**Table of Contents**

| x      | Quarterly report pursuant to Section 13 or      15(d) of the Securities Exchange Act of 1934  |
|--------|-----------------------------------------------------------------------------------------------|
|   |                                                                                          |
|   | For the quarterly period ended September 30,      2009                                        |
|   |                                                                                          |
| o      | Transition report pursuant to Section 13 or      15(d) of the Securities Exchange Act of 1934 |
|   |                                                                                          |
|   | For the transition period from ______________to      ______________.                          |
|   |                                                                                          |
|   |                                                                                          |

| **Nevada**                                                              |   |   |   | **20-8428738**                       |
|-------------------------------------------------------------------------|--------|--------|--------|--------------------------------------|
| (State or other jurisdiction of          incorporation or organization) |   |   |   | (I.R.S. Employer Identification No.) |

| ****   | Large accelerated filer o                                                  |                            | Accelerated filer o**** |   |
|--------|----------------------------------------------------------------------------|---------------------------------|-------------------------|--------|
|   |                                                                       |                            | ****                    |   |
| ****   | Non-accelerated filer o      (Do not check if a smaller reporting company) | Smaller reporting company x**** |                    |

----

|                                     Class                                     | Outstanding at November 12, 2009 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                             |
| Common Stock, par value $0.001 per          share                                                                                                                                                                                                                                                                                                                                                                                                     | 81,643,912                       |

----

|   |   | Page |
|--------|--------|------|

|                            | ITEM      1-- FINANCIAL STATEMENTS                                                                       |   1 |
|---------------------------------|----------------------------------------------------------------------------------------------------------|---------------|
|                            |                                                                                                     |          |
|                            | ITEM 2--      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF OPERATIONS |   8 |
|                            |                                                                                                     |          |
|                            | ITEM 3-- QUANTITATIVE AND QUALITATIVE      DISCLOSURES ABOUT MARKET RISK                                 | 14            |
|                            |                                                                                                     |          |
|                            | ITEM 4T-- CONTROLS AND PROCEDURES                                                                        | 14            |
|                            |                                                                                                     |          |
|                            |                                                                                                     |          |
| **PART II - OTHER INFORMATION** |                                                                                                     |
|                            |                                                                                                     |          |
|                            | ITEM 1-- LEGAL PROCEEDINGS                                                                               | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 1A-- RISK FACTORS                                                                                   | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 2-- UNREGISTERED SALES      OF EQUITY SECURITIES AND USE OF PROCEEDS                                | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 3-- DEFAULTS UPON SENIOR      SECURITIES                                                            | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 4-- SUBMISSION OF MATTERS      TO A VOTE OF SECURITY HOLDERS                                        | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 5-- OTHER INFORMATION                                                                               | 15            |
|                            |                                                                                                     |          |
|                            | ITEM 6-- EXHIBITS                                                                                        | 16            |
|                            |                                                                                                     |          |
|                            | SIGNATURES                                                                                               | 17            |

