**Tri-Valley      Corporation**

**                Delaware**
**84-0617433**

**4550      California Avenue, Suite 600, Bakersfield, California      93309**

**(661)      864-0500 **

**INTRODUCTORY        STATEMENT**

| ·   | Note                7 to the Consolidated Financial Statements has been revised to include                a                description of each or our industry                segments. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Management’s                Discussion and Analysis of Financial Condition and Results of Operations                has been revised to include a discussion of results by industry                segment. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | The                Controls and Procedures discussion was expanded to discuss our efforts to                remediate material weaknesses in our internal control over financial                reporting during the second quarter. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                     |                                                                      | Page   |   |
|--------------------------|---------------------------------------------------------------------------|--------|--------|
|                     |                                                                      |   |   |
| PART                I -  | FINANCIAL                INFORMATION                                      | 3      |   |
|                     |                                                                      |   |   |
| Item                1.   | Consolidated                Financial Statements                          | 3      |   |
|                     |                                                                      |   |   |
| Item                2.   | Management's                Discussion and Analysis of Financial          |   |   |
|                     | Condition                and Results of Operations                        | 14     |   |
|                     |                                                                      |   |   |
| Item                3.   | Quantitative                and Qualitative Disclosures about Market Risk | 18     |   |
|                     |                                                                      |   |   |
| Item                4.   | Controls                and Procedures                                    | 18     |   |
|                     |                                                                      |   |   |
| PART                II - | OTHER                INFORMATION                                          | 19     |   |
|                     |                                                                      |   |   |
| Item                1A.  | Risk                Factors                                               | 19     |   |
|                     |                                                                      |   |   |
| Item                2.   | Unregistered                Sales of Equity Securities                    | 19     |   |
|                     |                                                                      |   |   |
| Item                6.   | Exhibits                                                                  | 19     |   |
|                     |                                                                      |   |   |
| SIGNATURES               |                                                                      | 20     |   |
|                     |                                                                      |   |   |

----

**Part      I - FINANCIAL INFORMATION**

**TRI-VALLEY      CORPORATION**

**CONSOLIDATED      BALANCE SHEETS**

**ASSETS**

|                                               |   | June                30, |       | December                31, |   |
|----------------------------------------------------|--------|-------------------------|------------|-----------------------------|--------|
|                                               |   | 2007                    |       | 2006                        |   |
|                                               |   | (Unaudited)             |       | (Audited)                   |   |
|                                               |   |                    |       |                        |   |
| Current                assets                      |   |                    |       |                        |   |
| Cash                                               |   | $                       | 15,563,143 |                        | $      | 15,598,215 |   |
| Accounts                receivable, trade          |   |                    | 446,539    |                        |   | 377,278 |   |
| Prepaid                expenses                    |   |                    | 411,410    |                        |   | 42,529 |   |
|                                               |   |                    |       |                        |   |   |   |
| Total                current assets                |   |                    | 16,421,092 |                        |   | 16,018,022 |   |
|                                               |   |                    |       |                        |   |   |   |
| Property                and equipment, net         |   |                    |       |                        |   |   |   |
| Proved                properties                   |   |                    | 1,345,591  |                        |   | 1,407,925 |   |
| Unproved                properties                 |   |                    | 2,715,988  |                        |   | 2,792,340 |   |
| Rigs                                               |   |                    | 6,331,001  |                        |   | 5,371,593 |   |
| Other                property and equipment        |   |                    | 3,465,951  |                        |   | 2,504,185 |   |
|                                               |   |                    |       |                        |   |   |   |
| Total                property and equipment, net   |   |                    | 13,858,531 |                        |   | 12,076,043 |   |
|                                               |   |                    |       |                        |   |   |   |
| Other                assets                        |   |                    |       |                        |   |   |   |
| Deposits                                           |   |                    | 159,833    |                        |   | 309,833 |   |
| Investments                in partnerships         |   |                    | 17,400     |                        |   | 17,400 |   |
| Investment                in marketable securities |   |                    | 380,000    |                        |   | - |   |
| Goodwill                                           |   |                    | 212,414    |                        |   | 212,414 |   |
| Other                                              |   |                    | 20,413     |                        |   | 20,413 |   |
|                                               |   |                    |       |                        |   |   |   |
| Total                other assets                  |   |                    | 790,060    |                        |   | 560,060 |   |
|                                               |   |                    |       |                        |   |   |   |
| **Total                assets**                    |   | $                       | 31,069,683 |                        | $      | 28,654,125 |   |

