14       Amended and Restated Mortgage                        SB-2                         10.34       12/1/05
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
10.15       Foreclosure-Related Agreement                        8-K                          10.1        5/2/08
            dated April 30, 2008
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
21.1        List of Subsidiaries of Petrol Oil                   10-KSB         12/31/06      21          3/31/06
            and Gas, Inc.
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
31          Certification pursuant to Section         X
            302 of the Sarbanes-Oxley Act
----------------------------------------------------------------------------------------------------------------------

----------------------------------------------------------------------------------------------------------------------
32          Certification pursuant to Section         X
            906 of the Sarbanes-Oxley Act
----------------------------------------------------------------------------------------------------------------------

                                                         35

</TABLE>

<PAGE>




                                   SIGNATURES

           In accordance with Section 13 or 15(d) of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            PETROL OIL AND GAS, INC.

Dated: May 15, 2008
                                            By:  /s/  Loren Moll
                                               -------------------------------
                                                      Loren Moll, President

           In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.

Signature                      Title                                Date
---------                      -----                                ----

/s/ Loren Moll                 President,                           May 15, 2008
-------------------            CEO, Director,
    Loren Moll                 Principal Accounting Officer


/s/ Robert Kite                Director                             May 15, 2008
-------------------
    Robert Kite

                                       36

<PAGE>


                            Petrol Oil and Gas, Inc.
                   Index To Consolidated Financial Statements


Report of Independent Registered Public Accounting Firm                     F-1

Consolidated Balance Sheets, December 31, 2007 and 2006                     F-2

Consolidated Statement of Operations for the Years Ended
 December 31, 2007 and 2006                                                 F-3

Consolidated Statement of Stockholders' Equity for the Years Ended
 December 31, 2007 and 2006                                                 F-4

Consolidated Statement of Cash Flows for the Years Ended
 December 31, 2007 and 2006                                                 F-6

Notes to Consolidated Financial Statements                                  F-7

                                       37

<PAGE>

             Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders
Petrol Oil & Gas, Inc.

We have audited the accompanying consolidated balance sheet of Petrol Oil & Gas,
Inc. and subsidiaries as of December 31, 2007 and 2006, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for each of the two years in the period December 31, 2007. These financial
statements are the responsibility of Petrol Oil & Gas, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Petrol Oil & Gas, Inc. and
subsidiaries as of December 31, 2007 and 2006, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 2007 in conformity with accounting principles generally accepted in
the United States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses and had negative
cash flows from operations that raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in the Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

/s/  Weaver & Martin LLC
-----------------------------
     Weaver & Martin LLC



Kansas City, Missouri
May 15, 2008

                                      F-1


<PAGE>
<TABLE>
<CAPTION>

                                       Petrol Oil and Gas, Inc.
                                      Consolidated Balance Sheet



                                                                                 December 31,
                                                                             2007            2006
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
Assets
Current assets:
   Cash                                                                  $    506,711    $  5,917,958
   Accounts receivable                                                        529,554         624,731
   Derivative asset                                                            77,800            --
   Prepaid expenses                                                            42,495          38,085
                                                                         ------------    ------------
     Total current assets                                                   1,156,560       6,580,774
                                                                         ------------    ------------


Fixed assets:
   Pipeline                                                                 1,522,423       5,331,028
   Equipment and vehicles                                                     388,762         341,310
                                                                         ------------    ------------
                                                                            1,911,185       5,672,338
     Less accumulated depreciation                                            487,954         471,600
                                                                         ------------    ------------
       Net fixed assets                                                     1,423,231       5,200,738
                                                                         ------------    ------------

Other assets:
   Oil and gas properties using full cost accounting:
     Properties not subject to amortization                                   313,829       1,210,174
     Properties subject to amortization                                     8,605,842      21,856,363
   Capitalized loan costs, net                                                   --           662,511
   Deposits                                                                     3,000           1,932
   Derivative asset                                                              --           974,752
                                                                         ------------    ------------
       Total other assets                                                   8,922,671      24,705,732
                                                                         ------------    ------------

                                                                         $ 11,502,462    $ 36,487,244
                                                                         ============    ============


Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                                                      $     37,365    $    462,188
   Accrued liabilities                                                        649,032         430,190
   Current portion of long term debt                                       26,639,094      14,193,588
                                                                         ------------    ------------
       Total liabilities                                                   27,325,491      15,085,966
                                                                         ------------    ------------

Asset retirement obligation                                                   511,000         907,797
Long-term derivative liability                                                   --            58,133
Long-term debt, less current portion                                             --        13,169,895
                                                                         ------------    ------------
                                                                              511,000      14,135,825
                                                                         ------------    ------------

Commitments and contingencies

Stockholders' Equity:
   Preferred stock, $0.001 par value, 10,000,000 shares authorized, no
     shares issued and outstanding                                               --              --
   Common stock, $0.001 par value, 100,000,000 shares authorized
      29,090,926 and 29,084,597 shares issued and outstanding at
     December 31, 2007 and December 31, 2006, respectively                     29,090          29,084
   Stock owed but not issued, 0 and 6,329 at December 31, 2007 and
     December 31, 2006, respectively                                             --                 6
   Unamortized cost of options issued for compensation                           --        (1,461,747)
   Unamortized cost of stock issued for services                                 --           (47,600)
   Additional paid-in capital                                              27,220,866      28,555,484
   Other comprehensive income (loss)                                           77,800         916,619
   Accumulated (deficit)                                                  (43,661,785)    (20,726,393)
                                                                         ------------    ------------
                                                                          (16,334,029)      7,265,453
                                                                         ------------    ------------
                                                                         $ 11,502,462    $ 36,487,244
                                                                         ============    ============


 See notes to consolidated financial statements.

                                                  F-2
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                            Petrol Oil and Gas, Inc.
                      Consolidated Statements of Operations



                                                               For the Year Ended
                                                                  December 31,
                                                         ------------    ------------
                                                             2007            2006
                                                         ------------    ------------

<S>                                                      <C>             <C>
Revenue
    Oil and gas activities                               $  5,488,673    $  6,532,798
                                                         ------------    ------------
Expenses:
   Direct costs                                             2,605,257       2,908,693
   Pipeline costs                                             856,814         910,739
   General and administrative                               1,814,211       2,664,473
   Professional and consulting fees                           766,683       1,957,177
   Impairment of oil & gas properties & pipelines          15,564,184            --
   Depreciation, depletion and amortization                 2,338,490       2,811,185
                                                         ------------    ------------
     Total expenses                                        23,945,639      11,252,267
                                                         ------------    ------------

Net operating (loss)                                      (18,456,966)     (4,719,469)
                                                         ------------    ------------

Other income (expense):
   Interest income                                             76,986         335,581
   Interest expense                                        (4,555,410)     (3,411,320)
                                                         ------------    ------------
                                                           (4,478,424)     (3,075,739)


 Net (loss)                                              $(22,935,390)   $ (7,795,208)
                                                         ============    ============

Weighted average number of
   common shares outstanding - basic and fully diluted     29,090,926      28,770,494
                                                         ============    ============

Net (loss) per share - basic and fully diluted           $      (0.79)   $      (0.27)
                                                         ============    ============


See notes to consolidated financial statements.

