UNITED
STATES SECURITIES AND EXCHANGE COMMISSION





Washington,
D.C. 20549








FORM
10-Q





QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE


SECURITIES
AND EXCHANGE ACT OF 1934





For
      the quarterly period ended September 30, 2008
                    
                    Commission
      File No.
001-31852





Tri-Valley
Corporation


(Exact
name of registrant as specified in its charter)





Delaware
                  
                  84-0617433(State
      or other jurisdiction of incorporation or organization)
                  
                  (I.R.S.
      Employer Identification
No.)





4550
California Avenue, Suite 600, Bakersfield, California 93309


(Address
of principal executive offices)





(661)
864-0500


(Registrant's
telephone number, including area code)





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





Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. (as defined in Rule 12b-2 of the
Exchange Act). (Check one):





Large
      accelerated filer
              
              o
              Accelerated
      filer
              
              xNon-accelerated
      filer
              
              o
              Smaller
      reporting company
              
              o





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes o No x





The
number of shares of Registrant's common stock outstanding at October 31, 2008
was 27,370,367.









1




TRI-VALLEY
CORPORATION




INDEX





PagePART
      I -
                            
                            FINANCIAL INFORMATION
                            
                            3Item
      1.
                            
                            Consolidated Financial Statements
                            
                            3Item
      2.
                            
                            Management's Discussion and Analysis of Financial Condition
      and Results of Operations
                            
                            14Item
      3.
                            
                            Quantitative and Qualitative Disclosures about Market
      Risk
                            
                            20Item
      4.
                            
                            Controls and Procedures
                            
                            20PART
      II -
                            
                            OTHER INFORMATION
                            
                            20Item
      1A.
                            
                            Risk Factors
                            
                            20Item
      2.
                            
                            Unregistered Sales of Equity
      Securities
                            
                            21Item
      6.
                            
                            Exhibits
                            
                            21SIGNATURES
                            
                            21




2
 Table of Contents





PART
I





FINANCIAL INFORMATION





Item 1.
Unaudited Consolidated Financial
Statements





TRI-VALLEY
CORPORATION


CONSOLIDATED
BALANCE SHEETS





ASSETS


September
      30,
                
                
                December
      31,2008
                
                
                2007(Unaudited)
                
                
                (Audited)Current
      assetsCash
                
                $
                644,043
                
                
                $
                3,955,610Cash
      restricted to OPUS I use
                
                
                8,455,928
                
                
                
                3,712,083Accounts
      receivable, trade
                
                
                2,910,986
                
                
                
                313,521Prepaid
      expenses
                
                
                12,029
                
                
                
                12,029Total
      current assets
                
                
                12,022,986
                
                
                
                7,993,243Property
      and equipment, netProved
      properties
                
                
                2,204,746
                
                
                
                2,143,907Unproved
      properties
                
                
                4,509,568
                
                
                
                2,414,843Rigs
                
                
                1,458,258
                
                
                
                6,731,758Other
      property and equipment
                
                
                6,047,102
                
                
                
                4,942,145Total
      property and equipment, net
                
                
                14,219,674
                
                
                
                16,232,653Other
      assetsDeposits
                
                
                159,833
                
                
                
                338,772Invest
      in marketable securities (Note 4)
                
                
                101,052
                
                
                
                440,000Investments
      in partnerships
                
                
                17,400
                
                
                
                17,400Goodwill
                
                
                212,414
                
                
                
                212,414Other
                
                
                20,413
                
                
                
                20,413Total
      other assets
                
                
                511,112
                
                
                
                1,028,999Total
      assets
                
                $
                26,753,772
                
                
                $
                25,254,895





The
accompanying notes are an integral part of these consolidated financial
statements.




3
 Table of Contents





LIABILITIES AND
STOCKHOLDERS' EQUITY





September
      30,
                
                
                December
      31,2008
                
                
                2007(Unaudited)
                
                
                (Audited)Current
      liabilitiesNotes
      payable
                
                $
                388,396
                
                
                $
                402,003Accounts
      payable and accrued expenses
                
                
                4,048,326
                
                
                
                5,699,153Deferred
      revenue
                
                
                328,524
                
                
                
                242,163Amounts
      payable to joint venture participants
                
                
                2,123,375
                
                
                
                281,419Advances
      from joint venture participants, net
                
                
                642,390
                
                
                
                3,671,927Total
      current liabilities
                
                
                7,531,011
                
                
                
                10,296,665Non-Current
      LiabilitiesAsset
      retirement obligation
                
                
                282,395
                
                
                
                240,394Long-term
      portion of notes payable
                
                
                1,910,429
                
                
                
                2,355,707Total
      non-current liabilities
                
                
                2,192,824
                
                
                
                2,596,101Total
      liabilities
                
                
                9,723,835
                
                
                
                12,892,766Minority
      interest
                
                
                2,745,524
                
                
                
                249,945Stockholders’
      equityCommon
      stock, $.001 par value; 100,000,000 shares authorized; 27,368,367 and
      25,077,184  issued and outstanding at September 30, 2008, and
      December 31,2007,
      respectively
                
                
                27,368
                
                
                
                25,077Less:
      common stock in treasury, at cost, 100,025 shares
                
                
                (13,370
                )
                
                
                (13,370
                )Capital
      in excess of par value
                
                
                45,161,398
                
                
                
                37,090,714Additional
      paid in capital – warrants
                
                
                710,599
                
                
                
                782,729Additional
      paid in capital - stock options
                
                
                2,449,920
                
                
                
                1,800,642Accumulated
      deficit
                
                
                (33,805,498
                )
                
                
                (27,586,553
                )Accumulated
      other comprehensive income
                
                
                (246,004
                )
                
                
                12,945Total
      stockholders' equity
                
                
                14,453,116
                
                
                
                12,112,184Total
      liabilities, minority interest and stockholder's equity
                
                $
                26,753,772
                
                
                $
                25,254,895





The
accompanying notes are an integral part of these consolidated financial
statements.




4
 Table of Contents





TRI-VALLEY
CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS


(Unaudited)





For
      the Three Months
                    Ended
      September 30,
                  
                  
                  For
      the Nine Months
                    Ended
      September 30,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007RevenuesSale
      of oil and gas
                  
                  $
                  1,195,022
                  
                  
                  $
                  204,699
                  
                  
                  
                  2,823,396
                  
                  
                  $
                  536,900Gain
      on sale of asset
                  
                  
                  1,154
                  
                  
                  
                  -
                  
                  
                  
                  662,376
                  
                  
                  
                  -Rig
      income
                  
                  
                  -
                  
                  
                  
                  266,404
                  
                  
                  
                  1,122,384
                  
                  
                  
                  2,077,273Drilling
      & Development
                  
                  
                  -
                  
                  
                  
                  3,285,227
                  
                  
                  
                  -
                  
                  
                  
                  3,285,227Other
      income
                  
                  
                  227,528
                  
                  
                  
                  156,260
                  
                  
                  
                  727,805
                  
                  
                  
