UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549



FORM
10-KSB



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

SECURITIES
EXCHANGE ACT OF 1934



For
the fiscal year ended December 31, 2003



[
] 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.

(Name
of small business issuer in its charter)



|Nevada                                         | 90-0066187               
|---------------------------------------------- | -------------------------
|(State
      or other jurisdiction of          | (I.R.S.
      Employer   
|incorporation
      or organization)           | Identification
      No.)
|                                              
|2300
      Patrick Lane, Suite 26             
|Las
      Vegas, Nevada                        | 89119                    
|(Address
      of principal executive offices) | (Zip
      Code)         



Issuer's
telephone number including area code: (702) 454-3394



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



None



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



Common
Stock, $0.001 par value

(Title
of Class)



Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 days. Yes XNo _____



Check
if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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-KSB
or any amendment to this Form 10-KSB. [ ]

---

The
issuer's revenue for its most recent fiscal year ended December 31, 2003. $-0-



The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and ask price, as of
March 16, 2004 was $43,363,015 based on a share value of $3.25.



The
number of shares of Common Stock, $0.001 par value, outstanding on March 16,
2004 was 17,192,466 shares.



Transitional
Small Business Disclosure Format (check one): Yes ___ No X

---

PETROL
OIL AND GAS, INC.

(A
DEVELOPMENT STAGE COMPANY)

FOR
THE FISCAL YEAR ENDED

December
31, 2003



Index
to Report

on
Form 10-KSB





|PART
      I | Page(s)
|------------ | -------

|Item
      1. | Description
      of Business                             | 1-17
|------------- | --------------------------------------------------------- | ----
|Item
      2. | Description
      of Property                             | 18  
|Item
      3. | Legal
      Proceedings                                   | 18  
|Item
      4. | Submission
      of Matters to a Vote of Security Holders | 18  



PART II



|Item
      5.  | Market
      for Common Equity and Related Stockholder Matters                                   | 18-27
|-------------- | ------------------------------------------------------------------------------------------------ | -----
|Item
      6.  | Plan
      of Operation                                                                          | 27-34
|Item
      7.  | Financial
      Statements                                                                       | 34   
|Item
      8.  | Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure | 34   
|Item
      8A. | Controls
      and Procedures                                                                    | 35   



PART
III



|Item
      9.  | Directors,
      Executive Officers, Promoters and Control Persons; Compliance With Section
      16(a) of the Exchange Act | 35-39
|-------------- | --------------------------------------------------------------------------------------------------------------------------- | -----
|Item
      10. | Executive
      Compensation                                                                                                | 39-41
|Item
      11. | Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters                  | 41-42
|Item
      12. | Certain
      Relationships and Related Transactions                                                                        | 43-44
|Item
      13. | Exhibits
      and Reports on Form 8-K                                                                                      | 44-45
|Item
      14. | Principle
      Accountant Fees and Services                                                                                | 45-46

---

This
form 10-KSB contains forward-looking statements within the meaning of the
federal securities laws. These forward-looking statements are necessarily based
on certain assumptions and are subject to significant risks and uncertainties.
These forward-looking statements are based on management's expectations as of
the date hereof, and the Company does not undertake any responsibility to update
any of these statements in the future. Actual future performance and results
could differ from that contained in or suggested by these forward-looking
statements as a result of factors set forth in this Form 10-KSB (including those
sections hereof incorporated by reference from other filings with the Securities
and Exchange Commission), in particular as set forth in the "Plan of
Operation" under Item 6.



In
this form 10-KSB references to "PETROL", "the Company",
"we," "us," and "our" refer to PETROL OIL AND GAS,
INC.



Throughout
this document we may use certain terms or phrases that are specific to the oil
and gas industry. We have included a glossary, commencing on page 2, containing
these terms and phrases. We encourage you to refer to the glossary to gain a
better understanding of industry terms used throughout this filing.



PART
I



ITEM
1. DESCRIPTION OF BUSINESS



(a)
Business Development



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 executed an Asset Purchase
Agreement with Petrol Energy, Inc., whereby we issued 10,918,300 shares of our
restricted common stock to Petrol Energy in exchange for certain assets and
liabilities. The assets we acquired from Petrol Energy included approximately
289 oil and gas mineral leases.



On
August 20, 2002, we amended our Articles of Incorporation to change our name
from Euro Technology Outfitters to Petrol Oil and Gas, Inc.



On
August 21, 2002, our then sole officer and director, appointed Paul Branagan as
a director of the Company, tendered 5,826,240 shares of our stock for
cancellation, and subsequently resigned, leaving Mr. Branagan as our sole
director. Following his appointment, Mr. Branagan elected himself as the sole
officer of the Company.



We
have an authorized capitalization of 100,000,000 shares of common stock, $0.001
par value per share, and as of December 31, 2003 there were 17,247,466 shares
outstanding. We also have an authorized capitalization of 10,000,000 shares of
preferred stock at a par value of $0.001 per share, and as of December 31, 2003
there were no shares outstanding.



1

---

> GLOSSARY



|Term                          | Definition                                                                                                                                                                                                                                                                                                    
|----------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                              |                                                                                                                                                                                                                                                                                                               
|Adsorb                        | A
      process by which molecules are taken up on the surface of a solid by
      physical or chemical action. Large amounts of gases may be adsorbed on the
      surface of a porous material such as coal.                                                                                                
|                              |                                                                                                                                                                                                                                                                                                               
|Barrel                        | In
      the energy industry, a barrel is a unit of volume measurement used for
      petroleum and is equivalent to 42 U.S. gallons measured at 60 degrees
      Fahrenheit.                                                                                                                                 
|                              |                                                                                                                                                                                                                                                                                                               
|Basin                         | A
      depressed area where sediments have accumulated during geologic time and
      considered to be prospective for oil and gas deposits.                                                                                                                                                                 
|                              |                                                                                                                                                                                                                                                                                                               
|Blowout                       | An
      uncontrolled flow of oil, gas, water or mud from a wellbore caused when
      drilling activity penetrates a rock layer with natural pressures greater
      than the drilling mud in the borehole.                                                                                                  
|                              |                                                                                                                                                                                                                                                                                                               
|Coal
      rank               | The
      classification of coal relative to other coals, according to their degree
      of metamorphism, or progressive alteration, in the natural series from
      lignite to anthracite. Synonymous with coal quality.                                                                                   
|                              |                                                                                                                                                                                                                                                                                                               
|Coalification
      process   | A
      progressive process (bacterial decay and heat) that turns decayed plant
      material (peat) into the various ranks of coal. The first stage (peat to
      lignite) is decay and the remaining stages are thermal. The major
      by-products are methane, carbon dioxide, and water.              
|                              |                                                                                                                                                                                                                                                                                                               
|Completion
      / Completing | A
      well made ready to produce oil or natural gas. Completion involves
      cleaning out the well, running and cementing steel casing in the hole,
      adding permanent surface control equipment, and perforating the casing so
      oil or gas can flow into the well and be brought to the surface.
|                              |                                                                                                                                                                                                                                                                                                               
|Desorb                        | The
      release of materials (e.g., gas molecules) from being adsorbed onto a
      surface. The opposite of adsorb.                                                                                                                                                                                        
|                              |                                                                                                                                                                                                                                                                                                               
|Development                   | The
      phase in which a proven oil or gas field is brought into production by
      drilling production (development) wells.                                                                                                                                                                               
|                              |                                                                                                                                                                                                                                                                                                               
|Division
      order          | A
      contract for the sale of oil or gas, by the holder of a revenue interest
      in a well or property, to the purchaser (often a pipeline transmission
      company).                                                                                                                                 
|                              |                                                                                                                                                                                                                                                                                                               
|Drilling                      | The
      using of a rig and crew for the drilling, suspension, production testing,
      capping, plugging and abandoning, deepening, plugging back, sidetracking,
      redrilling or reconditioning of a well. Contrast to "Completion"
      definition.                                                  
|                              |                                                                                                                                                                                                                                                                                                               



2

---

|Drilling
      logs              | Recorded
      observations made of rock chips cut from the formation by the drill bit,
      and brought to the surface with the mud, as well as rate of penetration of
      the drill bit through rock formations. Used by geologists to obtain
      formation data.                                                                                                                                                                          
|-------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Exploration                      | The
      phase of operations which covers the search for oil or gas by carrying out
      detailed geological and geophysical surveys followed up where appropriate
      by exploratory drilling. Compare to "Development" phase.                                                                                                                                                                                                               
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Farm
      out                   | Assignment
      or partial assignment of an oil and gas lease from one lessee to another
      lessee                                                                                                                                                                                                                                                                                                                                            
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Gathering
      line / system    | A
      pipeline that transports oil or gas from a central point of production to
      a transmission line or mainline.                                                                                                                                                                                                                                                                                                                          
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Gross
      acre                 | An
      acre in which a working interest is owned. The number of gross acres is
      the total number of acres in which a working interest is owned                                                                                                                                                                                                                                                                                             
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Gross
      well                 | A
      well in which a working interest is owned. The number of gross wells is
      the total number of wells in which a working interest is owned.                                                                                                                                                                                                                                                                                             
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Held-By-Production
      (HBP)   | Refers
      to an oil and gas property under lease, in which the lease continues to be
      in force, because of production from the property.                                                                                                                                                                                                                                                                                                  
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Land
      services              | Services
      performed by an oil and gas company or agent, or landman, who negotiates
      oil and gas leases with mineral owners, cures title defects, and
      negotiates with other companies on agreements concerning the lease.                                                                                                                                                                                                          
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Logging
      (electric logging) | Process
      of lowering sensors into a wellbore to acquire downhole recordings that
      indicate a well's rock formation characteristics and indications of
      hydrocarbons                                                                                                                                                                                                                                                                
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Methane                          | An
      organic chemical compound of hydrogen and carbon (i.e., hydrocarbon), with
      the simplest molecular structure (CH4)                                                                                                                                                                                                                                                                                                                  
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Mineral
      Lease              | A
      legal instrument executed by a mineral owner granting exclusive right to
      another to explore, drill, and produce oil and gas from a piece of land                                                                                                                                                                                                                                                                                    
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Natural
      gas quality        | The
      value of natural gas is calculated by its BTU content. A cubic foot of
      natural gas on the average gives off 1000 BTU, but the range of values is
      between 500 and 1500 BTU. Energy content of natural gas is variable and
      depends on its accumulations which are influenced by the amount and types
      of energy gases they contain: the more non-combustible gases in a natural
      gas, the lower the Btu value.
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net
      acre                   | A
      net acre is deemed to exist when the sum of fractional working interests
      owned in gross acres equals one. The number of net acres is the sum of
      fractional working interests owned in gross acres expressed as whole
      numbers and fractions thereof.                                                                                                                                                                     
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Net
      well                   | A
      net well is deemed to exist when the sum of fractional working interests
      owned in gross wells equals one. The number of net wells is the sum of
      fractional working interests owned in gross wells expressed as whole
      numbers and fractions thereof.                                                                                                                                                                     
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Operator                         | A
      person, acting for himself or as an agent for others and designated to the
      state authorities as the one who has the primary responsibility for
      complying with its rules and regulations in any and all acts subject to
      the jurisdiction of the state                                                                                                                                                                    
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                   



3

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|Pennsylvanian
      age    | Geologic
      age of sediments deposited 320 to 286 million years ago                                                                                                                                                                                                                                                                                                    
|-------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Permeability               | The
      property of a rock formation which quantifies the flow of a fluid through
      the pore spaces and into the wellbore.                                                                                                                                                                                                                                          
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Pooled,
      Pooled Unit  | A
      term frequently used interchangeably with "Unitization" but more
      properly used to denominate the bringing together of small tracts
      sufficient for the granting of a well permit under applicable spacing
      rules.                                                                                                                                 
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Proved
      Reserves      | Estimated
      quantities of crude oil, natural gas, condensate, or other hydrocarbons
      that geological and engineering data demonstrate with reasonable certainty
      to be commercially recoverable in the future from known reservoirs under
      existing conditions using established operating procedures and under
      current governmental regulations.
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Re-completion              | Completion
      of an existing well for production from one formation or reservoir to
      another formation or reservoir that exists behind casing of the same well.                                                                                                                                                                                                   
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Reserves                   | Generally
      the amount of oil or gas in a particular reservoir that is available for
      production.                                                                                                                                                                                                                                                                
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Reservoir                  | The
      underground rock formation where oil and gas has accumulated. It consists
      of a porous rock to hold the oil or gas, and a cap rock that prevents its
      escape                                                                                                                                                                                          
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Reservoir
      Pressure   | The
      pressure at the face of the producing formation when the well is shut-in.
      It equals the shut in pressure at the wellhead plus the weight of the
      column of oil in the hole.                                                                                                                                                                          
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Shut-in
      well         | A
      well which is capable of producing but is not presently producing. Reasons
      for a well being shut in may be lack of equipment, market or other.                                                                                                                                                                                                              
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Stratigraphic
      Trap   | A
      variety of sealed geologic containers capable of retaining hydrocarbons,
      formed by changes in rock type or pinch-outs, unconformities, or
      sedimentary features.                                                                                                                                                                                       
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Structural
      Trap      | A
      variety of sealed geologic structures capable of retaining hydrocarbons,
      such as a faults or a folds.                                                                                                                                                                                                                                                       
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Tight
      gas sandstones | Low
      permeability (having lower capacity to flow fluids through pore spaces)
      sedimentary rocks with natural gas occuring in the pore spaces. Contrast
      to high permeability sandstone definition.                                                                                                                                                         
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Undeveloped
      acreage  | Leased
      acreage which has yet to be drilled on to test the potential for
      hydrocarbons.                                                                                                                                                                                                                                                                         
|                           |                                                                                                                                                                                                                                                                                                                                                                           
|Unitize,
      Unitization | Joint
      operations to maximize produced hydrocarbon recovery among separate
      operators within a common reservoir                                                                                                                                                                                                                                                 
|                           |                                                                                                                                                                                                                                                                                                                                                                           



4

---

|Western
      Interior Basin | Ancient
      inland sea and area of sediment deposition which divided North America
      into two separate landmasses in the Late Cretaceous Period, approximately
      75 to 80 million years ago.                                                                  
|---------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                             |                                                                                                                                                                                                                                                                         
|Working
      Interest       | The
      right granted to the lessee of a property to explore for and to produce
      and own oil, gas, or other minerals. The working interest owners bear the
      exploration, development, and operating costs on either a cash, penalty,
      or carried basis.



(b)
Business of Issuer



Petrol
is an oil and gas exploration and development company. Our primary business
objective is to produce economic quantities of hydrocarbons, including oil and
natural gas primarily natural gas from buried coal seams, denoted as coal-bed
methane (CBM). The first step in our business plan was achieved through the
acquisition of the mineral leases from Petrol Energy. Petrol has continued its
mineral leasing efforts and as of December 31, 2003 we have acquired mineral
lease agreements totaling approximately 134,812 acres. Petrol has now drilled
seven (7) exploratory wells to discover and determine if there is a sufficient
amount of commercially viable natural gas to subsequently commence production.
Once we commence production, if ever, we will need to create a ready market in
which to sell the produced gas.



When
and if Petrol determines that it can produce sufficient amounts of commercially
viable natural gas from a well, we intend to fund portions of our field
development operations through revenues obtained from sales of our CBM gas
production, if any. To accelerate the development program, when and if
established, we plan to take on Working Interest (WI) or Joint Venture (JV)
partners that will contribute to the costs of drilling and completion and then
share in revenues derived from production. This economic strategy may allow us
to utilize our own financial assets toward the growth of our leased acreage
holdings, pursue the acquisition of strategic oil and gas producing companies
and generally expand our existing operations, which are currently limited to the
lease acquisition and exploration phase.



Current
State of Operations



Petrol
presently has a six (6) well pilot/exploration program located within its leased
acreage in Coffey County Kansas. Following drilling, logging and setting steel
casing these wells were perforated in some of the coal intervals that contain
gas. The perforated coal intervals were acidizied and subsequently fractured
using conventional hydraulic techniques in order to stimulate production. They
are now in the process of de-watering the coals and their cleats using wellhead
and downhole pumping systems. Daily water production ranges between 50-350
barrels per day while CBM gas production is either flare tested or shut in at
the wellhead.



Petrol
continues to acquire new mineral leases in Missouri. Petrol has an exploratory
well in Cass County, Missouri and has been acquiring leases in both Cass and
Bates counties, Missouri.



5

---

Petrol
plans to employ a simple conventional WI model whereby our WI partner(s) would
provide all or the major share of the drilling and completion costs for a given
set of wells on a specific set of our leases for which the WI partner(s) would
receive a portion of the net production revenue. This practice is intended to
allow Petrol to drill and complete additional wells with reduced capital
outlays.



Our
field development program will include developing our mineral rights together
with either JV or WI partners. Although we have had several discussions with
financing groups regarding a WI partnership, we have yet to come to terms. Thus
at present Petrol has no WI partners. We also expect to expand our well drilling
operations program with our own drilling and production funds derived from
proceeds raised from equity financing, debt financing, or other sources.



The
Market: Natural Gas Supply and Demand



The
National Petroleum council estimates the US demand for natural gas to increase
from 22 Trillion cubic feet (TCF) in 1998 to over 31 TCF by 2015. This nearly
50% increase in demand for natural gas coupled with constrained supplies from
conventional sources and storage facilities suggests an urgent need for new gas
sources. Although conventional gas sources such as high permeability sandstones
currently supply about 60% of the US demand (13 TCF in 1998), projections
indicate a flat to declining supply through year 2015. The shortfall in
conventional gas supply is expected to be taken up by production from
un-conventional sources such as tight gas sandstones/shales, associated gas, and
CBM.