                                          F-3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                           Petrol Oil and Gas, Inc.
                                Consolidated Statement of Stockholders' Equity



                                                                                                Unamortized
                                                                 Additional        Stock      Cost of Options
                                         Common Stock             Paid-in          owed          Issued for
                                     Shares         Amount        Capital        Not Issued     Compensation
                                  ------------   ------------   ------------    ------------    ------------
<S>                                 <C>          <C>            <C>             <C>             <C>
Balance, January 1, 2006            26,890,083   $     26,890   $ 25,534,114    $        740    $ (2,380,365)

   Shares issued for services           95,317             95        165,505            --              --

   Shares authorized and
   unissued for services                  --             --           14,994               6            --

   Warrants and options
   issued for services                    --             --          145,252            --           (78,000)

   Warrants granted for
   financing                              --             --          661,778            --              --
   Shares issued for
   interest                            135,533            136        203,164            --              --
   Shares issued for debt
   conversion                          609,020            609        912,921            --              --

   Warrants exercised                  205,000            205        241,670            --              --

   Subscription cancelled
   for services                           --             --             --              --              --

   Shares used to acquire
   property                            409,195            409        676,088            --              --

   Shares previously authorized
   now issued                          740,449            740           --              (740)           --

   Amortization of options
   for services                           --             --             --              --           996,618

   Other Comprehensive loss               --             --             --              --              --

   Net loss                               --             --             --              --              --
                                  ------------   ------------   ------------    ------------    ------------

Balance, December 31, 2006          29,084,597   $     29,084   $ 28,555,484    $          6    $ (1,461,747)
                                  ============   ============   ============    ============    ============

   Cancellation of unearned
   options                                --             --       (1,334,619)           --         1,334,619

   Shares previously authorized
   now issued                            6,329              6           --                (6)           --

   Amortization of stock and
   options for service-                   --             --             --              --           127,128

   Other Comprehensive loss               --             --             --              --              --

   Net loss                               --             --             --              --              --

Balance, December 31, 2007          29,090,926   $     29,090   $ 27,220,866    $       --      $       --
                                  ============   ============   ============    ============    ============

                                                      F-4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                    Petrol Oil and Gas, Inc.
                         Consolidated Statement of Stockholders' Equity



                                                   Unamortized
                                      Other       Cost of Stock       Total
                                  Comprehensive     Issued for     Accumulated    Stockholders'
                                      Loss          Services         Deficit         Equity
                                  ------------    ------------    ------------    ------------
<S>                               <C>             <C>              <C>            <C>
Balance, January 1, 2006          $ (1,696,616)   $    (75,000)    (12,931,186)   $  8,478,576

   Shares issued for services             --           (47,600)           --           118,000

   Shares authorized and
   unissued for services                  --              --              --            15,000

   Warrants and options
   issued for services                    --              --              --            67,252

   Warrants granted for
   financing                              --              --              --           661,778
   Shares issued for
   interest                               --              --              --           203,300
   Shares issued for debt
   conversion                             --              --              --           913,530

   Warrants exercised                     --              --              --           241,875

   Subscription cancelled
   for services                           --            75,000            --            75,000

   Shares used to acquire
   property                               --              --              --           676,497

   Shares previously authorized
   now issued                             --              --              --              --

   Amortization of options
   for services                           --              --              --           996,618

   Other Comprehensive loss          2,613,235            --              --         2,613,235

   Net loss                               --              --        (7,795,208)     (7,795,208)
                                  ------------    ------------    ------------    ------------

Balance, December 31, 2006        $    916,619    $    (47,600)   $(20,726,393)   $  7,265,453
                                  ============    ============    ============    ============

   Cancellation of unearned
   options                                --              --              --              --

   Shares previously authorized
   now issued                             --              --              --              --

   Amortization of stock and
   options for service-                   --            47,600            --           174,728

   Other Comprehensive loss           (838,819)           --              --          (838,819)

   Net loss                               --              --       (22,935,390)    (22,935,390)

Balance, December 31, 2007        $     77,800    $       --      $(43,661,785)   $(16,334,029)
                                  ============    ============    ============    ============


See notes to consolidated financial statements.

                                               F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                        Petrol Oil and Gas, Inc.
                  Consolidated Statement of Cash Flows



                                                                       For the Year Ended
                                                                           December 31,
                                                                  ------------    ------------
                                                                      2007            2006
                                                                  ------------    ------------

<S>                                                               <C>             <C>
Cash flows from operating activities
Net (loss)                                                        $(22,705,390)   $ (7,795,208)
Depreciation, depletion and amortization                             2,338,490       2,811,185
Warrant accretion                                                    1,106,546       1,295,726
Accretion of asset retirement obligation                                58,589          71,779
Shares issued for interest                                                --           203,300
Stock subscriptions for services                                          --            75,000
Amortization of stock, warrants and options issued for services        174,728       1,196,870
Impairment of oil & gas properties & pipelines                      15,564,184            --


Adjustments to reconcile net (loss) to cash used in operating activities:
      Accounts receivable                                               95,177         (10,917)
      Prepaid and other assets                                          (4,410)        (38,085)
      Accounts payable                                                (424,822)       (912,750)
      Accrued liabilities                                              (11,158)        279,023
                                                                  ------------    ------------
Net cash used in operating activities                               (3,808,066)     (2,824,077)

Cash flows from investing activities
    Purchase of fixed assets                                           (48,548)     (3,055,781)
    Proceeds from sale of oil & gas properties                         744,000            --
    Additions to oil and gas properties and deposits                  (467,696)     (9,224,470)
    Additions to deposits                                                 --            (1,933)
    Purchase of oil and gas leases                                        --          (256,172)
                                                                  ------------    ------------
Net cash provided from (used in) investing activities                  227,756     (12,538,356)
                                                                  ------------    ------------



Cash flows from financing activities
    Additions to loan fees                                                --          (563,634)
    Proceeds from loans payable                                           --        15,000,000
    Payments on notes payable                                       (1,830,935)     (1,833,053)
    Proceeds from exercising of warrants                                  --           241,875
                                                                  ------------    ------------
Net cash provided from financing activities                         (1,830,935)     12,845,188
                                                                  ------------    ------------

Net increase (decrease) in cash                                     (5,411,245)     (2,517,245)
Cash - beginning                                                     5,917,956       8,435,203
                                                                  ------------    ------------
Cash - ending                                                     $    506,711    $  5,917,958
                                                                  ============    ============

Supplemental disclosures:
    Interest paid                                                 $  3,178,637    $  2,505,161
                                                                  ============    ============
    Income taxes paid                                                     --              --
                                                                  ============    ============

Non-cash transactions
    Stock issued for oil & gas properties                         $       --      $    676,497
                                                                  ============    ============
    Stock issued for debt conversions                                     --         1,116,830
                                                                  ============    ============
    Stock, warrants and options issued for services                       --         1,196,870
                                                                  ============    ============


See notes to consolidated financial statements.

