**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**FORM      10-QSB**

**EGPI      FIRECREEK, INC.**

| **NEVADA**(State                or other jurisdiction ofincorporation                or organization) | **8-0345961**(I.R.S.                Employer Identification No.) |
|-------------------------------------------------------------------------------------------------------|------------------------------------------------------------------|

----

**EGPI      FIRECREEK, INC.**

**f/k/a      Energy Producers, Inc.**

|  PART 1: FINANCIAL              INFORMATION                                                   |     |
|---------------------------------------------------------------------------------------------------------|----------|
|                                                                                                    |     |
|  Item              1. Financial Statements - Unaudited                                             |     |
|                                                                                                    |     |
|  Consolidated              Balance sheets                                                          |  3  |
|                                                                                                    |     |
|  Consolidated              Statement of Operations                                                 |  4  |
|                                                                                                    |     |
|  Consolidated              Statement of Cash Flows                                                 |  5  |
|                                                                                                    |     |
|  Consolidated              Statement of Changes in Shareholders’ Equity                      |  6  |
|                                                                                                    |     |
|  Notes              to the Unaudited Consolidated Financial Statements                             |  7  |
|                                                                                                    |     |
|  Item              2. Management’s Discussion and Analysis or              Plan of Operation |  10 |
|                                                                                                    |     |
|  Item              3. Controls and Procedures                                                      |  14 |
|                                                                                                    |     |
|  PART II: OTHER INFORMATION                                                                        |     |
|                                                                                                    |     |
|  Item              1 - Legal Proceedings                                                           |  14 |
|                                                                                                    |     |
|  Item              2 - Unregistered Sales of Equity Securities and Use of              Proceeds    |  15 |
|                                                                                                    |     |
|  Item              3 - Defaults upon Senior Securities                                             |  16 |
|                                                                                                    |     |
|  Item              4 - Submission of Matters to a Vote of Security              Holders            |  16 |
|                                                                                                    |     |
|  Item              5 - Other Information                                                           |  16 |
|                                                                                                    |     |
|  Item              6 - Exhibits                                                                    |  16 |
|                                                                                                    |     |
|  Certifications                                                                                    |     |
|                                                                                                    |     |
|  Signature                                                                                         |  17 |