----

**LIABILITIES      AND STOCKHOLDERS' EQUITY**

|                                                                                                                                            |   | June                30, |        | December                31, |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------|-------------|-----------------------------|--------|
|                                                                                                                                            |   | 2007                    |        | 2006                        |   |
|                                                                                                                                            |   | (Unaudited)             |        | (Audited)                   |   |
| Current                liabilities                                                                                                              |   |                    |        |                        |   |
| Notes                payable                                                                                                                    |   | $                       | 369,181     |                        | $      | 619,069 |   |
| Notes                payable - related parties                                                                                                  |   |                    | 53,112      |                        |   | 501,036 |   |
| Accounts                payable and accrued expenses                                                                                            |   |                    | 1,995,438   |                        |   | 2,237,116 |   |
| Amounts                payable to joint venture participants                                                                                    |   |                    | 138,609     |                        |   | 280,815 |   |
| Advances                from joint venture participants, net                                                                                    |   |                    | 8,569,985   |                        |   | 5,408,909 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Total                current liabilities                                                                                                        |   |                    | 11,126,325  |                        |   | 9,046,945 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Non-Current                Liabilities                                                                                                          |   |                    |        |                        |   |   |   |
| Asset                retirement obligation                                                                                                      |   |                    | 228,714     |                        |   | 216,714 |   |
| Long-term                portion of notes payable - related parties                                                                             |   |                    | 671,879     |                        |   | 698,963 |   |
| Long-term                portion of notes payable                                                                                               |   |                    | 2,071,125   |                        |   | 2,047,885 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Total                non-current liabilities                                                                                                    |   |                    | 2,971,718   |                        |   | 2,963,562 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Total                liabilities                                                                                                                |   |                    | 14,098,043  |                        |   | 12,010,507 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Stockholders'                equity                                                                                                             |   |                    |        |                        |   |   |   |
| Common                stock, $.001 par value; 100,000,000 shares                                                                                |   |                    |        |                        |   |   |   |
| authorized;                24,642,786 and 23,546,655 issued and                                                                                 |   |                    |        |                        |   |   |   |
| outstanding                at June 30, 2007, and December 31,                                                                                   |   |                    |        |                        |   |   |   |
| 2006,                respectively                                                                                                               |   |                    | 24,502      |                        |   | 23,407 |   |
| Less:                common stock in treasury, at cost,                                                                                         |   |                    |        |                        |   |   |   |
| 100,025                shares                                                                                                                   |   |                    | (13,370     | )                           |   | (13,370 | ) |
| Capital                in excess of par value                                                                                                   |   |                    | 34,808,802  |                        |   | 28,692,780 |   |
| Additional                paid in capital - warrants                                                                                            |   |                    | 905,713     |                        |   | 247,313 |   |
| Additional                paid in capital - stock options                                                                                       |   |                    | 1,758,951   |                        |   | 1,262,404 |   |
| Additional                paid in capital - Great Valley Drilling Company, LLC and Great Valley                Production Services Company, LLC |   |                    | 3,543,534   |                        |   | 5,438,087 |   |
| Accumulated                deficit                                                                                                              |   |                    | (24,056,492 | )                           |   | (19,007,003 | ) |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| Total                stockholders' equity                                                                                                       |   |                    | 16,971,640  |                        |   | 16,643,618 |   |
|                                                                                                                                            |   |                    |        |                        |   |   |   |
| **Total                liabilities and stockholder's equity**                                                                                   |   | $                       | 31,069,683  |                        | $      | 28,654,125 |   |