                                              F-6
</TABLE>

<PAGE>



                            PETROL OIL AND GAS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     Significant Accounting Policies

Nature of Business
         We are engaged in the exploration, development, production and
         marketing of oil and natural gas. Our primary objective is the
         development of Coalbed Methane (CBM) gas production projects. CBM was
         identified early on as an area in the oil and gas industry that was
         gaining recognition as a viable source of natural gas and was
         experiencing above average growth. We have focused our efforts to
         eastern Kansas and western Missouri where leases were acquired that
         appeared geologically suitable for CBM exploration.

Principles of Consolidation
         Our consolidated financial statements include the accounts of our
         wholly owned subsidiaries, Neodesha Pipeline, LLC and Coal Creek
         Pipeline, LLC after elimination of intercompany transactions.

Use of Estimates
         The preparation of consolidated financial statements in conformity with
         generally accepted accounting principles requires management to make
         estimates and assumptions that affect the reported amounts of assets
         and liabilities and disclosure of contingent assets and liabilities at
         the date of the consolidated financial statements and the reported
         amounts of revenues and expenses during the reporting period. Actual
         results could differ from those estimates.

Trade Accounts Receivable
         Trade accounts receivable are recorded at the invoiced amount and do
         not bear interest. We regularly review collectibility and establish or
         adjust an allowance for uncollectible accounts as necessary using the
         specific identification method. Account balances are charged off
         against the allowance after all means of collection have been exhausted
         and the potential for recovery is considered remote. There were no
         reserves for uncollectible amounts in the periods presented.

Stock-Based Compensation
         We record stock-based compensation in accordance with SFAS No. 123R
         "Share Based Payments", using the fair value method. All transactions
         in which goods or services are the consideration received for the
         issuance of equity instruments are accounted for based on Emerging
         Issues Task Force Issue No. 96-18, "Accounting for Equity Instruments
         That Are Issued to Other Than Employees for Acquiring, or in
         Conjunction with Selling, Goods or Services" using the fair value of
         the consideration received or the fair value of the equity.

                                      F-7

<PAGE>


Income Taxes
         We account for income taxes under SFAS 109, Accounting for Income
         Taxes. The asset and liability approach requires the recognition of
         deferred tax liabilities and assets for the expected future tax
         consequences of temporary differences between the carrying amounts and
         the tax basis of assets and liabilities. The provision for income taxes
         differ from the amounts currently payable because of temporary
         differences in the recognition of certain income and expense items for
         financial reporting and tax reporting purposes.

         Deferred income taxes may arise from temporary differences resulting
         from income and expense items reported for financial accounting and tax
         purposes in different periods. Deferred taxes are classified as current
         or non-current, depending on the classification of assets and
         liabilities to which they relate. Deferred taxes arising from temporary
         differences that are not related to an asset or liability are
         classified as current or non-current depending on the periods in which
         the temporary differences are expected to reverse.

         We adopted FASB Interpretation NO. 48, Accounting for Uncertainty in
         Income Taxes, as of January 1, 2007. FIN 48 clarifies the accounting
         for uncertainty in income taxes recognized in the companies' financial
         statements in accordance with FASB Statement No. 109, Accounting for
         Income Taxes. As a result, the Company applies a more-likely-than-not
         recognition threshold for all tax uncertainties. FIN 48 only allows the
         recognition of those tax benefits that have a greater than fifty
         percent likelihood of being sustained upon examination by the taxing
         authorities. As a result of implementing FIN 48, we reviewed our tax
         positions and determined there were no outstanding, or retroactive tax
         positions with less than a fifty percent likelihood of being sustained
         upon examination, therefore the implementation of this standard has not
         had a material affect on the financial statements.

         We classify tax-related penalties and net interest as income tax
         expense. As of December 31, 2007 and 2006, no income tax expense has
         been incurred.

Fair value of financial instruments
         The carrying amounts of our financial instruments, including cash and
         cash equivalents, accounts receivable, accounts payable, accrued
         expenses and notes payable approximate their fair values based on their
         short-term nature. Fair value estimates discussed herein are based upon
         certain market assumptions and pertinent information available to
         management as of December 31, 2007 and 2006. The respective carrying
         value of certain on-balance-sheet financial instruments approximated
         their fair values.

Earnings per common share
         SFAS No. 128, Earnings Per Share. This standard requires dual
         presentation of basic and diluted earnings per share on the face of the
         income statement for all entities with complex capital structures and
         requires a reconciliation of the numerator and denominator of the
         diluted loss per share computation.

                                      F-8

<PAGE>


         Potentially issuable shares of common stock pursuant to outstanding
         stock options and warrants are excluded from the diluted computation,
         as their effect would be anti-dilutive.

Cash and cash equivalents
         We consider all highly liquid investment instruments purchased with
         original maturities of three months or less to be cash equivalents for
         purposes of the consolidated statements of cash flows and other
         statements. We maintain cash on deposit in non-interest bearing
         accounts, which, at times, exceed federally insured limits. We have not
         experienced any losses on such accounts and believe we are not exposed
         to any significant credit risk on cash and equivalents.

Revenue recognition and imbalances
         Oil and gas revenues are recognized when production is sold to a
         purchaser at a fixed or determinable price, when delivery has occurred
         and title has transferred, and if collectibility of the revenue is
         probable. Cash received relating to future revenues is deferred and
         recognized when all revenue recognition criteria are met.

          We use the sales method of accounting for gas production imbalances.
         The volumes of gas sold may differ from the volumes to which we are
         entitled based on our interests in the properties. These differences
         create imbalances that are recognized as a liability only when the
         properties' estimated remaining reserves net to us will not be
         sufficient to enable the underproduced owner to recoup its entitled
         share through production. No receivables are recorded for those wells
         where we have taken less than our share of production. Gas imbalances
         are reflected as adjustments to estimates of proved gas reserves and
         future cash flows in the unaudited supplemental oil and gas
         disclosures. There was no imbalance at December 31, 2007 and 2006.

Debt issue costs
         Debt issuance costs incurred are capitalized and subsequently amortized
         over the term of the related debt on an interest method of accretion
         over the estimated life of the debt.