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**Table of Contents**

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | **September 30, 2009        (unaudited)** |       | **March 31, 2009** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------|------------|--------------------|--------|
| **ASSETS**                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                      |            |               |   |  |   |
| Current Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                      |       |               |   |   |   |
|          Cash                                                                                                                                                                                                                                                                                                                                                                                                                 | $                                         | 105,457    |               | $      | 426,430 |   |
|          Accounts      Receivable:                                                                                                                                                                                                                                                                                                                                                                                            |                                      |       |               |   |   |   |
|                   Oil      & Gas - Related Party                                                                                                                                                                                                                                                                                                                                 |                                      | 382,987    |               |   | 337,879 |   |
|                   Related      Party                                                                                                                                                                                                                                                                                                                                             |                                      | 773,219    |               |   | 1,107,854 |   |
|                   Other                                                                                                                                                                                                                                                                                                                                                          |                                      | 41,554     |               |   | 15,760 |   |
|          Inventory                                                                                                                                                                                                                                                                                                                                                                                                            |                                      | 2,445      |               |   | 7,514 |   |
|          Hedging      Account                                                                                                                                                                                                                                                                                                                                                                                                 |                                      | 6,317      |               |   | 6,317 |   |
|          Total      Current Assets                                                                                                                                                                                                                                                                                                                                                                                            |                                      | 1,311,979  |               |   | 1,901,754 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |            |               |   |  |   |
| Note      Receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      | 553,536    |               |   | 553,536 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |            |               |   |  |   |
| Oil      and Gas Properties - successful efforts method                                                                                                                                                                                                                                                                                                                                                                                                                    |                                      | 26,316,823 |               |   | 25,254,777 |   |
|          Less      Accumulated Depletion and Depreciation                                                                                                                                                                                                                                                                                                                                                                     |                                      | (7,328,208 | )                  |   | (6,206,558 | ) |
|                   Oil      & Gas Properties (net)                                                                                                                                                                                                                                                                                                                                |                                      | 18,988,615 |               |   | 19,048,219 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |            |               |   |  |   |
| Other      Depreciable Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                      | 2,322,167  |               |   | 2,171,654 |   |
|          Less      Accumulated Depreciation                                                                                                                                                                                                                                                                                                                                                                                   |                                      | (425,303   | )                  |   | (315,093 | ) |
|                   Other      Depreciable Assets (net)                                                                                                                                                                                                                                                                                                                            |                                      | 1,896,864  |               |   | 1,856,561 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |            |               |   |  |   |
| Leasehold      Held for Sale                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                      | 150,000    |               |   | 150,000 |   |
| Total Assets                                                                                                                                                                                                                                                                                                                                                                                                                                                               | $                                         | 22,900,994 |               | $      | 23,510,070 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |   |   |
| **LIABILITIES**                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                      |       |               |   |   |   |
| Current      Liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      |       |               |   |   |   |
|          Accounts      Payable                                                                                                                                                                                                                                                                                                                                                                                                | $                                         | 59,466     |               | $      | 22,033 |   |
|          Payable      to Related Parties                                                                                                                                                                                                                                                                                                                                                                                      |                                      | 29,812     |               |   | 148,550 |   |
|          Accrued      Expenses                                                                                                                                                                                                                                                                                                                                                                                                |                                      | 132,902    |               |   | 106,141 |   |
|               Accrued Expenses - Related Party                                                                                                                                                                                                                                                                                                                                                                                     |                                      | 109,664    |               |   | 130,870 |   |
|          Hedging      Liabilities - Current                                                                                                                                                                                                                                                                                                                                                                                   |                                      | 120,869    |               |   | - |   |
|                   Total      Current Liabilities                                                                                                                                                                                                                                                                                                                                 |                                      | 452,713    |               |   | 407,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |  |   |
|          Notes      Payable                                                                                                                                                                                                                                                                                                                                                                                                   |                                      | 10,119,270 |               |   | 8,955,202 |   |
|          Notes      Payable - Related Parties                                                                                                                                                                                                                                                                                                                                                                                 |                                      | 3,518,924  |               |   | 3,518,924 |   |
|                   Total      Long-Term Debt                                                                                                                                                                                                                                                                                                                                      |                                      | 13,638,194 |               |   | 12,474,126 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |   |   |
|          Asset      Retirement Obligation                                                                                                                                                                                                                                                                                                                                                                                     |                                      | 387,353    |               |   | 344,079 |   |
|          Hedging      Liability - Noncurrent                                                                                                                                                                                                                                                                                                                                                                                  |                                      | 25,056     |               |   | - |   |
|          Deferred      Tax Liability                                                                                                                                                                                                                                                                                                                                                                                          |                                      | 1,010,794  |               |   | 1,702,782 |   |
|                   Total      Liabilities                                                                                                                                                                                                                                                                                                                                         |                                      | 15,514,110 |               |   | 14,928,581 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |   |   |
|          Commitments      & Contingencies:                                                                                                                                                                                                                                                                                                                                                                                    |                                      | -          |               |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |   |   |
| Stockholders'      Equity                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                      |       |               |   |   |   |
|          Common      Stock, $.001 par,200,000,000 shares authorized and                         81,643,912      shares outstanding on September 30, 2009                         and      80,353,912 shares outstanding on March 31, 2009 |                                      | 81,643     |               |   | 80,353 |   |
|          Additional      Paid-In-Capital                                                                                                                                                                                                                                                                                                                                                                                      |                                      | 11,685,345 |               |   | 10,959,965 |   |
|          Retained      Deficit                                                                                                                                                                                                                                                                                                                                                                                                |                                      | (4,380,104 | )                  |   | (2,458,829 | ) |
|                   Total      Stockholders' Equity                                                                                                                                                                                                                                                                                                                                |                                      | 7,386,884  |               |   | 8,581,489 |   |
|                   Total      Liabilities & Stockholders' Equity                                                                                                                                                                                                                                                                                                                  | $                                         | 22,900,994 |               | $      | 23,510,070 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                      |       |               |   |   |   |