----

**TRI-VALLEY      CORPORATION**

**CONSOLIDATED      STATEMENTS OF OPERATIONS**

|                                                                                                           |   | For                the Three Months |       | For                the Six Months |   |
|----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|-----------------------------------|--------|
|                                                                                                           |   | Ended                June 30        |       | Ended                June 30      |   |
|                                                                                                           |   | 2007                                |       | 2006                              |   | 2007 |   | 2006 |   |
| Revenues                                                                                                       |   |                                |       |                              |   |   |   |   |   |
| Sale                of oil and gas                                                                             |   | $                                   | 168,015    |                              | $      | 291,255 |   | $ | 332,201 |   | $ | 609,977 |   |
| Rig                income                                                                                      |   |                                | 560,366    |                              |   | - |   |   | 1,810,869 |   |   | - |   |
| Drilling                & Development                                                                      |   |                                | -          |                              |   | 559,556 |   |   | - |   |   | 559,556 |   |
| Other                income                                                                                    |   |                                | 571,329    |                              |   | 70,325 |   |   | 672,940 |   |   | 104,773 |   |
| Interest                income                                                                                 |   |                                | 106,240    |                              |   | 6,080 |   |   | 200,307 |   |   | 11,937 |   |
| Total                Revenues                                                                                  |   |                                | 1,405,950  |                              |   | 927,216 |   |   | 3,016,317 |   |   | 1,286,243 |   |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Costs                and expenses                                                                              |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Oil                and gas lease expense                                                                       |   |                                | 116,098    |                              |   | 45,348 |   |   | 204,493 |   |   | 102,762 |   |
| Mining                exploration expenses                                                                     |   |                                | 45,662     |                              |   | 77,306 |   |   | 113,152 |   |   | 277,893 |   |
| Drilling                and development                                                                        |   |                                | 625,593    |                              |   | 426,847 |   |   | 858,089 |   |   | 469,409 |   |
| Rig                operations                                                                                  |   |                                | 335,450    |                              |   | - |   |   | 780,008 |   |   | - |   |
| Depletion,                depreciation and amortization                                                        |   |                                | 233,194    |                              |   | 111,076 |   |   | 486,317 |   |   | 222,744 |   |
| Interest                                                                                                       |   |                                | 71,770     |                              |   | 97,327 |   |   | 148,666 |   |   | 180,368 |   |
| Impairment                loss                                                                                 |   |                                | -          |                              |   | - |   |   | 246,862 |   |   | 458,564 |   |
| General                and administrative                                                                      |   |                                | 2,767,609  |                              |   | 1,721,366 |   |   | 5,228,219 |   |   | 2,627,279 |   |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Total                costs and expenses                                                                        |   |                                | 4,195,376  |                              |   | 2,479,270 |   |   | 8,065,806 |   |   | 4,339,019 |   |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Loss                from continuing operations, before income taxes and discontinued                operations |   |                                | (2,789,426 | )                                 |   | (1,552,054 | ) |   | (5,049,489 | ) |   | (3,052,776 | ) |
| Tax                provision                                                                                   |   |                                | -          |                              |   | - |   |   | - |   |   | - |   |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Loss                from continuing operations, before discontinued                                            |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| operations                                                                                                     |   |                                | (2,789,426 | )                                 |   | (1,552,054 | ) |   | (5,049,489 | ) |   | (3,052,776 | ) |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Loss                from discontinued operations                                                               |   |                                | -          |                              |   | (1,668,125 | ) |   | - |   |   | (3,251,510 | ) |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Net                Income (Loss)                                                                               |   | $                                   | (2,789,426 | )                                 | $      | (3,240,179 | ) | $ | (5,049,489 | ) | $ | (6,304,286 | ) |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Basic                net loss per share:                                                                       |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Loss                from continuing operations                                                                 |   | $                                   | (.11       | )                                 | $      | (.07 | ) | $ | (.20 | ) | $ | (.14 | ) |
| Income                (loss) from discontinued operations, net                                                 |   | $                                   | -          |                              | $      | (.07 | ) | $ | - |   | $ | (.13 | ) |
| Basic                loss per common share                                                                     |   | $                                   | (.11       | )                                 | $      | (.14 | ) | $ | (.20 | ) | $ | (.27 | ) |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Weighted                average number of shares                                                               |   |                                | 24,627,121 |                              |   | 23,067,509 |   |   | 24,278,448 |   |   | 23,196,116 |   |
|                                                                                                           |   |                                |       |                              |   |   |   |   |   |   |   |   |   |
| Potentially                dilutive shares outstanding                                                         |   |                                | 28,032,887 |                              |   | 25,824,234 |   |   | 27,555,100 |   |   | 26,059,022 |   |