CBM
shows great promise as a future source of natural gas, with the US Geological
Survey estimating some 700 TCF contained in 6 major CBM basins in the
continental US. This constitutes an enormous reserve, almost the entire US
demand for the next 25 years. The Western Interior Basin covering portions of
Oklahoma, Kansas, and Missouri is one of those 6 major basins. The Gas Research
Institute estimates CBM gas reserves in the Forrest City and Cherokee basin, the
two sub-basins of the Western Interior Basin contain approximately 7 TCF. Petrol's
leases all lie within one or both of these sub-basins



Given
the current volatility of the natural gas market, hedging may become a part of
Petrol's operating strategy. We believe the current supply and demand
fundamentals will lead to a strengthening in prices. Consequently, Petrol
intends to continually evaluate its hedge position, if any, and enter into
contracts accordingly.



CBM
Production



CBM
production is similar to conventional natural gas production in terms of the
physical production facilities and the product produced. However, surface
mechanics and some production characteristics of CBM wells are quite different
from traditional natural gas production wells. Methane is created as part of the
coalification process. Coals vary in their methane content which is defined by
the industry as cubic feet of gas per ton of coal Conventional natural gas wells
require a porous and permeable reservoir, hydrocarbon migration and a natural
structural or stratigraphic trap. However, CBM is trapped in the molecular
structure of the coal itself until it is released by pressure changes, resulting
from water removal from the coal-bed.



6

---

Water
completely permeates coal-beds and the natural fracture system or cleats as they
are normally referred are pervasive throughout the coal-beds in good producing
areas. The natural gas, principally methane, is adsorbed onto the grain surfaces
of the coal. To produce CBM, the water must be drawn off first, lowering the
pressure so that the methane will desorb from the coal thus allowing gas flow
from the coal into the de-watered cleats that act as high permeable conduits to
the well bore, where gas can be produced at the well head. These cleats are
formed during coalification and the permeability required for production may not
have fully developed, thereby rendering the well useless for production.



The
qualities of productive CBM wells include coal quality, the content of natural
gas per ton of coal, thickness of the coal-beds, reservoir pressure, existence
of natural fractures, and overall permeability of the coal-bed.



CBM
production also differs from conventional gas production that normally starts at
its highest production rate and then declines with time. Because coal-beds have
water residing within the cleats the water needs to be withdrawn in order to
promote production of the adsorbed gases. Thus, for the case of CBM, initial
water production is high and diminishes with time. CBM gas production, however,
starts at a relatively low rate reaching a peak some months later and then
begins to decline.



CBM
production is attractive due to several geological factors. Coal stores six or
seven times as much gas as a conventional natural gas reservoir of equal rock
volume due to the large internal surface area of coal. Significant amounts of
coal are accessible at shallow depths, making well drilling and completion
relatively inexpensive. Finding costs are also low since methane occurs in coal
deposits, and the location of the Nation's coal resources is well defined by the
USGS.



Corporate
Business Objectives



Petrol's
primary business objective is to produce economic quantities of natural gas from
CBM and other producible intervals. In the 6 major US CBM basins the coal-beds
vary greatly in thickness, quality and gas content. They also range in depths
from very near surface (< 500 ft) to very deep (>25,000 ft). The
difficulty, risks and costs associated with extracting CBM from deep formations
increases quite rapidly and nonlinearly with depth.



Petrol
intends to achieve our objective by:

1. concentrating
    our mineral leasing in core areas to achieve economies of scale,
2. acquiring
    and developing potentially high profit margin leased properties,
3. continually
    disposing of marginal and non-strategic leased properties,
4. balancing
    reserves, when developed, between oil and gas,
5. maintaining
    a high degree of financial flexibility, and
6. enhancing
    the value of our production through marketing and midstream activities.

7

---

Developmental
Program



One
of the reasons Petrol acquired leases in the Forrest City and Cherokee basisn
was the fact that of the major CBM basins within the continental US, the leased
area had the following attributes:

- relatively
    shallow CBM (<2,500 ft)
- good
    coal rank, gas content and distribution within the basin,
- low
    cost mineral leases,
- access
    to interstate pipeline systems and
- nearby
    oil and gas services.

The
Western Interior Basin located in the mid-continent, where the Petrol leases are
located, shows great promise because the basin embodies an extensive aerial
distribution of near shallow buried coal-beds, appears to contain large
quantities of high quality natural gas and has several readily available
interstate pipelines for sales and distribution. It appears that the area best
suited for our CBM project may be in and around Coffey County, Kansas, where gas
bearing coals are contained within the Forrest City and Cherokee basins,
sub-basins of the larger Western Interior basin. The entire eastern edge of the
State of Kansas and the western edge of Missouri overlays the western portion of
the basin.



Since
portions of the acquired mineral leases have existing oil or gas wells, some of
them are being considered for re-completion in sandstones and/or coal-beds that
appear economically productive. These will add to our knowledge base and may
provide financial support for anticipated expansion.



Operational
Area



As
an oil and gas exploration and development company, Petrol's primary objective
is the development of CBM gas production projects. We identified CBM 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. Petrol expects
to focus our investment efforts along with WI's in natural gas well development
projects located within known or highly-likely gas-bearing CBM formations in
southeastern Kansas and western Missouri starting within our roughly 88,812
acres of CBM leases acquired from Petrol Energy.



The
Western Interior Coal Region includes three basins in the central United States
that contain gas bearing coal deposits of similar area and rank. They are the
Arkoma, Forest City and Cherokee Basins. Together these three basins stretch
from western Arkansas and Central Oklahoma northward through eastern Kansas and
western Missouri into central Iowa. Our primary interests lie within areas
overlaying the Cherokee and Forest City Basin which are defined geographically
as the area bounded to the north by Bourbon Arch, to the east and southeast by
Ozark Dome, and to the west by the Nemaha uplift, encompassing northern
Oklahoma, southeastern Kansas, and southwestern Missouri.



8

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The
Cherokee Basin formation contains Pennsylvanian age coal-beds which are believed
to be relatively contiguous throughout the entire basin. Coal found throughout
the basin is generally of the same age and type and therefore theoretically
should contain similar quantities and quality of gas. Historically, the majority
of CBM gas production in Kansas has been south of our targeted area, including
production in Labette, Wilson, Neosho and Cherokee Counties, Kansas, where coal
seams and black shale averaging four feet in thickness have been reported and
initial water production generally has been less than 50 barrels per day,
eventually dropping to below 10 barrels per day. Although currently there are no
CBM wells producing in our targeted area, drilling logs from oil exploration in
and surrounding our targeted area typically confirm the uniformity of the
coal-beds, indicating coal seams similar to those found in the south of the
targeted area. Additionally, a small number of CBM gas wells are producing in
Woodson County, Kansas (the southern adjacent county to Coffey County,) and
Anderson County, Kansas (the eastern adjacent county to Coffey in which we have
acquired leases).



Data
derived from logs, cores and gas production tests on Petrol's exploratory wells
in Coffey County overlying the northern extent of the Cherokee basin and the
southern portion of the Forrest City basin have shown good gas content and the
ability to produce gas during the de-watering process. Production capacities
have yet to be determining.



Leasing
Activities



As
of December 31, 2003, we have about 289 signed lease agreements totaling
approximately 134,812 acres. These leases are scattered throughout Coffey
County, Kansas and the adjacent counties of Anderson, Osage, Lyon, Franklin,
Woodson as well as Cass and Bates counties in western Missouri. In the event
that we are successful in the development phase of our plan and find
commercially producible gas or oil, we intend to lease additional available
mineral rights to the extent that we believe such land will further our
exploration and development activities and provide increased value to the
company.



All
of the mineral leases that Petrol has executed grant us the exclusive right to
explore for and develop oil, gas and other hydrocarbons and minerals that may be
produced from wells drilled on the leased property. Each lease also grants us
rights of way to easements for laying pipelines and servicing or drilling other
wells in the vicinity of the leased property.



Our
lease agreements vary both in term and price per acre. Some of our leases are
for 2 year periods at $2/acre with extensions for 3 additional years, others are
for 3 year periods at $3/acre with extensions for 3 additional years, others are
for 5 years at $1/acre with extensions for 3 additional years, while others are
for 5 years at $10/acre with extensions for 3 additional years.



In
general, leases are payable on the one year signing anniversary of the lease
agreement. Regardless of whether or not we are producing oil and gas from a
leased property or acres pooled therewith, on the one-year anniversary of each
lease we will be required to pay the lessor their net agreed upon mineral
acreage fee. If we fail to make such payment, the lease will terminate 30 days
thereafter. Petrol has agreed to pay each lessor a royalty equal to 12.5% of any
oil, gas or other minerals that may be produced from wells drilled on the leased
property. In the event of a shut-in well capable of producing oil or gas, we
have agreed to pay the lessor a royalty per net mineral acre. All the lease
agreements allow Petrol to hold the lease with production.



9

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Pursuant
to the lease payment terms described above we have been obligated to make the
following one-year anniversary payments beginning in January 2003.



Due
        Date
      #
        of Gross Mineral Acres
      Payment
        DueJan
        2003
      2,314
      $
        4,429.00 (Paid)Feb
        2003
      13,837
      $138,370.00
        (Paid)March
        2003
      17,093
      $170,930.00
        (Paid)April
        2003
      4,083
      $
        34,148.00 (Paid)Jan
        2004
      157
      $
        1,570.00 (Paid)TOTAL:
      37,484
      $
        -0-




Under
our leases Petrol has the right to pool the leased property with other land
owned or leased by us in the immediate vicinity for the production of oil or
gas. With respect to shallow gas and associated hydrocarbons produced in
conjunction therewith, we have the right to pool or unitize the leased
properties into a development pool of a maximum of 3,000 acres if it has drilled
at least 2 wells within the pooled unit no later than 1 year after the
expiration of the primary term of the lease.



Petrol
has agreed to indemnify each lessor against any and all liabilities arising out
of our operations on the leased property, including environmental liabilities.
We have also agreed to pay each lessor liquidated damages for any leased
property that is damaged as a result of our operations on such leased property.
Additionally, Petrol has agreed to pay each lessor for any damages caused by us
to any crops growing on the leased property. Following the completion of our
operations on a leased property, we are obligated to restore the well site to
its original condition and land contour, to the extent possible.



All
of the oil and gas property that we have leased to date is considered
"undeveloped acreage" which the Securities and Exchange Commission
defines as "lease acreage on which wells have not been drilled or completed
to a point that would permit the production of commercial quantities of oil and
gas regardless of whether such acreage contains proved reserves."



Petrol
has rights to a working interest in approximately 88,812 gross undeveloped acres
(100% of each leased acre) and 77,710 net undeveloped acres (87.5% of 88,812
leased acres) in southeast Kansas. A "working interest" is the
operating interest that gives us, as the operator, the right to drill, produce
and conduct operating activities on the property and a share of production. A
"net acre" (or net well) is deemed to exist when the sum of the
fractional working interest owned in gross acres or gross wells equals one. The
number of net acres or net wells is then expressed as a whole number and
fractions thereof. A "gross acre" (or gross well) is the total acres
or wells, as the case may be, in which a working interest is owned.



Before
Petrol commits substantial resources, including obtaining necessary permits and
preparing for drilling on any particular leased property, we complete our due
diligence process on our leased property, including obtaining a title or title
insurance to confirm our rights to any oil, gas or other minerals produced
pursuant to our lease. It is difficult to determine what our final interest in
any oil, gas or other mineral that we produce will be until we have negotiated
with the third parties that we may hire to perform drilling, completion and
operating activities on our wells.



10

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Substantially
all of our capital expenditures have been associated with the acquisition of oil
and gas mineral leases. Our strategy is to continue to expand our lease base
principally through the acquisition of additional mineral leases. As a result,
it is likely that capital expenditures will exceed cash provided by operating
activities in years where significant growth occurs in our oil and gas reserve
base. In such cases, additional external financing will be required.



We
also intend to grow through the acquisition of producing oil and gas properties,
although at this time we are unable to predict the number and size of such
acquisitions, if any, which will be completed. Our ability to finance oil and
gas acquisitions is determined by cash flow from operations and available
sources of debt and equity financing.



We
continue to research the prospects for gas well development in other geological
formations. It is possible that we will invest in prospects not described here,
or that little investment will be made in the prospects described here.



Enutroff
LLC Agreement



On
July 1, 2003 we entered into an agreement with Enutroff LLC (Enutroff) whereby
Enutroff would be paid for introductions that result in completed transactions
as follows: 1). Debt financing, notes, loans- for any introductions made by
Enutroff a $10,000 fee would be paid plus 12% of the total value of the
financing. 2). Mergers and acquisitions-for any introductions made by Enutroff a
fee of 7.5% of the total value of the merger or acquisition. 3). Sale or
purchase of real property or mineral rights- a fee of up to 1/32 overriding
royalty interest on those mineral rights involved in a transaction. 4). Working
interest partners-a fee of up to 1/32 overriding royalty interest on any mineral
rights involved with a working interest partner and a fee of 10% of the ultimate
value of the transaction. 5). A fee of $40,000 to retain the services of
Enutroff for a period of one year was due on July 1, 2003. Enutroff introduced
us to CPA Directed Investments and received a $58,000 fee based on the $400,000
the Company borrowed from CPA. Total fees paid to Enutroff for the year ended
December 31, 2003 was $98,000.



CBM
Energy Agreement



On
January 15, 2004 we completed the acquisition of certain oil and gas mineral
leases ("Leases") in and around Franklin, Coffey, Woodson, Lyon and
Greenwood Counties, Kansas (the "Prospect Area"), amounting to
approximately 36,000 acres in exchange for 765,000 shares of our unregistered
restricted common stock.



11

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John
Haas, Mark Haas and W.B. Mitchell Agreement



On
January 15, 2004, we executed an agreement with John Haas, Mark Haas and W.B.
Mitchell. John Haas, Mark Haas, and W.B. Mitchell to grant us access to 10,000
acres of leased mineral rights. Pursuant to the agreement we received access to
the acreage for the purpose of evaluating and exploring for CBM gas production.
In exchange for the opportunity to explore and evaluate the acreage for purposes
of future gas exploration, we issued warrants to John Haas, Mark Haas, and W.B.
Mitchell as follows:

- 600,000
    warrants to purchase restricted common shares at $1.20 per share for a
    period of 2.5 years (for a collective total of 1,800,000 shares)
- 400,000
    warrants to purchase restricted common shares at $1.50 per share for a
    period of 2.5 years (for a collective total of 1,200,000 shares)
- 300,000
    warrants to purchase restricted common shares at $2.00 per share for a
    period of 3 years (for a collective total of 900,000 shares)

The
agreement terminates on or about July 15, 2004; however is subject to 6 month
extensions.



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.



12

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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, when established, will be 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:

- require
    the acquisition of a permit or other authorization before construction or
    drilling commences and for certain other activities;
- limit
    or prohibit construction, drilling and other activities on certain lands
    lying within wilderness and other protected areas; and
- impose
    substantial liabilities for pollution resulting from our intended
    operations.

The
permits required for our intended 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
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 intended 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.



13

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ESA.
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 intended 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, when implemented, altogether.



Competition



We
compare 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 two full time employees and two part time employees. As drilling
production activities commence, we intend to hire additional technical,
operational and administrative personnel as appropriate. None of our employees
are subject to any collective bargaining agreements, however, we have entered
into employment agreements with Paul Branagan, Gary Bridwell and David Polay. We
do not expect a significant change in the number of full time employees over the
next 12 months. We intend to use the services of independent consultants and
contractors to perform various professional services, particularly in the area
of land services, drilling, water hauling, pipeline construction, well design,
well-site monitoring and surveillance, permitting and environmental assessment.
We believe that this use of third-party service providers may enhance our
ability to contain general and administrative expenses.



Our
proposed personnel structure could be divided into three broad categories:
management and professional, administrative, and project personnel. As in most
small companies, the divisions between these three categories are somewhat
indistinct, as employees are engaged in various functions as projects and work
loads demand.



14

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Non-Executive
Employment Agreements



On
November 1, 2003, we executed an Employment Agreement with Gary Bridwell,
wherein Mr. Bridwell agreed to serve as the Company's Field Operations Manager.
We agreed to pay Mr. Bridwell a starting salary of $10,000.00 per month and he
is entitled to participate in the Company's group health insurance and also is
entitled to utilize the Company credit card, which is for the sole use of
Company business and is subject to the policies of the Company covering such
matters. After Mr. Bridwell has completed one year of employment we will issue
to him 100,000 shares of our $0.001 par value common stock.



Consultants



Goran
Blagojevic. On August 20, 2002, we entered into a Translation and
Business Consulting agreement with Goran Blagojevic. Under the terms of the
agreement Mr. Blagojevic agreed to perform written and verbal translation
services and certain other business consulting services for us. On December 20,
2002, we amended the agreement whereby Mr. Blagojevic agreed to assist us in
finding, assessing, qualifying and negotiating with potential European working
interest partners that would support our field development program. The term of
the agreement terminated on January 31, 2004. As consideration for the
additional responsibilities, we issued Mr. Blagojevic a warrant to purchase
500,000 shares of our common stock at $0.75 per share. The warrant expired on
July 1, 2003. On September 1, 2003, we issued a warrant to Goran Blagojevic to
purchase up to 900,000 shares of common stock at $0.75 per share as partial
consideration for consulting services. The warrant is exercisable until August
31, 2006.



B&B
Cooperative Venture and Birk Petroleum. On November 15, 2002, we entered
into a Service and Water Disposal Agreement with B&B Cooperative Venture
("B&B") and Birk Petroleum ("Birk"), whereby B&B
agreed to provide us with pumping services on our existing wells to monitor
operations, and assess and report on the disposition of the production process.
Birk agreed to transport the produced water from its lease tanks to the disposal
well where Birk will inject produced water into the disposal well. We agreed pay
B&B $10.00 per day for each well that it provides pumping services and pay
Birk at the rate of $60.00 per hour for water hauling and $250.00 per month for
the use of the disposal well. The term of the agreement was for 1 year
commencing on the date of execution.



