**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q/A**


**(Amendment
      No. 2)**





(Mark
      One)


**x
      QUARTERLY REPORT UNDER
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**





**For
      the Quarterly Period Ended October 31, 2007**





**o TRANSITION
      REPORT
      UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





**For
      the Transition Period from _________ to _________**





**Commission
      file number: 000-51321**




**TRIANGLE
      PETROLEUM CORPORATION**


(Name
      of
      Small Business Issuer in Its Charter)





**Nevada**
            
            **98-0430762**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer
              Identification
                No.)





Suite
      1250, 521 - 3 Avenue SW


Calgary,
      Alberta


Canada
      T2P 3T3


(Address
      of Principal Executive Offices)





(403)
      262-4471


(Registrant’s
      telephone number, including area code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





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





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer o accelerated
      filer o Non-accelerated filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes
o
      No x





As
      of
      December 6, 2007, there were 46,744,530 shares of registrant’s common stock
      outstanding.





**EXPLANATORY
      NOTE**





As
      set
      forth in the table below, between December 2005 and June 2006, Triangle
      Petroleum Corporation (the “Company”) completed private placements with certain
      investors in which the Company issued convertible securities.





Transaction
                Date
            
            Secured
              Convertible
              Debentures
              Sold
            
            Annual
              Interest
              Rate
            
            Conversion
                Price
            
            Warrants
              (one
                share
              per
                warrant)December
                8, 2005
            
            $
            5,000,000
            
            
            5
            %
            
            $5.00
                  or 90% of the average of the lowest three intraday trading prices
                  during
                  the ten trading days immediately preceding
                  conversion
            
            
            NoneJanuary
                17, 2006
            
            $
            5,000,000
            
            
            5
            %
            
            $5.00
                  or 90% of the average of the lowest three intraday trading prices
                  during
                  the ten trading days immediately preceding
                  conversion
            
            
            NoneJune
                1, 2006
            
            $
            5,000,000
            
            
            5
            %
            
            $5.00
                  or 90% of the average of the lowest three intraday trading prices
                  during
                  the ten trading days immediately preceding
                  conversion
            
            
            None





On
      April
      11, 2008, the Company’s independent registered public accounting firm, KPMG LLP,
      Chartered Accountants (“KPMG”) notified the Company’s Chief Financial Officer
      (“CFO”) that it believed there were errors in the Company’s financial statements
      resulting from the accounting for the conversion of these convertible
      debentures. Upon conversion of the above convertible debentures, the Company
      reduced the amount recorded as a derivative liability pertaining to the embedded
      conversion feature with the offsetting amount recorded as a decrease to the
      loss
      for the period. KPMG advised the CFO that it believed that upon conversion
      of
      the convertible debenture two entries were required. First, the derivative
      liability associated with the embedded conversion feature should be adjusted
      to
      its fair value immediately prior to the conversion with the change in fair
      value
      included in the statement of operations. Second, the re-valued derivative
      liability should be transferred to additional paid in capital.





On
      April
      11, 2008, the Company’s CFO further discussed the matter with Manning Elliott
      LLP, Chartered Accountants (“Manning Elliott”), the Company’s previous auditor.





From
      April 11, 2008 to April 21,  2008,
      management of the Company, conducted an analysis of the embedded conversion
      feature associated with these convertible debentures, with a particular focus
      on
      the accounting treatment of the derivative when the convertible debentures
      are
      converted. Management considered the guidance contained in Statement of
      Financial Accounting Standards No. 133, Accounting for Derivative Instruments
      and Hedging Activities and the Emerging Issues Task Force Issue No. 00-19,
      Accounting for Derivative Financial Instruments Indexed to, and Potentially
      Settled in, a Company’s Own Stock.





On
      April
      21, 2008, both the CFO and KPMG agreed that these facts caused them to believe
      that the Company’s accounting for these convertible debentures at the dates of
      conversion was incorrect and the Company determined that the effect of such
      misstatements was material to the quarterly reports on Form 10-Q for the
      quarters ended April 30, 2007, July 31, 2007 and October 31, 2007 (the
“Reports”). As a result, the Company determined that the Reports should no
      longer be relied upon and that they will need to be restated. The restatements
      are required to properly reflect the Company’s financial results for certain
      non-cash and non-operational related credits to earnings associated with the
      embedded derivative liabilities. The Form 10-Q’s will be restated as follows:


2




**April
      30, 2007**





April 30, 2007
              As
                Reported
              $
            
            Adjustment
              $
            
            April 30, 2007
              As
                Restated
              $Consolidated
                Balance SheetStockholders’
                DeficitAdditional
                Paid-In Capital
            
            
            35,910,819
            
            
            563,064
            
            
            36,473,883Deficit
                Accumulated During the Exploration Stage
            
            
            (21,055,525
            )
            
            (563,064
            )
            
            (21,618,589
            )





Three
                Months
              Ended
              April
                30, 2007
              As Reported
              $
            
            Adjustment
              $
            
            Three
                Months
              Ended
              April
                30, 2007
              As Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            2,030,604
            
            
            (563,064
            )
            
            1,467,540Net
                loss for the period
            
            
            (2,862,213
            )
            
            (563,064
            )
            
            (3,425,277
            )Net
                Loss Per Share –
                Basic and
                Diluted
            
            
            (0.09
            )
            
            
            
            
            (0.11
            )





**July
      31, 2007**





July
                31, 2007
              As
                Reported
              $
            
            Adjustment
              $
            
            July
                31, 2007
              As
                Restated
              $Consolidated
                Balance SheetStockholders’
                DeficitAdditional
                Paid-In Capital
            
            
            40,050,268
            
            
            1,490,182
            
            
            41,540,450Deficit
                Accumulated During the Exploration Stage
            
            
            (26,009,114
            )
            
            (1,490,182
            )
            
            (27,499,296
            )





Six Months Ended
              July 31, 2007
              As
                Reported
              $
            
            Adjustment
              $
            
            Six Months Ended
              July
                31, 2007
              As
                Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            5,045,596
            
            
            (1,490,182
            )
            
            3,555,414Net
                loss for the period
            
            
            (7,815,802
            )
            
            (1,490,182
            )
            
            (9,305,984
            )Net
                Loss Per Share –
                Basic and
                Diluted
            
            
            (0.22
            )
            
            
            
            
            (0.26
            )




3


**October
      31, 2007**





October 31, 2007
              As
                Reported
              $
            
            Adjustment
              $
            
            October 31, 2007
              As
                Restated
              $Consolidated
                Balance SheetStockholders’
                DeficitAdditional
                Paid-In Capital
            
            
            41,713,628
            
            
            1,802,063
            
            
            43,515,691Deficit
                Accumulated During the Exploration Stage
            
            
            (31,661,392
            )
            
            (1,802,063
            )
            
            (33,463,455
            )





Nine
                Months Ended
              October 31, 2007
              As
                Reported
              $
            
            Adjustment
              $
            
            Nine
                Months Ended
              October 31, 2007
              As
                Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            8,283,568
            
            
            (1,802,063
            )
            
            6,481,505Net
                loss for the period
            
            
            (13,468,080
            )
            
            (1,802,063
            )
            
            (15,270,143
            )Net
                Loss Per Share –
                Basic and
                Diluted
            
            
            (0.39
            )
            
            
            
            
            (0.44
            )




For
      the
      convenience of the reader, this Form 10-Q/A sets forth the original Form 10-Q
      in
      its entirety. However, this Form 10-Q/A only amends our financial statements
      and
      the footnotes to our financial statements, along with the corresponding changes
      to our Management’s Discussion and Analysis. We also corrected typographical
      errors and have revised our controls and procedures disclosure as a result
      of
      these restatements. No other information in the original Form 10-Q is amended
      hereby. In addition, pursuant to the rules of the SEC, Item 6 of Part II to
      the
      Initial Filing has been amended to contain currently dated certifications from
      our Principal Executive Officer and Principal Financial Officer, as required
      by
      Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications
      of
      our Principal Executive Officer and Principal Financial Officer are attached
      to
      this Form 10Q/A as Exhibits 31.1, 31.2, 32.1 and 32.2,
      respectively.