----

**TRI-VALLEY      CORPORATION**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS**

|                                                                                                                       |   | For                the Six Months |       |
|----------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|------------|
|                                                                                                                       |   | Ended                June 30,     |       |
|                                                                                                                       |   | 2007                              |       | 2006 |   |
| Cash                Flows from Operating Activities                                                                        |   |                              |       |   |   |
| Net                loss                                                                                                    |   | $                                 | (5,049,489 | ) | $ | (6,304,286 | ) |
| Loss                from discontinued operations                                                                           |   |                              | -          |   |   | (3,251,510 | ) |
| Loss                from continuing operations                                                                             |   | $                                 | (5,049,489 | ) |   | (3,052,776 | ) |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Adjustments                to reconcile net income to net cash used from operating                activities:              |   |                              |       |   |   |   |   |
| Depreciation,                depletion and amortization                                                                    |   |                              | 486,317    |   |   | 222,744 |   |
| Impairment,                dry hole and other disposals of property                                                        |   |                              | 258,862    |   |   | 458,564 |   |
| Stock                options                                                                                               |   |                              | 653,210    |   |   | 577,420 |   |
| Warrants                                                                                                                   |   |                              | 316,852    |   |   | - |   |
| Changes                in operating capital:                                                                               |   |                              |       |   |   |   |   |
| Prepaids-(increase)                decrease                                                                                |   |                              | (368,881   | ) |   | - |   |
| Deposits-(increase)                decrease                                                                                |   |                              | 150,000    |   |   | (105,037 | ) |
| Accounts                receivable-(increase) decrease                                                                     |   |                              | (69,261    | ) |   | (3,607 | ) |
| Trade                accounts payable-increase (decrease)                                                                  |   |                              | (939,490   | ) |   | 1,166,566 |   |
| Advances                from Great Valley Drilling, LLC-increase (decrease)                                                |   |                              | -          |   |   |   |   |
| Accounts                payable to joint venture                                                                           |   |                              |       |   |   |   |   |
| participants                and related parties-increase (decrease)                                                        |   |                              | (142,206   | ) |   | 95,669 |   |
| Advances                from joint venture participants - increase (decrease)                                              |   |                              | 3,161,076  |   |   | (363,726 | ) |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Net                cash provided (used in) continuing operations                                                           |   |                              | (1,543,010 | ) |   | (1,004,183 | ) |
| Net                cash provided by (used in) discontinued operations                                                      |   |                              | -          |   |   | (1,928,877 | ) |
| **Net                cash provided (used) by operating activities**                                                        |   |                              | (1,543,010 | ) |   | (2,933,060 | ) |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Cash                Flows from Investing Activities:                                                                       |   |                              |       |   |   |   |   |
| Capital                expenditures                                                                                        |   |                              | (2,515,667 | ) |   | (2,880,640 | ) |
| Investment                in marketable securities                                                                         |   |                              | (380,000   | ) |   | - |   |
| Repurchase                of minority interest in GVDC/GVPS                                                                |   |                              | (1,494,000 | ) |   | - |   |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Net                cash provided by (used in) continuing operations                                                        |   |                              | (4,389,667 | ) |   | (860,375 | ) |
| Net                cash provided by (used in) discontinued operations                                                      |   |                              | -          |   |   | (2,020,265 | ) |
|                                                                                                                       |   |                              |       |   |   |   |   |
| **Net                Cash Provided (Used) by Investing Activities**                                                        |   |                              | (4,389,667 | ) |   | (2,880,640 | ) |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Cash                Flows from Financing Activities                                                                        |   |                              |       |   |   |   |   |
| Proceeds                from long-term debt                                                                                |   |                              | -          |   |   | 1,298,628 |   |
| Principal                payments on long-term debt                                                                        |   |                              | (3,847     | ) |   | (477,468 | ) |
| Net                proceeds from additional paid in capital - stock options                                                |   |                              | 496,547    |   |   | - |   |
| Net                proceeds from additional paid in capital - warrants                                                     |   |                              | 658,400    |   |   | - |   |
| Net                proceeds from additional paid in capital - Great Valley Drilling/Great                Valley Production |   |                              | (400,551   | ) |   | 3,813,840 |   |
| Stock                issuance costs                                                                                        |   |                              | (787,900   | ) |   | - |   |
| Proceeds                from issuance of common stock                                                                      |   |                              | 5,934,956  |   |   | 1,152,511 |   |
|                                                                                                                       |   |                              |       |   |   |   |   |
| Net                cash provided by (used in) continuing operations                                                        |   |                              | 5,897,605  |   |   | 5,787,511 |   |
| Net                cash provided by (used in) discontinued operations                                                      |   |                              | -          |   |   | - |   |
|                                                                                                                       |   |                              |       |   |   |   |   |
| **Net                Cash Provided (Used) by Financing Activities**                                                        |   |                              | 5,897,605  |   |   | 5,787,511 |   |