William
Stoeckinger. On December 19, 2002, we entered into a one-year
geologist/technical advisor consulting agreement with William Stoeckinger. Under
the terms of the agreement Mr. Stoeckinger agreed to assist us in the areas of
geology, geophysical and formation evaluation, drilling and completion,
regulatory and lease evaluation matters and other technical concerns related to
the exploration and production of hydrocarbons. We agreed to pay Mr. Stoeckinger
a daily rate ranging from $400 to $500 per day for his services. As an
inducement for Mr. Stoeckinger to begin consulting for us, we issued him 160,000
shares of our common stock. In addition, we agreed to issue Mr. Stoeckinger
20,000 shares of our common stock for each month that he fulfilled his duties as
described in the agreement. As further consideration, we granted Mr. Stoeckinger
an option to purchase 50,000 shares of our common stock at $0.50 per share and
50,000 shares at $1.00 per share. The option expires on December 19, 2004. On
August 4, 2003, we amended the agreement to change the effective date to January
1, 2003 and termination date to January 31, 2004.



15

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Russell
Frierson. On December 27, 2002, we entered into a one-year land services
consulting agreement with Russell Frierson. Under the terms of his agreement,
Mr. Frierson agreed to provide to us land professional services in the nature of
preparation and drafting of written agreements concerning well location, waivers
of surface use and other lease provisions, damage release and compensation
agreements related to drilling operations, easement and right of way agreements,
pooling and farm out agreements, and such other consents, declarations,
designations, memoranda, notices, ratifications and stipulations by and between
us and any and all surface owners in or adjacent to our mineral lease hold
interests. As an inducement for Mr. Frierson to begin consulting for us, we
issued him 50,000 shares of our common stock. In addition, we granted Mr.
Frierson an option to purchase 50,000 shares of our common stock at $0.50 per
share for a period of 3 years. On March 19, 2004, Mr. Frierson exercised his
option through the delivery of a note to Petrol, which is secured by half of the
underlying shares of common stock (25,000). Petrol will release the shares upon
full payment of the note. Petrol registered the 50,000 shares on Form S-8.



Lawrence
Kehoe. On December 27, 2002, we entered into a one-year land services
consulting agreement with Lawrence Kehoe. Under the terms of his agreement, Mr.
Kehoe agreed to provide us with land professional services in the nature of
negotiation and execution of easements and surface agreements, and negotiation
and execution of requisite consents, declarations, designations, memoranda,
notices, ratifications and stipulations by and between us and any and all
surface owners in or adjacent to our mineral lease hold interests. As an
inducement for Mr. Kehoe to begin consulting for us, we issued him 325,000
shares of our common stock. In addition, we granted Mr. Kehoe an option to
purchase 325,000 shares of our common stock at $0.50 per share for a period of 3
years. On March 19, 2004, Mr. Kehoe exercised his option through the delivery of
a note to Petrol, which is secured by half of the underlying shares of common
stock (162,500). Petrol will release the shares upon full payment of the note.
Petrol registered the 325,000 shares on Form S-8.



Cody
Felton. On December 27, 2002, we entered into a one year land services
consulting agreements with Cody Felton. Under the terms of his agreement, Mr.
Felton agreed to provide us with land professional services in the nature of
acquisition and recording of mineral interests and the performance of any and
all due diligence and title work on leased properties. As an inducement for Mr.
Felton to begin consulting for us, we issued him 325,000 shares of our common
stock. In addition, we granted Mr. Felton an option to purchase 325,000 shares
of our common stock at $0.50 per share for a period of 3 years. On March 19,
2004, Mr. Felton exercised his option through the delivery of a note to Petrol,
which is secured by half of the underlying shares of common stock (162,500).
Petrol will release the shares upon full payment of the note. Petrol registered
the 325,000 shares on Form S-8.



16

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Research
Agreement



On
February 9, 2004, we entered into a Research Agreement with Joseph E.
Blankenship for purposes of providing analysis and research, valuation and
investment opinions on common stocks, preferred stocks, debt instruments,
convertible debentures and/or other corporate securities. Work product from the
Analyst will consist of "Research Reports" which are disseminated to
individual and institutional investors as well as research distributors.



For
the Scope of Work outlined above, we agreed to pay Source Capital, a
broker-dealer Mr. Blankenship is employed by, an amount of $6,000. We also
issued Mr. Blankenship 10,000 shares of our $0.001 par value restricted common
stock and granted an option to purchase a total of 50,000 shares. The option
includes 25,000 shares at $2.50 per share and the remaining 25,000 shares at
$4.00 per share. The term of the options is for a period of two (2) years.



Consultant
Agreement with CSC Group LLC



On
February 18, 2004, Petrol entered into a Consultant Agreement with CSC Group LLC
for purposes of assisting us in locating working interest partners and similar
financing agreements to further our business on a "best efforts"
basis. The Consultant's services shall include locating and evaluating potential
businesses and/or individuals that would make high quality candidates as Working
Interest (WI) Partners for our field development program. The term of the
agreement is for six months commencing on February 18, 2004 and may be extended
at any time prior to the expiration of the term. We agreed to compensate the
Consultant for its efforts in assisting us in locating WI partners, 1% for all
funds raised in an executed transaction between Petrol and Consultant's Clients.
As an inducement for the Consultant to begin his engagement, we agreed to issue
stock warrants, giving the Consultant the right to purchase 200,000 shares of
our common stock, $0.001 par value. The term and exercise price of the Warrant
Shares shall be: (i) 100,000 shares at $1.50 per share for a period of two
years; and (ii) 100,000 shares at $2.50 per share for a period of two years. The
Consultant Agreement is attached to this filing as an Exhibit.



Letter
Agreement with William D. Burk



On
March 1, 2004, we executed a letter agreement with William D. Burk
("Burk"), wherein it identifies the terms and conditions under which
Burk has performed certain oil and gas services and legal services for us since
August of 2003. In consideration of the Services and for Burk's continued
assistance to us, we agreed to grant Burk 100,000 options to purchase shares of
our common stock at $1.25 per share and 200,000 options to purchase shares of
our common stock at $1.50 per share. The term of the options is for a period of
three (3) years.



We
also agreed to reimburse Burk for reasonable business expenses incurred in
performing his services. Burk agreed to be available to assist us in the
preparation of agreements with future farmout and working interest participants.
In addition, we also may from time to time request Burk to provide specific
legal or consultation services, in this event, Burke may perform such additional
services on an hourly, daily or project fee basis, upon the agreement of both
parties.



17

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ITEM
2. DESCRIPTION OF PROPERTY



We
maintain our executive office at 2300 Patrick Lane, Suite 26, Las Vegas, NV
89119. The office is provided free of charge on a month-to-month basis by
Branagan & Associates. Paul Branagan, President of Petrol, is also president
of Branagan & Associates.



We
also lease approximately 2,500 square feet of space in Waverly, Kansas, where
our field and leasing offices are located. This facility is leased on a
month-to-month basis with our monthly lease obligation being $300.



ITEM
3. LEGAL PROCEEDINGS



We
are not presently a party to any material litigation, nor to the knowledge of
management is any litigation threatened against us, which may materially affect
us.



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



We
did not submit any matters to a vote of our security holders during the fourth
quarter of fiscal 2003.



PART
II



ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

> 

(a)
Market Information



Since
March 4, 2004, we have been eligible to participate in the OTC Bulletin Board,
an electronic quotation medium for securities traded outside of the Nasdaq Stock
Market, and prices for our common stock are published on the OTC Bulletin under
the trading symbol "POIG". The quotations reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions. This market is extremely limited and the prices quoted are not a
reliable indication of the value of our common stock. As of March 31, 2004, the
closing price of our shares of common stock was $3.25 per share.



(b)
Holders of Common Stock



As
of December 31, 2003, we had approximately 88 stockholders of record of the
17,247,466 shares outstanding.



(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.



18

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(d)
Securities Authorized for Issuance under Equity Compensation Plans



We
currently maintain a stock option plan to which incentive stock options to
purchase shares of common stock may be granted to employees, directors and
consultants. This 2002/2003 stock option plan was adopted by our board of
directors on December 16, 2002 and has not been approved by our stockholders.
The following table sets forth information as of December 31, 2003 regarding
outstanding options granted under the plan, warrants issued to consultants and
options reserved for future grant under the plan.



|Plan
      Category                                          | Number
      of
      shares to be issued upon exercise of outstanding options, warrants and
      rights
      (a) | Weighted-average
      exercise price of outstanding options, warrants and rights
      (b) | Number
      of shares remaining available for future issuance under equity
      compensation plans (excluding shares reflected in column (a))
      (c)
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                             |                                                                                                                     |                                                                                             |                                                                                                                                                          
|Equity
      compensation plans approved by stockholders     | --                                                                                                                  | $
      --                                                                                  | --                                                                                                                                                       
|                                                             |                                                                                                                     |                                                                                             |                                                                                                                                                          
|Equity
      compensation plans not approved by stockholders | 2,950,000
      (1)                                                                                                 | $
      0.96                                                                                | 950,000
      (2)                                                                                                                                        
|                                                             |                                                                                                                     |                                                                                             |                                                                                                                                                          
|Total                                                        | 2,950,000                                                                                                           | $
      0.96                                                                                | 950,000                                                                                                                                                  
|                                                             |                                                                                                                     |                                                                                             |                                                                                                                                                          

(1)
    Includes 900,000 warrants granted to a consultant.

(2)
    Options available for issuance under our 2002/2003 stock option plan, which
    we have issued 2,050,000 options as of December 31, 2003.



In our
2002/2003 Stock Option Plan we have reserved for issuance an aggregate of
3,000,000 shares of common stock. This plan is 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.



Use
        of Proceeds from Registered Securities



Our
    Registration Statement on Form SB-2 (File No. 333-102643), related to our
    initial public offering, was declared effective by the SEC on July 29, 2003.
    A total of 5,000,000 shares maximum and 500,000 shares minimum of Common
    Stock were registered with the SEC with an aggregate offering price of
    $5,000,000 maximum and $500,000 minimum. All of these shares were registered
    on our behalf. The offering commenced in August and terminated in December
    2003. We sold 2,350,473 shares of common stock, which resulted in $2,350,473
    of proceeds to the Company with no commissions paid on funds raised.



19

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We
incurred offering expenses of approximately $64,375 in connection with the
offering. Thus the net offering proceeds to us (after deducting offering
expenses) were approximately $2,286,098. No offering expenses were paid directly
or indirectly to any of our directors or officers (or their associates), persons
owning ten percent (10%) or more of any class of our equity securities or to any
other affiliates.



As
of December 31, 2003, approximately $1,227,000 of the net proceeds had been
used. As disclosed in the registration, approximately $413,501 was used to repay
short-term debt, approximately $86,168 was used as general working capital and
approximately $132,362 was used for drilling costs. Following the close of the
offering, our management reevaluated the use of proceeds included in the
prospectus. Based on their evaluation, we redirected certain intended uses of
the funds from the purchase of drilling/production equipment and used funds as
follows: we invested $200,000 in a fund managed by one of our stockholders, CPA
Directed Investments; approximately $134,635 was used for our mineral leases and
fees relating to those leases; we paid two of our consultants a total of
$205,200; and we paid David Polay, our recently elected chief financial officer,
approximately $55,134. As of December 31, 2003, the remaining net proceeds
(approximately $1,059,000) remain in our operating account pending future use.



Except
for the payment to Mr. Polay and salaries paid to officers as part of our
working capital, no offering proceeds were paid directly or indirectly to any of
our directors or officers (or their associates), persons owning ten percent
(10%) or more of any class of our equity securities or to any other affiliates.



In
April 2004, we filed a post-effective amendment to the Registration Statement to
deregister the 2,649,527 shares which remained unsold at the termination of the
offering.



Recent
        Sales of Unregistered Securities



Issuances
to Officers and Directors



On
March 3, 2000, we issued 5,000,000 shares of our $0.001 par value common stock
to our then sole officer and director for services valued at $5,000. The shares
were deemed to have been issued pursuant to an exemption provided by Section 4
(2) of the Act, which exempts from registration "transactions by an issuer
not involving any public offering."



From
January 1, 2001 through April 1, 2002 we issued shares of our common stock to
our then sole officer and director at par value, $0.001 per share, for
conversion of debt to equity for monies advanced by our then sole officer and
director. The dates of the issuance and number of shares issued is as follows:



20

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Date
      of issuance
    
    Number
      of SharesJanuary
      1, 2001
    
    1,405,000April
      1, 2001
    
    22,060July
      1, 2001
    
    13,240October
      1, 2001
    
    14,060April
      1, 2002
    
    21,880




We
believe that the issuances of the shares described above were exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2). Our then sole officer and director, because of his
position with our company, was deemed to be an accredited investor, as such term
is defined in rule 501(a) of Regulation D promulgated under the Securities Act
of 1933. The shares were issued directly by us and did not involve a public
offering or general solicitation. There were no commissions paid on the issuance
of the shares.On August 21, 2002, our then sole officer
and director cancelled 5,826,240 shares concurrent with the asset purchase with
Petrol Energy, Inc. for no consideration.



On
December 19, 2002, we granted Paul Branagan, our president and chairman, an
option to purchase 1,250,000 shares of our common stock at prices ranging from
$0.50 to $2.50 per share. We believe that the grant of the option was exempt
from the registration and prospectus delivery requirements of the Securities Act
of 1933 by virtue of Section 4(2). Mr. Branagan, because of his position with
our company, was deemed to be an accredited investor, as such term is defined in
rule 501(a) of Regulation D promulgated under the Securities Act of 1933.



Asset
Purchase Agreement



On
August 19, 2002, we executed an Asset Purchase Agreement with Petrol Energy,
Inc., whereby we issued 10,918,300 shares of our restricted common stock in
exchange for certain assets and liabilities of Petrol Energy. 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 shares were issued directly by us and did not involve a public offering or
general solicitation. The recipient of the shares occupied a privileged position
with our company, due to its preexisting relationship with our then sole officer
and director, that afforded them an opportunity for effective access to files
and records of our company that contained the relevant information needed to
make their investment decision, including our financial statements and 34 Act
reports. We reasonably believed that the recipient, immediately prior to issuing
the shares, had such knowledge and experience in our financial and business
matters that they were capable of evaluating the merits and risks of their
investment. The recipient's management had the opportunity to speak with our
then sole officer and director on several occasions prior to their investment
decision. There were no commissions paid on the issuance of the shares.



21

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NIO
Fund Sales



From
November 5, 2002 through December 2, 2002, we issued and sold a total of 660,303
shares to NIO FUND Investment Management Limited for a total purchase price of
$330,151.25, all of which was paid in cash. In addition to the above sales to
NIO, we issued NIO warrants to purchase up to $3,500,000 of our common stock at
a 12.5% discount to market, however, not to be less than $0.875 per share. All
of these warrants expired on or before January 31, 2004.



On
November 21, 2003, we issued NIO a new warrant for the purchase of 1,500,000
shares of common stock at $0.875 per share. This warrant expires November 20,
2006.



In
November 2003, NIO assigned the warrant to two individuals as follows: Paola
Simoni - 1,000,000; and Goran Blagojevic - 500,000.



We
believe that the issuance and sale of the shares and issuance of the warrants
were exempt from registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2), Regulation D and/or Regulation
S. The shares and warrants were issued directly by us and did not involve a
public offering or general solicitation. NIO is an accredited investor as such
term is defined in rule 501(a) of Regulation D promulgated under the Securities
Act of 1933. The recipient of the shares and warrants was afforded an
opportunity for effective access to files and records of our company that
contained the relevant information needed to make its investment decision,
including our financial statements and 34 Act reports. We reasonably believed
that the recipient, immediately prior to issuing the shares and warrants, had
such knowledge and experience in our financial and business matters that it was
capable of evaluating the merits and risks of its investment. The recipient had
the opportunity to speak with our management on several occasions prior to their
investment decision. There were no commissions paid on the issuance and sale of
the shares.



Issuances
to Consultants



On
December 30, 2002, we issued 3 of our consultants a total of 700,000 shares of
common stock and granted options to purchase up to 700,000 shares of common
stock at $0.50 per share as consideration for consulting services. The options
are exercisable for a period of 36 months. We believe that the issuance of the
shares and grant of the options were exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).
In April 2004, the 3 consultants exercised their warrants through the delivery
of notes. We are holding half of the shares as collateral against the notes. The
shares were subsequently registered on Form S-8.



On
January 26, 2003, we issued 55,000 shares of common stock to a consultant in
exchange for services rendered to us amounting to $27,500. 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), Regulation
D and/or Regulation S. The shares were issued directly by us and did not involve
a public offering or general solicitation. The recipient of the shares was
afforded an opportunity for effective access to files and records of our company
that contained the relevant information needed to make their investment
decision, including our financial statements and 34 Act reports. We reasonably
believed that the recipients, immediately prior to issuing that shares, had such
knowledge and experience in our financial and business matters that they were
capable of evaluating the merits and risks of their investment. The recipients
had the opportunity to speak with our management on several occasions prior to
their investment decisions. There were no commissions paid on the issuance and
sale of the shares.



22

---

On
May 20, 2003, we issued William Stoeckinger 160,000 shares of our common stock
and granted him an option to purchase (i) 50,000 shares of common stock at $0.50
per share and (ii) 50,000 shares of common stock at $1.00 per share. The options
are exercisable until December 19, 2004. In addition, as part of Mr. Stoeckinger's
consulting agreement we agreed to issue Mr. Stoeckinger an additional 20,000
shares per month for the term of his agreement (240,000 shares total). As of
December 31, 2003, 240,000 shares have been issued to Mr. Stoeckinger. We
believe that the issuance of the shares and grant of the option were exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933 by virtue of Section 4(2).