4


**TRIANGLE
      PETROLEUM CORPORATION AND SUBSIDIARIES**








**INDEX**PART I.
            FINANCIAL
                INFORMATIONITEM
                1.
            Consolidated
                balance sheets at October 31, 2007 (unaudited) and January 31,
                2007
            6Consolidated
                statements of operations for the three and nine months ended October
                31,
                2007 and 2006 and accumulated from December 11, 2003 (date of inception)
                to October 31, 2007 (unaudited)
            7Consolidated
                statements of cash flows for the nine months ended October 31, 2007
                and
                2006 (unaudited)
            8Notes
                to unaudited consolidated financial statements
            9
                -
                22ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            23-35ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            36ITEM
                4.
            Controls
                and Procedures
            37PART II.
            OTHER
                INFORMATIONITEM
                1
            Legal
                proceedings
            38ITEM
                1A
            Risk
                factors
            38ITEM
                2
            Unregistered
                sales of equity securities and use of proceeds
            39ITEM
                3
            Defaults
                upon senior securities
            39ITEM
                4
            Submission
                of matters to a vote of security holders
            39ITEM
                5
            Other
                information
            39ITEM
                6
            Exhibits
            39SIGNATURES
            40




5





Triangle
      Petroleum Corporation




(An
      Exploration Stage Company)


Consolidated
      Balance Sheets


(Expressed
      in U.S. dollars)


October
                31,
              2007
              $
            
            January
                31,
              2007
              $(Unaudited)Restated
                –
              Note
                16)ASSETSCurrent
                AssetsCash
                and cash equivalents
            
            
            9,343,940
            
            
            5,798,982Prepaid
                expenses (Note 3)
            
            
            847,408
            
            
            2,519,009Other
                receivables
            
            
            1,064,343
            
            
            344,342Total
                Current Assets
            
            
            11,255,691
            
            
            8,662,333Debt
                Issue Costs, net
            
            
            575,417
            
            
            916,353Property
                and Equipment (Note 4)
            
            
            72,291
            
            
            67,091Oil
                and Gas Properties (Note 5)
            
            
            28,045,769
            
            
            21,101,495Total
                Assets
            
            
            39,949,168
            
            
            30,747,272LIABILITIES
                AND STOCKHOLDERS’ EQUITY (DEFICIT)Current
                LiabilitiesAccounts
                payable
            
            
            4,284,914
            
            
            4,199,961Accrued
                interest on convertible debentures
            
            
            2,474,348
            
            
            2,095,989Accrued
                liabilities (Note 6)
            
            
            1,939,570
            
            
            466,112Derivative
                liabilities (Note 9)
            
            
            7,709,289
            
            
            15,992,857Convertible
                debentures, current portion, less unamortized discount of $nil and
                $515,626, respectively (Note 8(a))
            
            
            –
            
            
            2,234,374Total
                Current Liabilities
            
            
            16,408,121
            
            
            24,989,293Asset
                Retirement Obligations (Note 7)
            
            
            419,365
            
            
            90,913Convertible
                Debentures, less unamortized discount of $6,680,931 and $12,478,642,
                respectively (Note 8)
            
            
            13,069,069
            
            
            10,771,358Total
                Liabilities
            
            
            29,896,555
            
            
            35,851,564Contingencies
                and Commitments (Notes 1 and 13)Subsequent
                Events (Note 15)Stockholders’
                Equity (Deficit)Common
                Stock (Note 10)
              Authorized:
                100,000,000 shares, par value $0.00001
              Issued:
                37,704,805 shares (January 31, 2007 –
                22,475,866
                shares)
            
            
            377
            
            
            225Additional
                Paid-In Capital
            
            
            43,515,691
            
            
            13,088,795Deficit
                Accumulated During the Exploration Stage
            
            
            (33,463,455
            )
            
            (18,193,312
            )Total
                Stockholders’ Equity (Deficit)
            
            
            10,052,613
            
            
            (5,104,292
            )Total
                Liabilities and Stockholders’ Equity (Deficit)
            
            
            39,949,168
            
            
            30,747,272





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




6


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Consolidated
      Statements of Operations


(Expressed
      in U.S. dollars)


(Unaudited)





Accumulated from
              December 11, 2003
              (Date of Inception)
              to October 31,
            
            Three
              Months
              Ended
              October 31,
            
            Three
              Months
              Ended
              October 31,
            
            Nine
              Months
              Ended
              October 31,
            
            Nine
              Months
              Ended
              October 31,2007
            
            2007
            
            2006
            
            2007
            
            2006$
            
            $
            
            $
            
            $
            
            $Restated
                –
              Note
                16)
            
            Restated
                –
              Note
                16)
            
            
            
            Restated
                –
              Note
                16)Revenue,
                net of royalties
            
            
            439,201
            
            
            191,632
            
            
            24,540
            
            
            384,859
            
            
            24,540Operating
                ExpensesOil
                and gas production
            
            
            220,199
            
            
            146,396
            
            
            -
            
            
            220,199
            
            
            -Depletion,
                depreciation and accretion
            
            
            428,113
            
            
            151,327
            
            
            7,590
            
            
            391,884
            
            
            19,828Depreciation
                – property and equipment
            
            
            62,036
            
            
            9,178
            
            
            24,375
            
            
            30,792
            
            
            24,375General
                and administrative
            
            
            17,561,952
            
            
            1,717,907
            
            
            1,634,772
            
            
            5,252,439
            
            
            6,270,152Foreign
                exchange loss (gain)
            
            
            584,230
            
            
            467,707
            
            
            9,170
            
            
            627,454
            
            
            (12,086
            )Impairment
                loss on oil and gas properties
            
            
            10,795,341
            
            
            4,604,726
            
            
            1,041,852
            
            
            8,496,129
            
            
            1,086,789Total
                Operating Expenses
            
            
            29,651,871
            
            
            7,097,241
            
            
            2,717,759
            
            
            15,018,897
            
            
            7,389,058Net
                Loss from Operations
            
            
            (29,212,670
            )
            
            (6,905,609
            )
            
            (2,693,219
            )
            
            (14,634,038
            )
            
            (7,364,518
            )Other
                Income (Expenses)Accretion
                of discounts on convertible debentures
            
            
            (19,470,985
            )
            
            (1,704,802
            )
            
            (2,766,329
            )
            
            (6,313,336
            )
            
            (7,463,959
            )Amortization
                of debenture issue costs
            
            
            (804,584
            )
            
            (109,584
            )
            
            (117,707
            )
            
            (340,937
            )
            
            (294,097
            )Interest
                expense
            
            
            (3,102,407
            )
            
            (317,671
            )
            
            (448,248
            )
            
            (1,006,419
            )
            
            (1,287,136
            )Interest
                income
            
            
            1,091,840
            
            
            147,416
            
            
            166,201
            
            
            543,082
            
            
            444,957Unrealized
                gain on fair value of derivatives
            
            
            35,286,616
            
            
            2,926,091
            
            
            7,147,301
            
            
            6,481,505
            
            
            16,724,250Total
                Other Income (Expenses)
            
            
            13,000,480
            
            
            941,450
            
            
            3,981,218
            
            
            (636,105
            )
            
            8,124,015Net
                Income (Loss) Before Discontinued Operations
            
            
            (16,212,190
            )
            
            (5,964,159
            )
            
            1,278,999
            
            
            (15,270,143
            )
            
            759,497Discontinued
                Operations
            
            
            (32,471
            )
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                Income (Loss) for the Period
            
            
            (16,244,661
            )
            
            (5,964,159
            )
            
            1,278,999
            
            
            (15,270,143
            )
            
            759,497Deficit
                adjustment related to December 8, 2005 reclassification of warrants
                from
                additional paid-in capital to a derivative liability
            
            
            (17,218,794
            )Deficit
                accumulated during the exploration stage
            
            
            (33,463,455
            )Net
                Income (Loss) Per ShareBasic
            
            
            
            
            
            (0.16
            )
            
            0.06
            
            
            (0.44
            )
            
            0.04Diluted
            
            
            
            
            
            (0.16
            )
            
            0.05
            
            
            (0.44
            )
            
            0.03Weighted
                Average Number of Shares OutstandingBasic
            
            
            
            
            
            37,345,000
            
            
            20,716,000
            
            
            34,699,000
            
            
            20,107,000Diluted
            
            
            
            
            
            37,345,000
            
            
            26,716,000
            
            
            34,699,000
            
            
            26,107,000




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


7


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Consolidated
      Statements of Cash Flows


(Expressed
      in U.S. dollars)


(Unaudited)





Nine Months
              Ended
              October 31,
            
            Nine Months
              Ended
              October 31,2007
            
            2006$
            
            $(Restated
                –
              Note
                16)Operating
                ActivitiesNet
                loss (income) for the period
            
            
            (15,270,143
            )
            
            759,497Adjustments
                to reconcile net loss to net cash used in operating
                activities:Accretion
                of discount on convertible debentures
            
            
            6,313,336
            
            
            7,463,959Amortization
                of debt issue costs
            
            
            340,937
            
            
            294,097Depletion,
                depreciation and accretion
            
            
            391,884
            
            
            24,375Depreciation
                –
                property and equipment
            
            
            30,792
            
            
            19,828Impairment
                loss on oil and gas properties
            
            
            8,496,129
            
            
            1,086,789Stock-based
                compensation
            
            
            3,066,979
            
            
            4,670,481Unrealized
                gain on fair value of derivatives
            
            
            (6,481,505
            )
            