Property and Equipment
         Property and equipment are recorded at cost. Depreciation is on a
         straight-line method using the estimated lives of the assets (5-30
         years). Expenditures for maintenance and repairs are charged to
         expense.

Oil and gas properties
         We follow the full cost method of accounting for oil and gas
         properties. Accordingly, all costs associated with acquisition,
         exploration, and development are capitalized.

                                      F-9

<PAGE>


         All capitalized costs included in the estimated future costs to develop
         proved reserves, are amortized on the unit-of-production method using
         estimates of proved reserves. Investments in unproved properties and
         major development projects are not amortized until proved reserves
         associated with the projects can be determined or until impairment
         occurs. If the results of an assessment indicate that the properties
         are impaired, the amount of the impairment is added to the capitalized
         costs to be amortized. Abandonment's of oil and gas properties are
         charged to the full cost pool and amortized.

         Under the full cost method, the net book value of oil and gas
         properties are subject to a "ceiling". The ceiling is the estimated
         after-tax future net revenue from proved oil and gas properties,
         discounted at 10% per annum plus the lower of cost or fair market value
         of unproved properties. In calculating future net revenues, prices and
         costs in effect at the time of the calculation are held constant
         indefinitely, except for changes that are fixed and determinable by
         existing contracts. The excess, if any, of the net book value above the
         ceiling is written off as an expense.

         Sales of proved and unproved properties are accounted for as
         adjustments of capitalized costs with no gain or loss recognized,
         unless such adjustments would significantly alter the relationship
         between capitalized costs and proved reserves of oil and gas, in which
         case the gain or loss is recognized as income.

Long-lived assets
         Impairment of long-lived assets is recorded when indicators of
         impairment are present and the undiscounted cash flows estimated to be
         generated by those assets are less than the assets' carrying value. The
         carrying value of the assets is then reduced to their estimated fair
         value, which is usually measured based on an estimate of future
         discounted cash flows.

Asset retirement obligations
         We are required to recognize an estimated liability for the plugging
         and abandonment of our oil and gas wells and associated pipelines and
         equipment. The liability and the associated increase in the related
         long-lived asset are recorded in the period in which our asset
         retirement obligation ("ARO") is incurred. The liability is accreted to
         its present value each period and the capitalized cost is depreciated
         over the useful life of the related asset.

         The estimated liability is based on historical experience in plugging
         and abandoning wells, estimated remaining lives of those wells based on
         reserves estimates and federal and state regulatory requirements. The
         liability is discounted using an assumed credit-adjusted risk-free
         rate.

         Revisions to the liability could occur due to changes in estimates of
         plugging and abandonment costs, changes in the risk-free rate or
         remaining lives of the wells, or if federal or state regulators enact
         new plugging and abandonment requirements.

                                      F-10

<PAGE>


Concentration of credit risk
         We substantially sell all oil and gas production to two customers. In
         2007 and 2006 the two largest customers accounted for 92% and 6% and
         75% and 12%, of sales, respectively.

Accounting for Derivative Instruments and Hedging Activities
         We seek to reduce our exposure to unfavorable changes in natural gas
         prices by utilizing effectively fixed price contracts. The derivative
         instruments are recognized as assets or liabilities in the statement of
         financial position, measured at fair value. Accounting for changes in
         the fair value of the derivative depends on the intended use of the
         derivative and the resulting designation. For derivatives that are
         designated as cash flow hedges changes in fair value are recognized in
         other comprehensive income until the hedged item is recognized in
         earnings. Hedge effectiveness is measured at least quarterly based on
         the relative changes in fair value between the derivative contract and
         the hedged item over time. Any change in fair value resulting from
         ineffectiveness is recognized immediately in earnings.

         Although our fixed price contracts may not qualify for special hedge
         accounting treatment from time to time under specific guidelines of
         SFAS 133, we refer to these contracts as hedges inasmuch as this was
         the intent when such contracts were executed, the characterization is
         consistent with the actual economic performance of the contracts, and
         we expect the contracts to continue to mitigate our commodity price
         risk in the future. The accounting for the contracts is consistent with
         the requirements of SFAS 133.

         We have established the fair value of all derivative instruments using
         estimates determined by using established index prices and bases
         adjustments. The values reported in the financial statements change as
         these estimates are revised to reflect actual results, changes in
         market conditions or other factors.

Recent issued accounting Standards
         In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option
         for Financial Assets and Financial Liabilities" ("SFAS No. 159"). SFAS
         No. 159 allows us to choose to measure many financial assets and
         financial liabilities at fair value. Unrealized gains and losses on
         items for which the fair value option has been elected are reported in
         earnings. SFAS 159 is effective for fiscal years beginning after
         November 15, 2007. The adoption of SFAS 159 is not expected to have a
         material impact on our financial position, results of operation or cash
         flows.

         In December 2007, the FASB issued SFAS No. 160, "Non-controlling
         Interests in Consolidated Financial Statements". This statement amends
         ARB 51 to establish accounting and reporting standards for the
         non-controlling (minority) interest in a subsidiary and for the
         de-consolidation of a subsidiary. It clarifies that a non-controlling
         interest in a subsidiary is equity in the consolidated financial

                                      F-11

<PAGE>


         statements. SFAS No. 160 is effective for fiscal years and interim
         periods beginning after December 15, 2008. Management is currently
         evaluating the effect of this pronouncement on our financial position,
         results of operation or cash flows.

         In December 2007, the FASB issued SFAS No. 141 (Revised), "Business
         Combinations". SFAS 141 (Revised) establishes principals and
         requirements for how an acquirer of a business recognizes and measures
         in its financial statements, the identifiable assets acquired, the
         liabilities assumed, and any non-controlling interest in the acquiree.
         This statement also provides guidance for recognizing and measuring the
         goodwill acquired in the business combination and determines what
         information to disclose to enable users of the financial statements to
         evaluate the nature and financial effects of the business combination.
         The guidance will become effective for the fiscal year beginning after
         December 15, 2008. Management is currently evaluating the effect of
         this pronouncement on our financial position, results of operation or
         cash flows.

Reclassifications
         Certain reclassifications have been made to prior periods to conform to
current presentation.

2.  Going concern

         Our financial statements are prepared using generally accepted
         accounting principles applicable to a going concern, which contemplates
         the realization of assets and liquidation of liabilities in the normal
         course of business. Our ability to continue as a going concern is
         dependent upon us obtaining additional sources of capital or borrowings
         until the time when we are able to attain future profitable operations.
         The accompanying financial statements do not include any adjustments
         that might be necessary should the company be unable to continue as a
         going concern.

3.  Stockholders' Equity

Common stock
------------

         Stock Transactions
         ------------------

         2006
         ----

         During fiscal 2006, Laurus Master Fund Ltd. Converted $913,530 of
         principal and $203,300 of accrued interest under the convertible term
         note. Pursuant to the conversion rate of $1.50 they were issued 744,553
         shares of common stock.