Other
Issuances and Sales



On
December 27, 2002, we issued and sold a total of 88,390 shares of common stock
to 2 individual accredited investors for a total purchase price of $44,195, all
of which was paid in cash. We believe that the issuance and sale of the shares
was exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2), Regulation D and/or Regulation
S. The shares were issued directly by us and did not involve a public offering
or general solicitation. The recipients of the shares were afforded an
opportunity for effective access to files and records of our company that
contained the relevant information needed to make their investment decision,
including our financial statements and 34 Act reports. We reasonably believed
that the recipients, immediately prior to issuing the shares, had such knowledge
and experience in our financial and business matters that they were capable of
evaluating the merits and risks of their investment. The recipients had the
opportunity to speak with our management on several occasions prior to their
investment decision. There were no commissions paid on the issuance and sale of
the shares.



On
December 30, 2002, we issued and sold a total of 135,000 shares of common stock
to an individual accredited investor for a total purchase price of $101,250, all
of which was paid in cash. We believe that the issuance and sale of the shares
was exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2), Regulation D and/or Regulation
S. The shares were issued directly by us and did not involve a public offering
or general solicitation. The recipient of the shares was afforded an opportunity
for effective access to files and records of our company that contained the
relevant information needed to make its investment decision, including our
financial statements and 34 Act reports. We reasonably believed that the
recipient, immediately prior to issuing the shares, had such knowledge and
experience in our financial and business matters that it was capable of
evaluating the merits and risks of its investment. The recipient had the
opportunity to speak with our management on several occasions prior to its
investment decision. There were no commissions paid on the issuance and sale of
the shares.



23

---

On
February 6, 2003, we issued 1,000,000 shares of our $0.001 par value common
stock to Cornerstone Bank to hold as collateral for a line of credit in the
amount of $250,000. We believe that the issuance of the shares was exempt from
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2), 4(6) and Regulation D. The shares were issued
directly by us and did not involve a public offering or general solicitation.
The recipient of the shares was afforded an opportunity for effective access to
files and records of our company that contained the relevant information needed
to make their investment decision, including our financial statements and 34 Act
reports. We reasonably believed that the recipients, immediately prior to
issuing that shares, had such knowledge and experience in our financial and
business matters that they were capable of evaluating the merits and risks of
their investment. The recipients had the opportunity to speak with our
management on several occasions prior to their investment decisions. There were
no commissions paid on the issuance and sale of the shares. In July 2003, the
line of credit was repaid and the shares were returned from the bank for
cancellation.



On
March 13, 2003, we issued and sold a total of 350,000 shares of common stock to
4 individual accredited investors for a total purchase price of $262,500, all of
which was paid in cash. We believe that the issuance and sale of the shares was
exempt from the registration and prospectus delivery requirements of the
Securities Act of 1933 by virtue of Section 4(2), Regulation D and/or Regulation
S. The shares were issued directly by us and did not involve a public offering
or general solicitation. The recipients of the shares were afforded an
opportunity for effective access to files and records of our company that
contained the relevant information needed to make their investment decision,
including our financial statements and 34 Act reports.



On
April 17, 2003, we sold 100,000 shares of common stock to an individual
accredited investor for a total purchase price of $75,000, all of which was paid
in cash. We believe that the issuance and sale of the shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2), Regulation D and/or Regulation S. The shares were
issued directly by us and did not involve a public offering or general
solicitation. The recipient of the shares was afforded an opportunity for
effective access to files and records of our company that contained the relevant
information needed to make their investment decision, including our financial
statements and 34 Act reports. We reasonably believed that the recipient,
immediately prior to issuing the shares, had such knowledge and experience in
our financial and business matters that they were capable of evaluating the
merits and risks of their investment. The recipient had the opportunity to speak
with our management on several occasions prior to their investment decision.
There were no commissions paid on the issuance and sale of the shares.



On
July 2, 2003, we issued 1,000,000 shares of our $0.001 par value common stock to
CPA Directed Investments to hold as collateral for a loan in the amount of
$400,000. We believe that the issuance of the shares was exempt from
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2), 4(6) and Regulation D. The shares were issued
directly by us and did not involve a public offering or general solicitation.
The recipient of the shares was afforded an opportunity for effective access to
files and records of our company that contained the relevant information needed
to make their investment decision, including our financial statements and 34 Act
reports. We reasonably believed that the recipients, immediately prior to
issuing that shares, had such knowledge and experience in our financial and
business matters that they were capable of evaluating the merits and risks of
their investment. The recipients had the opportunity to speak with our
management on several occasions prior to their investment decisions. There were
no commissions paid on the issuance and sale of the shares. In January 2004, the
loan was repaid and the shares were returned for cancellation.



24

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Stock
Options and Warrants



On
August 20, 2002, pursuant to Goran Blagojevic's consulting agreement we granted
Mr. Blagojevic a warrant to purchase 500,000 shares of common stock at $0.75 per
share. This warrant expired on July 1, 2003, Mr. Blagojevic did not exercise his
warrant. On September 1, 2003, we issued a warrant to Goran Blagojevic to
purchase up to 900,000 shares of common stock at $0.75 per share as partial
consideration for consulting services. The warrant is exercisable until August
31, 2006. We believe that the issuances of the warrants were exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2).



On
December 19, 2002, pursuant to Paul Branagan's employment agreement we granted
Mr. Branagan an option to purchase shares of common stock according to the
following:



Number
      of Shares Purchasable
    
    Price
      Per Share250,000
    
    $0.50250,000
    
    $1.00250,000
    
    $1.50250,000
    
    $2.00250,000
    
    $2.50




The
options are exercisable at any time and expire on the third anniversary of
issuance or termination of Mr. Branagan's employment agreement. As of the date
of this filing, Mr. Branagan has not exercised any of his options.



On
December 19, 2002, pursuant to William Stoeckinger's consulting agreement we
granted Mr. Stoeckinger an option to purchase 50,000 shares of our common stock
at $0.50 per share and 50,000 shares as $1.00 per share. The option expires on
December 1, 2004.



On
December 27, 2002, we granted Russell Frierson an option to purchase 50,000
shares of our common stock at $0.50 per share for a period of 3 years. The
option was granted as an inducement for Mr. Frierson to begin consulting for us.
On March 12, 2004, Mr. Frierson exercised his option and purchased 50,000 shares
at $0.50 per share for a total purchase price of $25,000. Mr. Frierson executed
a Promissory Note wherein he promises to pay us $25,000 together with interest
at the rate of 6% per annum. We agreed to issue 25,000 shares of our common
stock to Mr. Frierson and retain possession of the remaining 25,000 shares,
together with a stock power as collateral until the promissory note is paid in
full, at which time we will release the collateral shares to Mr. Frierson. On
April 1, 2004, the 50,000 shares of common stock referenced above were
registered on Form S-8.



25

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On
December 27, 2002, we granted Lawrence Kehoe an option to purchase 325,000
shares of our common stock at $0.50 per share for a period of 3 years. The
option was granted as an inducement for Mr. Kehoe to begin consulting for us. On
March 12, 2004, Mr. Kehoe exercised his option and purchased 325,000 shares at
$0.50 per share for a total purchase price of $162,500. Mr. Kehoe executed a
Promissory Note wherein he promises to pay us $162,500 together with interest at
the rate of 6% per annum. We agreed to issue 162,500 shares of our common stock
to Mr. Kehoe and retain possession of the remaining 162,500 shares, together
with a stock power as collateral until the promissory note is paid in full, at
which time we will release the collateral shares to Mr. Kehoe. On April 1, 2004,
the 325,000 shares of common stock referenced above were registered on Form S-8.



On
December 27, 2002, we granted Cody Felton an option to purchase 325,000 shares
of our common stock at $0.50 per share for a period of 3 years. The option was
granted as an inducement for Mr. Felton to begin consulting for us. On March 12,
2004, Mr. Felton exercised his option and purchased 325,000 shares at $0.50 per
share for a total purchase price of $162,500. Mr. Felton executed a Promissory
Note wherein he promises to pay us $162,500 together with interest at the rate
of 6% per annum. We agreed to issue 162,500 shares of our common stock to Mr.
Felton and retain possession of the remaining 162,500 shares, together with a
stock power as collateral until the promissory note is paid in full, at which
time we will release the collateral shares to Mr. Felton. On April 1, 2004, the
325,000 shares of common stock referenced above were registered on Form S-8.



Subsequent
Events



On
January 15, 2004, we entered into an agreement with Mr. John Haas, Mr. Mark Hass
and Mr. W.B. Mitchell whereas we would be allowed access to approximately 10,000
acres of leased mineral rights for the purpose of exploring, and evaluating gas
production for 6 months. Each of the three individuals received 600,000 stock
warrants (1,800,000 total) to purchase shares at a price of $1.20 per share;
400,000 stock warrants (1,200,000 total) to purchase shares at a price of $1.50
per share; and 300,000 stock warrants (900,000 total) to purchase shares at a
price of $2.00 per share. The warrants expire on July 15, 2006. We believe that
the issuances of the warrants were exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933 by virtue of Section 4(2).



On
January 15, 2004, we issued 765,000 shares of stock to CBM Energy, Inc in
exchange for oil and gas mineral leases covering approximately 36,000 acres and
title to approximately 10 existing wells. 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 shares were issued
directly by us and did not involve a public offering or general solicitation.
The recipient of the shares occupied a privileged position with our company, due
to its preexisting relationship with our president, that afforded them an
opportunity for effective access to files and records of our company that
contained the relevant information needed to make their investment decision,
including our financial statements and 34 Act reports. We reasonably believed
that the recipient, immediately prior to issuing the shares, had such knowledge
and experience in our financial and business matters that they were capable of
evaluating the merits and risks of their investment. The recipient's management
had the opportunity to speak with our president and directors on several
occasions prior to their investment decision.



26

---

On
February 9, 2004, we agreed to issue 10,000 shares of common stock to and granted Joseph Blankenship an option to purchase 50,000
shares at $2.50 per share for the first 25,000 shares and $4.00 for the
remaining 25,000 shares. The option was granted pursuant to the Research
Agreement we entered into on February 9, 2004. The term of the option is for two
years.



On
February 18, 2004, we granted to CSC Group LLC a stock warrant giving CSC the
right to purchase 200,000 shares of our common stock. The term and exercise
price of the warrant shares shall be: (i) 100,000 shares at $1.50 per share for
a period of two years; and (ii) 100,000 shares at $2.50 per share for a period
of two years.



On
March 1, 2004 we issued 100,000 stock options with an exercise price of $1.25
per share and 200,000 stock options with an exercise price of $1.50 per share to
Mr. William Burk. Mr. Burk has performed consulting services for the Company.
The options expire in three years.



We
reasonably believed that the recipients, immediately prior to issuing the
shares, had such knowledge and experience in our financial and business matters
that they were capable of evaluating the merits and risks of their investment.
The recipients had the opportunity to speak with our management on several
occasions prior to their investment decision. There were no commissions paid on
the issuance and sale of the shares.



All
of the above-described issuances were exempt from registration (i) pursuant to
Section 4(2) of the Securities Act as transactions not involving a public
offering, (ii) Regulation S or (iii) Regulation D promulgated under the
Securities Act. With respect to each transaction listed above, no general
solicitation was made by us or any person acting on our behalf. All such
securities issued pursuant to such exemptions are restricted securities as
defined in Rule 144(a)(3) promulgated under the Securities Act, appropriate
legends have been placed on the documents evidencing the securities, and may not
be offered or sold absent registration or pursuant to an exemption therefrom.



ITEM
6. PLAN OF OPERATION



This
report contains forward-looking statements. Actual results and events could
differ materially from those projected, anticipated, or implicit, in the
forward-looking statements as a result of the risk factors set forth below and
elsewhere in this report.



With
the exception of historical matters, the matters discussed herein are
forward-looking statements that involve risks and uncertainties. Forward-looking
statements include, but are not limited to, statements concerning anticipated
trends in revenues and net income, the date of introduction or completion of our
products, projections concerning operations and available cash flow. Our actual
results could differ materially from the results discussed in such
forward-looking statements. The following discussion of our financial condition
and results of operations should be read in conjunction with our financial
statements and the related notes thereto appearing elsewhere herein.



27

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Overview



Petrol
Oil and Gas, Inc., formerly named Euro Technology Outfitters, was incorporated
in Nevada on March 3, 2000. We are structured to become an oil and gas
exploration and development company. Our primary business objective is to
produce economic quantities of natural gas from buried coal seams, denoted as
CBM.



We
have yet to generate revenues from any source and there is a substantial going
concern issue as to whether we will ever be able to commercialize our oil and
natural gas production and generate sufficient, if any, revenues to satisfy our
working capital requirements. Since inception, we have been dependent on the
sale of our equity securities and loans from affiliates to satisfy our working
capital requirements. We continue to have a working capital deficiency that
raises substantial concern regarding our ability to continue as a going concern.



Plan
of Operation



During
the next twelve months we plan to focus our efforts on increasing our production
and reserves of natural gas through the development of our existing properties,
raising additional capital and furthering our business plan.



We
intend to fund portions of our field operations through revenues obtained from
sales of our CBM gas production, if any. To accelerate the development program
we plan to take on JV or WI partners that will contribute to the costs of
drilling and completion and then share in revenues derived from production. This
economic strategy may allow us to utilize our own financial assets toward the
growth of our leased acreage holdings, pursue the acquisition of strategic oil
and gas producing companies and generally expand our existing operations.



Because
of our limited operating history we have yet to generate revenues from the sale
of oil or natural gas. Our activities have been limited to the negotiation of WI
agreements, mineral lease acquisition and preliminary analysis of reserves and
production capabilities from our exploratory test wells. Consequently, we have
incurred the expenses of start-up.



Our
future financial results will depend primarily on: (i) the ability to continue
to source and screen potential projects; (ii) the ability to discover commercial
quantities of natural gas and oil; (iii) the market price for oil and gas; and
(iv) the ability to fully implement our exploration and development program,
which is dependent on the availability of capital resources. There can be no
assurance that we will be successful in any of these respects, that the prices
of oil and gas prevailing at the time of production will be at a level allowing
for profitable production, or that we will be able to obtain additional funding
to increase our currently limited capital resources.



We
anticipated the need for at least $5,000,000, which was the maximum proceeds we
were attempting to raise through our registered offering. We raised $2,350,473
as of the closing date of the offering. The additional funds needed may be
raised through equity financing, debt financing, or other sources, which may
result in further dilution in the equity ownership of our stockholders. There is
still no assurance that even with the funds from the registration and a
subsequent private placement, if needed, we will be able to maintain operations
at a level sufficient for an investor to obtain a return on their investment in
our common stock. Thus we are focusing our attention toward WI partners to
assist in funding the development of our mineral leases. Nevertheless, we may
continue to be unprofitable for an indefinite period of time.



28

---

We
are unable to provide an accurate breakdown to the use of funds to be received
from any future private placement, or equity investments as the usage will be
solely based upon the outcome of our initial exploration and development
program. We have anticipated the need to hire additional staff, continue
development and refinement of our operations to meet customer needs and provide
additional working capital for our operations. Support for growth of our field
personal and operational activities will be partially derived from funding from
WI partners.



We
will face considerable risk in each of our business plan steps, such as
difficulty of hiring competent personnel within our budget and a shortfall of
funding due to our inability to raise capital in the equity securities market.
If no funding is received during the next twelve months, we will be forced to
rely on existing cash in the bank and funds received from the offering. We
anticipate utilizing our stock and stock options, where possible, to hire new
personnel and consultants.



We
have no operating history, no significant current operations, minimum cash on
hand, and no profit. Because of these factors, our auditors have issued an audit
opinion for us which includes a statement describing our going concern status.
This means there is substantial doubt about our ability to continue as a going
concern. While we believe we have made good faith estimates of our ability to
secure additional capital in the future to reach our goals, there is no
guarantee that we will receive sufficient funding to implement any future
business plan steps.



Our
future operating results will depend on many factors, including our ability to
raise adequate working capital, demand for our oil and gas production, the level
of competition and our ability to deliver products while maintaining quality and
controlling costs.



Field
Development



Our
current plan of operation for field development starts with identifying the most
promising and cost-effective drill sites on our current leased acres, drilling
and testing wells to prove reserves, completing the more promising test wells,
extracting the oil, gas and other hydrocarbons that we find, and delivering them
to market. Although we believe that we have leased enough land to move forward
with our field development, we will have to obtain additional financing before
we can fully implement this next phase of our operations.



Field
exploration and development operations began in August 2002, with the drilling
and logging of three test wells. Each exploratory/test well is located on a
separate mineral lease in the southwest portion of Coffey County. These drill
sites were selected based on a variety of factors, including information
gathered from historic records and drill logs (depth, and thickness of coal
seams and the results of electric gamma ray readings), proximity to existing
interstate distribution pipelines, ease of access for drilling equipment the
presence of oil and natural gas in the immediate vicinity, and consultations
with our geologist and driller. Since these are considered to be exploratory or
test wells they have only been partially completed in order to allow us to
investigate the production capacity of selected coal intervals, and to obtain
important technical information related to stimulation activities that are
almost always required to make CBM wells commercially productive. Thus we do not
presently have any estimates of oil and gas reserves on these properties.
Consequently we have not reported our reserve estimates to any state, or federal
authority.



29

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During
this exploration and development phase of our plan of operation we expect to
drill, test and complete about 12 CBM producing wells on our leases in Kansas
and Missouri. These drilling and testing efforts will also allow us to determine
whether there are other forms of commercially producible hydrocarbons present,
such as oil or other types of natural gas. Each well will be drilled and tested
individually. If commercially producible amounts of gas are present, the well
will be fully completed and a local distribution pipeline installed. Completed
wells that are producing and connected to distribution pipelines will begin
generating revenues as soon as they begin pumping although these revenues may be
realized on a quarterly basis.