            (16,724,250
            )Changes
                in operating assets and liabilities:Prepaid
                expenses
            
            
            (7,746
            )
            
            (191,922
            )Other
                receivables
            
            
            (619,287
            )
            
            (251,996
            )Accounts
                payable
            
            
            48,306
            
            
            1,038,261Accrued
                interest on convertible debentures
            
            
            378,359
            
            
            1,287,135Accrued
                liabilities
            
            
            123,966
            
            
            (594,169
            )Due
                to related parties
            
            
            –
            
            
            2,138Net
                Cash Used in Operating Activities
            
            
            (3,187,993
            )
            
            (1,115,777
            )Investing
                ActivitiesPurchase
                of property and equipment
            
            
            (35,992
            )
            
            (23,088
            )Oil
                and gas property expenditures
            
            
            (16,487,736
            )
            
            (11,194,598
            )Proceeds
                received from sale of oil and gas properties
            
            
            983,902
            
            
            –Changes
                in investing assets and liabilities
            
            
            2,964,771
            
            
            –Net
                Cash Used in Investing Activities
            
            
            (12,575,055
            )
            
            (11,217,686
            )Financing
                ActivitiesProceeds
                from issuance of common stock
            
            
            20,824,000
            
            
            –Common
                stock issuance costs
            
            
            (1,515,994
            )
            
            –Proceeds
                from issuance of convertible debentures
            
            
            –
            
            
            5,000,000Convertible
                debentures issuance costs
            
            
            –
            
            
            (425,000
            )Net
                Cash Provided from Financing Activities
            
            
            19,308,006
            
            
            4,575,000Increase
                in Cash and Cash Equivalents
            
            
            3,544,958
            
            
            7,758,463Cash
                and Cash Equivalents –
                Beginning
                of Period
            
            
            5,798,982
            
            
            17,394,422Cash
                and Cash Equivalents –
                End of Period
            
            
            9,343,940
            
            
            9,635,959Non-cash
                Investing and Financing Activities:Common
                stock issued for conversion of debentures
            
            
            6,250,000
            
            
            2,400,000Supplemental
                Disclosures:Interest
                paid
            
            
            628,058
            
            
            –Income
                taxes paid
            
            
            –
            
            
            –





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




8


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**1.**
            **Nature
                of Operations and Continuance of
                Business**





The
      Company was incorporated in the State of Nevada on December 11, 2003 under
      the
      name Peloton Resources Inc. In December 2003, the Company purchased six mineral
      claims situated in the Greenwood Mining Division in the Province of British
      Columbia, Canada. The Company’s principal business plan was to acquire, explore
      and develop mineral properties and to ultimately seek earnings by exploiting
      the
      mineral claims. During the fiscal year ended January 31, 2006, the Company
      abandoned its mineral property as a result of poor exploration results, and
      changed the Company’s principal business to that of acquisition, exploration and
      development of oil and gas resource properties. On May 10, 2005, the Company
      changed its name to Triangle Petroleum Corporation.





The
      Company is primarily engaged in the acquisition, exploration and development
      of
      oil and gas resource properties. It has been in the exploration stage since
      its
      formation in December 2003 and has not yet realized any significant revenues
      from its planned operations. At October 31, 2007, the Company has a working
      capital deficit of $5,152,430 and has incurred losses of $16,244,661 since
      inception on December 11, 2003. The Company issued $26,000,000 and $5,000,000
      of
      convertible debentures during the year ended January 31, 2006 and January 31,
      2007, respectively. During the nine month period ended October 31, 2007, the
      Company issued 10,412,000 shares of common stock for net proceeds of
      $19,308,006. The Company’s oil and gas capital expenditures for fiscal 2008 are
      expected to be approximately $23,000,000. In the nine months ended October
      31,
      2007, the Company’s oil and gas capital expenditures were $16,487,736, leaving
      an estimated $6,500,000 of capital expenditures to be incurred during the three
      months ended January 31, 2008. As at October 31, 2007, the Company had cash
      and
      cash equivalents of $9,343,940.





The
      Company will have to raise additional funds to complete the exploration and
      development phase of its programs and, while it has been successful in doing
      so
      in the past, there can be no assurance that it will be able to do so in the
      future. The
      continuation of the Company as a going concern for a period longer than the
      current fiscal year is dependent upon the ability of the Company to obtain
      necessary additional funds to continue operations and to determine the
      existence, discovery and successful exploitation
      of economically recoverable reserves in its resource properties, confirmation
      of
      the Company’s interests in the underlying properties, and
      the
      attainment of profitable operations.





**2.**
            **Summary
                of Significant Accounting
                Policies**





a)
            Basis
                of Presentation





These
      financial statements and related notes are presented in accordance with
      accounting principles generally accepted in the United States, and are expressed
      in US dollars. These consolidated financial statements include the accounts
      of
      the Company and its two wholly-owned subsidiaries, Elmworth Energy Corporation,
      incorporated in the Province of Alberta, Canada, and Triangle USA Petroleum
      Corporation, incorporated in the State of Colorado, USA. All significant
      intercompany balances and transactions have been eliminated. The Company’s
      fiscal year-end is January 31.





b)
            Interim
                Financial Statements





The
      interim unaudited consolidated financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      for interim financial information and with the instructions to Securities and
      Exchange Commission (“SEC”) Form 10-Q. They do not include all of the
      information and footnotes required by generally accepted accounting principles
      for complete financial statements. Therefore, these financial statements should
      be read in conjunction with the Company’s audited consolidated financial
      statements and notes thereto for the year ended January 31, 2007, included
      in
      the Company’s Annual Report on Form 10-KSB filed on May 1, 2007 with the
      SEC.





The
      consolidated financial statements included herein are unaudited; however, they
      contain all normal recurring accruals and adjustments that, in the opinion
      of
      management, are necessary to present fairly the Company’s consolidated financial
      position at October 31, 2007, and the consolidated results of its operations
      and
      consolidated cash flows for the nine months ended October 31, 2007 and 2006.
      The
      results of operations for the three and nine months ended October 31, 2007
      are
      not necessarily indicative of the results to be expected for future quarters
      or
      the full year.




9





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)




**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**





c)
            Use
                of Estimates





The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates. The
      Company regularly evaluates estimates and assumptions related to useful
      life and recoverability of long-lived assets, proved and unproved oil and gas
      expenditures, asset
      retirement obligations, stock-based compensation and deferred income tax asset
      valuation allowances. The Company bases its estimates and assumptions on current
      facts, historical experience and various other factors that it believes to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments about the carrying values of assets and liabilities and the
      accrual of costs and expenses that are not readily apparent from other sources.
      The actual results experienced by the Company may differ materially and
      adversely from the Company’s estimates. To the extent there are material
      differences between the estimates and the actual results, future results of
      operations will be affected.





d)
            Foreign
                Currency Translation





The
      Company's functional and reporting currency is the United States dollar and
      management has adopted SFAS No. 52, “ *Foreign
      Currency Translation”* .
      Monetary assets and liabilities denominated in foreign currencies are translated
      into United States dollars at rates of exchange in effect at the balance sheet
      date. Non-monetary assets, liabilities and items recorded in income arising
      from
      transactions denominated in foreign currencies are translated at rates of
      exchange in effect at the date of the transaction. Foreign currency transactions
      are primarily undertaken in Canadian dollars. The Company has not, to the date
      of these financials statements, entered into derivative instruments to offset
      the impact of foreign currency fluctuations.





e)
            Cash
                and Cash Equivalents





The
      Company considers all highly liquid instruments with maturity of three months
      or
      less at the time of issuance to be cash equivalents.





f)
            Property
                and Equipment





Property
      and equipment consists of computer hardware, geophysical software, furniture
      and
      equipment and leasehold improvements, and is recorded at cost. Computer hardware
      and geophysical software are depreciated on a straight-line basis over their
      estimated useful lives of three years. Furniture and equipment are depreciated
      on a straight-line basis over their estimated useful lives of five years.
      Leasehold improvements are depreciated on a straight-line basis over their
      estimated useful lives of five years.





g)
            Long-lived
                Assets





In
      accordance with SFAS No. 144, *“Accounting
      for the Impairment or Disposal of Long-Lived Assets”* ,
      the
      Company tests long-lived assets or asset groups for recoverability when events
      or changes in circumstances indicate that their carrying amount may not be
      recoverable. Circumstances which could trigger a review include, but are not
      limited to: significant decreases in the market price of the asset; significant
      adverse changes in the business climate or legal factors; accumulation of costs
      significantly in excess of the amount originally expected for the acquisition
      or
      construction of the asset; current period cash flow or operating losses combined
      with a history of losses or a forecast of continuing losses associated with
      the
      use of the asset; and current expectation that the asset will more likely than
      not be sold or disposed significantly before the end of its estimated useful
      life.