----

**EGPI      Firecreek, Inc.**

**(formerly      Energy Producers, Inc.)**

**Consolidated      Balance Sheets**

**As      of June 30, 2006 and December 31, 2005**

|                                                                                                        |   | **Unaudited**   |        |          |   |
|-------------------------------------------------------------------------------------------------------------|--------|-----------------|-------------|---------------|--------|
| **ASSETS**                                                                                                  |   | **30-Jun-2006** |        | **31-Dec-05** |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Current                assets:                                                                              |   |            |        |          |   |   |   |
| Cash                                                                                                        |   | $               | 864,518     |          | $      | 149,962 |   |
| Deferred                costs                                                                               |   |            | 179,324     |          |   | 0 |   |
| Accounts                receivable                                                                          |   |            | 9,851       |          |   | 0 |   |
| Total                current assets                                                                         |   | $               | 1,053,693   |          | $      | 149,962 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Other                assets:                                                                                |   |            |        |          |   |   |   |
| Fixed                assets- net                                                                            |   |            | 659,672     |          |   | 697,859 |   |
| Deferred                costs                                                                               |   |            | 379,306     |          |   | 0 |   |
| Other                receivables                                                                            |   |            | 0           |          |   | 2,759 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Total                assets                                                                                 |   | $               | 2,092,671   |          | $      | 850,580 |   |
|                                                                                                        |   |            |        |          |   |   |   |
|                                                                                                        |   |            |        |          |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS' DEFICIT**                                                    |   |            |        |          |   |   |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Current                liabilities:                                                                         |   |            |        |          |   |   |   |
| Accounts                payable & accrued expenses                                                      |   | $               | 401,100     |          | $      | 303,436 |   |
| Notes                payable                                                                                |   |            | 4,112,210   |          |   | 3,204,427 |   |
| Total                current liabilities                                                                    |   | $               | 4,513,310   |          | $      | 3,507,863 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Advances                payable to shareholders                                                             |   |            | 233,075     |          |   | 147,780 |   |
| Convertible                debentures payable-net                                                           |   |            | 305,739     |          |   | 26,195 |   |
| Total                liabilities                                                                            |   |            | 5,052,124   |          |   | 3,681,838 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Net                liabilities of discontinued operations                                                   |   |            | 78,352      |          |   | 78,352 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| Shareholders'                deficit:                                                                       |   |            |        |          |   |   |   |
| Series                A preferred stock, 20 million authorized, par value $0.001,one share                  |   |            |        |          |   |   |   |
| convertible                to one common share, no stated dividend, none outstanding                        |   | $               | 0           |          | $      | 0 |   |
| Series                B preferred stock, 20 million authorized, par value $0.001,one share                  |   |            |        |          |   |   |   |
| convertible                to one common share, no stated dividend, none outstanding                        |   |            | 0           |          |   | 0 |   |
| Series                C preferred stock, 20 million authorized, stated value $.001,one                share |   |            |        |          |   |   |   |
| convertible                to ten common shares, no stated dividend                                         |   |            | 0           |          |   | 1,539,000 |   |
| Common                stock- $.001 par value, authorized 900,000,000 shares,                                |   |            |        |          |   |   |   |
| issued                and outstanding, 292,772,112 at June 30, 2006 and                                     |   |            |        |          |   |   |   |
| 220,913,500                shares at December 31, 2005                                                      |   |            | 292,771     |          |   | 220,913 |   |
| Additional                paid in capital                                                                   |   |            | 18,925,336  |          |   | 15,878,127 |   |
| Accumulated                deficit                                                                          |   |            | (22,255,912 | )             |   | (20,547,650 | ) |
| Total                shareholders' deficit                                                                  |   |            | (3,037,805  | )             |   | (2,909,610 | ) |
|                                                                                                        |   |            |        |          |   |   |   |
| Total                Liabilities & Shareholders' Deficit                                                |   | $               | 2,092,671   |          | $      | 850,580 |   |
|                                                                                                        |   |            |        |          |   |   |   |
| **See                the notes to the consolidated financial                statements.**                   |   |            |        |          |   |   |   |