Once
we have identified a proposed drilling site, we as a licensed operators in the
State of Kansas and Missouri, will be engaged in all aspects of well site
operations. As the operator we will be responsible for permitting the well,
which will include obtaining permission from the Kansas Oil and Gas commission
or Missouri relative to spacing requirements and any other stated and federal
environmental clearances required at the time that the permitting process
commences. Additionally, we will formulate and deliver to all interest owners an
operating agreement establishing each participant's rights and obligations in
that particular well based on the location of the well and the ownership. In
addition to the permitting process, we as the operator will be responsible for
hiring the driller, geologist and land men to make final decisions relative to
the zones to be targeted, confirming that we have good title to each leased
parcel covered by the spacing permit and to actual drill the well to the target
zones. Should the well be successful, we will be responsible for completing the
well and connecting it to the most appropriate transmission facility for the
hydrocarbons produced.



As
the operator we will be the caretaker of the well once production has commenced.
We have no formal experience in well operations and will have to hire or retain
professionals to assist us in our efforts. As the operator, we will be
responsible for paying bills related to the well, billing working interest
owners for their proportionate expenses in drilling and completing the well, and
selling the production from the well. Again, we have no experience in operating
an oil or gas production company, therefore, we will be forced to hire
experienced operation staff, when needed. Once the production has been sold, we
anticipate that the purchaser thereof will carry out its own research with
respect to ownership of that production and will send out a division order to
confirm the nature and amount of each interest owned by each interest owner.
Once a division order has been established and confirmed by the interest owners,
the production purchaser will issue the checks to each interest owner in
accordance with its appropriate interest. From that point forward, we as
operator will be responsible for maintaining the well and the wellhead site
during the entire term of the production or until such time as the operator has
been replaced or appropriately abandoned. We anticipate hiring professionals to
assist us in our operations until such time as our management has sufficient
knowledge and operations ability.



30

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We
had a one year consulting agreement with Mr. William Stoeckinger, a Certified
Petroleum Geologist, from Bartlesville, Oklahoma. Mr. Stoeckinger provided
geological services both in the assessment process and in the development
program. On January 31, 2004, the term of the agreement expired, however Mr.
Stoeckinger continues to provide geologic consulting services on an as needed
basis.



Based
on our first series of exploratory/test wells we anticipate that each well in
our targeted area will cost approximately $30,000 to locate, drill and test, an
additional $80,000 to complete, plus an additional $350 per month per well to
pay for electricity, pulling and repairs, pumping and other miscellaneous
charges. In support of these operations we have working agreements with local
third parties to monitor and maintain our wells and perform drilling and
work-over activities.



If
any of our wells proves to hold commercially producible gas, we will need to
install a distribution infrastructure to transport our gas from the wellhead to
one of the major distribution pipelines. We have identified several major
interstate distribution pipelines that operate within and pass through the
counties in which we have lease holdings. These include pipelines owned and
operated by Southern Star, CMS Energy, and Enbridge. We have initiated contact
with two of these companies to ascertain the specific locations of their
pipelines, their requirements to purchase gas from us (including volume of gas
and quality of gas), and the costs to connect to their pipelines. Traditionally,
the major distribution of gas in the United States have purchased production
from anyone who can get sufficient quantities of quality gas to their
distribution pipeline. Because some of these companies have purchased coal-bed
methane from producing wells in the southern part of Kansas, we believe that if
the gas produced from wells drilled in our targeted area meets their criteria in
both quantity and quality, they will purchase our gas from the Company at market
prices. To date, we have not entered into any purchase agreements nor have we
received assurances from anyone that they will enter into such agreements with
us in the future.



Presently,
we cannot accurately predict the costs of transporting our gas products to these
existing interstate pipelines. The cost of installing a distribution
infrastructure or local gathering system will vary depending upon the distance
the gas must travel from its wellhead to the compressor station and high
pressure pipeline tap, and whether the gas must be treated to meet the
purchasing company's quality standards. However, based on the close proximity of
several major distribution pipelines to our leased properties, plus our intent
to drill as close to these pipelines as practicable, we anticipate that the
total cost of installing a distribution infrastructure for a group of about 50
producing wells will be approximately $6,500 each plus a one-time expense of
$5,000 per well to tap into the high pressure interstate pipeline and support a
compressor and monitoring system.



The
prices obtained for oil and gas are dependent on numerous factors beyond our
control, including domestic and foreign production rates of oil and gas, market
demand and the effect of governmental regulations and incentives. We do not have
any delivery commitments with respect to any oil or gas produced from any
properties that we acquire. However, due to the U.S. government's recent push
toward increased domestic production of energy sources, the high demand for
natural gas, we do not anticipate any difficulties in selling any oil and gas
that it produces, once it has been delivered to a distribution facility.



31

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The
success of this phase of our plan of operation is dependent upon our ability to
obtain additional capital to drill exploratory and test wells and also upon our
successfully finding commercially producible amounts of coal-bed methane gas or
other hydrocarbons in the wells that we drill. We cannot assure you that we will
obtain the necessary capital or that we will find commercially producible
amounts of gas if our drilling operations commence.



The
timing of most of our capital expenditures is discretionary. Currently there are
no material long-term commitments associated with our capital expenditure plans.
Consequently, we have a significant degree of flexibility to adjust the level of
such expenditures as circumstances warrant. The level of our capital
expenditures will vary in future periods depending on energy market conditions
and other related economic factors.



Liquidity
and Capital Resources



A
critical component of our operating plan impacting our continued existence is
the ability to obtain additional capital through additional equity and/or debt
financing and JV or WI partnerships. We do not anticipate enough positive
internal operating cash flow until such time as we can generate substantial
revenues, which may take the next few years to fully realize. In the event we
cannot obtain the necessary capital to pursue our strategic plan, we may have to
cease or significantly curtail our operations. This would materially impact our
ability to continue operations.



Through
the date of this filing, we have successfully raised approximately $2,350,473
from our registered offering. We anticipated these funds to satisfy our working
capital needs for six to nine months.



Since
inception, we have financed cash flow requirements through debt financing and
issuance of common stock for cash and services. As we expand operational
activities, we may continue to experience net negative cash flows from
operations, pending receipt of servicing or licensing fees, and will be required
to obtain additional financing to fund operations through common stock offerings
and bank borrowings to the extent necessary to provide working capital.



Over
the next twelve months we believe that existing capital and anticipated funds
from operations will not be sufficient to sustain operations and planned
expansion. Consequently, we will be required to seek additional capital in the
future to fund growth and expansion through additional equity or debt financing
or credit facilities. No assurance can be made that such financing would be
available, and if available it may take either the form of debt or equity. In
either case, the financing could have a negative impact on our financial
condition and our Stockholders.



32

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We
anticipate incurring operating losses over the next twelve months. Our lack of
operating history makes predictions of future operating results difficult to
ascertain. Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets such as
technology related companies. Such risks include, but are not limited to, an
evolving and unpredictable business model and the management of growth. To
address these risks we must, among other things, implement and successfully
execute our business and marketing strategy, continue to develop and upgrade
technology and products, respond to competitive developments, and attract,
retain and motivate qualified personnel. There can be no assurance that we will
be successful in addressing such risks, and the failure to do so can have a
material adverse effect on our business prospects, financial condition and
results of operations.



Under
our current plan of operation, we are required to make certain lease payments to
maintain our rights to develop and drill for oil and gas. There lease payments
are material obligations to us and our lease holdings are our biggest asset.



As
of December 31, 2003, we had assets of $2,577,447, and $373,810 in liabilities.
Resulting in a stockholder's equity of $2,203,637.



Material
Risks



We
are a development stage company, recently reorganized and have minimal operating
history, which makes an evaluation of us extremely difficult. At this stage of
our business operations, even with our good faith efforts, potential investors
have a high probability of losing their investment.



We
have yet to generate revenues from operations and have been focused on
organizational, start-up, market analysis and fund raising activities since we
incorporated. Although we intend to increase our production and reserves of
natural gas, there is nothing at this time on which to base an assumption that
these new business operations will prove to be successful or that we will ever
be able to operate profitably. Our future operating results will depend on many
factors, including our ability to raise adequate working capital, demand and
acceptance of our business plan, the level of our competition and our ability to
attract and maintain key management and employees.



While
we believe our estimates of projected occurrences and events are within the
timetable of our business plan, there can be no guarantees or assurances that
the results anticipated will occur.



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. If we are
unable to continue as a going concern, it is likely that we will not be able to
continue in business.



As
a result of our deficiency in working capital and other factors, our auditors
have included a paragraph in their report regarding substantial doubt about our
ability to continue as a going concern. Our plans in this regard are to seek
additional funding through future equity private placements or debt facilities.



33

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Personnel



We
currently have two full time employees and two part time employees. As drilling
production activities commence, we intend to hire additional technical,
operational and administrative personnel as appropriate. We do not expect a
significant change in the number of full time employees over the next 12 months.
We intend to use the services of independent consultants and contractors to
perform various professional services, particularly in the area of land
services, drilling, water hauling, pipeline construction, well design, well-site
monitoring and surveillance, permitting and environmental assessment. We believe
that this use of third-party service providers may enhance our ability to
contain general and administrative expenses.

Going
Concern



The
financial statements included in this filing have been prepared in conformity
with generally accepted accounting principles that contemplate the continuance
of the Company as a going concern. The Company's cash position may be inadequate
to pay all of the costs associated with testing, production and marketing of
products. Management intends to use borrowings and security sales to mitigate
the effects of its cash position, however no assurance can be given that debt or
equity financing, if and when required will be available. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets and classification of liabilities that might
be necessary should the Company be unable to continue existence.

ITEM
7. FINANCIAL STATEMENTS



See
Index to Financial Statements and Financial Statement Schedules appearing on
page F-1 through F-20 of this Form 10-KSB.



ITEM
      8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
      FINANCIAL DISCLOSURE

> 

NONE.



ITEM
8A. CONTROLS AND PROCEDURES



We
are a development stage company with no revenues and during 2003 our board of
directors had responsibility for our internal controls and procedures over our
financial reporting.



We
have implemented and maintain disclosure controls and procedures which consist
of: the control environment, risk assessment, control activities, information
and communication and monitoring. Our scope of internal control therefore
extends to policies, plans procedures, processes, systems, activities,
initiatives, and endeavors required of a company with our limited transactions,
revenues, expenses, and operations. These controls and procedures are designed
to ensure that the information required to be disclosed in our Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules.



34

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There
have been no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls or in
other factors that could significantly affect the controls subsequent to the
date of the evaluation referenced below.



Within
90 days prior to the date of this report, we carried out an evaluation, under
the supervision of Mr. Branagan, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures. Based on the
foregoing, Mr. Branagan concluded that, given the Company's limited operations,
our disclosure controls and procedures were effective.



PART
III



ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.



The
following table sets forth the names and positions of our executive officers and
directors. Directors will be elected at our annual meeting of stockholders and
serve for one year or until their successors are elected and qualify. Officers
are elected by the Board and their terms of office are, except to the extent
governed by employment contract, at the discretion of the Board.



|NAME                   | AGE | POSITION                                           
|---------------------- | --- | ---------------------------------------------------
|Paul
      T. Branagan | 60  | President,
      CEO, Chairman, Secretary/Treasurer
|Loren
      Moll       | 47  | Director                                           
|David
      Polay      | 39  | Chief
      Financial Officer                      



Duties,
Responsibilities and Experience



Paul
Branagan, president, CEO and chairman of Petrol. Mr. Branagan
graduated from the University of Las Vegas Nevada with a B.S. in physics. From
1993 to the present Mr. Branagan has been the President and Senior Scientist of
Branagan & Associates, Inc. From 1975 to 1993 he was the Project Manager,
Assistant Oil and Gas Division Manager and Senior Scientist of CER Corporation
of Las Vegas, Nevada. Since 1999, Mr. Branagan has been the President and a
member of the board of directors of Millennium Plastics Corporation, a 34 Act
Reporting Nevada Corporation.



Loren
W. Moll, a director 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.



35

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David
Polay, chief financial officer for the Company, has an extensive
background in accounting, business systems and computer engineering. From 1993
to 2003, Mr. Polay was President and CFO of Polay Trading Technology, where he
successfully developed financial systems used to manage institutional and
private investors' money. From 1990 to 1993, he was CFO and founding partner of
Impact Health Systems. Impact Health Systems created software and internet-based
systems for the medical and health insurance industries. From 1989 to 1991, Mr.
Polay worked for KPMG Peat Marwick in Silicon Valley as an accountant, where he
assisted KPMG in establishing their Microcomputing Consulting Group. Mr. Polay
graduated with high honors from the University of Florida's Fisher School of
Accounting with B.S. degrees in Computer Engineering and Accounting.



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.



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.



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 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.



No
Executive Officer or Director of the Corporation is the subject of any pending
legal proceedings.



36

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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 during the year ended 2003 there were no delinquent filers.



Audit
Committee



We
do not have an Audit Committee, our board of directors during 2003, performed
some of the same functions of an Audit Committee, such as: recommending a firm
of independent certified public accountants to audit the annual financial
statements; reviewing the independent auditors independence, the financial
statements and their audit report; and reviewing management's administration of
the system of internal accounting controls. The Company does not currently have
a written audit committee charter or similar document.



Code
of Ethics



A
code of ethics relates to written standards that are reasonably designed to
deter wrongdoing and to promote:

1. Honest and ethical conduct, including the ethical handling of actual or
        apparent conflicts of interest between personal and professional
        relationships;
2. Full, fair, accurate, timely and understandable disclosure in reports
        and documents that are filed with, or submitted to, the Commission and
        in other public communications made by an issuer;
3. Compliance with applicable governmental laws, rules and regulations;
4. The prompt internal reporting of violations of the code to an
        appropriate person or persons identified in the code; and
5. Accountability for adherence to the code.

We
have not adopted a corporate code of ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions in that of our officers and
directors serves in all the above capacities.



Our
decision to not adopt such a code of ethics results from our having only one
officer and two directors operating as the sole management for the Company in
2003. We believe that as a result of the limited interaction which occurs having
a sole officer for the Company eliminates the current need for such a code, in
that violations of such a code would be reported to the party generating the
violation.



37

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Nominating
Committee



We
do not have a Nominating Committee or Nominating Committee Charter. Our board of
directors performed some of the functions associated with a Nominating
Committee. We have elected not to have a Nominating Committee in that we are a
development stage company with limited operations and resources.



Stock
    Option and Non-Employee Directors' Plan



The
following description applies to the stock option plan which we adopted in
December of 2002; 2,050,000 options have been granted as of December 31, 2003.



We
have reserved for issuance an aggregate of 3,000,000 shares of common stock
under our 2002/2003 Stock Option Plan and Non-Employee Directors' Plan. 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
efforts, and to assist in attracting the best available individuals to the
Company in the future.



Stock
Option 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 plan and the directors' plan) and other employees and consultants
and its subsidiaries (if established) will be eligible to receive options under
the planned stock option plan. The committee will administer the stock option
plan 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
plan.

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 plan 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 plan 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 this plan when some awards may be exercised. In the
event of a change of control (as defined in the stock option plan), the date on
which all options outstanding under the stock option plan may first be exercised
will be accelerated. Generally, all options terminate 90 days after a change of
control.



38

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Option
Grants



The
board of directors adopted a 2002/2003 stock option plan pursuant to which
incentive stock options or nonstatutory stock options to purchase up to
3,000,000 shares of common stock may be granted to employees, directors and
consultants. Pursuant to the plan, stock options were granted as follows:



|Date
      Granted      |  | Exercise
      Price Per Share |  | Number
      of Shares
|----------------------- |  | ------------------------------ |  | ----------------------
|                        |  |                                |  |                       
|December
      19, 2002 |  |                                |  |                       
|Granted                 |  | $0.50
      to $2.50           |  | 1,350,000             
|Exercised               |  | -                              |  | -0-                   
|Cancelled               |  | -                              |  | -0-                   
|                        |  |                                |  |                       
|December
      27, 2002 |  |                                |  |                       
|Granted                 |  | $0.50                          |  | 700,000               
|Exercised               |  | -                              |  | -0-                   
|Cancelled               |  | -                              |  | -0-                   
|                        |  |                                |  |                       
|Total
      outstanding |  | $0.50
      to $2.50           |  | 2,050,000             



ITEM
10. EXECUTIVE COMPENSATION



The
following table sets forth the cash compensation of our executive officers: Paul
Branagan, president, since his appointment on August 21, 2002 through December
31, 2003; and David Polay, chief financial officer, since his appointment on
November 17, 2003 through December 31, 2003.



Summary
Compensation Table

|                                                            |                 | Annual
      Compensation | Long
      Term Compensation
|----------------------------------------------------------- | --------------- | ------------------------- | ----------------------------
|                                                            |                 |                           |                             
|Name
      and Principal Position                           | Year            | Salary                    | Bonus                       
|Paul
      Branagan,
      President                        | 2003
      2002 | $145,417
      $35,000    | -0-
      -0-               
|                                                            |                 |                           |                             
|David
      Polay,
      Chie
      Financial
      Officer | 2003            | $5,134                    | $50,000                     
|                                                            |                 |                           |                             

(1)
    In November, we amended Mr. Branagan's employment agreement granting Mr.
    Branagan a 1/100 over riding royalty on wells we complete. The over riding
    royalty is described in further detail below.

(2)
    The options are exercisable at prices ranging from $.50 to $2.50 per share,
    pursuant to Mr. Branagan's Employment Agreement.



39

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Employment
Agreements



Paul
Branagan



On
December 19, 2002, we entered into an employment agreement with Paul Branagan.
The term of employment is three (3) years. Mr. Branagan serves as President,
CEO, Chairman, Secretary/Treasurer and Director. We agreed to pay Mr. Branagan a
base salary of $135,000 per annum for the first year of employment, increasing
to $160,000 per annum for the second and third year of his employment. In
addition to the cash compensation earned by Mr. Branagan, we granted Mr.
Branagan an option to purchase shares of our common stock according to the
following:





Number
      of Shares Purchasable
    
    Price
      Per Share250,000
    
    $0.50250,000
    
    $1.00250,000
    
    $1.50250,000
    
    $2.00250,000
    
    $2.50




The
options are exercisable at any time and expire on the third anniversary of
issuance or the termination of Mr. Branagan's employment agreement.