         On February 16, 2006, we issued 40,334 shares of our common stock in
         exchange for working interest in producing wells valued at $60,500.

                                      F-12

<PAGE>


         On March 31, 2006, we expensed $75,000 subscription receivable in
         exchange for services rendered in connection with investor relation
         services.

         On May 9, 2006, we issued 368,861 shares of our common stock for the
         purchase of working interests in producing wells valued at $615,997.

         During the year ended December 31, 2006 we issued 95,317 shares of our
         common stock for various services received. We recorded an expense in
         the amount of $118,000, the fair value of the underlying shares. We
         recorded as expense $47,600 and $70,400 in the years ended December 31,
         2007 and 2006, respectively.

         At December 31, 2006, we authorized the issuance of 6,329 shares of our
         common stock and recorded an expense in the amount of $15,000, the fair
         value of services rendered. As of December 31, 2006. These shares were
         unissued at December 31. 2006.

         2007
         ----

         During the year ended December 31, 2007, 6,329 shares that were owed
         but unissued at the end of December 31, 2006 were issued.

         Options and warrants
         --------------------
         All values of options and warrants were determined based on the
         Black-Scholes pricing model.

         The weighted average of the assumptions used to value options and
         warrants in 2006 were: Interest rate-6.44%, Days to expiration-1,460,
         Stock price $1.60, Strike price-$1.74, Volatility-49%, Yield-0%.

         There were no options or warrants issued in the year ended December 31,
         2007.

         Options
         -------

         2006
         ----
         On January 1, 2006, we entered into a one-year agreement with R. J.
         Falkner whereby we granted Mr. Falkner 110,000 options at a strike
         price of $1.76 exercisable for a period of thirty-six months. The value
         of the option was $104,004. . We recognized $26,004 and $78,00 as
         consulting expense in fiscal 2007 and 2006 respectively.

         On June 30, 2006, we extended the term of options previously issued to
         a consultant and recorded an expense in the amount of $30,910.

                                      F-13

<PAGE>


         On September 15, we granted CSC Group 25,000 options at a strike price
         of $1.75 exercisable for a period of twenty-four months. The value of
         the option was $10,338 and was recorded as consulting expense.

         2007
         ----
         As of December 31, 2006, there was $1,461,747 of unamortized costs of
         options issued for compensation relating to the options issued to Mr.
         Branagan in 2005. $127,128 of that amount was amortized into
         compensation expense in fiscal 2007. During 2007, Mr. Branagan's
         employment with the Company ended. At that time the options were
         cancelled and the remaining $1,334,619 unamortized cost of the options
         was offset to Paid in Capital.

         Warrants
         --------

         2006
         ----
         On February 22, 2006, we issued 100,000 shares of our common stock for
         the exercise of warrants in exchange for cash totaling $150,000.

         On April 1, 2006 we granted Laurus Master Fund 200,000 warrants at a
         strike price of $1.80 per share for a five-year period in connection
         with the new note. The value of the warrants was $265,015. The value
         will be accreted to interest expense over the estimated term of the
         loan.

         On April 28, 2006, we issued 105,000 shares of our common stock for the
         exercise of warrants in exchange for cash totaling $91,875.

         On May 31, 2006 we granted Laurus Master Fund 400,000 warrants at a
         strike price of $1.65 per share for a five-year period in connection
         with the new note. The value of the warrants was $396,763. The value
         will be accreted to interest expense over the estimated term of the
         loan.

         2007
         ----

         In fiscal 2007 the remaining unamortized balance of warrants that were
         issued to Laurus Master Fund in connection with the loans was expensed
         as the loan was in default. The amount expensed was $1,106,546.

                                      F-14

<PAGE>
<TABLE>
<CAPTION>


         A summary of stock options and warrants is as follows:


                                                                   Weighted                                   Weighted
                                                Options         Average Price             Warrants          Average Price
                                        ===================== =================== ======================== ================
       <S>                                          <C>                     <C>                 <C>                   <C>
       Outstanding, 1/1/06                         2,775,000               $1.67               18,491,666            $1.83
       Granted                                       135,000                1.76                  600,000
                                                                                                           1.70
       Cancelled                                   (100,000)                 .75              (3,950,000)             1.47
       Exercised                                       --                    --                 (205,000)             1.18
                                        --------------------- ------------------- ------------------------ ----------------
       Outstanding, 12/31/06                       2,810,000               $1.70               14,936,666            $1.87
                                        ===================== =================== ======================== ================

       Outstanding, 1/1/07                         2,810,000               $1.70               14,936,666            $1.87
       Granted                                          --                   --                      --               --
       Cancelled                                  (2,050,000)               1.58                     --               --
       Exercised                                       --                   1.42               (6,703,333)             1.36
                                        --------------------- ------------------- ------------------------ ----------------
       Outstanding, 12/31/07                         760,000               $2.12                8,233,333            $2.28
                                        ===================== =================== ======================== ================




4.   Commitments

         On April 2, 2004 we entered into a 39-month lease for office space
         expiring in June of 2007. The monthly lease payment is $3,448.40. On
         April 13, 2006 we entered into an additional 24-month lease for office
         space located in Kansas. The monthly lease payment is $1,700. In August
         of 2007 we entered into a 12-month least for additional office space
         located in Kansas. The monthly lease payment is $3,000. Total rent
         expense for 2007 and 2006 was approximately $52,000, and $56,780,
         respectively. Future minimum rent payments due under these leases is
         $30,800 in 2008 and nothing thereafter.

5. Notes Payable

         Notes payable consists of the following:

                                                                     ---------------------------------------
                                                                                  December 31,
                                                                            2007                2006
                                                                     -------------------- ------------------
                    Convertible note                                        $  1,598,620       $  3,432,360
                    Secured term note                                         25,000,000         25,000,000
                    Note payable to GMAC                                           4,891             16,930
                    Note payable to bank                                          35,583             20,739
                                                                     -------------------- ------------------
                    Total                                                     26,639,094         28,470,029
                    Less unamortized cost of warrants                               --           (1,106,546)
                                                                     -------------------- ------------------
                                                                              26,639,094          27,363483
                    Less current portion                                     (26,639,094)       (14,193,588)
                                                                     -------------------- ------------------
                    Long-term debt                                          $       --         $ 13,169,895
                                                                     ==================== ==================

                                                    F-15
</TABLE>

<PAGE>



         Convertible note
         ----------------
         On October 2004 we issued an $8,000,000 secured convertible term note
         ("Note") to Laurus Master Fund, Ltd. ("Laurus"). The Note is
         convertible into shares of our common stock at an initial conversion
         price of $1.50 per share. The convertible note has a term of three
         years and accrues interest at the prime rate plus 3% per year The Note
         is secured by substantially all our assets. This note is in default at
         December 31, 2007.