----

**EGPI      Firecreek, Inc.**

**(formerly      Energy Producers, Inc.)**

**Consolidated      Statements of Operations**

**For      the Six and Three Months Ended June 30, 2006 and June 30,      2005**

**(unaudited)**

|                                                                                           |   | **Six                Months**                                                                                                                                                                                                             |        | **Six                Months** |   | **Three                Months**                                                                                                                                                                                                           |   | **Three                Months** |        |
|------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------|-------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|
|                                                                                           |   | **Unaudited**                                                                                                                                                                                                                             |        | **Unaudited**                 |   | **Unaudited**                                                                                                                                                                                                                             |   | **Unaudited**                   |        |
|                                                                                           |   | **30-Jun-06**                                                                                                                                                                                                                             |        | **30-Jun-05**                 |   | **30-Jun-06**                                                                                                                                                                                                                             |   | **30-Jun-05**                   |        |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |
| Gross                Revenues from sales                                                       |   | $                                                   50,682 |        | $0                            |   | $                                                   42,702 |   | $0                              |        |
| Cost                of sales                                                                   |   |                                                                                                                                                                                                                                      | (34,498     | )                             |   | 0                                                                                                                                                                                                                                         |   |                            | (27,851     | ) |   | 0 |   |
| Net                Revenues from sales                                                         |   | $                                                                                                                                                                                                                                         | 16,184      |                          | $      | 0                                                                                                                                                                                                                                         |   | $                               | 14,851      |   | $ | 0 |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| General                and administrative expenses:                                            |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| General                administration                                                          |   | $                                                                                                                                                                                                                                         | 1,100,720   |                          | $      | 2,796,264                                                                                                                                                                                                                                 |   | $                               | 634,037     |   | $ | 2,456,357 |   |
| Total                general & administrative expenses                                     |   |                                                                                                                                                                                                                                      | 1,100,720   |                          |   | 2,796,264                                                                                                                                                                                                                                 |   |                            | 634,037     |   |   | 2,456,357 |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Net                loss from operations                                                        |   |                                                                                                                                                                                                                                      | ($1,084,536 | )                             |   | ($2,796,264                                                                                                                                                                                                                               | )      |                            | ($619,186   | ) |   | ($2,456,357 | ) |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Other                revenues and expenses:                                                    |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Interest                expense                                                                |   |                                                                                                                                                                                                                                      | (623,726    | )                             |   | (1,656,298                                                                                                                                                                                                                                | )      |                            | (320,356    | ) |   | (1,639,137 | ) |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Net                loss before provision for income taxes                                      |   |                                                                                                                                                                                                                                      | ($1,708,262 | )                             |   | ($4,452,562                                                                                                                                                                                                                               | )      |                            | ($939,542   | ) |   | ($4,095,494 | ) |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Provision                for income taxes                                                      |   |                                                                                                                                                                                                                                      | 0           |                          |   | 0                                                                                                                                                                                                                                         |   |                            | 0           |   |   | 0 |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Net                loss                                                                        |   |                                                                                                                                                                                                                                      | ($1,708,262 | )                             |   | ($4,452,562                                                                                                                                                                                                                               | )      |                            | ($939,542   | ) |   | ($4,095,494 | ) |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Basic                & fully diluted net loss per common share:                            |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Loss                per share                                                                  |   |                                                                                                                                                                                                                                      | ($0.01      | )                             |   | ($0.05                                                                                                                                                                                                                                    | )      | $                               | 0.00        |   |   | ($0.04 | ) |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Weighted                average of common shares outstanding:                                  |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| Basic                & fully diluted                                                       |   |                                                                                                                                                                                                                                      | 261,697,742 |                          |   | 98,222,204                                                                                                                                                                                                                                |   |                            | 278,558,461 |   |   | 110,032,050 |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
|                                                                                           |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |
| **See                the notes to the consolidated financial                statements.** |   |                                                                                                                                                                                                                                      |        |                          |   |                                                                                                                                                                                                                                      |   |                            |        |   |   |   |   |