On
November 20, 2003, we amended Mr. Branagan's employment agreement to add a
royalty provision as follows:

1. Mr. Branagan shall receive a 1/100 Over Riding Royalty on any wells
          completed.
2. The Over Riding Royalty shall be paid as determined by our Board of
          Directors.
3. The term of the payment of the Over Riding Royalty shall be for the
        remaining term of the employment agreement and may be changed and/or
        extended at any time by our Board of Directors.
4. The term "Over Riding Royalty" shall be defined as a
        fractional interest in the gross production of oil and gas, in addition
        to the usual royalties paid to any lessor.

David
Polay



On
November 17, 2003, we executed an Employment Agreement with David Polay, wherein
Mr. Polay agreed to serve as our Chief Financial Officer. Mr. Polay agreed to
work part time until his position requires a full time effort. We agreed to pay
Mr. Polay a starting salary of $6,000 per month and we also paid him a one-time
sign on bonus in the amount of $50,000.



40

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Compensation
Committee



We
currently do not have a compensation committee of the board of directors.
However, the board of directors intends to establish a compensation committee,
which is expected to consist of three inside directors and two independent
members. Until a formal committee is established our entire board of directors
will review all forms of compensation provided to our executive officers,
directors, consultants and employees including stock compensation and loans.

Director
Compensation and Other Arrangements



Directors
of Petrol who are not employees 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.



ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
        RELATED STOCKHOLDER MATTERS.



The
following tables present information, to the best of the Company's knowledge,
about the beneficial ownership of its common stock on March 16, 2004 relating to
the beneficial ownership of the Company's common stock by those persons known to
beneficially own more than 5% of the Company's capital stock and by its
directors and executive officers. The percentage of beneficial ownership for the
following table is based on 17,192,466 shares of common stock outstanding.



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 shares of common stock that the stockholder
has a right to acquire within 60 days 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.



Security
Ownership of Certain Beneficial Owners



|Name
      and Address of Beneficial Owner (1)                                                |  | Number
      of
      Shares |  | Percent
      Of
      Class (2)
|--------------------------------------------------------------------------------------------- |  | ---------------------------- |  | --------------------------------
|Goran
      Blagojevic (3)
      
      PTTA
      Chiavica 2
      37121
      Verona, Italy |  | 1,475,000                    |  | 8.6%                            
|                                                                                              |  |                              |  |                                 
|Paolo
      Simoni (4)
      
      Via
      Al Forte 8
      Lugano,
      Switzerland      |  | 1,640,343                    |  | 9.5%                            
|                                                                                              |  |                              |  |                                 



41

---

|John
      Haas (5)
      
      12980
      Foster, Suite 120
      Overland,
      KS 66213     |  | 1,300,000 |  | 7.6%
|------------------------------------------------------------------------------------------------- |  | --------- |  | ----
|                                                                                                  |  |           |  |     
|Mark
      Haas (5)
      
      12980
      Foster, Suite 120
      Overland,
      KS 66213     |  | 1,300,000 |  | 7.6%
|                                                                                                  |  |           |  |     
|W.B.
      Mitchell (5)
      
      12980
      Foster, Suite 120
      Overland,
      KS 66213 |  | 1,300,000 |  | 7.6%
|                                                                                                  |  |           |  |     
|Michael
      Morse
      12502
      Russel
      Overland
      Park, KS 66209                  |  | 900,000   |  | 5.2%
|                                                                                                  |  |           |  |     

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., thepower
    to dispose of, or to direct the disposition of, a security).
2. Figures
    are rounded to the nearest tenth of a percent.
3. Includes
    900,000 warrants to purchase shares of common stock at $0.75 per share
    through August 31, 2006 and 500,000 warrants to purchase shares of common
    stock at $0.875 per share through November 20, 2006.
4. Includes
    1,000,000 warrants to purchase shares of common stock at $0.875 per share
    through November 20, 2006.
5. Each
    of John Haas, Mark Haas and W.B. Mitchell individually have the right to
    purchase: 600,000 warrants (1,800,000 total) to purchase shares of common
    stock at $1.20 per share through July 15, 2006; 400,000 warrants (1,200,000
    total) to purchase shares of common stock at $1.50 per share through July
    15, 2006; and 300,000 warrants (900,000 total) to purchase shares of common
    stock at $2.00 per share through January 15, 2007.

> 

Security
    Ownership of Management



|Name
      and Address of Beneficial Owner (1) |  | Number
      of
      Shares |  | Percent
      Of
      Class (2)
|---------------------------------------------- |  | ---------------------------- |  | --------------------------------
|Paul
      Branagan, President (3)             |  | 1,750,000                    |  | 10.2%                           
|Loren
      Moll, Director                     |  | 3,100,000                    |  | 18.0%                           
|David
      Polay, Chief Financial Officer     |  | 250,000                      |  | 1.5%                            
|All
      Directors & Officers as a Group      |  | 5,100,000                    |  | 29.7%                           

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., thepower
    to dispose of, or to direct the disposition of, a security). All addresses
    are care of the Company, 2300 Patrick Lane, Suite 26, Las Vegas, NV 89119.
2. Figures are rounded to the nearest tenth of a percent.
3. Includes 1,250,000 options to purchase shares of common stock at prices
    ranging from $.50 to $2.50 per share.

42

---

ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS



Paul
Branagan



Paul
Branagan, our sole officer and chairman of the board, is an officer and director
of Millennium Plastics Corporation, another public company, which may impact the
amount of his time spent on our business matters. Mr. Branagan may have demands
placed on his time, which will detract from the amount of time he is able to
devote to us. Mr. Branagan intends to devote at least 40 hours per week of his
business time and attention to our activities as required. Although Mr. Branagan
has other current business interests he will attend to Petrol business as his
first priority. We consent to and understand this potential conflict of
interest.



Our
executive office is provided free of charge on a month-to-month basis by
Branagan & Associates. Paul Branagan, President of Petrol, is also president
of Branagan & Associates.



NIO
Fund



On
August 19, 2002, we entered into a letter of intent with NIO Fund Investment
Management Limited (NIO) whereby NIO would exclusively raise funds throughout
Europe and invest in us. From November 5, 2002 through December 2, 2002, we
issued and sold a total of 660,303 shares to NIO for a total purchase price of
$330,151.25, all of which was paid in cash. In addition to the above sales to
NIO, we issued NIO warrants to purchase up to $3,500,000 of additional shares of
our restricted common stock in the amount of $500,000 per month for the months
of March, April, May, June, August and November of 2003 and January of 2004. The
price per share would be at a discount of 12.5% of the market price of our
shares that were being traded on any exchange or over-the-counter but not less
than $0.875 per share.



On
November 21, 2003 we agreed with NIO to issue a new warrant to NIO for the
purchase of 1,500,000 shares of common stock at $0.875 per share. This warrant
expires November 20, 2006.



In
November 2003, NIO assigned the warrant to two individuals as follows: Paola
Simoni - 1,000,000; and Goran Blagojevic - 500,000.



Goran
Blagojevic



We
have entered into a Translation and Business Consulting agreement with Goran
Blagojevic. On September 1, 2003, we issued a warrant to Mr. Blagojevic to
purchase up to 900,000 shares of common stock at $0.75 per share as partial
consideration for consulting services. The warrant is exercisable until August
31, 2006. In addition, for the years ended December 31, 2003, we paid Mr.
Blagojevic $107,200 in cash compensation for services rendered to us.



43

---

CPA
Directed Investments



On
July 2, 2003, we issued 1,000,000 shares of our common stock to CPA Directed
Investments to hold as collateral for a loan in the amount of $400,000. In
January 2004, the loan was repaid and the shares were returned for cancellation.
CPA holds 100,000 shares of the Company's common stock. Further, we invested
$200,000 in a fund that is being managed by CPA. There were no investment
management fees charged in the year ended December 31, 2003.



ITEM
        13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K



(a)
Documents filed as part of this Report



> 1.
> Financial Statements:

> A.
> INDEX TO FINANCIAL STATEMENTS
> 1.
> Independent Auditors Report F-1
> 2.
> Financial Statements:
>         Balance
> Sheet F-2
> Statement
> of Operation F-3
> Statement
> of Changes in Stockholders' F-4
> Statement
> of Cash Flows F-5
>           Notes
> to Financial Statements F-6 - F-20
> 2.
> During the fiscal year December 31, 2003 the Company did not file any Form 8-Ks.
> 
>         3.
>         Subsequent to the end of the fiscal year, the Company filed the
>         following reports on Form 8-K
>       8-K
> Report filed on April 1, 2004, Notification of trading on the OTC:BB.



44

---

4.
Exhibits

EXHIBIT
INDEX

|Exhibit
      Number | Description                                                                                                                  
|-------------------- | -----------------------------------------------------------------------------------------------------------------------------
|(2)**                | Asset
      Purchase Agreement between Petrol Energy, Inc. and Euro Technology
      Outfitters, August 19, 2002             
|(3)(i)**             | Articles
      of Incorporation                                                                                              
|                     | (a)
      Certificate of Amendment of Articles of Incorporation of Euro Technology
      Outfitters, filed on August 20, 2002
|                     | (b)
      Articles of Incorporation for Euro Technology Outfitters, filed on March
      3, 2000                             
|(3)(ii)**            | Bylaws
      for Euro Technology Outfitters                                                                                  
|(10.1)**             | Amendment
      to Translation and Business Consulting agreement with Goran Blagojevic
      dated dated December 20, 2002   
|(10.2)**             | Service
      and Water Disposal Agreement dated November 15, 2002                                                           
|(10.3)**             | Employment
      agreement with Paul Branagan dated December 19, 2002                                                        
|(10.4)**             | Geologist/Technical
      Advisor Consulting Agreement with William Stoeckinger dated December 19,
      2002                
|(10.5)**             | Land
      Services Consulting Agreement with Russell Frierson dated December 27,
      2002                                 
|(10.6)**             | Land
      Services Consulting Agreement with Lawrence Kehoe dated December 27, 2002                                         
|(10.7)**             | Land
      Services Consulting Agreement with Cody Felton dated December 27, 2002                                            
|(10.8)**             | Waverly
      Kansas Office Lease dated January 21, 2003                                                                     
|(10.9)**             | 2002
      Master Stock Option Plan                                                                                          
|(10.10)***           | Term
      Sheet of Compensation for Enutroff, dated 7/01/03.                                                                
|(10.10)*             | Consultant
      Agreement of CSC Group LLC                                                                                  
|(10.11)*             | Employment
      Agreement of David Polay                                                                                    
|(10.12)*             | Addendum
      to Employment Agreement of Paul Branagan                                                                      
|(10.13)*             | Employment
      Agreement of Gary Bridwell                                                                                  
|(10.14)*             | Letter
      Agreement with William D. Burke                                                                                 
|(10.15)*             | Purchase
      and Sale Agreement with CBM Energy Inc.                                                                       
|(10.16)*             | Research
      Agreement with Joseph E. Blankenship                                                                          
|(10.17)*             | Research
      Agreement Scope of Work and Compensation                                                                      
|(10.18)*             | Business
      Partnership Term Sheet with John Haas, Mark Haas, and W.B. Mitchell                                           
|(16)**               | Letter
      of G. Brad Beckstead CPA regarding change in certifying accountant,
      September 5, 2002                     
|(31-1)*              | Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act for Paul Branagan                                      
|(31-2)*              | Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act for David Polay                                        
|(32-1)*              | Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act for Paul Branagan                                      
|(32-2)*              | Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act for David Polay                                        



________________________

* Filed
herewith

**
Filed in Form SB-2 on January 22, 2003

***
Filed in Form 10-QSB on September 30, 2003



45

---

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 2003 and 2002 were
    $38,996 and $18,398, 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 2003 and 2002 were $2,500 and $713,
respectively.



(4)
ALL OTHER FEES



Weaver
& Martin billed us $15,000 for audit related services relating to our
Registration Statement on Form SB-2. There were no other fees to be billed by
Weaver & Martin LLC for the fiscal years 2003 and 2002 other than the fees
described herein and above.



(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.



46

---

SIGNATURES



Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on our behalf by
the undersigned, thereunto duly authorized.



PETROL
OIL AND GAS, INC.                                                                                            
DATED: April 14, 2004







By:
/s/ Paul
Branagan

Paul
Branagan, President





Pursuant
to the requirements of the Securities Exchange Act of 1934, 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/
Paul
Branagan         | President, Secretary/Treasurer, | April
14, 2004
|Paul
Branagan             | CEO, Chairman                   |               
|                          |                                 |               
|/s/
Loren
Moll            | Director                        | April 14, 2004
|Loren
Moll                |                                 |               
|                          |                                 |               
|/s/
          David Polay | Chief Financial Officer         |               
|David
Polay               |                                 | April 14, 2004



47

---

Petrol
Oil and Gas, Inc.

Index
To Financial Statements



|Report
of Independent Certified Public Accountants                                                                          | F-1       
|--------------------------------------------------------------------------------------------------------------------------- | ----------
|Balance
Sheets, December 31, 2003 and 2002                                                                                  | F-2       
|Statement
of Operations for the Years Ended December 31, 2003, 2002 and
from inception (March 3, 2000) to December 31, 2003
|F-3                                                                                                                        
|Statement
of Stockholders' Equity from inception (March 3, 2000) to December
31, 2003                                      
|F-4                                                                                                                        
|Statement
of Cash Flows for the Year Ended December 31, 2003, 2002, and
from inception (March 3, 2000) to December 31, 2003
|F-5                                                                                                                        
|Notes
to Financial Statements                                                                                               | F-6 - F-20



48

---

Report
of Independent Registered Public Accounting Firm



Stockholders
and Directors

Petrol
Oil and Gas, Inc.



We
have audited the accompanying balance sheet of Petrol Oil and Gas, Inc. as of
December 31, 2003 and 2002 and the related statements of operations,
stockholders' deficit, and cash flows for each of the two years in the period
ended December 31, 2003. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.



We
conducted our audits in accordance with generally accepted auditing standards in
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes 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 and Gas, Inc. as of
December 31, 2003 and 2002 and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 2003 in conformity
with U.S. generally accepted accounting principles.



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 from operations and is
dependent upon the continued sale of its securities or obtaining debt financing
for funds to meet its cash requirements. These factors raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
with regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.









Weaver
& Martin, LLC

Kansas
City, Missouri

March
26, 2004



F-1

---

Petrol
Oil and Gas, Inc.

(A
Development Stage Company)

Balance
Sheet



|                                                                                                                                                   | December
      31,
      2003 | December
      31,
      2002
|-------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------- | -----------------------------
|Assets                                                                                                                                             |                               |                              
|Current
      assets:                                                                                                                              |                               |                              
|Cash                                                                                                                                               | $
      1,059,838             | $
      161,836              
|Investment                                                                                                                                         | 200,000                       | -                            
|Total
      current assets                                                                                                                         | 1,259,838                     | 161,836                      
|                                                                                                                                                   |                               |                              
|Equipment                                                                                                                                          | 2,134                         | -                            
|Vehicles                                                                                                                                           | 28,009                        | -                            
|Accumulated
      depreciation                                                                                                                     | (2,107)                       | -                            
|                                                                                                                                                   | 28,036                        | -                            
|                                                                                                                                                   |                               |                              
|Oil
      and gas properties using full cost accounting:                                                                                           |                               |                              
|Properties
      not subject to amortization                                                                                                       | 1,289,573                     | 282,956                      
|                                                                                                                                                   | $
      2,577,447             | $
      444,792              
|                                                                                                                                                   |                               |                              
|Liabilities
      and stockholders' equity                                                                                                         |                               |                              
|Current
      liabilities:                                                                                                                         |                               |                              
|Notes
      payable-current                                                                                                                        | $
      4,000                 | $
      -                    
|Accounts
      payable                                                                                                                             | 268,071                       | 109,969                      
|Accrued
      liabilities                                                                                                                          | 31,316                        | -                            
|Due
      to officer                                                                                                                               | 47,500                        | 25,000                       
|Total
      current liabilities                                                                                                                    | 350,887                       | 134,969                      
|                                                                                                                                                   |                               |                              
|Long-term
      debt                                                                                                                               | 22,923                        | -                            
|                                                                                                                                                   |                               |                              
|Contingencies
      and commitments                                                                                                                |                               |                              
|                                                                                                                                                   |                               |                              
|Stockholders'
      equity:                                                                                                                        |                               |                              
|Preferred
      stock, $.001 par, authorized 10,000,000 shares; no shares issued                                                                   | -                             | -                            
|Common
      stock, $.001 par, authorized 100,000,000 shares; 17,247,466 and 13,151,993
      issued and outstanding at December 31, 2003 and 2002 | 17,247                        | 13,152                       
|Stock
      for services not issued 160,000 and 215,000 shares at December 31, 2003
      and 2002                                                 | 160                           | 215                          
|Unamortized
      cost of stock issued for services                                                                                                | (1,000)                       | -                            
|Additional
      paid in capital                                                                                                                   | 4,630,713                     | 1,006,155                    
|Deficit
      accumulated under the development stage                                                                                              | (2,443,483)                   | (709,699)                    
|Total
      stockholders' equity                                                                                                                   | 2,203,637                     | 309,823                      
|                                                                                                                                                   | $
      2,577,447             | $
      444,792              



See
notes to financial statements.



F-2

---

Petrol
Oil and Gas, Inc.