                  829,200Interest
      income
                  
                  
                  1,752
                  
                  
                  
                  61,776
                  
                  
                  
                  30,530
                  
                  
                  
                  262,083Total
      Revenues
                  
                  
                  1,425,456
                  
                  
                  
                  3,974,366
                  
                  
                  
                  5,366,491
                  
                  
                  
                  6,990,683Costs
      and expensesOil
      and gas lease expense
                  
                  
                  189,487
                  
                  
                  
                  56,352
                  
                  
                  
                  566,519
                  
                  
                  
                  260,845Mining
      exploration expenses
                  
                  
                  93,012
                  
                  
                  
                  61,058
                  
                  
                  
                  223,383
                  
                  
                  
                  174,210Drilling
      and development
                  
                  
                  -
                  
                  
                  
                  1,890,199
                  
                  
                  
                  -
                  
                  
                  
                  2,748,288Rig
      operations
                  
                  
                  219,194
                  
                  
                  
                  179,896
                  
                  
                  
                  1,098,775
                  
                  
                  
                  959,904Depletion,
      depreciation and amortization
                  
                  
                  196,860
                  
                  
                  
                  253,745
                  
                  
                  
                  911,230
                  
                  
                  
                  740,062Interest
                  
                  
                  31,327
                  
                  
                  
                  69,555
                  
                  
                  
                  185,529
                  
                  
                  
                  218,221Impairment
      loss (Note 8)
                  
                  
                  -
                  
                  
                  
                  229,569
                  
                  
                  
                  315,328
                  
                  
                  
                  476,431General
      and administrative
                  
                  
                  2,122,482
                  
                  
                  
                  2,560,953
                  
                  
                  
                  8,349,245
                  
                  
                  
                  7,789,171Total
      costs and expenses
                  
                  
                  2,852,362
                  
                  
                  
                  5,301,327
                  
                  
                  
                  11,650,009
                  
                  
                  
                  13,367,132Loss
      before minority interest
                  
                  
                  (1,426,906
                  )
                  
                  
                  (1,326,961
                  )
                  
                  
                  (6,283,518
                  )
                  
                  
                  (6,376,449
                  )Minority
      interest
                  
                  
                  (229,507
                  )
                  
                  
                  -
                  
                  
                  
                  (233,276
                  )
                  
                  
                  -Net
      Loss
                  
                  
                  (1,197,399
                  )
                  
                  
                  (1,326,961
                  )
                  
                  
                  (6,050,242
                  )
                  
                  
                  (6,376,449
                  )Basic
      net loss per share:
                    Loss
      from operations
                  
                  $
                  (.04
                  )
                  
                  $
                  (.05
                  )
                  
                  $
                  (.22
                  )
                  
                  $
                  (.26
                  )Basic
      loss per common share
                  
                  $
                  (.04
                  )
                  
                  $
                  (.05
                  )
                  
                  $
                  (.22
                  )
                  
                  $
                  (.26
                  )Weighted
      average number of shares outstanding
                  
                  
                  27,278,817
                  
                  
                  
                  24,667,768
                  
                  
                  
                  27,189,267
                  
                  
                  
                  24,692,750Potentially
      dilutive shares outstanding
                  
                  
                  30,245,662
                  
                  
                  
                  28,039,242
                  
                  
                  
                  30,288,830
                  
                  
                  
                  28,061,268





No
dilution is reported since net income is a loss per SFAS 128





The
accompanying notes are an integral part of these consolidated financial
statements.




5
 Table of Contents





TRI-VALLEY
CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)




For
      the Nine MonthsEnded
      September 30,2008
                                
                                
                                2007Cash
      Flows from Operating ActivitiesNet
      loss
                                
                                $
                                (6,050,242
                                )
                                
                                $
                                (6,376,449
                                )Adjustments
      to reconcile net income to net cash used from operating
      activities:Depreciation,
      depletion and amortization
                                
                                
                                911,230
                                
                                
                                
                                740,062Loss
      on Impairment of Fixed Assets
                                
                                
                                315,328
                                
                                
                                
                                476,431Minority
      interest
                                
                                
                                (233,276
                                )
                                
                                
                                -Stock
      options
                                
                                
                                577,064
                                
                                
                                
                                688,564Gain
      on sale of property
                                
                                
                                (662,376
                                )
                                
                                
                                -Warrants
                                
                                
                                -
                                
                                
                                
                                316,852Changes
      in operating capital:Increase
      in prepaids
                                
                                
                                -
                                
                                
                                
                                (509,239
                                )Decrease
      in deposits and other assets
                                
                                
                                178,939
                                
                                
                                
                                150,000Increase
      in accounts receivable
                                
                                
                                (2,597,465
                                )
                                
                                
                                44,106Decrease
      in accounts payable, deferred revenue and accrued expenses
                                
                                
                                (1,564,466
                                )
                                
                                
                                1,887,506Increase
      accounts payable to joint ventureparticipants
      and related parties
                                
                                
                                1,841,956
                                
                                
                                
                                (100,469
                                )Decrease
      in advances from joint venture participants
                                
                                
                                (3,029,537
                                )
                                
                                
                                912,319Net
      Cash Used by Operating Activities
                                
                                
                                (10,312,845
                                )
                                
                                
                                (1,770,317
                                )Cash
      Flows from Investing Activities:Proceeds
      from sale of property
                                
                                
                                7,388,654
                                
                                
                                
                                -Proceeds
      from the sale of marketable securities
                                
                                
                                79,999
                                
                                
                                
                                -Investment
      in marketable securities
                                
                                
                                -
                                
                                
                                
                                (380,000
                                )Buy
      back of minority interest in GVPS
                                
                                
                                (418,648
                                )
                                
                                
                                (3,285,126
                                )Capital
      expenditures
                                
                                
                                (5,897,856
                                )
                                
                                
                                (3,669,191
                                )Net
      Cash Provided / (Used) by Investing Activities
                                
                                
                                1,152,149
                                
                                
                                
                                (7,334,317
                                )Cash
      Flows from Financing ActivitiesPrincipal
      payments on long-term debt
                                
                                
                                (458,885
                                )
                                
                                
                                (314,409
                                )Net
      proceeds from additional paid in capital – stock options
                                
                                
                                293,514
                                
                                
                                
                                358,548Net
      proceeds from additional paid in capital – warrants
                                
                                
                                -
                                
                                
                                
                                658,400Net
      proceeds from minority interest holders – Great Valley Drilling/Great
      Valley Production
                                
                                
                                2,978,800
                                
                                
                                
                                -Stock
      issuance costs
                                
                                
                                (1,314,711
                                )
                                
                                
                                (649,900
                                )Net
      proceeds from issuance of common stock
                                
                                
                                9,094,256
                                
                                
                                
                                5,966,831Net
      Cash Provided by Financing Activities
                                
                                $
                                10,592,974
                                
                                
                                $
                                6,019,470





The
accompanying notes are an integral part of these consolidated financial
statements.