----

**EGPI      Firecreek, Inc.**

**(formerly      Energy Producers, Inc.)**

**Unaudited      Consolidated Statements of Cash Flows**

**For      the Quarters Ended June 30, 2006 and June 30, 2005**

**(Unaudited)**

|                                                                                           |   | **Unaudited** |        | **Unaudited** |   |
|------------------------------------------------------------------------------------------------|--------|---------------|-------------|---------------|--------|
|                                                                                           |   | **30-Jun-06** |        | **30-Jun-05** |   |
| Operating                Activities:                                                           |   |          |        |          |   |
| Net                loss                                                                        |   |          | ($1,708,262 | )             |   | ($4,452,562 | ) |
| Adjustments                to reconcile net loss items                                         |   |          |        |          |   |   |   |
| not                requiring the use of cash:                                                  |   |          |        |          |   |   |   |
| Depreciation                expense                                                            |   |          | 38,185      |          |   | 459 |   |
| Amortization                of beneficial conversion feature                                   |   |          | 177,669     |          |   | 1,320,358 |   |
| Consulting                expense                                                              |   |          | 5,407       |          |   | 229,280 |   |
| Interest                expense                                                                |   |          | 446,057     |          |   | 0 |   |
| Deferred                loan fees                                                              |   |          | 43,320      |          |   |   |   |
| Changes                in other operating assets and liabilities :                             |   |          |        |          |   |   |   |
| Accounts                receivable                                                             |   |          | (9,851      | )             |   | 0 |   |
| Other                receivable                                                                |   |          | 2,759       |          |   | 0 |   |
| Deferred                costs                                                                  |   |          | (130,000    | )             |   | 0 |   |
| Accounts                payable and accrued expenses                                           |   |          | 98,024      |          |   | (350,067 | ) |
| Net                cash used by operations                                                     |   |          | ($1,036,692 | )             |   | ($3,252,532 | ) |
|                                                                                           |   |          |        |          |   |   |   |
| Investing                activities:                                                           |   |          |        |          |   |   |   |
| Purchase                of equipment                                                           |   | $             | 0           |          |   | ($81,475 | ) |
| Net                cash used by investing activities                                           |   |          | 0           |          |   | (81,475 | ) |
|                                                                                           |   |          |        |          |   |   |   |
| Financing                Activities:                                                           |   |          |        |          |   |   |   |
| Credit                equity line                                                              |   | $             | 1,505,000   |          | $      | 0 |   |
| Issued                common stock                                                             |   |          | 79,840      |          |   | 215,345 |   |
| Issued                preferred stock                                                          |   |          | 0           |          |   | 900 |   |
| Issued                convertible debenture                                                    |   |          | 0           |          |   | 4,000,000 |   |
| Payment                of capital lease                                                        |   |          | 0           |          |   | (12,275 | ) |
| Warrants                converted                                                              |   |          | 100,000     |          |   | 0 |   |
| Shareholder                advances received (paid)                                            |   |          | 66,409      |          |   | (302,187 | ) |
| Net                cash provided by financing activities                                       |   |          | 1,751,248   |          |   | 3,901,783 |   |
|                                                                                           |   |          |        |          |   |   |   |
| Net                increase (decrease) in cash during the period                               |   | $             | 714,556     |          | $      | 567,776 |   |
|                                                                                           |   |          |        |          |   |   |   |
| Cash                balance at January 1st                                                     |   |          | 149,962     |          |   | 5,538 |   |
|                                                                                           |   |          |        |          |   |   |   |
| Cash                balance at June 30th                                                       |   | $             | 864,518     |          | $      | 573,314 |   |
|                                                                                           |   |          |        |          |   |   |   |
| Supplemental                disclosures of cash flow information:                              |   |          |        |          |   |   |   |
| Interest                paid during the period                                                 |   | $             | 0           |          | $      | 1,574 |   |
| Income                taxes paid during the period                                             |   | $             | 0           |          | $      | 0 |   |
|                                                                                           |   |          |        |          |   |   |   |
| **See                the notes to the consolidated financial                statements.** |   |          |        |          |   |   |   |