Recoverability
      is assessed based on the carrying amount of the asset and its fair value which
      is generally determined based on the sum of the undiscounted cash flows expected
      to result from the use and the eventual disposal of the asset, as well as
      specific appraisal in certain instances. An impairment loss is recognized when
      the carrying amount is not recoverable and exceeds fair value.





h)
            Oil
                and Gas Properties




The
      Company utilizes the full-cost method of accounting for petroleum and natural
      gas properties. Under this method, the Company capitalizes all costs associated
      with acquisition, exploration and development of oil and natural gas reserves,
      including leasehold acquisition costs, geological and geophysical expenditures,
      lease rentals on undeveloped properties and costs of drilling of productive
      and
      non-productive wells into the full cost pool on a country by country basis.
      When
      the Company obtains proven oil and gas reserves, capitalized costs, including
      estimated future costs to develop the proved reserves and estimated abandonment
      costs, net of salvage, will be depleted on the units-of-production method using
      estimates of proved reserves. The costs of unproved properties are not amortized
      until it is determined whether or not proved reserves can be assigned to the
      properties. Until such determination is made the Company assesses the unproven
      properties at least annually whether impairment has occurred, and includes
      in
      the amortization base drilling exploratory dry holes associated with unproved
      properties.


10





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**





h)
            Oil
                and gas properties (continued)





The
      Company applies a ceiling test to the capitalized cost in the full cost pool.
      The ceiling test limits such cost to the estimated present value, using a ten
      percent discount rate, of the future net revenue from proved reserves, based
      on
      current economic and operating conditions. Specifically, the Company computes
      the ceiling test so that capitalized cost, less accumulated depletion and
      related deferred income tax, do not exceed an amount (the ceiling) equal to
      the
      sum of: (A) The present value of estimated future net revenue computed by
      applying current prices of oil and gas reserves (with consideration of price
      changes only to the extent provided by contractual arrangements) to estimated
      future production of proved oil and gas reserves as of the date of the latest
      balance sheet presented, less estimated future expenditures (based on current
      cost) to be incurred in developing and producing the proved reserves computed
      using a discount factor of ten percent and assuming continuation of existing
      economic conditions; plus (B) the cost of property not being amortized; plus
      (C)
      the lower of cost or estimated fair value of unproven properties included in
      the
      costs being amortized; less (D) income tax effects related to differences
      between the book and tax basis of the property.





For
      unproven properties, the Company excludes from capitalized costs subject to
      depletion, all costs directly associated with the acquisition and evaluation
      of
      the unproved property until it is determined whether or not proved reserves
      can
      be assigned to the property. Until such a determination is made, the Company
      assesses the unproven property at least annually to ascertain whether impairment
      has occurred. In assessing impairment the Company considers factors such as
      historical experience and other data such as primary lease terms of the
      property, average holding periods of unproved property, comparable leasehold
      sales and geographic and geologic data. The Company adds the amount of
      impairment assessed to the cost to be amortized subject to the ceiling test.





i)
            Asset
                Retirement Obligations





The
      Company recognizes a liability for future retirement obligations associated
      with
      the Company’s oil and gas properties. The estimated fair value of the asset
      retirement obligation is based on the current cost escalated at an inflation
      rate and discounted at a credit adjusted risk-free rate. This liability is
      capitalized as part of the cost of the related asset and amortized over its
      useful life. The liability accretes until the Company settles the
      obligation.





j)
            Debt
                Issue Costs





In
      accordance with the Accounting Principles Board Opinion 21 *“Interest
      on Receivables and Payables”* ,
      the
      Company recognizes debt issue costs on the balance sheet as deferred charges,
      and amortizes the balance over the term of the related debt. The Company follows
      the guidance in the EITF 95-13 “ *Classification
      of Debt Issue Costs in the Statement of Cash Flows”* and
      classifies cash payments for debt issue costs as a financing
      activity.





k)
            Revenue
                Recognition





The
      Company recognizes oil and gas revenue when production is sold at a fixed or
      determinable price, persuasive evidence of an arrangement exists, delivery
      has
      occurred and title has transferred, and collectibility is reasonably
      assured.





l)
            Income
                Taxes





The
      Company has adopted SFAS No. 109 *“Accounting
      for Income Taxes”* as of
      its inception. Pursuant to SFAS No. 109 the Company is required to compute
      tax
      asset benefits for net operating losses carried forward. Potential benefits
      of
      income tax losses are not recognized in the accounts until realization is more
      likely than not. The potential benefits of net operating losses have not been
      recognized in these financial statements because the Company cannot be assured
      it is more likely than not it will utilize the net operating losses carried
      forward in future years.





On
      February 1, 2007, the Company adopted Financial Accounting Standards Board
      Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes – an interpretation
      of FASB Statement No. 109”* (“FIN
      48”). FIN 48 prescribes a measurement process for recording in the financial
      statements uncertain tax positions taken or expected to be taken in a tax
      return. Additionally, FIN 48 provides guidance regarding uncertain tax positions
      relating to derecognition, classification, interest and penalties, accounting
      in
      interim periods, disclosure and transition. At October 31, 2007, the Company
      had
      no material uncertain tax positions.




11


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)




**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**




m)
            Basic
                and Diluted Net Income (Loss) Per
                Share




The
      Company computes net income (loss) per share in accordance with SFAS No.
      128 *,
      "Earnings per Share"* (“SFAS
      128”). SFAS 128 requires presentation of both basic and diluted earnings per
      share (EPS) on the face of the income statement. Basic EPS is computed by
      dividing net income (loss) available to common shareholders (numerator) by
      the
      weighted average number of shares outstanding (denominator) during the period.
      Diluted EPS gives effect to all dilutive potential common shares outstanding
      during the period including stock options, and warrants, using the treasury
      stock method, and convertible securities, using the if-converted method. In
      computing diluted EPS, the average stock price for the period is used in
      determining the number of shares assumed to be purchased from the exercise
      of
      stock options or warrants. Diluted EPS excludes all dilutive potential shares
      if
      their effect is anti-dilutive. Shares underlying these securities totaled
      approximately 22,215,000 as of October 31, 2007.




n)
            Financial
                Instruments




The
      fair
      values of financial instruments, which include cash and cash equivalents, other
      receivables, accounts payable, accrued interest on convertible debt and accrued
      liabilities approximate their carrying values due to the relatively short
      maturity of these instruments. The fair value of convertible debentures are
      estimated to approximate their carrying values based on borrowing rates
      currently available to the Company for debt with similar terms.




o)
            Derivative
                Liabilities




In
      accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging
      Activities” (“SFAS 133”), as amended, and EITF Issue No. 00-19, “Accounting for
      Derivative Financial Instruments Indexed to, and Potentially Settled in, a
      Company’s Own Stock” (“EITF 00-19”) the Company records derivatives at their
      fair values on the date that they meet the requirements of a derivative
      instrument and at each subsequent balance sheet date. Any change in fair value
      will be recorded as non-operating, non-cash income or expense at each reporting
      date.




p)
            Concentration
                of Risk




The
      Company does not believe that it is exposed to interest rate risk. The Company
      maintains its cash accounts in one commercial bank located in Calgary, Alberta,
      Canada. The Company's cash accounts consist of uninsured and insured business
      checking accounts and deposits maintained principally in U.S. dollars. Financial
      instruments that potentially subject the Company to concentrations of credit
      risk consist primarily of cash in excess of federally insured amounts. As at
      October 31, 2007, the Company has not engaged in any transactions that would
      be
      considered derivative instruments on hedging activities. To date, the Company
      has not incurred a loss relating to this concentration of credit risk.




q)
            Comprehensive
                Loss




SFAS
      No.
      130, *“Reporting
      Comprehensive Income,”* establishes standards for the reporting and display of comprehensive loss and
      its components in the financial statements. As at October 31, 2007 and 2006,
      the
      Company has no items that represent comprehensive loss and, therefore, has
      not
      included a schedule of comprehensive loss in the financial
      statements.




r)
            Stock-Based
                Compensation




The
      Company records stock based compensation in accordance with SFAS 123(R),
“Share-Based Payments,” which requires the measurement and recognition of
      compensation expense, based on estimated fair values, for all share-based
      awards, made to employees and directors, including stock options. In
      March 2005, the Securities and Exchange Commission issued SAB 107 relating
      to SFAS 123(R). The Company applied the provisions of SAB 107 in its adoption
      of
      SFAS 123(R).




All
      transactions in which goods or services are received for the issuance of equity
      instruments are accounted for based on the fair value of the consideration
      received or the fair value or the equity instrument issued, whichever is the
      more reliable measure.