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**Table of Contents**

| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | **Three          Months Ended**                          |       | **Six          Months Ended**             |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------|------------|-------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ****September          30, 2009**          (unaudited)** |       | ******September 30, 2008****(unaudited)** |   | ********September 30, 2009******(unaudited)** |   | **********September 30, 2008********(unaudited)** |
| **Revenues**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                     |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|          Oil        & Gas Sales                                                                                                                                                                                                                                                                                                                                                                                                                                        | $                                                        | 556,141    |                                      |   | $ | 2,282,048 |   |   | $ | 1,174,212 |   |   | $ | 5,034,795 |   |
|        Sale        of Leases                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                     | 137,677    |                                      |   |   | 18,005 |   |   |   | 137,677 |   |   |   | 18,005 |   |
|          Other        Income                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                     | 90,119     |                                      |   |   | 109,568 |   |   |   | 173,582 |   |   |   | 208,983 |   |
| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     | 783,937    |                                      |   |   | 2,409,621 |   |   |   | 1,485,471 |   |   |   | 5,261,783 |   |
| **Costs        and Expenses**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                          |       |                                      |   |  |   |   |   |  |   |   |   |  |   |   |
|          Oil        & Gas Lease Operating Expenses                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                     | 515,195    |                                      |   |   | 789,234 |   |   |   | 1,043,398 |   |   |   | 1,385,267 |   |
|          Workover        Expenses                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                          | 43,998     |                                      |   |  | 87,982 |   |   |  | 43,998 |   |   |  | 160,407 |   |
|          Severance        & Ad Valorem Taxes                                                                                                                                                                                                                                                                                                                                                                                                                           |                                                     | 31,129     |                                      |   |   | 132,125 |   |   |   | 65,195 |   |   |   | 286,237 |   |
|          Depletion        & Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                          | 684,361    |                                      |   |  | 381,660 |   |   |  | 1,395,927 |   |   |  | 782,636 |   |
|          ARO        Accretion                                                                                                                                                                                                                                                                                                                                                                                                                                          |                                                     | 11,031     |                                      |   |   | - |   |   |   | 21,781 |   |   |   | - |   |
|          General        & Administrative:                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                          |            |                                      |   |   |  |   |   |   |  |   |   |   |  |   |
|                   Salaries        & Benefits                                                                                                                                                                                                                                                                                                                                                                              |                                                     | 201,935    |                                      |   |   | 135,068 |   |   |   | 403,495 |   |   |   | 321,613 |   |
|                   Legal        & Professional                                                                                                                                                                                                                                                                                                                                                                             |                                                          | 648,979    |                                      |   |  | 193,129 |   |   |  | 776,830 |   |   |  | 313,639 |   |
|                   Other        General & Administrative                                                                                                                                                                                                                                                                                                                                                                   |                                                     | 126,406    |                                      |   |   | 40,295 |   |   |   | 272,371 |   |   |   | 211,784 |   |
|          Interest,        net of capitalized interest of $132,375         and        $151,343 for the three months ended                9/30/09 and 9/30/08, respectively and                $254,273 and $312,919 for the six months         ended        9/30/08 and 9/30/08, respectively |                                                     | -          |                                      |   |   | 2,900 |   |   |   | - |   |   |   | 2,900 |   |
| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     | 2,263,034  |                                      |   |   | 1,762,393 |   |   |   | 4,022,995 |   |   |   | 3,464,483 |   |
| Other        Income (Expense)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                          |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
|          Interest        Income                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                     | 13,934     |                                      |   |   | 40 |   |   |   | 27,904 |   |   |   | 61,246 |   |
|          Loss        on Equity Method Investments                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                          | -          |                                      |   |  | (142,395 | ) |   |  | - |   |   |  | (142,395 | ) |
|          Hedging        Gain (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                     | (103,643   | )                                         |   |   | (93 | ) |   |   | (103,643 | ) |   |   | (6,746 | ) |
| Income        (Loss) from continuing operations         before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                     | (1,568,806 | )                                         |   |   | 504,780 |   |   |   | (2,613,263 | ) |   |   | 1,709,405 |   |
| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Income        Tax Benefit (Expense)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                     | 351,944    |                                      |   |   | (211,323 | ) |   |   | 691,988 |   |   |   | (632,941 | ) |
| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Net        Income (Loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $                                                        | (1,216,862 | )                                         |   | $ | 293,457 |   |   | $ | (1,921,275 | ) |   | $ | 1,076,464 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| **Basic        & Diluted Loss per Common Share**                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $                                                        | (0.02      | )                                         |   | $ | 0.00 |   |   | $ | (0.02 | ) |   | $ | 0.01 |   |
| **Weighted        Average Common        Shares Outstanding**                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                     | 80,998,912 |                                      |   |   | 80,181,310 |   |   |   | 80,722,483 |   |   |   | 80,181,310 |   |
| ****                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                     |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |

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**Table of Contents**

|                                                                                                                                           | **Six        Months Ended**                      |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------|
|                                                                                                                                                | **September        30, 2009        (unaudited)** |   | **September        30, 2008        (unaudited)** |
| **Operating      Activities:**                                                                                                                 |                                             |   |   |   |   |   |   |
|      Net      (Loss) Income                                                                                           | $                                                | (1,921,275 | ) |   | $ | 1,076,464 |   |
|           Adjustments      to reconcile net (loss) income to cash from operating activities: |                                             |  |   |   |   |  |   |
|           Income      Tax (Benefit) Expense                                                  |                                             | (691,988 | ) |   |   | 632,941 |   |
|           Depletion,      Depreciation, & Amortization                                       |                                             | 1,395,927 |   |   |   | 782,636 |   |
|           Loss      on Equity Method Investment                                              |                                             | - |   |   |   | 142,395 |   |
|           Stock      based compensation                                                      |                                             | 146,171 |   |   |   | 53,880 |   |
|           Non-employee      stock based compensation                                         |                                             | 580,500 |   |   |   | - |   |
|           ARO      Accretion                                                                 |                                             | 43,274 |   |   |   | - |   |
|      Changes      in Operating Assets and Liabilities                                                                 |                                             |  |   |   |   |  |   |
|           Changes      in Accrued Liabilities                                                |                                             | 26,826 |   |   |   | 86,086 |   |
|           Change      in Inventory                                                           |                                             | 5,069 |   |   |   | (3,983 | ) |
|           Change      in Related Party Receivables/Payables                                  |                                             | 194,691 |   |   |   | (1,149,370 | ) |
|           Changes      in Other Receivables                                                  |                                             | (25,794 | ) |   |   | - |   |
|           Changes      in Hedging Activity                                                   |                                             | 145,925 |   |   |   | 6,746 |   |
|           Changes      in Royalties Payable                                                  |                                             | - |   |   |   | 29,462 |   |
|           Change      in Revenue Receivables                                                 |                                             | (45,173 | ) |   |   | (343,971 | ) |
|           Changes      in Accounts Payable                                                   |                                             | 37,433 |   |   |   | 208,985 |   |
|      Net      Cash provided (used) from operating activities                                                          |                                             | (108,414 | ) |   |   | 1,522,271 |   |
|                                                                                                                                           |                                             |   |   |   |   |   |   |
| **Investing      Activities:**                                                                                                                 |                                             |   |   |   |   |   |   |
|      Oil      & Gas Drilling, Completing and Leasehold Acquisition Costs                                              |                                             | (1,062,046 | ) |   |   | (4,843,315 | ) |
|      Change      in Related Party Payable related to drilling                                                         |                                             | - |   |   |   | 2,170,131 |   |
|      Investment      in Other Depreciable Assets                                                                      |                                             | (150,513 | ) |   |   | (365,936 | ) |
|      Note      Receivable Collections (Advances)                                                                      |                                             | - |   |   |   | 6,611 |   |
|      Net      Cash used in investing activities                                                                       |                                             | (1,212,559 | ) |   |   |          (3,032,509 | ) |
|                                                                                                                                           |                                             |   |   |   |   |   |   |
| **Financing      Activities**                                                                                                                  |                                             |   |   |   |   |   |   |
|      Notes      Payable (Payments) Advances                                                                           |                                             | 1,000,000 |   |   |   | 702,505 |   |
|      Related      Party Note Advances                                                                                 |                                             | - |   |   |   | 500,000 |   |
|      Net      Cash provided from financing activities.                                                                |                                             | 1,000,000 |   |   |   | 1,202,505 |   |
|                                                                                                                                           |                                             |   |   |   |   |   |   |
| Net      Decrease in cash                                                                                                                      |                                             | (320,973 | ) |   |   | (307,733 | ) |
| Cash -      Beginning of the period                                                                                                            |                                             | 426,430 |   |   |   | 592,665 |   |
| Cash      - End of the period                                                                                                                  | $                                                | 105,457 |   |   | $ | 284,932 |   |
|                                                                                                                                           |                                             |   |   |   |   |   |   |