----

**EGPI      Firecreek, Inc.**

**(formerly      Energy Producers, Inc.)**

**Unaudited      Consolidated Statement of Changes in Shareholders’ Deficit**

**For      the Periods ended June 30, 2006 and June 30, 2005**

|                                            |   | **Common** |        | **Par**   |   | **Paid                in**   |   | **Accumulated** |                       |      |   |
|-------------------------------------------------|--------|------------|-------------|-----------|--------|------------------------------|--------|-----------------|----------------------------|-----------|--------|
|                                            |   | **Shares** |        | **Value** |   | **Capital**                  |   | **Deficit**     |                       | **Total** |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Balance                at January 1, 2006       |   |       | 220,913,500 |      | $      | 220,913                      |   | $               | 15,878,127                 |      |   | ($20,547,650 | ) |   | ($4,448,610 | ) |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Issuance                of warrants             |   |       |        |      |   |                         |   |            | 5,407                      |      |   |   |   |   | 5,407 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Issuance                of common stock         |   |       | 4,148,514   |      |   | 4,148                        |   |            | 75,692                     |      |   |   |   |   | 79,840 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Conversion                of warrants           |   |       | 4,000,000   |      |   | 4,000                        |   |            | 96,000                     |      |   |   |   |   | 100,000 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Conversion                of preferred stock    |   |       | 20,250,000  |      |   | 20,250                       |   |            | 1,518,750                  |      |   |   |   |   | 1,539,000 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Issued                shares to pay equity line |   |       | 43,460,098  |      |   | 43,460                       |   |            | 981,359                    |      |   |   |   |   | 1,024,819 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Beneficial                conversion feature    |   |       |        |      |   |                         |   |            | 370,001                    |      |   |   |   |   | 370,001 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Net                loss for the period          |   |       |             |      |   |                              |   |            |                            |      |   | (1,708,262 | ) |   | (1,708,262 | ) |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Balance                at June 30, 2006         |   |       | 292,772,112 |      | $      | 292,771                      |   | $               | 18,925,336                 |      |   | ($22,255,912 | ) |   | ($3,037,805 | ) |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
|                                            |   |       | **Common**  |      |   | **Common**                   |   |            | **Paid                in** |      |   | **Accumulated** |   |   |   |   |
|                                            |   |       | **Shares**  |      |   | **Par                Value** |   |            | **Capital**                |      |   | **Deficit** |   |   | **Total** |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Balance                at January 1, 2005       |   |       | 75,247,968  |      | $      | 75,248                       |   | $               | 6,388,767                  |      |   | ($8,703,930 | ) |   | ($2,239,915 | ) |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Issued                shares for services       |   |       | 9,700,000   |      |   | 9,700                        |   |            | 219,580                    |      |   |   |   |   | 229,280 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Issued                shares to pay notes       |   |       | 770,435     |      |   | 770                          |   |            | 19,639                     |      |   |   |   |   | 20,409 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Debentures                converted to shares   |   |       | 27,051,000  |      |   | 27,051                       |   |            | 328,459                    |      |   |   |   |   | 355,510 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Beneficial                conversion feature    |   |       |        |      |   |                         |   |            | 1,227,273                  |      |   |   |   |   | 1,227,273 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Detachable                warrants issued       |   |       |        |      |   |                         |   |            | 215,345                    |      |   |   |   |   | 215,345 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Foreign                currency                 |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| translation                adjustment           |   |       |        |      |   |                         |   |            |                       |      |   | 36,613 |   |   | 36,613 |   |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Net                loss for the period          |   |       |             |      |   |                              |   |            |                            |      |   | (4,452,562 | ) |   | (4,452,562 | ) |
|                                            |   |       |        |      |   |                         |   |            |                       |      |   |   |   |   |   |   |
| Balance                at June 30, 2005         |   |       | 112,769,403 |      | $      | 112,769                      |   | $               | 8,399,063                  |      |   | ($13,179,155 | ) |   | ($4,608,047 | ) |

**Please      see the notes to the consolidated financial      statements.**

----

**EGPI      Firecreek, Inc.**

**Unaudited      Notes to the Consolidated Financial Statements**

**For      the Six months ended June 30, 2006 and June 30, 2005**

| **1.** | **Organization                of the Company and Significant Accounting                Principles** |
|--------|-----------------------------------------------------------------------------------------------------|

*Consolidation-      *

*Use      of Estimates*

*Revenue      Recognition- *

*Cash-*

*Deferred      costs- *

*Fixed      Assets*
**-      **

----

*Long      Lived Assets*

*Debentures      Payable- *
*Accounting      for Convertible Debt Issued with Beneficial Conversion      Features.*

*Discontinued      Operations-*

*Income      taxes- *
*Accounting      for Income Taxes*

**2.      Net Loss per Share**

*Earnings      per Share *
*.*

|                                    |   | **30-Jun-06** |        | **30-Jun-05** |   |
|-----------------------------------------|--------|---------------|-------------|---------------|--------|
|                                    |   |          |        |          |   |   |   |
| Net                loss                 |   |          | ($1,708,262 | )             |   | ($4,452,562 | ) |
|                                    |   |          |        |          |   |   |   |
|                                    |   |          |        |          |   |   |   |
| Total                shares outstanding |   |          | 292,772,112 |          |   | 98,248,968 |   |
|                                    |   |          |        |          |   |   |   |
| Weighted                average         |   |          | 261,697,742 |          |   | 86,857,114 |   |
|                                    |   |          |        |          |   |   |   |
| Loss                per share           |   |          | ($0.01      | )             |   | ($0.05 | ) |