----

**TRI-VALLEY      CORPORATION**

**CONSOLIDATED      STATEMENTS OF CASH FLOWS (Continued)**

|                                                                  |   |   |       |   |   |
|-----------------------------------------------------------------------|--------|--------|------------|--------|--------|
| **Net                Increase in Cash and Cash Equivalents**          |   |   | (35,072    | )      |   | (26,189 | ) |
| Cash                and Cash Equivalents at Beginning of Period  |   |   | 15,598,215 |   |   | 4,876,921 |   |
|                                                                  |   |   |       |   |   |   |   |
| Cash                and Cash Equivalents at End of Period             |   | $      | 15,563,143 |   | $      | 4,850,732 |   |
|                                                                  |   |   |       |   |   |   |   |
| Supplemental                Information:                              |   |   |       |   |   |   |   |
| Cash                paid for interest                                 |   | $      | 148,667    |   | $      | 336,860 |   |
| Cash                paid for taxes                                    |   | $      | -          |   | $      | - |   |

----

**TRI-VALLEY      CORPORATION**

**NOTES      TO CONDENSED FINANCIAL STATEMENTS**

**FOR      THE SIX MONTHS ENDED**

**June      30, 2007 and 2006**

**NOTE      1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION**

| ·   | 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 Tri-Valley’s mineral interests. Select operates 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. However, from time to time TVOG may contract various units to              third              parties when not immediately needed for TVOG projects. Tri-Valley has              retained 54% of the ownership interest and the remainder is owned by              private parties. Operations began in the third quarter of 2006. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 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. TVC exercised its option              to              buy back the minority interest in GVDC in May 2007 and the buy back              was              finalized by the end of June 2007. The cost to buy back the minority              interest was $1,319,040. GVDC is now 100% owned by TVC. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Tri-Valley              Power Corporation is inactive at the present              time. |
|--------------------|-----------------------------------------------------------------------------------------|

----

**NOTE      2 - PER SHARE COMPUTATIONS**

**NOTE      3 - SUMMARY OF RECENTLY ISSUED ACCOUNTING PRONOUCEMENTS**

*“Accounting      for Uncertainty in Income Taxes*

*“Fair      Value Measurements.”*

*Considering      the Effects of Prior Year Misstatements when Quantifying Misstatements in      Current Year Financial Statements*

**NOTE      3 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Continued)**

*The      Fair Value Option for Financial Assets and Financial      Liabilities*

**NOTE      4 - INVESTMENT**

*Accounting      for Certain Investments in Debt and Equity Securities*

|                                | June                30, 2007 |
|-------------------------------------|------------------------------|
|                                |                         |
| Net                cost of equities | $                380,000     |
| Unrealized                Gains     | --                           |
| Unrealized                Losses    | --                           |
|                                |                         |
| Fair                Market Value    | $                380,000     |
|                                |                         |

*“Foreign      Currency Translation*

----

**NOTE      5 - CHANGES IN SECURITIES**

*Accounting      for Convertible Debt and Debt issued with Stock Purchase Warrants (APB14)*
*Accounting      for Convertible Securities with Beneficial Conversion Features or Contingently      Adjustable Conversion Ratios, (EITF 98-5) *
*Application      of Issue No 98-5 to Certain Convertible Instruments and (EITF 00-27.*
      convertible instruments using the Black-Scholes valuation method, using the      same      assumptions used for valuing employee options for purposes of SFAS No. 123R,      except that the expected life of the warrant is used. * *Under      these guidelines, the Company allocates the value of the proceeds received.      The      price allocated for the warrants is calculated by subtracting the current market      price of the stock from the total proceeds of the sale of the restricted stock      with the warrant attached. The allocated fair value is recorded as capital      paid      in - warrants. This allocated fair value of the proceeds from the sale of      warrants is subtracted from the value of the warrants using the Black-Scholes      valuation method to calculate the stock issuance expense. 