SFAS
      123(R) requires companies to estimate the fair value of share-based awards
      on
      the date of grant using an option-pricing model. The Company uses the
      Black-Scholes option-pricing model as its method of determining fair value.
      This
      model is affected by the Company’s stock price as well as assumptions regarding
      a number of subjective variables. These subjective variables include, but are
      not limited to the Company’s expected stock price volatility over the term of
      the awards, and actual and projected employee stock option exercise behaviors.
      The value of the portion of the award that is ultimately expected to vest is
      recognized as an expense in the consolidated statement of operations over the
      requisite service period.




No
      tax
      benefits were attributed to stock-based compensation expense because a full
      valuation allowance was maintained for all net deferred tax assets.




12





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**





s)
            Recently
                Issued Accounting Pronouncements





In
      February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      159, *“The
      Fair Value Option for Financial Assets and Financial Liabilities - Including
      an
      Amendment of FASB Statement No. 115”* .
      This
      statement permits entities to choose to measure many financial instruments
      and
      certain other items at fair value. Most of the provisions of SFAS No. 159 apply
      only to entities that elect the fair value option. However, the amendment to
      SFAS No. 115 *“Accounting
      for Certain Investments in Debt and Equity Securities”* applies
      to all entities with available-for-sale and trading securities. SFAS No. 159
      is
      effective as of the beginning of an entity’s first fiscal year that begins after
      November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
      year that begins on or before November 15, 2007, provided the entity also elects
      to apply the provision of SFAS No. 157, *“Fair
      Value Measurements”* .
      The
      adoption of this statement is not expected to have a material effect on the
      Company's financial statements.





In
      September 2006, the FASB issued SFAS No. 157, *“Fair
      Value Measurements* ”.
      The
      objective of SFAS No. 157 is to increase consistency and comparability in fair
      value measurements and to expand disclosures about fair value measurements.
      SFAS
      No. 157 defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements. SFAS No. 157 applies under other accounting pronouncements
      that require or permit fair value measurements and does not require any new
      fair
      value measurements. The provisions of SFAS No. 157 are effective for fair value
      measurements made in fiscal years beginning after November 15, 2007. The
      adoption of this statement is not expected to have a material effect on the
      Company's future reported financial position or results of
      operations.





t)
            Recently
                Adopted Accounting Pronouncements





In
      September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108,
“ *Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements.”* SAB No.
      108 addresses how the effects of prior year uncorrected misstatements should
      be
      considered when quantifying misstatements in current year financial statements.
      SAB No. 108 requires companies to quantify misstatements using a balance sheet
      and income statement approach and to evaluate whether either approach results
      in
      quantifying an error that is material in light of relevant quantitative and
      qualitative factors. SAB No. 108 is effective for periods ending after November
      15, 2006. The adoption of SAB No. 108 did not have a material effect on the
      Company’s financial statements.





In
      September 2006, the FASB issued SFAS No. 158, *“Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment
      of
      FASB Statements No. 87, 88, 106, and 132(R)”* .
      This
      statement requires employers to recognize the overfunded or underfunded status
      of a defined benefit postretirement plan (other than a multiemployer plan)
      as an
      asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted net assets
      of a not-for-profit organization. This statement also requires an employer
      to
      measure the funded status of a plan as of the date of its year-end statement
      of
      financial position, with limited exceptions. The provisions of SFAS No. 158
      are
      effective for employers with publicly traded equity securities as of the end
      of
      the fiscal year ending after December 15, 2006. The adoption of this statement
      did not have a material effect on the Company's financial
      statements.





In
      March
      2006, the FASB issued SFAS No. 156, *"Accounting
      for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
      Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities"* .
      This
      statement requires all separately recognized servicing assets and servicing
      liabilities be initially measured at fair value, if practicable, and permits
      for
      subsequent measurement using either fair value measurement with changes in
      fair
      value reflected in earnings or the amortization and impairment requirements
      of
      Statement No. 140. The subsequent measurement of separately recognized servicing
      assets and servicing liabilities at fair value eliminates the necessity for
      entities that manage the risks inherent in servicing assets and servicing
      liabilities with derivatives to qualify for hedge accounting treatment and
      eliminates the characterization of declines in fair value as impairments or
      direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
      year
      beginning after September 15, 2006. The adoption of this statement did not
      have
      a material effect on the Company's financial statements.





In
      February 2006, the FASB issued SFAS No. 155, *"Accounting
      for Certain Hybrid Financial Instruments-an amendment of FASB Statements No.
      133
      and 140"* ,
      to
      simplify and make more consistent the accounting for certain financial
      instruments. SFAS No. 155 amends SFAS No. 133, *"Accounting
      for Derivative Instruments and Hedging Activities"* ,
      to
      permit fair value re-measurement for any hybrid financial instrument with an
      embedded derivative that otherwise would require bifurcation, provided that
      the
      whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
      SFAS No. 140, *"Accounting
      for the Impairment or Disposal of Long-Lived Assets"* ,
      to
      allow a qualifying special-purpose entity to hold a derivative financial
      instrument that pertains to a beneficial interest other than another derivative
      financial instrument. SFAS No. 155 applies to all financial instruments acquired
      or issued after the beginning of an entity's first fiscal year that begins
      after
      September 15, 2006, with earlier application allowed. The adoption of this
      statement did not have a material effect on the Company's future reported
      financial position or results of operations.


13


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)




**2.**
            **Summary
                of Significant Accounting Policies
                (continued)**





u)
            Reclassifications


Certain
      reclassifications have been made to the prior period’s financial statements to
      conform to the current period’s presentation.





**3.**
            **Prepaid
                Expenses**





The
      components of prepaid expenses are as follows:





October 31, 2007
              $
            
            January 31,
              2007
              $Office
                space deposit
            
            
            24,702
            
            
            –Prepaid
                insurance
            
            
            71,842
            
            
            151,086Prepaid
                joint-venture exploration costs
            
            
            688,578
            
            
            2,367,923Professional
                and consulting services
            
            
            32,376
            
            
            –Royalty
                deposit
            
            
            23,088
            
            
            –Software
                subscriptions
            
            
            6,822
            
            
            –Total
                prepaid expenses
            
            
            847,408
            
            
            2,519,009





**4.**
            **Property
                and Equipment**





Cost
              $
            
            October 31, 2007
              Accumulated
              Depreciation
              $
            
            Net Carrying
              Value
              $
            
            January 31, 2007
              Net Carrying
              Value
              $Computer
                hardware
            
            
            69,708
            
            
            32,494
            
            
            37,214
            
            
            31,906Furniture
                and equipment
            
            
            48,273
            
            
            15,312
            
            
            32,961
            
            
            25,164Geophysical
                software
            
            
            8,000
            
            
            5,884
            
            
            2,116
            
            
            5,086Leasehold
                improvements
            
            
            7,927
            
            
            7,927
            
            
            –
            
            
            4,935Total
            
            
            133,908
            
            
            61,617
            
            
            72,291
            
            
            67,091





**5.**
            **Oil
                and Gas Properties**





The
      following table summarizes information regarding the Company's oil and gas
      acquisition, exploration and development activities:





October 31, 2007
            
            January 31, 2007$
            
            $Proved
                PropertiesExploration
                costs
            
            
            13,661,354
            
            
            2,965,420Less:Accumulated
                depletion
            
            
            (387,303
            )
            
            (36,229
            )Impairment
                costs
            
            
            (10,795,341
            )
            
            (2,299,212
            )2,478,710
            
            
            629,979Unproven
                PropertiesAcquisition
                costs
            
            
            10,795,922
            
            
            14,405,798Exploration
                costs
            
            
            14,771,137
            
            
            6,065,71825,567,059
            
            
            20,471,516Net
                Carrying Value
            
            
            28,045,769
            
            
            21,101,495





All
      of
      the Company’s oil and gas properties are located in the United States and
      Canada. The Company is currently participating in oil and gas exploration
      activities in Arkansas, Montana, Wyoming and Texas, USA, and Nova Scotia and
      New
      Brunswick, Canada.





(a)
            On
                July 18, 2007, the Company sold its 27% interest in 12,100 gross
                acres in
                northeast Hill County of Texas for gross proceeds of $983,902. The
                Company
                had incurred unproven land and geological and geophysical costs of
                $1,929,305 related to this prospect which resulted in a $945,403
                non-cash
                impairment being recognized in the three months ended July 31,
                2007.


14





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**5.**
            **Oil
                and Gas Properties
                (continued)**





(b)
            As
                at July 31, 2007, the Company’s proved property costs exceeded the ceiling
                test limitation which resulted in a $2,946,000 non-cash impairment
                loss
                being recognized in the three months ended July 31, 2007.





(c)
            During
                2007, the Company’s unproven properties in Alberta were considered
                impaired. As a result, the unproven property costs were no longer
                eligible
                to be classified as unproven property costs under full cost accounting.
                As
                such, they were reclassified to the proved property costs at October
                31,
                2007 resulting in the ceiling test limitation to be exceeded and
                a
                $4,604,726 non-cash impairment loss being recognized in the three
                months
                ended October 31, 2007.