----

**3.      Common and Preferred Stock Transactions**

**4.      Fixed Assets- Net**

|                                             |   | **30-Jun-06** |    | **31-Dec-05** |   |
|--------------------------------------------------|--------|---------------|---------|---------------|--------|
|                                             |   |          |    |          |   |   |   |
| Well                lease & equipment        |   | $             | 601,000 |          | $      | 601,000 |   |
| Computer                equipment & software |   |          | 63,675  |          |   | 63,676 |   |
| Office                equipment                  |   |          | 19,056  |          |   | 19,056 |   |
| Improvements                & furniture      |   |          | 30,166  |          |   | 30,166 |   |
| Accumulated                depreciation          |   |          | (54,225 | )             |   | (16,039 | ) |
|                                             |   |          |    |          |   |   |   |
| Net                property & equipment      |   | $             | 659,672 |          | $      | 697,859 |   |

**5.      Issuance of Warrants**

|                                            |   |   |       | Wgtd                Avg       |   | Wgtd                Years  |   |
|-------------------------------------------------|--------|--------|------------|-------------------------------|--------|----------------------------|--------|
|                                            |   | Amount |       | Exercise                Price |   | to                Maturity |   |
|                                            |   |   |       |                          |   |                       |   |   |   |   |
| Outstanding                at January 1, 2005   |   |   | 4,200,000  |                          | $      | 0.96                       |   |   | 2.64 |   |
|                                            |   |   |       |                          |   |                       |   |   |   |   |
| Issued                                          |   |   | 36,575,000 |                          |   |                       |   |   |   |   |
| Exercised                                       |   |   | (313,000   | )                             |   |                       |   |   |   |   |
| Expired                                         |   |   | (400,000   | )                             |   |                       |   |   |   |   |
|                                            |   |   |       |                          |   |                       |   |   |   |   |
| Outstanding                at December 31, 2005 |   |   | 40,062,000 |                          | $      | 0.37                       |   |   | 3.24 |   |
|                                            |   |   |       |                          |   |                       |   |   |   |   |
| Issued                                          |   |   | 5,500,000  |                          |   |                       |   |   |   |   |
| Exercised                                       |   |   | (4,000,000 | )                             |   |                       |   |   |   |   |
| Expired                                         |   |   | 0          |                          |   |                       |   |   |   |   |
|                                            |   |   |       |                          |   |                       |   |   |   |   |
| Outstanding                at June 30, 2006     |   |   | 41,562,000 |                          | $      | 0.40                       |   |   | 3.27 |   |

**6.      Income Tax Provision**

| Provision                for income taxes is comprised of the following:                                                                                 |   | **30-Jun-06** |        | **30-Jun-05** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|---------------|--------|
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Net                loss before provision for income taxes                                                                                                |   |          | ($1,708,262 | )             |   | ($4,452,562 | ) |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Current                tax expense:                                                                                                                      |   |          |        |          |   |   |   |
| Federal                                                                                                                                                  |   | $             | 0           |          | $      | 0 |   |
| State                                                                                                                                                    |   |          | 0           |          |   | 0 |   |
| Total                                                                                                                                                    |   | $             | 0           |          | $      | 0 |   |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Less                deferred tax benefit:                                                                                                                |   |          |        |          |   |   |   |
| Timing                differences                                                                                                                        |   |          | (5,629,427  | )             |   | (5,061,183 | ) |
| Allowance                for recoverability                                                                                                              |   |          | 5,629,427   |          |   | 5,061,183 |   |
| Provision                for income taxes                                                                                                                |   | $             | 0           |          | $      | 0 |   |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| A                reconciliation of provision for income taxes at the statutory rate                to                provision                           |   |          |        |
| for                income taxes at the Company's effective tax rate is as                follows:                                                        |   |          |        |          |   |   |   |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Statutory                U.S. federal rate                                                                                                               |   |          | 34          | %             |   | 34 | % |
| Statutory                state and local income tax                                                                                                      |   |          | 10          | %             |   | 10 | % |
| Less                allowance for tax recoverability                                                                                                     |   |          | -44         | %             |   | -44 | % |
| Effective                rate                                                                                                                            |   |          | 0           | %             |   | 0 | % |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Deferred                income taxes are comprised of the following:                                                                                     |   |          |        |          |   |   |   |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Timing                differences                                                                                                                        |   | $             | 5,629,427   |          | $      | 5,061,183 |   |
| Allowance                for recoverability                                                                                                              |   |          | (5,629,427  | )             |   | (5,061,183 | ) |
| Deferred                tax benefit                                                                                                                      |   | $             | 0           |          | $      | 0 |   |
|                                                                                                                                                     |   |          |        |          |   |   |   |
| Note:                The deferred tax benefits arising from the timing differences begin                to                expire in fiscal year 2010 and |
| may                not be recoverable upon the purchase of the Company under current                IRS                statutes.                         |   |          |        |