**NOTE      6 - STOCK BASED COMPENSATION EXPENSE**

----

**NOTE      7 - FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS**

*“Disclosure      about Segments of an Enterprise and Related Information”.*

| o   | *Oil              and gas operations*              include our share of revenues from oil and gas wells on which TVOG              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. |
|---------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | *Rig              operations*              began in 2006, when the Company acquired drilling rigs and began operating              them through subsidiaries GVPS and GVDC. Rig operations include income              from rental of oil field equipment. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | *Minerals*              include the Company’s mining and mineral prospects and operations, and              expenses associated with those operations. In 2006, the Company recorded              minerals revenue from consulting services performed for the mining              and              minerals industry, which are included on the operating statement as              other              income. |
|---------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| o   | *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. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                     |   |  Six                Months Ended June 30, 2007 |       | Six                Months Ended June 30, 2006 |   |
|----------------------------------------------------------|--------|-----------------------------------------------------|------------|-----------------------------------------------|--------|
|                                                     |   |                                           |       |                                          |   |
| **Sales                and Other Operating Revenues**    |   |                                           |       |                                          |   |
| Oil                & Gas                             |   | $                                                   | 594,288    |                                          | $      | 696,187 |   |
| Rigs                                                     |   |                                                | 1,943,822  |                                          |   | - |   |
| Minerals                                                 |   |                                                | 478,207    |                                          |   | 30,500 |   |
| Drilling                and Development                  |   |                                                | -          |                                          |   | 559,556 |   |
|                                                     |   |                                                |       |                                          |   |   |   |
| Consolidated                Sales and Operating Revenues |   |                                                | 3,016,317  |                                          |   | 1,286,243 |   |
|                                                     |   |                                                |       |                                          |   |   |   |
|                                                     |   |                                                |       |                                          |   |   |   |
| **Net                Income (Loss)**                     |   |                                                |       |                                          |   |   |   |
| Oil                & Gas                             |   | $                                                   | (4,688,902 | )                                             | $      | (2,222,674 | ) |
| Rigs                                                     |   |                                                | (209,431   | )                                             |   | (317,635 | ) |
| Minerals                                                 |   |                                                | (151,156   | )                                             |   | (3,854,124 | ) |
| Drilling                and Development                  |   |                                                | -          |                                          |   | 90,147 |   |
|                                                     |   |                                                |       |                                          |   |   |   |
| Consolidated                Net Income (Loss)            |   | $                                                   | (5,049,489 | )                                             | $      | (6,304,286 | ) |
|                                                     |   |                                                |       |                                          |   |   |   |

----

|                                     |   |   | June                30, 2007 |   | December                31, 2006 |
|------------------------------------------|--------|--------|------------------------------|--------|----------------------------------|
|                                     |   |   |                         |   |                             |
| **Total                Assets**          |   |   |                         |   |                             |
| Oil                & Gas             |   |   | $                21,005,182  |   | $                18,517,488      |
| Rigs                                     |   |   | 7,524,315                    |   | 7,853,046                        |
| Minerals                                 |   |   | 2,540,186                    |   | 2,283,591                        |
| Drilling                and Development  |   |   | -                            |   | -                                |
|                                     |   |   |                         |   |                             |
| Consolidated                Total Assets |   |   | $                31,069,683  |   | $                28,654,125      |
|                                     |   |   |                         |   |                             |