(A
Development Stage Company)

Statement
of Operations



|                                           | Year Ended December 31, | March 3, 2000 (inception) to December 31, 2003
|------------------------------------------ | ----------------------- | ----------------------------------------------
|                                           | 2003                    | 2002                                          
|Revenue:                                   | $
      --              | $
      --                                    
|                                           |                         |                                               
|Professional
      and consulting fees     | 1,374,754               | 639,508                                       
|Office                                     | 67,759                  | -                                             
|Wages                                      | 163,417                 | 42,738                                        
|Travel                                     | 59,673                  | 10,480                                        
|Miscellaneous
      expense                | 53,092                  | 10,519                                        
|                                           |                         |                                               
|                                           |                         |                                               
|Loss
      from operations                 | (1,718,695)             | (703,245)                                     
|                                           |                         |                                               
|Other
      income (expense):              |                         |                                               
|Interest
      income                      | 1,067                   | -                                             
|Interest
      expense                     | (16,156)                | -                                             
|                                           |                         |                                               
|Other
      income (expense)               | (15,089)                | -                                             
|                                           |                         |                                               
|Loss
      before income tax               | (1,733,784)             | (703,245)                                     
|                                           |                         |                                               
|Provision
      for income tax             | -                       | -                                             
|                                           |                         |                                               
|Net
      loss                             | $
      (1,733,784)     | $
      (703,245)                             
|                                           |                         |                                               
|                                           |                         |                                               
|                                           |                         |                                               
|Basic
      and diluted earnings per share | $
      (0.12)          | $
      (0.08)                                
|                                           |                         |                                               
|Weighted
      shares outstanding          | 14,721,438              | 8,338,208                                     



ee
notes to financial statements.



F-3

---

Petrol
Oil and Gas, Inc.

(A
Development Stage Company)

Statement
of Stockholders' Equity



|                                                                               | Common
      Stock | Additional
      Paid-in Capital | Stock
      For Services Not Issued | Unamortized
      Cost of Stock Issued For Services | Deficit
      Accumulated During Development Stage | Total
      Stockholders' Equity (Deficit)
|------------------------------------------------------------------------------ | ------------------ | -------------------------------- | ----------------------------------- | --------------------------------------------------- | -------------------------------------------------- | ------------------------------------------
|                                                                               | Per
      Share    | Shares                           | Amount                             
|March
      3, 2000, Inception                                                 | $0.001             | 5,000,000                        | $
      5,000                       | $
      -                                           | $
      -                                          | $
      -                                 
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Net
      loss from inception to December 31, 2000                             |                    | -                                | -                                   | -                                                   | -                                                  | -                                         
|Balance
      December 31, 2000                                                |                    | 5,000,000                        | 5,000                               | -                                                   | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|January
      1, 2001 issued for debt paid by the stockholder of Company stock | 0.001              | 1,405,000                        | 1,405                               | -                                                   | -                                                  | -                                         
|April
      1, 2001 issued for debt paid by the stockholder of Company stock   | 0.001              | 22,060                           | 22                                  | -                                                   | -                                                  | -                                         
|July
      1, 2001 issued for debt paid by the stockholder of Company stock    | 0.001              | 13,240                           | 13                                  | -                                                   | -                                                  | -                                         
|October
      1, 2001 issued for debt paid by the stockholder of Company stock | 0.001              | 14,060                           | 14                                  | -                                                   | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Net
      loss for the year ended 12/31/01                                     |                    | -                                | -                                   | -                                                   | -                                                  | -                                         
|Balance
      December 31, 2001                                                |                    | 6,454,360                        | 6,454                               | -                                                   | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|July 1, 2002
      issued for debt paid by the stockholder of Company stock    | 0.001              | 21,880                           | 22                                  | -                                                   | -                                                  | -                                         
|Stock
      contributed to capital by the stockholder of Company stock         | 0.001              | (5,826,240)                      | (5,826)                             | 5,826                                               | -                                                  | -                                         
|Stock
      issued in an asset purchase                                        | 0.005              | 10,918,300                       | 10,918                              | 39,662                                              | -                                                  | -                                         
|Stock
      sold                                                               | 0.538              | 883,693                          | 884                                 | 474,712                                             | -                                                  | -                                         
|Stock
      for services not issued                                            | 0.500              | -                                | -                                   | 107,285                                             | 215                                                | -                                         
|Stock
      issued for services                                                | 0.500              | 700,000                          | 700                                 | 349,300                                             | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Options
      issued for services                                              |                    |                                  |                                     |                                                     |                                                    |                                           
|Includes
      $7,738 value of options for President of the Company            |                    | -                                | -                                   | 29,370                                              | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Net
      loss for the year ended 12/31/02                                     |                    | -                                | -                                   | -                                                   | -                                                  | -                                         
|Balance
      December 31, 2002                                                |                    | 13,151,993                       | 13,152                              | 1,006,155                                           | 215                                                | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Stock
      for services                                                       | 0.75               | 80,000                           | 80                                  | 89,880                                              | 40                                                 | -                                         
|Stock
      for services                                                       | 1.00               | -                                | -                                   | 119,880                                             | 120                                                | -                                         
|Stock
      sold                                                               | 0.75               | 450,000                          | 450                                 | 337,050                                             | -                                                  | -                                         
|Unissued
      stock issued                                                    |                    | 215,000                          | 215                                 | -                                                   | (215)                                              | -                                         
|Stock
      to bank for loan collateral                                        | 0.001              | 1,000,000                        | 1,000                               | -                                                   | -                                                  | (1,000)                                   
|Warrants
      issued for services                                             |                    | -                                | -                                   | 794,000                                             | -                                                  | -                                         
|Stock
      sold but not issued                                                | 1.00               | 2,350,473                        | 2,350                               | 2,283,748                                           | -                                                  | -                                         
|                                                                               |                    |                                  |                                     |                                                     |                                                    |                                           
|Net
      loss for the year ended 12/31/03                                     |                    | -                                | -                                   | -                                                   | -                                                  | -                                         
|                                                                               |                    | 17,247,466                       | $
      17,247                      | $
      4,630,713                                   | $
      160                                        | $
      (1,000)                           



See
notes to financial statements.



F-4

---

Petrol
Oil and Gas, Inc.

(A
Development Stage Company)

Statement
of Cash Flows



|                                                                                                                      | Year Ended December 31, | March 3, 2000 (inception) to December 31, 2003
|--------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----------------------------------------------
|                                                                                                                      | 2003                    | 2002                                          
|Operating
      activities:                                                                                           |                         |                                               
|Net
      loss                                                                                                        | $
      (1,733,784)     | $
      (703,245)                             
|Adjustments
      to reconcile net loss to cash used in operating activities-                                         |                         |                                               
|Depreciation                                                                                                          | 2,107                   | -                                             
|Stock
      and options issued for services                                                                           | 1,004,000               | 486,870                                       
|Change
      in assets and liabilities-                                                                               |                         |                                               
|Accounts
      payable                                                                                                | 158,102                 | 20,589                                        
|Accrued
      liabilities                                                                                             | 31,315                  | -                                             
|Due
      to officer                                                                                                  | 22,500                  | 25,000                                        
|Cash
      used in operating activities                                                                               | (515,760)               | (170,786)                                     
|                                                                                                                      |                         |                                               
|Investing
      activities:                                                                                           |                         |                                               
|Equipment
      purchase                                                                                              | (30,142)                | -                                             
|Investment                                                                                                            | (200,000)               | -                                             
|Additions
      to oil & gas property not subject to amortization                                                     | (1,006,617)             | (142,995)                                     
|Cash
      used in investing activities                                                                               | (1,236,759)             | (142,995)                                     
|                                                                                                                      |                         |                                               
|Financing
      activities:                                                                                           |                         |                                               
|Stock
      issued for debt paid by stockholder of Company                                                            | --                      | 21                                            
|Payments
      made on note payable                                                                                   | (1,086)                 | -                                             
|Notes
      payable                                                                                                   | 28,009                  | -                                             
|Stock
      sold                                                                                                      | 2,623,598               | 475,596                                       
|Cash
      provided from financing activities                                                                         | 2,650,521               | 475,617                                       
|                                                                                                                      |                         |                                               
|Increase
      in cash                                                                                                | 898,002                 | 161,836                                       
|                                                                                                                      |                         |                                               
|Beginning
      cash                                                                                                  | 161,836                 | -                                             
|Ending
      cash                                                                                                     | $
      1,059,838       | $
      161,836                               
|                                                                                                                      |                         |                                               
|Supplemental
      cash flow information:                                                                             |                         |                                               
|Interest
      paid                                                                                                   | $
      16,156          | $
      --                                    
|                                                                                                                      |                         |                                               
|Income
      taxes paid                                                                                               | $
      --              | $
      --                                    
|                                                                                                                      |                         |                                               
|Non
      cash financing activities:                                                                                  |                         |                                               
|                                                                                                                      |                         |                                               
|Stock
      issued for assets acquired                                                                                | $
      --              | $
      50,580                                
|                                                                                                                      |                         |                                               
|Addition
      to oil & gas property not subject to amortization and accounts payable
      assumed in asset purchase | --                      | 89,381                                        
|                                                                                                                      |                         |                                               
|Stock
      contributed to paid in capital                                                                            | --                      | 5,826                                         
|Unamortized
      cost of stock issued for services                                                                   | 1,000                   |                                               
|Stock
      for services not issued                                                                                   | 160                     | 215                                           
|Stock,
      warrants and options issued for services                                                                 | 854,000                 | 107,500                                       



See
notes to financial statements.



F-5

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



NOTE
1 SIGNIFICANT ACCOUNTING POLICIES



Basis
of Presentation:



We
are currently a development stage enterprise reporting under the provisions of
Statement of Financial Accounting Standards No. 7.



Organization
and business:



On
March 3, 2000, Euro Technology Outfitters (Euro) was incorporated in Nevada.
Euro was a reporting public shell with no business activity. On August 19, 2002
Euro acquired, in an asset purchase agreement, land leases and accumulated
expenditures and assumed liabilities from Petrol Energy, Inc. (Petrol). Petrol
received 10,918,300 shares of Euro and transferred into Euro property leases
that the Company will use for the development and exploration of oil, gas, and
methane. The par value of the Euro shares ($10,918 and additional paid-in
capital of $39,662) was recorded as an asset in the oil & gas properties not
subject to amortization account. The amount consisted of lease payments made by
Petrol prior to the acquisition. Also we assumed from Petrol accounts payable
totaling $89,381 and increased the asset account oil & gas properties not
subject to amortization for the associated capitalized costs relating to the
payables.



On
August 20, 2002, we amended our Articles of Incorporation changing our name from
Euro Technology Outfitters to Petrol Oil and Gas, Inc. and increased the
authorized capital stock to 100,000,000 shares of Common Stock $0.001 par value
and, 10,000,000 shares of Preferred Stock $0.001 par value.



We
are an oil and gas exploration and development company whose primary objective
is the development of Coal Bed Methane (CBM) gas production projects. We
identified CBM 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.



Goodwill
and Other Intangible Assets:



Goodwill
and indefinite life intangible assets are recorded at fair value and not
amortized, but are reviewed for impairment at least annually or more frequently
if impairment indicators arise, as required by SFAS No. 142. As of December 31,
2003 we had no goodwill or other intangible assets.



F-6

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



Stock-Based
Compensation:



We
account for stock and options issued for services by non-employees based on the
market value of the stock at the date of the agreement and the market value of
the options as determined by the Black-Scholes pricing model. This cost is
amortized to expense over the life of the agreement to provide services. We
account for our stock option plan in accordance with the provisions of SFAS No.
123, "Accounting for Stock Based Compensation". SFAS No. 123 permits
entities to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of the grant. Alternatively, SFAS No. 123 also
allows entities to apply the provisions of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations and provides pro forma net income
and pro forma earnings per share disclosures for employee stock option grants as
if the fair-value-based method defined in SFAS No. 123 had been applied. During
2003, we adopted the fair value recognition provisions of SFAS No. 123,
effective as of the beginning of the year. No options were granted to employees
in the year ended December 31, 2003.



Income
Taxes:



Amounts
provided for income tax expense are based on income reported for financial
statement purpose and do not necessarily represent amounts currently payable
under tax laws. Deferred taxes, which arise principally from temporary
differences between the period in which certain income and expense items are
recognized for financial reporting purposes and the period in which they affect
taxable income, are included in the amounts provided for income taxes. Under
this method, the computation of deferred tax assets and liabilities give
recognition to the enacted tax rates in effect in the year the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to amounts that we expect to realize.



Fair
value of financial instruments:



The
carrying amounts of financial instruments, including cash, investment, accounts
payable, accrued liabilities, due to Officer and note payable approximates fair
value because of the short-term natures of these items.



Loss
per share:



The
loss per share is computed in accordance with 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.



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.



F-7

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



Use
of Estimates:



The
preparation of 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 financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.



Cash
and cash equivalents:



Cash
and cash equivalents include cash in banks and certificates of deposit that
mature within three months of the date of purchase.



Revenue
recognition:



As
of December 31, 2003 we have not recognized any revenue during our corporate
existence but it is our policy is to recognize revenue 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.



Recent
issued accounting Standards:



In
June 2001, The Financial Accounting Standards Board issued SFAS 143,
"Accounting for Asset Retirement Obligations." This required that an
asset retirement obligation (ARO) associated with the retirement of a tangible
long-lived asset be recognized as a liability in the period in which a legal
obligation is incurred and becomes determinable, with an offsetting increase in
the carrying amount of the associated asset. The cost of the tangible asset,
including the initially recognized ARO, is depleted such that the cost of the
ARO is recognized over the useful life of the asset. The ARO is recorded at fair
value, and accretion expense will be recognized over time as the discounted
liability is accreted to its expected settlement value. The fair value of the
ARO is measured using expected future cash outflows discounted at the company's
credit-adjusted risk-free interest rate. SFAS 143 was adopted on January 1,
2003; however, there was no previous activity in which an ARO applied. In the
year ended December 31, 2003 we recorded an ARO for the abandonment of wells at
the completion of either a dry hole or all production activity.



F-8

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



In
January 2003, the Financial Accounting Standards Board (FASB) issued
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51" (the
Interpretation). The Interpretation requires the consolidation of variable
interest entities in which an enterprise absorbs a majority of the entity's
expected losses, receives a majority of the entity's expected residual returns,
or both, as a result of ownership, contractual or other financial interests in
the entity. Currently, entities are generally consolidated by an enterprise that
has a controlling financial interest through ownership of a majority voting
interest in the entity. The Interpretation was originally immediately effective
for variable interest entities created after January 31, 2003, and effective in
the fourth quarter of fiscal 2003 for those created prior to February 1, 2003.
However, in October 2003, the FASB deferred the effective date for those
variable interest entities created prior to February 1, 2003, until the first
quarter of fiscal 2004. This interpretation did not affect our financial
statements.



In
April 2003, the FASB issued Statement of Financial Accounting Standards No. 149,
"Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" (SFAS No. 149). SFAS No. 149 amends SFAS No. 133 to provide
clarification on the financial accounting and reporting of derivative
instruments and hedging activities and requires that contracts with similar
characteristics be accounted for on a comparable basis. The standard is
effective for contracts entered onto or modified after June 30, 2003, and for
hedging relationships designed after June 30, 2003. The adoption of SFAS No. 149
did not have a material impact on our financial position or results of
operations.



In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Instruments
with Characteristics of Both Liabilities and Equity" (SFAS No. 150). SFAS
No. 150 establishes how an issuer classifies and measures certain freestanding
financial instruments with characteristics of liabilities and equity and
requires that such instruments be classified as liabilities. The standard is
effective for financial instruments entered into or modified after May 31, 2003,
and is otherwise effective in the fourth quarter of fiscal 2003. The adoption of
SFAS No. 150 did not have material impact on our financial position or results
of operation.



Depreciation:



Depreciation
is provided by the straight-line method using an estimated life of the equipment
of 5 years.



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
of oil and gas reserves, including directly related overhead costs and interest,
are capitalized.



F-8

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



All
capitalized costs included in the estimated future costs to develop proved
reserves, will be amortized on the unit-of-production method using estimates of
proved reserves. Investments in unproved properties and major developments
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.



In
addition, the capitalized costs are subject to a "ceiling test," which
basically limits such costs to the aggregate of the "estimated present
value," discounted at a 10% interest rate of future net revenues from
proved reserves, based on current economic and operating conditions, plus the
lower of cost or fair market value of unproved properties.



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.



Abandonment's
of properties are accounted for as adjustments of capitalized costs with no loss
recognized.



Long-lived
assets:



We
review the carrying value of long-lived assets at each balance sheet date if
indication of impairment exists. Recoverability is assessed using undiscounted
cash flows based upon historical results and current projections of earnings
before interest and taxes. Impairment is measured using discounted cash flows of
future operating results based upon a rate that corresponds to the cost of
capital. Impairments are recognized in operating results to the extent that
carrying value exceeds discounted cash flows of future operations.



Asset
retirement obligations:



We
accrue for asset retirement obligations, primarily for assets on leased sites,
in the period in which the obligations are incurred. We accrue these costs at
estimated fair value. When the related liability is initially recorded, we
capitalize the cost by increasing the carrying amount of the long-lived asset.
Over time, the liability is accreted to its settlement value and the capitalized
cost is depreciated over the useful life of the related asset. Upon settlement
of the liability, we recognize a gain or loss for any difference between the
settlement amount and the liability recorded. We have identified asset
retirement obligations pertaining to the closure of wells on our land leases. We
have estimated the fair value of our asset retirement obligations, based in part
on the terms of quoted agreements.



Reclassifications:



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



F-10

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



NOTE
2 GOING CONCERN



Our
financial statements are prepared using the 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 our ability to obtain
additional sources of capital, and in attaining future profitable operations.
Our management is currently initiating their business plan and is in the process
of raising additional capital. The accompanying financial statements do not
include any adjustments that might be necessary should we be unable to continue
as a going concern.



NOTE
3 STOCKHOLDERS' EQUITY



Common
stock



The
aggregate number of shares of common stock that we have the authority to issue
is 100,000,000 shares at a par value of $0.001. As of December 31, 2003 and
2002, there was an additional 160,000 and 215,000 shares, respectively, that we
needed to issue. These shares were issued in subsequent periods.