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**Table of Contents**

|                                                                                                                               | ******Six        Months Ended**                                  |    |
|------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|---------|
|                                                                                                                               | ******September        30, 2009**        (unaudited****)******** |    | ********September        30, 200**8        (unaudited)****** |   |
| **Supplemental      Disclosure of Cash Flow Information**                                                                          |                                                             |    |   |   |   |   |
|                Cash paid during period for:                                           |                                                             |    |   |   |   |   |
|                   Interest      Interest | $                                                                | 118,709 |   | $ | 195,386 |   |
|                                                                                                                               |                                                             |    |   |   |   |   |
|                   Income      Taxes      | $                                                                | -       |   | $ | - |   |
|                                                                                                                               |                                                             |    |   |   |   |   |
| **Non      Cash Investing and Financing Activities**                                                                               |                                                             |    |   |   |   |   |
|          Warrants      Issued                                                         | $                                                                | -       |   | $ | 36,967 |   |
|                                                                                                                               |                                                             |    |   |   |   |   |
|          Stock      Based Consulting Fees                                             | $                                                                | 580,500 |   | $ | - |   |
|                                                                                                                               |                                                             |    |   |   |   |   |

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**Table of Contents**

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**Table of Contents**

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**Table of Contents**

| Settlement      Period   | Monthly        Volumes |   |   | Fixed Price |   |   | Price         Floor |   |   | Price                Ceiling |   |
|--------------------------|------------------------|--------|--------|-------------|--------|--------|---------------------|--------|--------|------------------------------|--------|
| Crude      Oil Swaps     |                   |   |   |        |   |   |                |   |   |                         |   |   |
| 10/01/09      - 12/31/09 | 2,000                  |   | BBLS   | $           | 70.40  |   |                | N/A    |   |                         | N/A    |   |
|                     |                        |   |   |        |   |   |                |        |   |                         |        |   |
| Natural      Gas Swaps   |                        |   |   |        |   |   |                |        |   |                         |        |   |
| 10/01/09      - 12/31/09 | 20,000                 |   | MMBTU  | $           | 4.205  |   |                | N/A    |   |                         | N/A    |   |
| 1/01/10      - 6/30/10   | 20,000                 |   | MMBTU  | $           | 5.54   |   |                | N/A    |   |                         | N/A    |   |
|                     |                        |   |   |        |   |   |                |   |   |                         |   |   |
| Crude      Oil Collars   |                        |   |   |        |   |   |                |   |   |                         |   |   |
| 1/01/10      - 12/31/10  | 2,000                  |   | BBLS   |        | N/A    |   | $                   | 65.00  |   | $                            | 85.00  |   |
|                     |                        |   |   |        |   |   |                |   |   |                         |   |   |
| Natural      Gas Collars |                        |   |   |        |   |   |                |   |   |                         |   |   |
| 7/1/10      - 12/31/10   | 20,000                 |   | MMBTU  |        | N/A    |   | $                   | 5.50   |   | $                            | 6.50   |   |