6
 Table of Contents





TRI-VALLEY
CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS


(Unaudited)


For
      the Nine MonthsEnded
      September 30,2008
                                                  
                                                  
                                                  2007Net
      Increase/(Decrease) in Cash and Cash Equivalents
                                                  
                                                  
                                                  1,432,278
                                                  
                                                  
                                                  
                                                  (3,085,164
                                                  )Cash
      and Cash Equivalents at Beginning of Period
                                                  
                                                  
                                                  7,667,693
                                                  
                                                  
                                                  
                                                  15,598,215Cash
      and Cash Equivalents at End of Period
                                                  
                                                  $
                                                  9,099,971
                                                  
                                                  
                                                  $
                                                  12,513,051For
      the Nine Months
                                                    Ended
      September 30,2008
                                                  
                                                  
                                                  2007Supplemental
      Information:Cash
      paid for interest
                                                  
                                                  $
                                                  185,529
                                                  
                                                  
                                                  $
                                                  218,221




The
accompanying notes are an integral part of these consolidated financial
statements.




7
 Table of Contents





TRI-VALLEY
CORPORATION


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


FOR
THE NINE MONTHS ENDED


September
30, 2008 and 2007


(Unaudited)




NOTE
1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION





Description
of Business





Tri-Valley
Corporation (“TVC” or the Company), a Delaware corporation formed in 1971, is in
the business of exploring, acquiring and developing petroleum and metal and
mineral properties and interests therein.





The
Company identifies reportable segments by product.  The Company
includes revenues from both external customers and revenues from transactions
with other operating segments in its measure of segment profit or
loss.  The Company also includes interest revenue, DD&A, and other
operating expenses in its measure of segment profit or loss.  The
results of these four segments are presented in Note 7 to the Consolidated
Financial Statements.





The
Company’s four industry segments are:





-
            Oil and gas operations
      include our share of revenues from oil and gas wells on which Tri-Valley
      Oil and Gas Company serves as operator, royalty income and production
      revenue from other partnerships in which we have operating or
      non-operating interests.  It also includes revenues for
      consulting services for oil and gas related
  activities.





-
            Rigs and refurbishing
      operations began in 2006, when the Company acquired drilling
      rigs and began operating them through subsidiaries Great Valley Production
      Services, LLC, and Great Valley Drilling Company, LLC.  Rig
      operations include income from rental of oil field equipment and income
      received from refurbishing and selling oilfield
  equipment.





-
            Minerals include the
      Company’s mining and mineral prospects and operations, and expenses
      associated with those operations.





-
            Drilling and
      development includes revenues received from oil and gas drilling
      and development operations performed for joint venture partners, including
      the Opus-I drilling partnership.





The
Company has five subsidiaries:


·
              Tri-Valley
      Oil & Gas Company (“TVOG”) operates the oil & gas
      activities.  TVOG derives the majority of its revenue from oil
      and gas drilling and turnkey development. TVOG primarily generates its own
      exploration prospects from its internal database, and also screens
      prospects from other geologists and companies.  TVOG generates
      these geological “plays” within a certain geographic area of mutual
      interest.  The prospect is then presented to potential
      co-ventures.  The company deals with both accredited individual
      investors and energy industry companies.  TVOG serves as the
      operator of these co-ventures. TVOG operates both the oil and gas
      production segment and the drilling and development segment of our
      business lines.
 
 ·
              Select
      Resources Corporation (“Select”) was created in late 2004 to manage, grow
      and operate the minerals segment of our business
  lines.
 
 ·
              Great
      Valley Production Services, LLC, (“GVPS”) was formed in 2006 to operate
      oil production services, well work over and drilling rigs, primarily for
      TVOG.  In July of 2008, the drilling rigs were sold so that
      going forward the primary operations of GVPS will be to refurbish oilfield
      equipment for use in the
 8
 Table of Contents
 NOTE
1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (continued)
 
 Company’s
operations and for sale to outside third parties.  During the third
quarter Tri-Valley sold 21% of the ownership interest to private parties and has
retained a 79% ownership interest in this subsidiary.
 
 ·
              Great
      Valley Drilling Company, LLC (“GVDC”) was formed in 2006 to operate oil
      drilling rigs, primarily in Nevada where Tri-Valley has 17,000 acres of
      prospective oil leases.  However, because rig availability is
      scarce in Nevada, GVDC has an opportunity to do contract drilling for
      third parties in both petroleum and geothermal projects.  For
      the time being GVDC, whose operation began in the first quarter of 2007,
      expects its primary activity will be contract drilling for third parties.
      GVDC is 100% owned by TVC.
 
 ·
              Tri-Valley
      Power Corporation is inactive at the present
  time.


Basis of
Presentation





The
financial information included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring adjustments),
which are, in the opinion of management, necessary for a fair statement of
results for the interim periods. The results of operations for the nine month
period ended September 30, 2008, are not necessarily indicative of the results
to be expected for the full year.





The
accompanying consolidated financial statements do not include footnotes and
certain financial presentations normally required under generally accepted
accounting principles in the United States of America; and, therefore, should be
read in conjunction with our Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 14, 2008, for the year ended
December 31, 2007.





Principles of
Consolidation





The
consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, TVOG, Select, GVDC, Tri-Valley Power Corporation,
since their inception.  GVPS, where the Company has retained a 79%
ownership interest is also included in the consolidation.  Other
partnerships in which the Company has an operating or nonoperating interest in
which the Company is not the primary beneficiary and owns less than 51%, are
proportionately combined.  This includes Opus I, Martins-Severin,
Martins-Severin Deep, and Tri-Valley Exploration 1971-1
partnerships.  All material intra and intercompany accounts and
transactions have been eliminated in combination and consolidation.








NOTE
2 - PER SHARE COMPUTATIONS





Per share
computations are based upon the weighted-average number of common shares
outstanding during each year. Common stock equivalents are not included in the
computations since their effect would be anti-dilutive.








NOTE
3 – SUMMARY OF RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS





Accounting for Business
Combinations




During
December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations” (“SFAS
No. 141(R)”), which establishes new accounting and disclosure requirements for
recognition and measurement of identifiable assets, liabilities and goodwill
acquired and requires that the fair value estimates of contingencies acquired or
assumed be considered as part of the original purchase price allocation. SFAS
No. 141(R) is effective for periods beginning on or after December 15, 2008.
This standard does not presently affect the Company’s financial
statements.




9
 Table of Contents





NOTE
3 – SUMMARY OF RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS (continued)





Fair Value
Measurements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.”
This Statement replaces multiple existing definitions of fair value with a
single definition, establishes a consistent framework for measuring fair value
and expands financial statement disclosures regarding fair value measurements.
This Statement applies only to fair value measurements that already are required
or permitted by other accounting standards and does not require any new fair
value measurements. SFAS No. 157 is effective for fiscal years beginning
subsequent to November 15, 2007. We adopted this Statement in the first quarter
of 2008, and the adoption did not have a material impact on our financial
position or results of operations.