         Secured term notes
         ------------------
         In October 2005 we borrowed $10,000,000 from Laurus on a secured term
         note. The interest on the note is prime plus 3.25%. Principal payments
         are based on an amount that approximated 80% of net revenues as defined
         in the note agreement. This principally consists of net revenue on new
         producing wells. The loan will mature on October 31, 2008. The loan is
         in default as of December 31, 2007.

         On March 31, 2006, we borrowed $5,000,000 from Laurus under the credit
         facility provided in October 2005. Under the terms of the agreement the
         Company issued a Secured Term Note (the "Note") in the aggregate
         principal amount of $5 million. The Note has a three-year term and
         bears an interest rate equivalent to the "prime rate" published by the
         Wall Street Journal from time to time plus 3.25%, subject to a floor of
         10% and a ceiling of 14% per annum. Concurrently with the agreements
         listed above, the Company amended and restated its previous $10 million
         Secured Term Note dated October 31, 2005 with Laurus Funds. The loan
         will mature on March 31, 2009 but is in default as of December 31,
         2007.

         On May 31, 2006, we borrowed $10,000,000 from Laurus under the credit
         facility provided in October 2005. Under the terms of the agreement the
         Company issued a Secured Term Note (the "Note") in the aggregate
         principal amount of $5 million. The Note has a three-year term and
         bears an interest rate equivalent to the "prime rate" published by the
         Wall Street Journal from time to time plus 3.25%, subject to a floor of
         10% and a ceiling of 14% per annum. Concurrently with the agreements
         listed above, the Company amended and restated its previous $10 million
         Secured Term Note dated October 31, 2005 with Laurus Funds. The loan
         will mature on May 31, 2009 but is in default as of December 31, 2007.

         The master security agreement establishes substantially all of our
         assets as collateral for the convertible note as well as for this note.

         Other notes payable
         -------------------
         We acquired a truck on September 10, 2003 and financed the purchase
         with a five-year loan from GMAC bearing an interest rate of 8.74%. As
         of December 31, 2007, the outstanding loan balance is $4,891.

                                      F-16

<PAGE>


         We have $35,583 outstanding on two loans with Cornerstone bank as of
         December 1, 2007. One loan bears interest of 7% and matured on March
         13, 2008. The other loan bears interest of 8% and matured on February
         25, 2008.

         Loan fees
         We have incurred loan fees in connection with our financing activities
as follows:

                                                     ---------------------
                                                       Financing Fees
                                                     =====================

         Balance, January 1, 2006                    $             816,329
           Add for 2006 Notes                                      563,634
           2006 amortization                                     (717,452)
                                                     ---------------------

         Balance, December 31, 2006                  $             662,511
                                                     =====================

         Balance, January 1, 2007                    $             662,511
           2007 amortization                                     (662,511)
                                                     ---------------------
         Balance, December 31, 2007                  $                --
                                                     =====================

         Capitalized Interest
         --------------------
         We capitalize interest cost incurred on funds used in the development
         of our oil and gas properties. Capitalized interest is recorded as part
         of our capitalized oil and gas properties and is depleted over the
         estimated useful life of the assets. Interest cost capitalized for the
         years ended December 31, 2007 and 2006 was $-and $808,714,
         respectively.

     6.  Income Taxes

         Deferred income taxes are determined based on the tax effect of items
         subject to differences in book and taxable income. We had no income tax
         provision for the years ended December 31, 2006, 2005 and 2004. There
         are approximately $22,500,000 of net operating loss carry-forwards,
         which expire in 2018-2021. The net deferred tax is as follows as of
         December 31,:

                                                      2007          2006
                                                  ------------  ------------
Non-current deferred tax asset (liabilities):
   Net operating loss carry-forward               $10,641,000   $ 7,650,000
   Impaired assets & Goodwill                       1,279,000         --
   Oil & gas properties                            (6,690,000)   (5,226,000)
   Valuation allowance                             (5,230,000)   (2,424,000)
                                                  ------------  ------------
Total deferred tax, net                            $       --   $      --
                                                  ============  ============

                                      F-17

<PAGE>


        A reconciliation of the provision for income taxes to the statutory
        federal rate for continuing operations is as follows as of December 31,:

                                                       ---------- ----------
                                                        2007       2006
                                                       ---------- ----------
             Statutory tax rate                            34.0%      34.0%
             Non-deductible expense                        (2.4)        7.8
             Oil & gas properties                         (14.8)      (21.4)
             Change in valuation allowance                (16.8)      (20.4)
                                                       ---------- ----------
             Effective tax rate                             0.0%        0.0%
                                                       ========== ==========

7. Related Party Transactions

         On June 30, 2006, we expensed a subscription receivable in the amount
         of $75,000 for one of our shareholders in exchange for public relation
         services rendered.

         During the year ended December 31, 2007 and 2006, we paid fees to
         Caldwell & Moll, LLC totaling $163,715 and $100,091, respectively for
         legal services provided in connection with current litigation. An
         Officer of the Company is a member of the service provider. As of
         December 31, 2006 the balance owed to Caldwell & Moll was $20,384.

         During the year ended December 31, 2007 and 2006, we paid fees to
         Accuity Financial Services, Inc. totaling $47,100 and $82,500,
         respectively for services provided in connection with preparation of
         our quarterly financial statements. A Director (resigned in 2007) of
         the Company is an officer of the service provider. As of December 31,
         2006 the balance owed to Accuity Financial Services, Inc. was $18,000.

8. Derivatives

        Description of contracts.
        -------------------------
        We utilize energy swaps to reduce exposure to unfavorable changes in
        natural gas prices through fixed-price contracts. These contracts allow
        us to predict with greater certainty the effective natural gas prices
        received for hedged production. These contracts also benefit operating
        cash flows and earnings when market prices are less than the fixed
        prices provided under the contracts. However, we will not benefit from
        market prices that are higher than fixed prices in contracts for hedged
        production. If we are unable to provide the quantity that we have
        contracted for we will have to go to the open market to purchase the
        required amounts that we have contracted to provide. For the year ended
        December 31, 2007 and 2006 fixed price contracts hedged approximately
        88% and 84%, respectively, of our oil & gas production.