**7.      Equity Credit Line**

----

| Due    |   | 9-Sep-06  |   |   |   | $1,086,803 |
|--------|--------|-----------|--------|--------|--------|------------|
| Due    |   | 14-Nov-06 |   |   |   | 1,488,215  |
| Due    |   | 21-Apr-07 |   |   |   | 581,603    |
| Due    |   | 29-Dec-07 |   |   |   | 955,590    |
|   |   |      |   |   |   |       |
|   |   |      |   |   |   |       |
|   |   | Total     |   |   |   | $4,112,210 |

**8.      Issuance of Convertible Debentures**

**ITEM      2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF      OPERATION**

**Overview**

----

**General**

----

**I.      Results of Operations**

**Six      months ended June 30, 2006 vs. six months ended June 30,      2005.**

| **Detail                of general & administrative expenses:** |   |                |      |
|---------------------------------------------------------------------|--------|---------------------|-----------|
|                                                                |   |           |      |   |   |
|                                                                |   |           |      |   |   |
|                                                                |   |  **30-Jun-06** |      | **30-Jun-05** |   |
|                                                                |   |                |      |   |   |   |   |
| Advertising                & promotion                          |   | $                   | 1,574     |   | $ | 42,610 |   |
| Administration                                                      |   |                | 47,044    |   |   | 221,820 |   |
| Consulting                                                          |   |                | 111,194   |   |   | 500,120 |   |
| Depreciation                                                        |   |                | 38,185    |   |   | 459 |   |
| Investor                incentives                                  |   |                | 43,320    |   |   | 616,008 |   |
| Professional                fees                                    |   |                | 225,505   |   |   | 928,198 |   |
| Rent                & storage                                   |   |                | 58,530    |   |   | 131,282 |   |
| Research                                                            |   |                | 84,404    |   |   | 77,662 |   |
| Salaries                & benefits                              |   |                | 118,609   |   |   | 120,202 |   |
| Taxes                                                               |   |                | 9,598     |   |   | 1,559 |   |
| Telephone                                                           |   |                | 23,012    |   |   | 45,307 |   |
| Travel                costs                                         |   |                | 56,366    |   |   | 111,037 |   |
| Well                development                                     |   |                | 283,379   |   |   | 0 |   |
|                                                                |   |                |      |   |   |   |   |
| Total                                                               |   | $                   | 1,100,720 |   | $ | 2,796,264 |   |

----

**Three      months ended June 30, 2006 vs Three months ended June 30,      2005**

**Discussion      of Financial Condition: Liquidity and Capital Resources**

**ITEM      3. CONTROLS AND PROCEDURES**

**PART      II. OTHER INFORMATION**

**ITEM      1 - LEGAL PROCEEDINGS**

**ITEM      2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS**

----

**ITEM      3 - DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM      5 - OTHER INFORMATION**

**ITEM      6 - EXHIBITS**

**EXHIBIT      No.**
**DESCRIPTION**