The Fair Value Option for
Financial Assets and Financial Liabilities





In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities,” which permits an entity to measure
certain financial assets and financial liabilities at fair value. The objective
of SFAS No. 159 is to improve financial reporting by allowing entities to
mitigate volatility in reported earnings caused by the measurement of related
assets and liabilities using different attributes, without having to apply
complex hedge accounting provisions. Under SFAS No. 159, entities that elect the
fair value option (by instrument) will report unrealized gains and losses in
earnings at each subsequent reporting date. The fair value option election is
irrevocable, unless a new election date occurs. SFAS No. 159 establishes
presentation and disclosure requirements to help financial statement users
understand the effect of the entity’s election on its earnings, but does not
eliminate disclosure requirements of other accounting standards. Assets and
liabilities that are measured at fair value must be displayed on the face of the
balance sheet. The Company adopted this statement effective beginning January 1,
2008, and the adoption did not have a material impact on our financial position
or results of operations.





Noncontrolling Interest in
Consolidated Financial Statements





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements — An Amendment of ARB No. 51”. SFAS No.
160 establishes new accounting and reporting standards for a noncontrolling
interest in a subsidiary and for the deconsolidation of a subsidiary.
Specifically, this statement requires the recognition of a noncontrolling
interest (minority interest) as equity in the consolidated financial statements.
The amount of net income attributable to a noncontrolling interest will be
included in consolidated net income on the face of the income statement. SFAS
No. 160 requires that changes in a parent’s ownership interest in a subsidiary
that do not result in deconsolidation are equity transactions if the parent
retains its controlling financial interest. In addition, this statement requires
that a parent recognize a gain or loss when a subsidiary is deconsolidated. Such
gain or loss will be measured using the fair value of the noncontrolling equity
investment on the deconsolidation date. SFAS No. 160 also includes expanded
disclosures regarding the interests of the parent and its noncontrolling
interest. SFAS No. 160 will be effective for the Company on January 1, 2009. We
do not expect the adoption of SFAS No. 160 to have a material impact on our
financial position or results of operations.




The Hierarchy of Generally
Accepted Accounting Principles




In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles”. SFAS No. 162 identifies the sources of accounting
principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles in the
United States. The new standard becomes effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411. SFAS No. 162 is not expected to have a material impact on our
consolidated financial position or results of operations.




10
 Table of Contents





NOTE
4 – INVESTMENT





In the
second quarter of 2007, the Company received 150,000 stock options for Duluth
Metals common stock for providing executive and geological services for Duluth
Metals.  The stock options are exercisable at $0.30
Canadian.  During the fourth quarter of 2007, the options were
exercised and converted into stock at a cost of $47,055. During the second
quarter of 2008, 30,000 shares of stock were sold at an average price of $2.82
Canadian.  The market value of each share of stock on September 30,
2008, was $0.82 Canadian.  The Company follows the provisions of
Statement of Financial Accounting Standards No. 115 (SFAS 115), “Accounting for Certain Investments
in Debt and Equity Securities.” SFAS 115 requires companies to classify
their investments as trading, available-for-sale or held-to-maturity. The
Company’s securities consist of stock which has been classified as
available-for-sale. These are recorded in the financial statements at fair
market value and any unrealized gains (losses) will be reported as a component
of shareholder equity. At September 30, 2008, the cost basis net of write-downs,
unrealized gains, unrealized losses and fair market value of the Company's
holdings are as follows:





September
      30,
                          2008Net
      cost of equities
                        
                        $
                        341,644Unrealized
      Losses
                        
                        
                        (240,592
                        )Fair
      Market Value
                        
                        $
                        101,052





SFAS 115
requires that for each individual security classified as available-for-sale, a
company shall determine whether a decline in fair value below the cost basis is
other than temporary. If the decline in fair value is judged as such, the cost
basis of the individual security shall be written down to fair value as a new
cost basis and the amount of the write-down shall be reflected in other
comprehensive income of the equity section. At September 30, 2008, the company's
marketable securities had a fair market value of $101,052.  The
unrealized loss of $201,448 for the third quarter of 2008 is reported as other
comprehensive income bringing the net unrealized loss inception to date to
$240,592.





This
investment was translated into U.S. Dollars in accordance with SFAS No. 52,“Foreign Currency
Translation.”  The investment was translated at the rate of
exchange on the balance sheet date.








NOTE
5 - CHANGES IN SECURITIES





Common
Stock





During
the third quarter of 2008, the Company issued 426,603 shares of common stock.
Two employees exercised employee stock options during the quarter to purchase
9,500 shares totaling $27,400. 417,103 shares were issued in private placements
at prices of $5.00 to $7.49 per share, for a total consideration of $ 2,420,688.
Total stock issuance cost for the third quarter was $374,826.








NOTE
6 – STOCK BASED COMPENSATION EXPENSE





Stock Based
Compensation





Compensation
expense charged against income for stock based awards in the third quarter of
2008 and 2007 was $255,127 and $35,354, pre-tax, respectively, and is included
in general and administrative expense in the Consolidated Statement of
Operations.




11
 Table of Contents





NOTE
6 – STOCK BASED COMPENSATION EXPENSE (continued)





For
further information regarding stock based compensation, please refer to Note 5
of the Notes to the Consolidated Financial Statements in the Annual Report on
Form 10-K for the year ended December 31, 2007.








NOTE
7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS





The
Company reports operating segments according to SFAS No. 131, “Disclosure about Segments of an
Enterprise and Related Information.”





The
Company identifies four principal industry segments by products and services,
which are described in Note 1
– Description of Business and Basis of Presentation – Description of
Business.  The Company includes revenues from both external
customers and revenues from transactions with other operating segments in its
measure of segment profit or loss.





The
following table sets forth our revenues by segment for the nine months ended
September 30, 2008 and the nine months ended September 30, 2007, in
thousands:





Three
      Months Ended September 30
                                                
                                                
                                                Nine
      Months Ended September 302008
                                                
                                                
                                                2007
                                                
                                                
                                                2008
                                                
                                                
                                                2007Sales
      and Other RevenuesOil
      & Gas
                                                
                                                $
                                                1,425
                                                
                                                
                                                $
                                                300
                                                
                                                
                                                
                                                3,345
                                                
                                                
                                                $
                                                894Rigs
      & refurbishing operations
                                                
                                                
                                                -
                                                
                                                
                                                
                                                269
                                                
                                                
                                                
                                                1,877
                                                
                                                
                                                
                                                2,213Minerals
                                                
                                                
                                                -
                                                
                                                
                                                
                                                120
                                                
                                                
                                                
                                                144
                                                
                                                
                                                
                                                598Drilling
      and Development
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,285
                                                
                                                
                                                
                                                -
                                                
                                                
                                                
                                                3,286Consolidated
      Sales and Other Revenues
                                                
                                                $
                                                1,425
                                                
                                                
                                                $
                                                3,974
                                                
                                                
                                                $
                                                5,366
                                                
                                                
                                                $
                                                6,991





The
following table sets forth our operating income (loss)by segment, in
thousands:





Three
      Months Ended September 30
                                    
                                    
                                    Nine
      Months Ended September 302008
                                    
                                    
                                    2007
                                    
                                    
                                    2008
                                    
                                    
                                    2007Operating
      income (loss)Oil
      & Gas
                                    
                                    $
                                    (644
                                    )
                                    
                                    $
                                    (1,474
                                    )
                                    
                                    $
                                    (3,940
                                    )
                                    
                                    $
                                    (4,581
                                    )Rigs
      & refurbishing operations
                                    
                                    
                                    (73
                                    )
                                    
                                    
                                    (984
                                    )
                                    
                                    
                                    (921
                                    )
                                    
                                    
                                    (1,083
                                    )Minerals
                                    
                                    
                                    (194
                                    )
                                    
                                    
                                    (159
                                    )
                                    
                                    
                                    (363
                                    )
                                    
                                    
                                    (310
                                    )Drilling
      and Development
                                    
                                    
                                    -
                                    
                                    
                                    
                                    1,395
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    537Non
      Segmented
                                    
                                    
                                    (286
                                    )
                                    
                                    
                                    (105
                                    )
                                    
                                    
                                    (826
                                    )
                                    
                                    
                                    (939
                                    )Total
      income
                                    
                                    
                                    (1,197
                                    )
                                    
                                    
                                    (1,327
                                    )
                                    
                                    
                                    (6,050
                                    )
                                    
                                    
                                    (6,376
                                    )





The
following table summarizes our total assets, in thousands:





September
      30, 2008
                
                
                December
      31, 2007Total
      AssetsOil
      & Gas
                
                $
                22,970
                
                
                $
                18,191Rigs
      & refurbishing operations
                
                
                1,903
                
                
                
                4,703Minerals
                
                
                1,881
                
                
                
                2,361Consolidated
      Total Assets
                
                $
                26,754
                
                
                $
                25,255




12
 Table of Contents





NOTE
8 – SALE OF RIG ASSETS & IMPAIRMENT





In June
2008, GVPS entered into an agreement to sell rigs and rig related equipment to
Excalibur Well Services Corporation.  During the 2nd
quarter, the company recorded an impairment loss of $315,328.  The
sale of the rigs and rig related equipment was completed during the third
quarter and no gain or loss was recorded related to this sale due to the 2nd quarter
impairment loss.





Property
sold consisted of the following:


Original
                            Carrying
                            Amount
                          
                          
                          Impairment
                          
                          
                          Adjusted
                            Carrying
                            ValueDrilling
      Rigs
                          
                          $
                          4,441,850
                          
                          
                          $
                          (278,804
                          )
                          
                          $
                          4,163,046Drilling
      Rig Equipment
                          
                          
                          560,746
                          
                          
                          
                          (30,410
                          )
                          
                          
                          530,336Vehicles
                          
                          
                          112,732
                          
                          
                          
                          (6,114
                          )
                          
                          
                          106,618Total
                          
                          $
                          5,115,328
                          
                          
                          $
                          (315,328
                          )
                          
                          $
                          4,800,000





Outstanding
liabilities at June 30, 2008 related to these assets totaled
$364,124.  Outstanding liabilities at September 30, 2008 related to
these assets totaled $0.




13
 Table of Contents





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





Notice
Regarding Forward-Looking Statements





This
report contains forward-looking statements. The words, "anticipate," "believe,"
"expect," "plan," "intend," "estimate," "project," "could," "may," "foresee,"
and similar expressions are intended to identify forward-looking statements.
These statements include information regarding expected development of
Tri-Valley's business, lending activities, relationship with customers, and
development in the oil and gas industry. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed,
estimated or otherwise indicated.





Results
of Operations





Three
months ended September 30, 2008 Compared to three months ended September 30,
2007





For the
quarter ended September 30, 2008, revenue was $1.4 million, compared to $4.0
million in the third quarter of 2007, a decrease of $2.6 million. We had an
operating loss of about $1.2 million in the third quarter of 2008, compared to a
loss of $1.3 million in the third quarter of 2007.





Revenues





The
Company identifies reportable segments by products and services.  The
Company includes revenues from both external customers and revenues from
transactions with other operating segments in its measure of segment profit or
loss.  The Company also allocates interest revenue and expense,
DD&A, and other operating expenses in its measure of segment profit or
loss.  The following table sets forth our revenues by segment for the
third quarter of 2008 and 2007, in thousands.





Three
      Months
                                                    Ended
      September 30
                                                  
                                                  
                                                  Increase/
                                                  
                                                  
                                                  Percentage2008
                                                  
                                                  
                                                  2007
                                                  
                                                  
                                                  (Decrease)
                                                  
                                                  
                                                  Change
      (%)Oil
      and gas
                                                  
                                                  $
                                                  1,425
                                                  
                                                  
                                                  $
                                                  300
                                                  
                                                  
                                                  $
                                                  1,125
                                                  
                                                  
                                                  
                                                  375Rig
      & refurbishing operations
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  269
                                                  
                                                  
                                                  
                                                  (267
                                                  )
                                                  
                                                  
                                                  (100
                                                  )Minerals
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  120
                                                  
                                                  
                                                  
                                                  (120
                                                  )
                                                  
                                                  
                                                  (100
                                                  )Drilling
      & development
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,285
                                                  
                                                  
                                                  
                                                  (3,285
                                                  )
                                                  
                                                  
                                                  (100
                                                  )Total
      revenues
                                                  
                                                  $
                                                  1,425
                                                  
                                                  
                                                  $
                                                  3,974
                                                  
                                                  
                                                  $
                                                  (2,549
                                                  )
                                                  
                                                  
                                                  (64
                                                  )





Oil and
gas revenues in the third quarter of 2008 included approximately $1.4 million
from the sale of oil and gas, compared to $300 thousand in the third quarter of
2007. This also represents a quarter-over-quarter increase of 375%. The increase
resulted from both significantly increased oil and gas production and increased
commodity pricing.





The
primary oil and gas activities during the third quarter of 2008 represented an
ongoing rapid build-up of operations per our “Operation Catapult” initiative
which is focused on rapidly accelerating production of oil and gas and resultant
operating cash flow, and investment returns to our Partners and Shareholders. In
summary, key activity included the completion of Phase I drilling for the TVOG
Opus I Drilling Program LP, progressive cyclic steaming of heavy oil wells,
ongoing conversion of temporary to permanent facilities, installation of a fuel
gas line and test headers, a variety of remedial work on existing wellbores,
additional new perforated zones on existing wells, additional field-level
staffing to handle our uplift, and continued, prudent progression of the
existing asset exploitation programs. The Company expects that the oil and gas
production will continue to grow increasing revenues and that the operating
income of this segment will be improved by year-end 2008.




14
 Table of Contents




Operating Income
(Loss)





The
following table sets forth our operating income (loss) by segment in the second
quarter of 2008 and 2007, in thousands.