**NOTE      8 -**
**      INCOME TAXES**

|                                             |   | December                31, |       | June                30, |   |
|--------------------------------------------------|--------|-----------------------------|------------|-------------------------|--------|
|                                             |   | 2006                        |       | 2007                    |   |
|                                             |   |                        |       |                    |   |
| Deferred                tax assets:              |   |                        |       |                    |   |
| Net                operating loss carryforwards  |   | $                           | 5,398,000  |                    | $      | 5,520,000 |   |
| Statutory                depletion carryforwards |   |                        | 496,000    |                    |   | 496,000 |   |
|                                             |   |                        |       |                    |   |   |   |
| Total                deferred tax assets         |   |                        | 5,894,000  |                    |   | 6,016,000 |   |
| Valuation                allowance               |   |                        | (5,894,000 | )                       |   | (6,016,000 | ) |
|                                             |   |                        |       |                    |   |   |   |
| **Net                deferred tax assets**       |   | **$**                       | **-**      |                    | **$**  | **-** |   |

|                                                                     |   | December                31, |     | June                30, |   |
|--------------------------------------------------------------------------|--------|-----------------------------|----------|-------------------------|--------|
|                                                                     |   | 2006                        |     | 2007                    |   |
| Income                (loss) before tax                                  |   | $                           | (940,512 | )                       | $      | (5,049,489 | ) |
|                                                                     |   |                        |     |                    |   |   |   |
| Computed                "expected" tax (benefit)                         |   | $                           | (376,000 | )                       | $      | (2,020,000 | ) |
| State                tax liability                                       |   |                        | -        |                    |   | - |   |
|                                                                     |   |                        |     |                    |   |   |   |
| Utilization                (non-utilization) of operating loss carryover |   |                        | 376,000  |                    |   | 2,020,000 |   |
| **Total                income tax provision**                            |   | **$**                       | **-**    |                    | **$**  | **-** |   |

----

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

**Notice      Regarding Forward-Looking Statements**

**Results      of Operations**

|                                    | Second                Quarter | First                Six Months |
|-----------------------------------------|-------------------------------|---------------------------------|
|                                    | 2007                          | 2006                            | 2007 | 2006 |
|                                    |                          |                            |   |   |
| Oil                and gas              | $   302        | $                368            | $                   594 | $                696 |
| Rig                operations           | 631                           | -                               | 1,944 | - |
| Minerals                                | 473                           | -                               | 478 | 31 |
| Drilling                and development | -                        | 559                             | -  | 559 |
|                                    |                          |                            |   |   |
| Total                revenues           | $1,406                        | $                927            | $                  3,016 | $                1,286 |

*Oil      and Gas*

*Rig      Operations*

*Mining      Activities*

----

*Drilling      and Development Operations*

|                                         |   | Quarter                Ended 6/30/07 |   | Quarter                Ended 6/30/06 |   |
|----------------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|
|                                         |   |                                 |   |                                 |   |
| Oil                and gas                   |   | $                                    | (2,456 | )                                    | $      | (1,136 | ) |
| Rig                operations                |   |                                 | (512   | )                                    |   | (317 | ) |
| Minerals                                     |   |                                 | 179    |                                 |   | (1,877 | ) |
| Drilling                and development      |   |                                 | -      |                                 |   | (90 | ) |
|                                         |   |                                 |   |                                 |   |   |   |
| Total                operating income (loss) |   | $                                    | (2,789 | )                                    | $      | (3,240 | ) |

----

----

**Item      3. Quantitative and Qualitative Disclosures about Market      Risk**

**Item      4. Controls and Procedures**

| o   | Evaluation              of proved properties |
|---------------|----------------------------------------------|

| o   | Accounting              for income taxes; |
|---------------|-------------------------------------------|

| o   | Complete              reviewing, updating and risk assessment of all of our financial controls              and procedures; |
|---------------|-----------------------------------------------------------------------------------------------------------------------------|

| o   | Provide              additional training of financial staff; |
|---------------|--------------------------------------------------------------|

| o   | Purchase              additional research materials and services; |
|---------------|-------------------------------------------------------------------|

| o   | Continue              to shorten the financial closing process to allow more time for a thorough              review; and |
|---------------|---------------------------------------------------------------------------------------------------------------------------|

| o   | Improve              the reporting disclosure and the formulation of accounting for              taxes |
|---------------|--------------------------------------------------------------------------------------------------------|

----

**PART      II - OTHER INFORMATION**

**Item      1A. **
**Risk      Factors**

**Item      2. Unregistered Sales of Equity Securities**

**Item      6. Exhibits**

----

**Signatures**

**TRI-VALLEY      CORPORATION**

*/s/F.      Lynn Blystone*

*/s/      Arthur M. Evans*