(d)
            The
                Company's unproven acquisition and exploration costs were distributed
                in
                the following geographic areas:





October 31, 2007
              $
            
            January 31, 2007
              $Alberta
            
            
            –
            
            
            6,154,643East
                Coast (Nova Scotia and New Brunswick)
            
            
            8,018,366
            
            
            654,159Canada
            
            
            8,018,366
            
            
            6,808,802Arkansas
            
            
            14,297,692
            
            
            7,569,101Rocky
                Mountains (Colorado, Montana, Wyoming)
            
            
            2,548,245
            
            
            2,187,391Texas
            
            
            702,756
            
            
            3,906,222United
                States
            
            
            17,548,693
            
            
            13,662,714Total
                unproven acquisition and exploration costs
            
            
            25,567,059
            
            
            20,471,516





**6.**
            **Accrued
                Liabilities**





The
      components of accrued liabilities are as follows:





October
                31, 2007
              $
            
            January
                31, 2007
              $Oil
                and gas expenditures
            
            
            1,939,570
            
            
            466,112





**7.**
            **Asset
                Retirement Obligations**





October 31, 2007
              $
            
            January 31, 2007
              $Beginning
                asset retirement obligations
            
            
            90,913
            
            
            33,000Additions
                related to new properties
            
            
            –
            
            
            –Liabilities
                incurred
            
            
            261,180
            
            
            58,186Deletions
                related to property disposals
            
            
            –
            
            
            –Accretion
            
            
            38,018
            
            
            1,467Increase
                (decrease) due to foreign exchange
            
            
            29,254
            
            
            (1,740
            )Total
                asset retirement obligations
            
            
            419,365
            
            
            90,913





The
      Company is required to recognize an estimated liability for future costs
      associated with the abandonment of its oil and gas properties including without
      limitation the costs of reclamation of drilling sites, storage and transmission facilities and access roads. The Company bases its estimate of
      the
      liability on management’s industry experience and on its current understanding
      of federal and state regulatory requirements. The present value calculations
      requires an estimate of the economic lives of the Company’s properties,
      assumptions of future inflation rates to apply to external estimates and the
      determination of the credit-adjusted risk-free rate. The estimated asset
      retirement obligations are reflected in depreciation, depletion and accretion
      calculations over the remaining life of the oil and gas
      properties.




15




Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**8.**
            **Convertible
                Debentures**





(a)
            On
                June 14, 2005, the Company entered into a securities purchase agreement
                with a single accredited investor (the “Purchase Agreement”) pursuant to
                which the investor purchased an 8% convertible debenture with a principal
                amount of $1,000,000, and warrants to purchase 1,000,000 shares of
                the
                Company’s common stock, exercisable at a price of $1.00 per share until
                June 15, 2008. Pursuant to the Purchase Agreement, the investor had
                the
                right to purchase up to $5,000,000 of additional convertible debentures
                and warrants to purchase 5,000,000 shares of common stock which was
                exercised on July 14, 2005, in exchange for an 8% convertible debenture
                with a principal amount of $5,000,000 and warrants to purchase 5,000,000
                shares of the Company’s common stock, exercisable at a price of $1.00 per
                share until June 15, 2008.





The
      total
      convertible debentures of $6,000,000 were due and payable on June 10, 2007.
      The
      principal and accrued interest on these convertible debentures may be converted
      into shares of the Company’s common stock at a rate of $1.00 per share, at the
      option of the holder. The investor has contractually agreed to restrict the
      ability to convert the convertible debentures to an amount which would not
      exceed the difference between the number of shares of common stock beneficially
      owned by the holder or issuable upon exercise of the warrant held by such holder
      and 4.99% of the outstanding shares of common stock of the Company. The
      securities were issued in a private placement transaction pursuant to Regulation
      D under the Securities Act of 1933, as amended. The Company filed an SB-2
      Registration Statement registering the resale of shares of the Company's common
      stock issuable upon conversion of these convertible debentures and exercise
      of
      the warrants.





In
      accordance with EITF 98-5 *“Accounting
      for Convertible Securities with Beneficial Conversion Features or Contingently
      Adjustable Conversion Ratios”,* the
      Company recognized the value of the embedded beneficial conversion feature
      of
      $3,141,817 as additional paid-in capital and an equivalent discount which will
      be expensed over the term of the convertible debentures. In addition, in
      accordance with EITF 00-27 *“Application
      of Issue No. 98-5 to Certain Convertible Instruments”* ,
      the
      Company has allocated the proceeds of issuance between the convertible debt
      and
      the detachable warrants based on their relative fair values. Accordingly, the
      Company recognized the fair value of the detachable warrants of $2,858,183
      as
      additional paid-in capital and an equivalent discount against the convertible
      debentures. During the year ended January 31, 2006, a principal amount of
      $900,000 was converted into 900,000 shares of common stock. The unamortized
      discount on the converted debenture of $731,250 was charged to accretion
      expense. During the year ended January 31, 2007, a principal amount of
      $2,350,000 was converted into 2,350,000 shares of common stock. The unamortized
      discount on the converted debentures of $1,171,875 was charged to accretion
      expense. During the nine month period ended October 31, 2007, a principal amount
      of $2,750,000 was converted into 2,750,000 shares of common stock. The
      unamortized discount on the converted debenture of $284,375 was charged to
      accretion expense. As at October 31, 2007, all of these $6,000,000 convertible
      debentures have been converted into common stock of the Company. On June 21,
      2007, accrued interest of $628,058 was paid.




On
      December 8, 2005, upon the issuance of the convertible debentures referred
      to in
      Note 8(b), the detachable warrants no longer met the requirements for equity
      classification. As such, the Company reversed the previous fair value recorded
      on the date of issuance in additional paid-in capital of $2,858,183 and recorded
      the fair value of the warrants of $31,384,800 as a derivative liability pursuant
      to SFAS 133 and EITF 00-19. The change in the fair value of the warrants from
      the date of issuance to December 8, 2005 of $28,526,617 was accounted for as
      an
      adjustment to stockholders’ equity. During the nine months ended October 31,
      2007, the Company recorded a gain on the change in fair value of the derivative
      liability of $7,668,600 (October 31, 2006 - $15,293,400) and as at October
      31,
      2007, the fair value of the derivative liability was $2,782,800 (January 31,
      2007 - $10,451,400).





(b)
            On
                December 8, 2005, the Company entered into a Securities Purchase
                Agreement
                with a single investor pursuant to which the investor purchased 5%
                secured
                convertible debentures in the aggregate principal amount of $15,000,000.
                The gross proceeds of this financing will be received as
                follows:





(i)
            $5,000,000
                was received on closing;


(ii)
            $5,000,000
                was received on the second business day prior to the filing date
                of the
                SB-2 Registration Statement; and


(iii)
            $5,000,000
                was received on the fifth business day following the effective date
                of the
                SB-2 Registration Statement





The
      Company agreed to pay an 8% fee on the receipt of each installment, and a
      $15,000 structuring fee. The convertible debentures mature on the third
      anniversary of the date of issue (the “Maturity Date”) and bear interest at 5%
      per annum. The Company is not required to make any payments until the Maturity
      Date. The investor may convert, at any time, any amount outstanding under the
      convertible debentures into shares of common stock of the Company at a
      conversion price per share equal to the lesser of $5.00 or 90% of the average
      of
      the three lowest daily volume weighted average prices of the common stock,
      as
      quoted by Bloomberg, LP, of the ten trading days immediately preceding the
      date
      of conversion.





The
      Company, at its option has the right, with three business days advance written
      notice, to redeem a portion or all amounts outstanding under these convertible
      debentures prior to the Maturity Date provided that the closing bid price of
      the
      common stock is less than $5.00 at the time of the redemption. In the event
      of
      redemption, the
      Company is
      obligated to pay an amount equal to the principal amount being redeemed plus
      a
      20% redemption premium, and accrued interest.


16


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**8.**
            **Convertible
                Debentures (continued)**





In
      connection with the Purchase Agreement, the
      Company also
      entered into a registration rights
      agreement (the
“Registration Rights
      Agreement ”)
      providing for the filing of an SB-2 Registration Statement (the “Registration
      Statement”) with the U.S. Securities and Exchange Commission (“SEC”) registering
      the common stock issuable upon conversion of the convertible debentures. The
      Company was
      obligated to use its best efforts to cause the Registration Statement to be
      declared effective no later than June
      30,
      2006 and to
      insure that the Registration Statement remains in effect until all of the shares
      of common stock issuable upon conversion of the convertible debentures have
      been
      sold. In the event of a default of its obligations under the Registration Rights
      Agreement ,
      including its agreement to file the Registration Statement with the SEC no
      later
      than January
      22, 2006 ,
      or if
      the Registration Statement was not declared effective by June
      30,
      2006 ,
      it is
      required pay to the investor, as liquidated damages, for each month that the
      Registration Statement has not been filed or declared effective, as the case
      may
      be, either a cash amount or shares of common stock equal to 2% of the liquidated
      value of the convertible debentures. The Company filed an SB-2 Registration
      Statement on January 18, 2006 that was declared effective May 26,
      2006.