Three
      Months
                                                                      Ended
      September 30
                                                                    
                                                                    
                                                                    Increase/
                                                                    
                                                                    
                                                                    Percentage2008
                                                                    
                                                                    
                                                                    2007
                                                                    
                                                                    
                                                                    (Decrease)
                                                                    
                                                                    
                                                                    Change
      (%)Total
      operating incomeOil
      & Gas
                                                                    
                                                                    $
                                                                    (644
                                                                    )
                                                                    
                                                                    $
                                                                    (1,474
                                                                    )
                                                                    
                                                                    
                                                                    830
                                                                    
                                                                    
                                                                    
                                                                    56Rig
      & refurbishing operations
                                                                    
                                                                    
                                                                    (73
                                                                    )
                                                                    
                                                                    
                                                                    (984
                                                                    )
                                                                    
                                                                    
                                                                    911
                                                                    
                                                                    
                                                                    
                                                                    93Minerals
                                                                    
                                                                    
                                                                    (194
                                                                    )
                                                                    
                                                                    
                                                                    (159
                                                                    )
                                                                    
                                                                    
                                                                    (35
                                                                    )
                                                                    
                                                                    
                                                                    (22
                                                                    )Drilling
      and Development
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    1,395
                                                                    
                                                                    
                                                                    
                                                                    (1,395
                                                                    )
                                                                    
                                                                    
                                                                    (100
                                                                    )Non-segmented
                                                                    
                                                                    
                                                                    (286
                                                                    )
                                                                    
                                                                    
                                                                    (105
                                                                    )
                                                                    
                                                                    
                                                                    (181
                                                                    )
                                                                    
                                                                    
                                                                    (172
                                                                    )Total
      income
                                                                    
                                                                    $
                                                                    (1,197
                                                                    )
                                                                    
                                                                    $
                                                                    (1,327
                                                                    )
                                                                    
                                                                    $
                                                                    130
                                                                    
                                                                    
                                                                    
                                                                    10





Income
for the quarter ended September 30, 2008 was a loss of $1.2 million, compared to
$1.3 million loss in the third quarter of 2007, a decrease in the loss of $0.1
million.





Nine
months ended September 30, 2008 Compared to nine months ended September 30,
2007





For the
nine months ended September 30, 2008, revenue was $5.3 million, compared to $7.0
million in the first nine months of 2007, a decrease of $1.7 million. We had an
operating loss of about $6.0 million in the first nine months of 2008, compared
to a loss of $6.4 million in the first nine months of 2007.





General
and administrative expenses were $8.3 million for the first nine months ended
September 30, 2008, compared to $7.7 million for the first nine months of 2007,
an increase of $0.6 million.  $0.4 million of this increase was due to
non-recurring expenses associated with the buy back of the minority interest of
GVPS.  The remaining $0.2 million increase was due to the addition of
new staff.





Revenues





The
Company identifies reportable segments by products and services.  The
Company includes revenues from both external customers and revenues from
transactions with other operating segments in its measure of segment profit or
loss.  The Company also allocates interest revenue and expense,
DD&A, and other operating expenses in its measure of segment profit or
loss.  The following table sets forth our revenues by segment for the
first nine months of 2008 and 2007, in thousands.





Nine
      Months
                            Ended
      September 30
                          
                          
                          Increase/
                          
                          
                          Percentage2008
                          
                          
                          2007
                          
                          
                          (Decrease)
                          
                          
                          Change
      (%)Oil
      and gas
                          
                          $
                          3,345
                          
                          
                          $
                          894
                          
                          
                          $
                          2,451
                          
                          
                          
                          274Rig
      & refurbishing operations
                          
                          
                          1,877
                          
                          
                          
                          2,213
                          
                          
                          
                          (336
                          )
                          
                          
                          (15
                          )Minerals
                          
                          
                          144
                          
                          
                          
                          598
                          
                          
                          
                          (454
                          )
                          
                          
                          (76
                          )Drilling
      & development
                          
                          
                          
                          
                          
                          
                          3,286
                          
                          
                          
                          (3,286
                          )
                          
                          
                          (100
                          )Total
      revenues
                          
                          $
                          5,366
                          
                          
                          $
                          6,991
                          
                          
                          $
                          (1,625
                          )
                          
                          
                          (23
                          )




15
 Table of Contents








Operating Income
(Loss)





The
following table sets forth our operating income (loss) by segment for the first
nine months of 2008 and 2007, in thousands.





Nine
      Months
                                    Ended
      September 30
                                  
                                  
                                  Increase/
                                  
                                  
                                  Percentage2008
                                  
                                  
                                  2007
                                  
                                  
                                  (Decrease)
                                  
                                  
                                  Change
      (%)Total
      operating incomeOil
      & Gas
                                  
                                  $
                                  (3,940
                                  )
                                  
                                  $
                                  (4,581
                                  )
                                  
                                  
                                  641
                                  
                                  
                                  
                                  14Rig
      & refurbishing operations
                                  
                                  
                                  (921
                                  )
                                  
                                  
                                  (1,083
                                  )
                                  
                                  
                                  162
                                  
                                  
                                  
                                  15Minerals
                                  
                                  
                                  (363
                                  )
                                  
                                  
                                  (310
                                  )
                                  
                                  
                                  (53
                                  )
                                  
                                  
                                  (17
                                  )Drilling
      and Development
                                  
                                  
                                  -
                                  
                                  
                                  
                                  1,395
                                  
                                  
                                  
                                  (1,395
                                  )
                                  
                                  
                                  (100
                                  )Non-segmented
                                  
                                  
                                  (826
                                  )
                                  
                                  
                                  (939
                                  )
                                  
                                  
                                  113
                                  
                                  
                                  
                                  12Total
      operating income
                                  
                                  $
                                  (6,050
                                  )
                                  
                                  $
                                  (6,376
                                  )
                                  
                                  $
                                  326
                                  
                                  
                                  
                                  5





Income
for the nine months ended September 30, 2008 was a loss of $6.0 million,
compared to $6.3 million loss in the first nine months of 2007, a decrease in
the loss of $0.3 million.





Oil
and Gas





Work
continued apace on facilities build up of the Company’s primary development
property in the Oxnard, California oilfields to support increase of
production.  Recovery of the heavy oil from the Upper Vaca Tar Sand
formation requires drilling of wells with horizontal bores in the range of 1,200
– 1,500 feet, specialized completion techniques, extensive high pressure/high
temperature steaming, addition of light gravity oil diluent, water separation
and shipping by truck to a pipeline terminal.  The steam generators
are now supplied by natural gas, and an oil sales pipeline is being
arranged.





Tri-Valley
is presently steaming and producing from seven horizontal well bores and
evaluating various zones on its Hunsucker Lease. It recently added the Lenox
Ranch across the street with 20 idle vertical wells that are being
systematically re-worked in preparation for steaming and
production.  New horizontal wells are planned for drilling in the
fourth quarter since horizontal bores can produce at rates greater than what
vertical wells can do.