                                      F-18

<PAGE>


        The following table summarizes our fixed price contracts as of December
31, 2007:
                                                              Year Ending
                                                              December 31,
                                                          -------------------
                                                                 2008
                                                          -------------------
                Gas
                Contract volume                                       90,000
                Weighted-average price                                 $7.23

                Oil
                 Contract                                                 --
                volume
                 Weighted-average price                                   --

                Fair value asset                                  $   77,800

        Accounting.
        All fixed price contracts have been executed in connection with our
        natural gas hedging program. The differential between the fixed price
        and the floating price for each contract settlement period multiplied by
        the associated contract volume is the contract profit or loss. All of
        our contracts are considered to be cash flow hedges and there were no
        realized gains or losses in the years ending December 31, 2007 and 2006.
        The change in the fair value is shown as an adjustment to other
        comprehensive income with a corresponding balance sheet asset or
        liability recorded.

        Credit risk.
        The counter parties to our fixed-price contracts are the customers
        buying our product. Should the counter party default on a contract there
        can be no assurance that we will be able to enter into a new contract
        with a third party on terms comparable to the original contract. We have
        not experienced non-performance. Cancellation or termination of a
        fixed-price contract would subject a greater portion of our gas and oil
        production to market prices, which in a low price environment, could
        have an adverse effect on our operating results.

        Market risk.
        Market risk has been significantly hedged through fixed-price contracts.

9.   Asset Retirement Obligations

        Our asset retirement obligations relate to the abandonment of oil and
        gas wells. The amounts recognized were based on numerous estimates and
        assumptions, including future retirement costs, inflation rates and
        credit adjusted risk-free interest rates. The following shows the
        changes in asset retirement obligations for the financial statements
        presented.

                                      F-19

<PAGE>




                                                       Years Ended December 31,
                                                           2007      2006
                                                         --------- ---------
     Asset retirement obligation, beginning of year      $ 907,797 $ 749,618
     Liabilities incurred during the year                    --       84,600
     Liabilities settled during the year                  (455,386)     --
     Accretion of expense                                   58,589    71,779
                                                         --------- ---------
     Asset retirement obligations, end of year           $ 511,000 $ 907,797
                                                         ========= =========

10.  Impairment of Oil & Gas Properties

     We perform a full-cost ceiling test each quarter. The test establishes a
     limit (ceiling), on a country-by-country basis, on the book value of oil
     and gas properties. The capitalized costs of proved oil and gas properties,
     net of accumulated DD&A and the related deferred income taxes, may not
     exceed this "ceiling". The ceiling limitation is the estimated after-tax
     future net cash flows from proved oil and gas reserves, excluding future
     cash outflows associated with settling asset retirement obligations accrued
     on the balance sheet. The estimate of after-tax future net cash flows is
     calculated using a discount rate of 10 percent per annum and prices in
     effect at the end of the period held flat for the life of production,
     except where future oil and gas sales are covered by physical contract
     terms or by derivative instruments that qualify, and are accounted for, as
     cash flow hedges. If capitalized costs exceed this limit, the excess is
     charged to expense. The ceiling test resulted in an impairment of
     $15,564,184 in the year ended December 31, 2007. This impairment was for
     costs assigned to the full cost method subject to amortization, which
     included the cost of the wells, gathering systems and leasehold costs.

11.Subsequent Events

     In January, 2008 we entered into a fixed price contract covering
     approximately 45,000 DTH per month at a weighted average price of $7.10 for
     a one-year period beginning April 1, 2008.

     On April 30, 2008, Petrol Oil and Gas, Inc., Neodesha Pipeline, Inc. and
     Coal Creek Pipeline, Inc. (collectively, "Petrol") entered into a
     Foreclosure-Related Agreement (the "Agreement") with LV Administrative
     Services, Inc. ("LV"), administrative and collateral agent for Laurus
     Master Fund, Ltd. ("Laurus"), Valens Offshore SPV I, Ltd. ("Valens
     Offshore"), Valens U.S. SPV I, LLC ("Valens US"), Calliope Capital
     Corporation ("Calliope") and Pallas Production Corp. ("Pallas", and
     together with, Laurus, Valens Offshore, Valens US and Calliope, the
     "Holders").

     Petrol is in default of certain obligations to its Holders under its
     Secured Convertible Term Note, dated October 28, 2004, in the principle
     amount of $8,000,000; its Secured Term Note, dated October 31, 2005, in the
     principle amount of $10,000,000; its Secured Term Note, dated March 31,
     2006, in the principle amount of $5,000,000; and its Secured Term Note,
     dated May 26, 2006, in the principle amount of $10,000,000 (collectively,
     the "Notes," and all other obligations of Petrol together with the Notes,

                                      F-20

<PAGE>


     the "Outstanding Obligations"), and has received from LV and the Holders a
     default and acceleration notice with respect to the Outstanding
     Obligations. The aggregate amount due and owing to the Holders as of April
     30, 2008 is approximately $35.7 million.

     The Outstanding Obligations are secured by various mortgages and other
     fixed and mixed assets and real and personal property pursuant to security
     and other agreements covering assets or other rights to which Petrol has
     rights (all such assets, rights and collateral, collectively, the
     "Collateral"), a portion of which are assets and rights referred to as the
     "Petrol-Neodesha Project," located in Neosho and Wilson Counties, Kansas,
     consisting of, among other Collateral, mortgages, and real, personal
     property and fixed and mixed assets used in connection with the
     Petrol-Neodesha Project (the "Neodesha Collateral").

     The Agreement allows the Holders to foreclose on the Neodesha Collateral
     and governs the terms and conditions of the foreclosure. The Agreement
     provides that Petrol will not contest the sale of the Neodesha Collateral,
     which will be conducted as a public foreclosure sale in accordance with
     Kansas law. Petrol has agreed to reasonably assist LV and the Holders in
     the completion of the foreclosure sale. After the sale of the Neodesha
     Collateral becomes final, LV and the Holders will release Petrol of all
     remaining amounts owed or claims they may have, and the Holders will
     reassign to Petrol their overriding royalty interests in the mineral leases
     located at Petrol's Coal Creek Project.

     As part of the Agreement, Petrol will cancel all outstanding warrants for
     purchases of securities issued to Holders in connection with the
     Outstanding Obligations and replace them with warrants to purchase
     1,000,000 shares of common stock at an initial exercise price of $0.20 per
     share.

12.  Supplemental Oil and Gas Reserve Information (Unaudited)

        Net Capitalized costs related to oil & gas producing activities

                                                    Years Ended December 31,
                                                 ------------      ------------
                                                     2007               2006
                                                 ------------      ------------

              Proved                             $ 12,710,443      $ 24,576,664
              Unproved                                313,829         1,210,174
                                                 ------------      ------------
                                                   13,024,272        25,783,838
              Accumulated depreciation
                 and depletion                     (4,104,601)       (2,717,301)
                                                 ------------      ------------
              Net capitalized costs              $  8,919,671      $ 23,066,537
                                                 ============      ============

                                      F-21

<PAGE>
<TABLE>
<CAPTION>


         Costs incurred in oil & gas producing activities for the year ended
December 31,:

                                                                  2007            2006
                                                              -----------     -----------
        <S>                                                   <C>             <C>
         Acquisition of properties proved & unproved          $      --       $   256,172
         Development costs                                        467,696       9,987,368
                                                              -----------     -----------
         Total                                                $   467,696     $10,243,540
                                                              ===========     ===========

        Results of operations from oil and gas producing activities
        The following table includes revenues and expenses associated directly
        with our gas and oil producing activities. It does not include any
        interest costs and general and administrative costs and, therefore, is
        not necessarily indicative of the contribution to consolidated net
        operating results of our gas and oil operations.