The
      investor has agreed to restrict its ability to convert the convertible
      debentures and receive shares of the
      Company ’s
      common
      stock such that the number of shares of common stock held by the investor in
      the
      aggregate and its affiliates after such conversion or exercise does not exceed
      4.9% of the then issued and outstanding shares of the
      Company ’s
      common
      stock.





In
      connection with the Securities Purchase Agreement, the
      Company and each
      of its subsidiaries executed
      security agreements (the “Security Agreements”) in favor of the investor
      granting them a first priority security interest in all of the Company’s goods,
      inventory, contractual rights and general intangibles, receivables, documents,
      instruments, chattel paper, and intellectual property. The Security Agreements
      state that if an event of default occurs under the convertible debentures or
      Security Agreements, the investor has the right to take possession of the
      collateral, to operate the Company’s business using the collateral, and have the
      right to assign, sell, lease or otherwise dispose of and deliver all or any
      part
      of the collateral, at public or private sale or otherwise to satisfy the
      Company’s obligations under these agreements.





The
      Company classified the conversion features as derivative liabilities pursuant
      to
      SFAS 133 and EITF 00-19. As such, the Company recorded derivative liabilities
      (Refer to Notes 9 and 16) related to the convertible debentures equal to the
      fair values of the conversion feature of $10,151,918 and an equivalent discount
      on the debentures of $10,151,918. During the year ended January 31, 2007, a
      principal amount of $1,750,000 was converted into 943,336 shares of common
      stock. The unamortized discount on the converted debentures of $847,164 was
      charged to accretion expense. During the nine month period ended October 31,
      2007, a principal amount of $3,500,000 was converted into 2,016,939 shares
      of
      common stock. The unamortized discount on the converted debentures of $1,181,031
      was charged to accretion expense. The carrying value of the convertible
      debentures will be accreted to the face value of $9,750,000 to maturity. To
      October 31, 2007, accrued interest of $1,120,240 (January 31, 2007 – $693,699)
      has
      been included in accrued liabilities and $7,361,282 (October 31, - $2,695,357)
      has been accreted increasing the carrying value of the convertible debentures
      to
      $6,959,366 (January 31, 2007 - $7,154,808) (net of conversions of $5,250,000).
      During the nine months ended October 31, 2007, the Company recorded a loss
      on
      the change in fair value of the derivative liability of $1,187,095 (October
      31,
      2006 $283,525) and as at October 31, 2007, the fair value of the derivative
      liability was $4,926,489 (January 31, 2007 - $5,541,457).





(c)
            On
                December 28, 2005, the Company entered into a Securities Purchase
                Agreement with two accredited investors providing for the sale bythe
                Companyto
                the investors of 7.5% convertible debentures in the aggregate principal
                amount of $10,000,000, of which $5,000,000 was advanced immediately,
                and
                1,250,000 warrants (the “Warrants”) to purchase 1,250,000 shares ofthe
                Company’s
                common stock, exercisable at a price of $5.00 per share untilDecember
                28,2006,
                of which 625,000 were issued. The second installment of $5,000,000
                and
                625,000 warrants was advanced on January 18, 2006, upon the filing
                of an
                SB-2 Registration Statement bythe
                Companywith the SEC. The warrants expired in full without exercise during
                the
                fiscal year ended January 31, 2007.





The
      convertible debentures mature on the third anniversary of the date of issuance
      (the “Maturity Date”) and bear interest at the annual rate of 7.5%. The
      Company is not
      required to make any payments until the Maturity Date. The investors may
      convert, at any time, any amount outstanding under the convertible debentures
      into shares of common stock of the
      Company at a
      conversion price per share of $4.00.





In
      connection with the Securities Purchase Agreement, the
      Company also
      entered into a registration rights
      agreement (the
“Registration Rights Agreement”) providing for the filing of a registration
      statement (the “Registration Statement”) with the SEC registering the common
      stock issuable upon conversion of the convertible debentures and Warrants. The
      Company was
      obligated to use its best efforts to cause the Registration Statement to be
      declared effective no later than May
      28,
      2006 and to
      insure that the registration statement remains in effect until all of the shares
      of common stock issuable upon conversion of the convertible debentures have
      been
      sold. In the event of a default of its obligations under the Registration Rights
      Agreement, including its agreement to file the Registration Statement with
      the
      SEC no later than February
      26, 2006 ,
      or if
      the Registration Statement was not declared effective by June 30,
      2006 ,
      the
      Company is required pay to the investors, as liquidated damages, for each month
      that the Registration Statement has not been filed or declared effective, as
      the
      case may be, a cash amount equal to 1% of the liquidated value of the
      convertible debentures. The Company filed an SB-2 Registration Statement on
      January 18, 2006 that was declared effective May 25, 2006.




17


Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**8.**
            **Convertible
                Debentures (continued)**





Each
      investor has agreed to restrict its ability to convert the convertible
      debentures or exercise the Warrants and receive shares of the
      Company ’s
      common
      stock such that the number of shares of common stock held by them in the
      aggregate and their affiliates after such conversion or exercise does not exceed
      4.99% of the then issued and outstanding shares of the
      Company ’s
      common
      stock.





In
      accordance with SFAS 133 and EITF 00-19, the Company recognized the fair value
      of the warrants of $3,261,250 as a derivative liability (Refer to Notes 9 and
      16) and an equivalent discount on the debentures. Also, the Company recorded
      the
      residual value of the embedded beneficial conversion feature of $6,738,750
      as
      additional paid-in capital and an equivalent discount on the debentures. The
      carrying value of the convertible debentures will be accreted to the face value
      of $10,000,000 to maturity. To October 31, 2007, accrued interest of $1,354,108
      (January 31, 2007 – $793,150)
      has
      been included in accrued liabilities, and $6,109,703 (January 31, 2007 -
      $3,616,550) has been accreted increasing the carrying value of the convertible
      debentures to $6,109,703 (January 31, 2006 - $3,616,550). During the nine
      months ended October 31, 2007, the Company recorded a gain on the change in
      fair
      value of the derivative liability of $nil (October 31, 2006 - $1,714,375) and
      as
      at October 31, 2007, the fair value of the derivative liability was $nil
      (January 31, 2007 –
      $nil).





**9.**
            **Derivative
                Liabilities**




The
      Company evaluated the application of SFAS 133 and EITF 00-19 for the convertible
      debentures and related detachable warrants issued to investors as outlined
      in
      Note 8. SFAS 133 and EITF 00-19 require the Company to bifurcate and separately
      account for some conversion features of convertible debentures as embedded
      derivatives. They also require that when detachable warrants meet certain
      requirements that they need to be recorded as derivative liabilities. The
      Company concluded that the conversion features of the December 8, 2005 debenture
      issuance and all warrants outstanding on that date and subsequently issued
      were
      required to be accounted for as derivatives. Pursuant to SFAS 133, the Company
      bifurcated the conversion feature from the December 8, 2005 debentures because
      the economic characteristics and risks of the conversion features were
      determined to not be clearly and closely related to the economic characteristics
      and risks of the debentures, and the number of shares issuable pursuant to
      the
      conversion features was variable. As such, the Company determined that the
      conversion features related to the December 8, 2005 debentures and all
      outstanding warrants met the attributes of a liability and therefore recorded
      their fair values as current liabilities. The Company is required to record
      their fair value on each balance sheet date at fair value with changes in the
      values of these derivatives reflected in the statement of operations. Also,
      these derivative liabilities were not previously classified as such in the
      Company's historical financial statements. In order to reflect these changes,
      the Company has restated its financial statements for the period ended October
      31, 2007 as described in Note 16.




The
      Company uses the Black-Scholes valuation model to calculate the fair value
      of
      derivative liabilities. The following table shows the assumptions used in the
      calculation of the call value for the conversion features as at October 31,
      2007.




Volatility
            
            Risk Free
              Rate
            
            Dividend
              Yield
            
            Term in
              YearsWeighted
                Average Assumptions at:October
                31, 2007
            
            
            74
            %
            
            4.04
            %
            
            –
            
            
            1.40




The
      following table shows the assumptions used in the Black-Scholes calculation
      of
      the detachable warrants as at October 31, 2007.




Volatility
            
            Risk Free
              Rate
            
            Dividend
              Yield
            
            Term in
              YearsWeighted
                Average Assumptions at:October
                31, 2007
            
            
            74
            %
            
            4.04
            %
            
            –
            
            
            0.62




During
      the nine month period ended October 31, 2007, the Company recorded a gain on
      derivatives of $8,283,568 equal to the difference in the fair value of the
      derivatives at January 31, 2007 and October 31, 2007.