| • | Level 1      - Quoted prices for identical instruments in active markets;                                                                                                                                                                                                                                  |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                       |
| • | Level 2      - Quoted prices for similar instruments in active markets, quoted prices      for identical or similar instruments in markets that are not active, and      model-derived valuations in which all significant inputs and significant      value drivers are observable in active markets; and |
|   |                                                                                                                                                                                                                                                                                                       |
| • | Level 3      - Valuations derived from valuation techniques in which one or more significant      inputs or significant value drivers are unobservable.                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                       |

| Type        of Contract                       |   | Balance        Sheet Location      |    | Estimated        Fair Value |    |
|-----------------------------------------------|--------|------------------------------------|---------|-----------------------------|---------|
|                                          |   |                               |    |                        |    |   |   |
| Crude      Oil Swaps                          |   | Other      Current Liabilities     |    | $                           | 2,104   |   |   |
| Natural      Gas Swaps                        |   | Other      Current Liabilities     |    |                        | 82,860  |   |   |
| Crude      Oil Collars                        |   | Other      Current Liabilities     |    |                        | 16,273  |   |   |
| Natural      Gas Collars                      |   | Other      Current Liabilities     |    |                        | 19,632  |   |   |
| Total      Current Derivative Liabilities     |   | $                                  | 120,869 |                        |    |
|                                          |   |                               |    |                        |    |   |   |
| Crude      Oil Collars                        |   | Other      Non-Current Liabilities |    | $                           | 5,424   |   |   |
| Natural      Gas Collars                      |   | Other      Non-Current Liabilities |    |                        | 19,632  |   |   |
| Total      Non-Current Derivative Liabilities |   | $                                  | 25,056  |                        |    |
| Total      Derivative Liabilities             |   |                               |    |                        | 145,925 |   |   |
|                                          |   |                               |    |                        |    |   |   |

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|                                 | Fiscal        Years Ending March 31, |   |   |   |   |   |   |       |
|--------------------------------------|--------------------------------------|--------|--------|--------|--------|--------|--------|------------|
|                                 |                                 | 2010   |   |   | 2011   |   |   | 2012       |   |   | Thereafter |   |   | Total |   |
| Office Lease Payments                | $                                    | 53,200 |   | $      | -      |   | $      | -          |   | $ | - |   | $ | 53,200 |   |
| Notes Payable      - Related Parties |                                 | -      |   |   | -      |   |   | -          |   |   | 3,518,924 |   |   | 3,518,924 |   |
| Senior      Secured Note Payable     |                                 | -      |   |   | -      |   |   | 10,800,000 |   |   | - |   |   | 10,800,000 |   |
|                                      | $                                    | 53,200 |   | $      | -      |   | $      | 10,800,000 |   | $ | 3,518,924 |   | $ | 14,372,124 |   |
|                                 |                                 |   |   |   |   |   |   |       |   |   |   |   |   |   |   |

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| EXHIBIT      NUMBER |   | DESCRIPTION                                                                                                                          |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                 |
| 31.1                |   | CEO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 31.2                |   | CFO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 32.1                |   | CEO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2                |   | CFO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |

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|                   | **REOSTAR      ENERGY CORPORATION**                                                                                                                                                                                                     |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |                                                                                                                                                                                                                                    |
| November      16, 2009 |                                                                                                                                                                                                                                    |
|              | By    /s/      Scott D. Allen                                 |
|                   |      Scott      D. Allen, Chief Financial Officer            (Principal Financial Officer and duly authorized      signatory)                                                         |
|                   |                                                                                                                                                                                                                                    |
|                   |                                                                                                                                                                                                                                    |

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| EXHIBIT      NUMBER |   | DESCRIPTION                                                                                                                          |
|---------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                 |
| 31.1                |   | CEO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 31.2                |   | CFO      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                     |
| 32.1                |   | CEO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2                |   | CFO      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to      Section 906 of the Sarbanes-Oxley Act of 2002 |

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