                                                              Years Ended December 31,
                                                                2007            2006
                                                            -----------      -----------
              Production revenues                           $ 5,488,673      $ 6,532,798
              Production and pipeline costs                  (2,605,257)      (4,776,035)
              Depreciation and depletion                     (1,387,300)      (1,793,788)
              Income tax  (allocated on gross profits
              based on statutory rates)                        (509,000)        (285,000)
                                                            -----------      -----------
              Results of operations for producing
              activities                                    $   987,116      $   634,578
                                                            ===========      ===========

        Gas and oil Reserve Quantities
        Our ownership interests in estimated quantities of proved oil and gas
        reserves and changes in net proved reserves, all of which are located in
        the United States, are summarized below. Proved reserves are estimated
        quantities of natural gas and oil that geological and engineering data
        demonstrate with reasonable certainty to be recoverable in future years
        from known reservoirs under existing economic and operating conditions.
        Proved developed reserves are those that are expected to be recovered
        through existing wells with existing equipment and operating methods.
        Reserves are stated in thousand cubic feet (mcf) of natural gas and
        barrels (bbl) of oil. Geological and engineering estimates of proved
        natural gas and oil reserves at one point in time are highly
        interpretive, inherently imprecise and subject to ongoing revisions that
        may be substantial in amount. Although every reasonable effort is made
        to ensure that the reserve estimates are accurate, by their nature
        reserve estimates are generally less precise than other estimates
        presented in connection with financial statement disclosures.

                                      F-22

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                                         Gas -mcf           Oil -bbls
                                                                     ------------------ ------------------
       <S>                                                                  <C>                <C>
       Proved reserves:
         Balance, January 1, 2006                                           15,132,733            123,055
         Revisions of previous estimates                                    (1,913,483)             8,354
         Extensions and discoveries                                            445,662            120,230
         Production                                                           (831,009)           (22,249)
                                                                     ------------------ ------------------
         Balance December 31, 2006                                          12,833,903            229,390
                                                                     ================== ==================
                                                                             Gas - mcf         Oil - bbls
                                                                     ------------------ ------------------
       Proved reserves:
         Balance, January 1, 2007                                           12,833,903            229,390
         Revisions of previous estimates                                    (3,969,471)            (4,903)
         Divested reserves                                                       --              (147,981)
         Extensions and discoveries                                          1,653,603               --
         Production                                                           (740,568)           (11,482)
                                                                     ------------------ ------------------
       Balance, December 31, 2007                                            9,777,467             65,024
                                                                     ================== ==================

                                                                          Gas-mcf           Oil-bbls
                                                                     ------------------ ------------------
       Proved developed reserves at the end of the year:
            Balance, December 31, 2006                                       8,525,003            229,390
                                                                     ================== ==================
            Balance, December 31, 2007                                       4,331,717             65,024
                                                                     ================== ==================

        Standardized measure of discounted future net cash flows
        The standardized measure of discounted future net cash flows from our
        proved reserves for each of the years presented in the financial
        statements is summarized below. The standardized measure of future cash
        flows as of December 31, 2007 and 2006 is calculated using a price per
        Mcf of natural gas of $4.31 and $7.50, respectively and a price per
        barrel of oil at $81.81 and $54.00, respectively. Estimated future cash
        flows are based on independent reserve data. Because the standardized
        measure of future net cash flows was prepared using the prevailing
        economic conditions existing at December 31, 2007, 2006 and 2005, it
        should be emphasized that such conditions continually change.
        Accordingly, such information should not serve as a basis in making any
        judgment on the potential value of the Company's recoverable reserves or
        in estimating future results of operations.

       Year ended December 31, 2006
          Future production revenue                                                          $  109,137,000
          Future production costs                                                               (50,029,000)
          Future development costs                                                               (4,586,000)
                                                                                     -----------------------
          Future cash flows before income taxes                                                  54,522,000
          Future income taxes                                                                    (7,930,000)
                                                                                     -----------------------
          Future net cash flows                                                                  46,592,000
          10% annual discount for estimating of future cash flows                               (15,720,000)
                                                                                     -----------------------
       Standardized measure of discounted net cash flows                                     $   30,872,000
                                                                                     =======================

                                                    F-23
</TABLE>

<PAGE>
<TABLE>
<CAPTION>


       <S>                                                                                     <C>
       Year ended December 31, 2007
          Future production revenue                                                            $  47,461,000
          Future production costs                                                                (23,916,000)
          Future development costs                                                                (8,495,000)
                                                                                     -----------------------

          Future cash flows before income tax                                                     15,050,000
          Future income taxes                                                                           --
                                                                                     -----------------------
          Future net cash flows                                                                   15,050,000
          10% annual discount for estimating of future cash flows                                 (6,130,000)
                                                                                     -----------------------
       Standardized measure of discounted net cash flows                                       $   8,920,000
                                                                                     =======================

          Changes in Standardized Measure of Discounted Future Net Cash Flows
         The principal changes in the standardized measure of discounted future
         net cash flows relating to proven natural gas and oil properties were
         as follows:

       Balance, January 1, 2006                                                                $  34,580,000
          Sales, net of production costs                                                          (8,237,000)
          Net changes in pricing and production costs                                            (14,394,000)
          Extensions and discoveries                                                               4,601,000
          Revisions                                                                              (10,344,000)
          Development costs incurred that were previously estimated                                4,816,000
          Net change in estimated future development costs                                         1,625,000
          Accretion of discount                                                                       52,000
          Change in income taxes                                                                  18,173,000
                                                                                     -----------------------
       Balance December 31, 2006                                                               $  30,872,000
                                                                                     =======================

       Balance, January 1, 2007                                                                $  30,872,000
          Sales, net of production costs                                                          (7,068,000)
          Net changes in pricing and production costs                                            (12,480,000)
          Extensions and discoveries                                                               3,898,000
          Revisions                                                                              (13,471,000)
          Development costs incurred that were previously estimated                                     --
          Net change in estimated future development costs                                        (1,123,000)
          Accretion of discount                                                                      272,000
          Change in income taxes                                                                   7,930,000
                                                                                     -----------------------

       Balance December 31, 2007                                                               $   8,920,000
                                                                                     =======================

                                                    F-24
</TABLE>