On
Tri-Valley’s Moffat Ranch gas field west of Madera, California, the new 48-X
well continues to be produced at a choked back rate to avoid sand/water
build-up.  At the Company’s Temblor properties in the South Belridge
and Edison oil fields, modest oil production continues as the pilot water flood
project build up continues and new shallow wells are contemplated for the fourth
quarter 2008 and first quarter 2009.





Tri-Valley
is raising the last $15 million of the $100 million TVOG Opus I Drilling Program
LP, primarily to attain some 20 horizontal wells at the Oxnard
properties.  When these well bores have continuous steam from injector
wells, the Company believes sustained production in the 10,000 barrels of oil
can be obtained according to a report by the late Canadian steam assisted
gravity drainage of heavy oil expert, Dr. Ralph Butler. Other drilling programs,
both exploratory and development are being considered for launch in
2009.





Rig
& refurbishing operations





There
were no revenues from rig operations in the third quarter compared to $0.27
million in the third quarter of 2007.  GVPS did not realize operating
revenue in the third quarter of 2008 due to the sale of rig assets in
July.  The operating loss in the third quarter of 2008 was $73
thousand, compared to an operating loss of $0.9 million in the third quarter of
2007, or a decrease in the loss of $0.8 million.




16
 Table of Contents





In June
2008, GVPS agreed to sell all of its production and drilling rigs and down hole
tools to Excalibur Well Services, Inc. in exchange for cash and a highly
attractive, preferred client status for well servicing.  The sale was
completed in July 2008 for a price of $4.8 million.  GVPS recognized
an impairment loss of $0.3 million in the second quarter to write down the value
of the assets being sold to the sales price.  GVPS retained its fleet
of 17 steam generators.





GVDC
drilled one petroleum well in Nevada for another operator during the second
quarter. The rig is presently idle and is looking for its next
jobs.  More than 120 petroleum and geothermal wells have been staked
or permitted for future drilling in Nevada.  We believe that GVDC’s
experience in Nevada provides a profitable opportunity for the business line in
2008 and beyond, and the Company has stepped up its marketing activity in
Nevada, Idaho and eastern Washington.  With engine modifications to
accommodate stricter air quality rules, the rig can also operate in
California.





Minerals
Activities





There
were no revenues from minerals activities in the third quarter of 2008 compared
to $120 thousand in the third quarter of 2007, due to a decrease in consulting
revenue. With the primary emphasis of the Company to boost oil and gas
production, the properties of Select Resources largely have been in a care and
maintenance status.  However, Jim Bush, formerly Vice President of
exploration for Tri-Valley Oil and Gas Co. and now President of Select
Resources, has assumed the charge of activating and monetizing the properties
through finding joint venture partners, spin-off or outright sale.





For the
third quarter, mineral programs continued the assessment and compilation of
geologic information as was done in the previous quarter for the Calder,
Richardson, and Shorty Creek properties in Alaska, but made significant advances
in understanding the Admiral Calder calcium carbonate deposit (see
below).  Select also continued to pursue candidates for management and
officer levels in the company and consultants to assist in property
development.  Select continues to be devoted to returning the Admiral
Calder mine to a profitable undertaking, continues to explore precious metal
opportunities, continues to include uranium as a new commodity of interest, and
has reduced efforts directed towards acquiring new base metals and industrial
minerals properties.  More specific information is provided in the
following sections.





Industrial
Minerals





During
the third quarter, Select continued low-cost monitoring and security at the
Admiral Calder calcium carbonate quarry in Alaska and undertook additional
maintenance activity and equipment testing.  Several sections of the
crushing and material handling plant were operated as were various parts of the
maintenance shop and the on-site analytical lab.  As a result, we now
have a much better grasp of what needs to be done prior to directing any effort
towards restart and it is not overwhelming.





In
addition to the above, Select made significant advances in understanding the
Admiral Calder calcium carbonate deposit itself.  This deposit is
almost certainly in the top 10% of the globe’s deposits and by some experts is
considered to be in the top 1%.  We believe it may well be one of the
top 5 or 10 calcium carbonate deposits in the world.  The chemical
purity and high whiteness/brightness characteristics make the product suitable
for high-end uses as in adhesives, plastics, rubber, paint products, paper, and
possibly in high end paper applications (although we are currently investigating
its characteristics when pulverized to the sub 10 micron
size-range).  Even more important, it appears as though the amount of
the high quality product in the deposit is easily twice the estimates originally
provided and perhaps triple or more.  These findings significantly
change the overall life and potential production rates of the operation, and
along with that the potential profit.  In short, our compilation of
many different reports and reworking of the calculations of the in-ground
resource are indicating that this deposit is much better than we had originally
envisioned, and along with that so are the economics.  To further
enhance the value of these findings, the third quarter saw the beginning of
inquiries about developing the property and meetings with potential joint
venture partners.  In addition to the ground calcium carbonate (GCC)
market and chemical grade calcium carbonate market, Select is further evaluating
the site’s potential to produce new product types that can competitively
participate in new (i.e. first-time for Calder) market
categories.  These include dimension stone, and ways to minimize and
exploit mine waste (such as using low grade material for acid rock drainage
control at other mines).  Putting the quarry into a revenue-generating
status remains a Select priority.  In parallel with the above, Select
is considering candidates for a long-term position to head up the development of
this property.




17
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Select
continues to maintain a number of industrial mineral projects in six western
states in a hold status, pending further review.  Commodities in these
projects include barite, sand & gravel, aggregate, limestone, dolomite,
calcium carbonate, cinder, and other industrial mineral
commodities.





Precious
Metals





Select
continues to solicit mining interests for the larger scale exploration on both
the Richardson and Shorty Creek properties, as well as identifying a field site
manager for both properties.   Select has contacted, and
continues to solicit, candidates for these positions.





Shorty
Creek has been described by the State Geologist of Alaska as perhaps the best
un-drilled gold exploration project in Alaska.  It should be pointed
out that Select’s neighbor, International Tower Hill, located only a few miles
northerly from Shorty Creek, has delineated in excess of 3 million in-the-ground
ounces of gold via drilling.





The
Richardson District is arguably the most prospective gold exploration district
in Alaska and it remains under-explored.  Tri-Valley has found native
gold at 60 locations along a 20 mile swath suggesting the possibility of a large
system.





Uranium





Select
has begun soliciting and reviewing uranium opportunities in a very targeted and
selective manner.  Select is adhering rigorously to strict high-end
criteria for these properties.





Base
Metals





Base
Metals operations continue to be on hold.





Non-segmented
items





The
non-segmented items consist of stock option expense and interest
expense.  Non-segmented items decreased from $0.9 million in the first
nine months of 2007, to $0.8 million in the first nine months of
2008.  Stock option expense for the first nine months of 2008 was $0.6
million, compared to $0.7 million for the first nine months of 2007, a decrease
of $0.1 million.  Interest expense for the first nine months of 2008
was $0.2 million, unchanged from the first nine months of 2007.





Capital Resources and
Liquidity





In 2002
through the third quarter of 2008, our drilling activities have been largely
funded by selling interests in our OPUS I drilling partnership. We do not borrow
in order to fund drilling activities. Our continued drilling activity relies on
our ability to raise money for projects through drilling partnerships or other
joint ventures.