Preferred
stock



The
aggregate number of shares of preferred stock that we have the authority to
issue is 10,000,000 shares at a par value of $0.001. As of December 31, 2003, no
shares of preferred stock were issued.



Stock
Issuance's



At
inception, we issued 5,000,000 shares of common stock. During the period from
inception to August 19, 2002 an additional 1,476,240 shares of common stock were
issued in exchange for liabilities paid by a stockholder. On August 21, 2002, a
stockholder contributed to paid in capital 5,826,240 shares of Company stock



On
August 19, 2002, an Asset Purchase Agreement was signed, whereby 10,918,300
shares of restricted common stock were exchanged for assets.



F-11

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



On
August 19, 2002, we entered into a letter of intent with NIO Funds Investment
Management Limited (NIO) whereby NIO would exclusively raise funds for us
throughout Europe. A fee of 2% was charged for all funds raised and was netted
against the sales of our common stock. NIO was allowed to sell on our behalf up
to 750,000 restricted shares of common stock at a price of $.50 per share and an
additional 250,000 shares at a price of $.75 per share. We granted NIO the
privilege of purchasing additional shares of our restricted common stock in the
amount of $500,000 per month for the months of March, April, May, June, August
and November of 2003 and January of 2004. The price per share was set at a
discount of 12.5% of the market price of our shares that were being traded on
any exchange or over-the-counter but not less than $.875 per share. There was no
value assigned to the ability to invest in the Company based on the Black-Scholes
pricing model. NIO raised net capital in the amount of $475,596 and 883,693
shares were issued.



On
November 21, 2003 we entered into an agreement with NIO whereby NIO received
1,500,000 warrants to purchase our shares at a price of $.875 per share with a
three-year life. The value of the options using the Black-Scholes pricing model
was $461,000 using the following assumptions:



|Interest
rate      | 2.35% 
|------------------ | ------
|Days
to expiration | 1,095 
|Strike
Price       | $.875 
|Stock
price        | $1.00 
|Volatility         | 32.75%
|Yield              | 0%    



The
value of the options of $461,000 was charged to professional and consulting fee
expense with an offset to paid-in capital. On November 24, 2003 NIO assigned
1,000,000 warrants to Mr. Paolo Simoni and 500,000 warrants to Mr. Goren
Blagojevic.



The
Board of Directors on December 16, 2002 adopted the 2002 stock option plan for
3,000,000 shares.



We
entered into a land services consulting agreements on December 27, 2002 with Mr.
Lawrence Kehoe, Mr. Cody Felton and Mr. Russell Frierson. The term of each of
the agreements was for one year. Mr. Kehoe and Mr. Felton received as
consideration 325,000 shares each of Company stock and 325,000 stock options
allowing them to purchases shares of Company stock at a price of $.50 per share
with a three-year life. Mr. Frierson received 50,000 shares of Company stock and
50,000 options to purchase Company stock at a price of $.50 per share for a
three-year life. The value assigned to the stock issued was $350,000 and was
charged to professional and consulting fee expense. The value of the options
using the Black-Scholes pricing model was $20,086 using the following
assumptions:



F-12

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



|Interest
rate      | 1.97%
|------------------ | -----
|Days
to expiration | 1,095
|Strike
Price       | $.50 
|Stock
price        | $.50 
|Volatility         | 0%   
|Yield              | 0%   



The
options value was charged to professional and consulting fee expense with an
offset to paid-in capital. See Note 9-Subsequent Events as the three individuals
exercised the options on March 19, 2004.



We
entered into an employment agreement with Mr. Paul Branagan on August 20, 2002.
The three-year agreement provided for compensation at $11,250 per month for year
1 and $13,333 per month for years 2 and 3. Mr. Branagan also received 1,250,000
options. The options have a three year life and 250,000 are exercisable at $.50
per share; 250,000 are exercisable at $1.00 per share; 250,000 exercisable at
$1.50 per share; 250,000 exercisable at $2.00 per share and 250,000 exercisable
at $2.50 per share. The value of the options, using the Black-Scholes pricing
model, was $7,738. This amount has been recorded as wages expense and an
offsetting amount was recorded as additional paid in capital. The assumptions
used are to value the options were as follows:



|Interest
rate      | 2.13%               
|------------------ | --------------------
|Days
to expiration | 1,095               
|Stock
price        | $.50                
|Strike
price       | various$.50 to $2.50
|Volatility         | 0%                  
|Yield              | 0%                  



We
entered into a geologist/technical advisor consulting agreement on December 1,
2002 with Mr. William Stoeckinger. The agreement was for a one year term
(amended to a thirteen month term) and Mr. Stoeckinger received 160,000 shares
upon signing the agreement, 20,000 shares per month for thirteen (as amended in
a subsequent agreement) months, 50,000 options exercisable at $.50 per share and
50,000 options exercisable at $1.00 per share for a three year period. The value
assigned to the issued stock was $80,000 at December 31, 2002. Mr. Stoeckinger
also was paid $4,055 during the year ended December 31, 2002. The value of the
options, using the Black-Scholes pricing model, was $1,548. This was recorded as
a professional and consulting fee expense and an offsetting amount was recorded
as additional paid in capital.



F-13

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



The
assumptions used to value the options were as follows:



|Interest
rate      | 2.13%                
|------------------ | ---------------------
|Days
to expiration | 1095                 
|Stock
price        | $.50                 
|Strike
price       | various $.50 to $1.00
|Volatility         | 0%                   
|Yield              | 0%                   



During
the year ended December 31, 2003 the value assigned to the monthly stock
issuance was $.75 for the months January-June and $1.00 for the months
July-December. The total amount assigned for the stock issuances was $210,000.
Mr. Stoeckinger also received fees in 2003 amounting to $34,699.



At
December 31, 2003 and 2002 Mr. Stoeckinger was owed 160,000 shares that weren't
issued at December 31, 2003 and 2002. Included in the equity section of the
balance sheet was stock for services not issued that had a balance of $160,
which represents the unissued stock's par value. The shares were issued in
fiscal 2004.



We
entered into a retainer agreement for translation and business consulting on
August 20th, 2002 with Mr. Goran Blagojevic. Either party may
terminate this agreement at any time. Mr. Blagojevic received 500,000 warrants
to acquire Company stock at a price of $.75 per share that expired August 31,
2003. The value of the warrants, using the Black-Scholes pricing model, was
zero. The warrants expired unexercised in 2003. The assumptions used to value
the warrants were as follows:



|Interest
rate      | 2.15%
|------------------ | -----
|Days
to expiration | 365  
|Stock
price        | $.50 
|Strike
price       | $.75 
|Volatility         | 0%   
|Yield              | 0%   



Mr.
Blagojevic, on December 27, 2002, accepted 55,000 shares of Company stock as
payment for an outstanding invoice. These shares were not issued at December 31,
2002 and the amount due of $55 was included in the stock paid for not issued
account. The shares were issued in 2003. Mr. Blagojevic received $24,991 in
professional fees in the year ended December 31, 2002.



Mr.
Blagojevic received 900,000 warrants on September 1, 2003. The warrants had a
strike price of $.75 and expiration date of August 31, 2006. The value of the
warrants, using the Black-Scholes pricing model, was $333,000 and this was
recorded as a professional and consulting expense. The assumptions used to value
the warrants were as follows:



F-14

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



|Interest
rate      | 1.95% 
|------------------ | ------
|Days
to expiration | 1,095 
|Stock
price        | $1.00 
|Strike
price       | $.75  
|Volatility         | 32.75%
|Yield              | 0%    



A
summary of stock options and warrants is as follows:





|                            |           | Average |            | Average
|--------------------------- | --------- | ------- | ---------- | -------
|                            | Options   | Price   | Warrants   | Price  
|Outstanding
      at 1/1/02 | --        | --      | --         | --     
|Granted                     | 2,050,000 | $1.12   | 500,000    | $.75   
|Cancelled                   | --        | --      | --         | --     
|Exercised                   | --        | --      | --         | --     
|Outstanding
      12/31/02  | 2,050,000 | $1.12   | 500,000    | $.75   
|                            |           |         |            |        
|Outstanding
      at 1/1/03 | 2,050,000 | $1.12   | 500,000    | $.75   
|Granted                     | --        | --      | 2,4000,000 | .83    
|Cancelled                   | --        | --      | (500,000)  | .75    
|Exercised                   | --        | --      | --         | --     
|Outstanding
      12/31/03  | 2,050,000 | $1.12   | 2,400,000  | $.83   
|                            |           |         |            |        



We
sold 450,000 share of stock at a price of $.75 per share and 2,350,473 shares at
a price of $1.00 per share in 2003. The costs associated with the sale of these
shares totaled $60,000 for professional fees and $4,375 for other costs. These
costs were netted against the additional paid in capital associated with the
sale of the stock.



On
April 18, 2003, we issued 1,000,000 shares of our common stock to Cornerstone
Bank as collateral for a note payable to the bank. On July 7, 2003 we paid off
the note and the bank returned the shares. On July 2, 2003 we entered into a
loan agreement with CPA Directed Investments (CDI). As part of that agreement we
were required to issue 1,000,000 shares of Company stock in CDI's name. The par
value of the shares of $1,000 was recorded as common stock with an offsetting
amount recorded as a reduction of equity in the account-unamortized cost of
stock issued for services. The loan was repaid and the stock was returned on
January 26, 2004.



F-15

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



NOTE
4 COMMITMENTS



On
July 1, 2003 we entered into an agreement with Enutroff LLC (Enutroff) whereby
Enutroff would be paid for introductions that result in completed transactions
as follows: 1). Debt financing, notes, loans- for any introductions made by
Enutroff a $10,000 fee would be paid plus 12% of the total value of the
financing. 2). Mergers and acquisitions-for any introductions made by Enutroff a
fee of 7.5% of the total value of the merger or acquisition. 3). Sale or
purchase of real property or mineral rights- a fee of up to 1/32 overriding
royalty interest on those mineral rights involved in a transaction. 4). Working
interest partners-a fee of up to 1/32 overriding royalty interest on any mineral
rights involved with a working interest partner and a fee of 10% of the ultimate
value of the transaction. 5). A fee of $40,000 to retain the services of
Enutroff for a period of one year was due on July 1, 2003. Enutroff introduced
us to CPA Directed Investments (CDI) and received a $58,000 fee based on the
$400,000 the Company borrowed from CDI. Total fees paid to Enutroff for the year
ended December 31, 2003 was $98,000. The fees were recorded as a professional
and consulting fee expense.



On
November 15, 2002, we entered into a Service and Water Disposal Agreement with
two companies, whereby pumping services would be provided as well as
transportation of its produced water to a disposal well. The Company owes $10.00
per day for each well that is provided with pumping services and will pay $60.00
per hour for water hauling and $250.00 per month for the use of the disposal
well.



On
January 21, 2003 we entered into a lease agreement for office space. The term of
the agreement is one year and rent is $300 per month.



NOTE
5 SHORT-TERM NOTES PAYABLE



We
borrowed $240,000 from Cornerstone Bank under a note that was due August 3,
2003. Interest was 2% over the corporate base rate (6.25%). The note was repaid
July 7, 2003.



In
July 2003, we borrowed $400,000 from CDI. The interest rate on the loan was 10%.
1,000,000 shares of common stock were issued to CDI as collateral that was held
until the loan was paid. The loan was for 180 days. Pursuant to the loan
agreement, upon the occurrence and during a continuance of default, all
remaining amounts of the loan shall, at the option of CDI, become immediately
due and payable, and CDI may exercise at any time any rights and remedies
available to it under applicable law of the State of Nevada. The loan is due and
payable upon the earlier of: (i)180 days from the date of the agreement, or (ii)
within 30 days from closing of the Company's registered offering. The loan was
repaid by December 31, 2003. Interest paid to CDI was $13,501.



F-16

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



NOTE
6 LONG-TERM DEBT



We
acquired a truck on September 10, 2003 and financed the purchase with a
five-year loan from GMAC. Interest is 8.74%. The current portion of the note is
$4,000 and the long-term portion is $22,923. Future amounts owed are
2004-$4,000; 2005-$5,574; 2006-$5.641; 2007-$6,154; 2008-$5,554.



NOTE
7 INCOME TAXES



Deferred
income taxes are determined based on the tax effect of items subject to
differences in book and taxable income. There is approximately $2,939,000 of net
operating loss carry-forwards, which expires in 2017. The net deferred tax is as
follows:





Non-current
      deferred tax asset (liabilities):Net
      operating loss carry-forward
    $1,000,000
    $239,000Exploration
      and development cost capitalized for financial purposes expensed for tax
      purposes Valuation
      allowance
    (450,000)
      (550,000)
    --
      (239,000)Total
      deferred tax net
    $
      --
    $
      --




A
reconciliation of the provision for income taxes to the statutory federal rate
for continuing operations is as follows for each of the years 2003 and 2002:





Statutory
      tax rate
    34.0%Valuation
      allowance
    <34.0>Effective
      tax rate
    0.0%




NOTE
8 RELATED PARTY TRANSACTIONS



The
due to Officer liability of $47,500 and $25,000 represents the unpaid amounts
owed to Mr. Branagan at December 31, 2003 and 2002.



Total
fees to Mr. Stoeckinger for the years ended December 31, 2003 and 2002 were
$244,699 and $85,603.



F-17

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



Total
fees to Mr. Blagojevic for the years ended December 31, 2003 and 2002 were
$469,302 and $24,991.



Total
interest paid to CDI (see note5), a stockholder of the Company, for the year
ended December 31, 2003 was $13,501. We invested $200,000 in a fund that is
being managed by CPA Directed Investments. At December 31, 2003 the value of the
investments was recorded at the market value of $200,000. There were no
investment management fees charged in the year ended December 31, 2003.



Total
fees to Mr. Frierson for the year ended December 31, 2003 and 2002 were $5,900
and $26,412, respectively.



Total
fees paid to Mr. David Polay and his company for the year ended December 31,
2003 was $55,134.



NOTE
9 SUBSEQUENT EVENTS



On
January 15, 2004 we entered into an agreement with Mr. John Haas, Mr. Mark Hass
and Mr. W.B.Mitchell whereas we would be allowed access to approximately 10,000
acres of leased mineral rights for the purpose of exploring, and evaluating gas
production for 6 months. Mr. John Haas agreed to join the Board of Directors of
the Company. Mr. Mark Hass agreed to be a project manager and consultant for the
Company. Mr. W.B. Mitchell agreed to provide consulting support for lease/land
acquisitions. Each of the three individuals received 600,000 stock warrants
(1,800,000 total) to purchase shares at a price of $1.20 per share; 400,000
stock warrants (1,200,000 total) to purchase shares at a price of $1.50 per
share; and 300,000 stock warrants (900,000 total) to purchase shares at a price
of $2.00 per share. The warrants expire on July 15, 2006. The value of the
warrants, using the Black-Scholes pricing model, is $420,700 and this will be
charged to first quarter 2004 operations.



On
January 15, 2004 we issued 765,000 shares of stock to CBM Energy, Inc in
exchange for oil and gas mineral leases covering approximately 36,000 acres and
title to approximately 10 existing wells. The value of the transaction is
$765,000. The value assigned to the assets will be based on the unamortized
lease cost of each acre and the fair market value determination of the remaining
amount of saleable product from the existing wells. Any amount paid that exceeds
the fair market value of the assets acquired as determined, if applicable, will
be written off as a charge to first quarter 2004 operations.



CDI
returned 1,000,000 shares of Company stock on January 26, 2004.



180,000
shares of stock that was due Mr. Stoeckinger was issued on March 6, 2004.



F-18

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



On
February 9, 2004, we agreed to issue 10,000 shares of common stock to and granted Joseph Blankenship an option to purchase 50,000
shares at $2.50 per share for the first 25,000 shares and $4.00 for the
remaining 25,000 shares. The option was granted pursuant to the Research
Agreement we entered into on February 9, 2004. The term of the option is for two
years.



On
February 18, 2004, we granted to CSC Group LLC a stock warrant giving CSC the
right to purchase 200,000 shares of our common stock. The term and exercise
price of the warrant shares shall be: (i) 100,000 shares at $1.50 per share for
a period of two years; and (ii) 100,000 shares at $2.50 per share for a period
of two years.



On
March 1, 2004 we issued 100,000 stock options with an exercise price of $1.25
per share and 200,000 stock options with an exercise price of $1.50 per share to
Mr. William Burk. Mr. Burk has performed consulting services for the Company.
The options expire in three years. The value of the options, using the Black-Scholes
pricing model, is $38,700. This will be charged to the first quarter 2004
operations.



On
March 19, 2004 Mr. Kehoe exercised 325,000 options at a price of $.50 per share,
Mr. Felton exercised 325,000 options at a price of $.50 per share and Mr.
Frierson exercised 50,000 options at a price of $.50 per share. The options were
exercised with a note due



the
Company for the strike price. 50% of the stock was issued and 50% of the stock
was issued and held as collateral for the notes.



NOTE
10 SUPPLEMENTAL OIL AND GAS DISCLOSURE



Oil
and gas operations



We
have only begun preliminary exploration and as a result have had no revenue or
production expense or other expense relating to operations.



Capitalized
costs relating to oil & gas producing properties



At
December 31, 2003 and 2002 capitalized costs of $1,289,573 and $282,956,
respectively, related to unproven oil & gas properties.



Capitalized
costs incurred



All
of the costs are related to unproved property





|2003                         |           
|---------------------------- | ----------
|Acquisitions
      costs     | $606,423  
|Exploration
      costs      | 400,194   
|Costs
      expended in 2003 | $1,006,617
|                             |           



F-19

---

PETROL
OIL AND GAS, INC.

(A
Development Stage Company)

NOTES
TO FINANCIAL STATEMENTS



|2002                         |         
|---------------------------- | --------
|Acquisitions
      costs     | $141,187
|Exploration
      costs      | 141,769 
|Costs
      expended in 2002 | $282,956



Oil
& gas reserve information



There
are no proved oil and gas reserves at December 31, 2003.