Current
assets were about $12.0 million at September 30, 2008, up from $8.0 million at
year end 2007, an increase of $4.0 million. Cash on hand increased from $7.6
million at year end 2007 compared to $9.0 million at September 30, 2008. Trade
accounts receivable increased to $2.9 million at September 30, 2008, compared to
$0.3 million at year end 2007 due to increased oil and gas
production.  Current liabilities decreased to about $7.5 million at
September 30, 2008, compared to $10.3 million at year end 2007.





Operating
Activities





We had a
negative cash flow of $10.3 million for the nine months ended September 30, 2008
compared to a negative cash flow of $1.7 million for the same period in
2007.  The negative cash flow in the current period is due mainly to
our loss from operations along with our decrease in advances from joint venture
participants and an increase in accounts receivable.  Our loss from
operations was approximately $6.0 million for the nine months ended September
30, 2008 compared to a $6.3 million loss for the same period in
2007.




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Investing
Activities





Net cash
provided by investing activities was $1.1 million for the first nine months of
2008 compared to $7.3 million used for the first nine months of
2007.  During 2008, the company received $7.3 million from the sale of
rig assets, three steam generators and a heater treater. $5.9 million was used
towards capital expenditures, primarily the drilling of new wells and we used
$0.4 million to buy back membership units in GVPS.





Financing
Activities





Net cash
provided by financing activities was $10.6 million for the first nine months of
2008 compared to $6.0 million for the same period of 2007. We received $9.0
million from sales of restricted shares of common stock in privately negotiated
transactions including the exercise of stock options by employees. We used
$459,000 to pay down principal on long-term debt. The company raised $2.9
million from the sale of partnership units in GVP. We have not planned any
private placement of equity securities for the remainder of 2008, but we may
continue to receive funds from privately negotiated transactions. We do not have
a targeted or budgeted amount of equity financing activities.





Liquidity





The
recoverability of our oil and gas reserves depends on future events, including
obtaining adequate financing for our exploration and development program,
successfully completing our planned drilling program, and achieving a level of
operating revenues that is sufficient to support our cost
structure.  At various times in our history, it has been necessary for
us to raise additional capital through private placements of equity
financing.  When such a need has arisen, we have met it
successfully.  It is management’s belief that we will continue to be
able to meet our needs for additional capital as such needs arise in the
future.  We may need additional capital to pay for our share of costs
relating to the drilling prospects and development of those that are successful,
and to acquire additional oil and gas leases, drilling equipment and other
assets.  The total amount of our capital needs will be determined in
part by the number of prospects generated within our exploration program and by
the working interest that we retain in those prospects.





During
the remainder of 2008, we expect to expend approximately $7 million on drilling
activities. Funds for the majority of these activities will be provided by sales
of partnership interests in the Opus-I drilling partnership, which will still be
raising funds for development purposes.  Tri-Valley’s portion is
expected to be approximately $1.5 million.  Our ability to complete
our planned drilling activities in 2008 depends on some factors beyond our
control, such as availability of equipment and personnel.  Our actual
capital commitments for fiscal year 2008 are less than $2 million, but to expend
$7 million we will require additional capital from the OPUS partnership or other
outside parties.





During
the remainder of 2008, we expect expenditures of approximately $ 0.2 million on
mining activities, including mining lease and exploration expenses.





Should we
choose to make an acquisition of producing oil and gas properties, such an
acquisition would likely require that some portion of the purchase price be paid
in cash, and thus would create the need for additional
capital.  Additional capital could be obtained from a combination of
funding sources.  The potential funding sources include:




·
            Cash
      flow from operating activities,


·
            Borrowings
      from financial institutions (which we typically
  avoid),


·
              Debt
      offerings, which could increase our leverage and add to our need for cash
      to service such debt (which we typically
avoid),


·
            Additional
      offerings of our equity securities, which would cause dilution of our
      common stock,


·
            Sales
      of portions of our working interest in the prospects within our
      exploration program, which would reduce future revenues from its
      exploration program,


·
            Sale
      to an industry partner of a participation in our exploration
      program,


·
            Sale
      of all or a portion of our producing oil and gas properties, which would
      reduce future revenues.




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Our
ability to raise additional capital will depend on the results of our operations
and the status of various capital and industry markets at the time such
additional capital is sought.  Accordingly, there can be no assurances
that capital will be available to us from any source or that, if available, it
will be on terms acceptable to us.  The Company has no off balance
sheet arrangements.


New Accounting
Pronouncements





See Note
3 to our unaudited consolidated financial statements.








Item
3.  Quantitative and Qualitative Disclosures
about Market Risk





Tri-Valley
Corporation does not engage in hedging activities and does not use commodity
futures or forward contracts in its cash management functions.








Item
4.  Controls and Procedures





As of
September 30, 2008, an evaluation was performed under the supervision and with
the participation of our management, including our Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. These controls and procedures are based on
the definition of disclosure controls and procedures in Rule 13a-15(e) and Rule
15d-15(e) promulgated under the Securities Exchange Act of 1934.





Based on
that evaluation as of September 30, 2008, our management, including the CEO and
CFO concluded that our disclosure controls and procedures were effective to
ensure that the information required to be disclosed by us in the reports that
we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in SEC
rules and forms.





Management,
including our CEO and CFO, have concluded that our disclosure controls and
procedures provide reasonable assurance that the controls and procedures will
meet their desired control objectives.In
designing and evaluating our control system, management recognized that any
control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance of achieving the desired control objectives.
Further, the design of a control system must reflect the fact that there are
resource constraints, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any that may affect our operations have been
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty, and that breakdowns can occur because of simple
error or mistake.





During
the third quarter of 2008, there were no changes in the Company's internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over
financial reporting.








PART
II - OTHER INFORMATION





Item
1A.  Risk Factors





There
have been no material changes from the risk factors previously disclosed in our
Annual Report on Form 10-K for the fiscal year ended December 31,
2007.




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 Table of Contents





Item
2.  Unregistered Sales of Equity
Securities





During
the third quarter of 2008, the Company issued 426,603 shares of restricted
common stock to 60private investors at
prices of $5.00 to $7.49 per share for a total consideration of
$2,420,688.





All of
these transactions were conducted in reliance on the exemption from registration
requirements of the Securities Act of 1933 contained in Section 4(2) of that
Act.








Item
6.  Exhibits





Item           Description





31.1           Rule
13a-14(a)/15d-14(a) Certification


31.2           Rule
13a-14(a)/15d-14(a) Certification


32.1           18
U.S.C. Section 1350 Certification


32.2           18
U.S.C. Section 1350 Certification








Signatures








Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.





TRI-VALLEY
  CORPORATIONNovember
      10, 2008
                            
                            /s/F. Lynn BlystoneF.
      Lynn BlystoneChairman,
      President and CEONovember
      10, 2008
                            
                            /s/ Arthur M. EvansArthur
      M. EvansChief
      Financial
Officer





21