18





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**10.**
            **Common
                Stock**





Shares
            
            Common Stock
            
            Additional Paid-
              In Capital$
            
            $January
                31, 2007
            
            
            22,475,866
            
            
            192
            
            
            13,088,795Conversion
                of debentures (c)
            
            
            4,766,939
            
            
            47
            
            
            8,052,016Private
                placement (d)
            
            
            10,412,000
            
            
            104
            
            
            20,823,896Issuance
                costs (d)
            
            
            -
            
            
            -
            
            
            (1,515,994
            )Investor
                relations services (e)
            
            
            50,000
            
            
            1
            
            
            108,499Stock-based
                compensation (a, b and Note 10)
            
            
            -
            
            
            -
            
            
            2,958,479October
                31, 2007
            
            
            37,704,805
            
            
            377
            
            
            43,515,691





(a)
            On
                May 16, 2005, the Company issued 4,000,000 shares of common stock
                to the
                President of the Company at $0.01 per share for proceeds of $40,000.
                As
                the shares were issued for below fair value, a discount on the issuance
                of
                shares of $4,160,000 was recorded as deferred compensation. During
                the
                year ended January 31, 2007, $2,080,000 was charged to operations.
                During
                the nine month period ended October 31, 2007, $606,667 was charged
                to
                operations.





(b)
            On
                June 2, 2005, the Company issued 2,000,000 shares of common stock
                to the
                President of the Company’s subsidiary at $0.01 per share for proceeds of
                $20,000. As the shares were issued for below fair value, a discount
                on the
                issuance of shares of $2,700,000 was recorded as deferred compensation.
                During the year ended January 31, 2007, $1,350,000 was charged to
                operations. During the nine month period ended October 31, 2007,
                $450,000
                was charged to operations.





(c)
            During
                the nine months period ended October 31, 2007, the Company issued
                4,766,939 shares of common stock upon the conversion of $6,250,000
                of
                convertible notes. The date of issuance is shown on the table below.





Date
            
            Shares
            
            Common
              Stock
            
            Face value
              (net of common
                stock)
            
            Fair Value of
                Embedded Conversion Feature
            
            Additional Paid- InCapital#
            
            $
            
            $
            
            
            
            $February
                20, 2007
            
            
            108,923
            
            
            1
            
            
            249,999
            
            
            148,079
            
            
            398,078March
                6, 2007
            
            
            900,000
            
            
            9
            
            
            899,991
            
            
            -
            
            
            899,991March
                7, 2007
            
            
            106,696
            
            
            1
            
            
            249,999
            
            
            140,935
            
            
            390,394April
                11, 2007
            
            
            129,333
            
            
            1
            
            
            249,999
            
            
            140,104
            
            
            390,103April
                30, 2007
            
            
            128,939
            
            
            1
            
            
            249,999
            
            
            133,945
            
            
            383,944May
                4, 2007
            
            
            748,000
            
            
            7
            
            
            747,993
            
            
            -
            
            
            747,993May
                11, 2007
            
            
            130,494
            
            
            2
            
            
            249,999
            
            
            135,254
            
            
            385,253May
                21, 2007
            
            
            265,041
            
            
            3
            
            
            499,997
            
            
            255,559
            
            
            755,556June
                15, 2007
            
            
            279,002
            
            
            3
            
            
            499,997
            
            
            263,994
            
            
            763,991June
                21, 2007
            
            
            1,102,000
            
            
            11
            
            
            1,101,989
            
            
            -
            
            
            1,101,989June
                25, 2007
            
            
            138,742
            
            
            1
            
            
            249,998
            
            
            134,197
            
            
            384,195June
                28, 2007
            
            
            138,566
            
            
            1
            
            
            249,999
            
            
            138,115
            
            
            388,114September
                25, 2007
            
            
            591,203
            
            
            6
            
            
            749,994
            
            
            311,880
            
            
            1,061,874-Total
            
            
            4,766,939
            
            
            47
            
            
            6,249,953
            
            
            1,802,062
            
            
            8,052,016





(d)
            On
                February 26, 2007, the Company issued 10,412,000 shares of common
                stock
                pursuant to a private placement for net proceeds of $19,308,006 after
                issue costs of $1,515,994. Pursuant to the terms of sale, the Company
                agreed to cause a resale registration statement covering the common
                stock
                to be filed no later than 30 days after the closing and declared
                effective
                no later than 120 days after the closing. If the Company fails to
                comply
                with the registration statement filing or effective date requirements,
                it
                will be required to pay the investors a fee equal to 1% of the aggregate
                amount invested by the purchasers per each 30 day period of delay,
                not to
                exceed 10%. On March 14, 2007, the registration statement was declared
                effective. In connection with the financing the Company paid the
                placement
                agents of the offering a cash fee of 6.5% of the proceeds of the
                offering.





(e)
            On
                June 26, 2007, the Company issued 50,000 shares of common stock at
                a fair
                value of $108,500 for investor relation services
                rendered.


19





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**11.**
            **Stock
                Options**




Effective
      August 5, 2005, the Company approved the 2005 Incentive Stock Plan (the “2005
      Plan”) to issue up to 2,000,000 shares of common stock. Pursuant to the 2005
      Plan, stock options vest 20% upon granting and 20% every six months. As at
      October 31, 2007, the Company had 320,000 stock options available for granting
      pursuant to the 2005 Plan. The 2005 Plan allows for the granting of stock
      options at a price of not less than fair value of the stock and for a term
      not
      to exceed five years. The total number of options granted to any person shall
      not exceed 5% of the issued and outstanding common stock of the
      Company.




Effective
      August 17, 2007, the Company approved the 2007 Incentive Stock Plan (the “2007
      Plan”) to issue up to 2,000,000 shares of common stock. Pursuant to the 2007
      Plan, stock options vest 20% upon granting and 20% every six months. As at
      October 31, 2007, the Company had 1,300,000 stock options available for granting
      pursuant to the 2007 Plan. The 2007 Plan allows for the granting of stock
      options at a price of not less than fair value of the stock and for a term
      not
      to exceed five years. The total number of options granted to any person shall
      not exceed 5% of the issued and outstanding common stock of the
      Company.




The
      weighted average grant date fair value of stock options granted during the
      nine
      month periods ended October 31, 2007 and 2006 was $1.21 and $2.96 per share,
      respectively. No stock options were exercised during the nine month periods
      ended October 31, 2007 and 2006. During the nine month period ended October
      31,
      2007 and 2006, the Company recorded stock-based compensation of $1,901,812
      and
      $2,097,981, respectively, as general and administrative expense.




A
      summary
      of the Company’s stock option activity is as follows:





Number of
              Options
            
            Weighted Average
                Exercise Price
              $
            
            Weighted Average
                Remaining Contractual Term
            
            Aggregate Intrinsic
                Value
              $Outstanding,
                January 31, 2007
            
            
            1,630,000
            
            
            3.31Granted
            
            
            1,250,000
            
            
            2.02Forfeited
            
            
            (500,000
            )
            
            3.14Outstanding,
                October 31, 2007
            
            
            2,380,000
            
            
            2.67
            
            
            3.93
            
            
            –Exercisable,
                October 31, 2007
            
            
            1,280,000
            
            
            3.16
            
            
            3.31
            
            
            –




The
      fair
      value of each stock option grant was estimated on the date of the grant using
      the Black-Scholes option pricing model with the following weighted average
      assumptions:




Nine
                Month Period Ended
              October
                31, 2007Expected
                dividend yield
            
            
            0
            %Expected
                volatility
            
            
            129
            %Expected
                life (in years)
            
            
            2.5Risk-free
                interest rate
            
            
            4.39
            %




As
      at
      October 31, 2007, there was $1,520,844 (January 31, 2007 - $2,187,094) of total
      unrecognized compensation costs related to nonvested share-based compensation
      arrangements granted under the 2005 Plan and 2007 Plan which are expected to
      be
      recognized over a weighted-average period of 20 months. The total fair value
      of
      shares vested during the nine months ended October 31, 2007 and 2006 was
      $1,901,812 and $2,097,981, respectively.




A
      summary
      of the status of the Company’s nonvested shares as of October 31, 2007, and
      changes during the nine month period ended October 31, 2007, is presented
      below:




Number
                of Shares
            
            Weighted-Average
              Grant-Date
              Fair
                Value
              $Nonvested
                at January 31, 2007
            
            
            782,000
            
            
            2.80Granted
            
            
            1,250,000
            
            
            1.21Forfeited
            
            
            (120,000
            )
            
            2.35Vested
            
            
            (812,000
            )
            
            2.34Nonvested
                at October 31, 2007
            
            
            1,100,000
            
            
            1.38




20





Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)





**12.**
            **Share
                Purchase Warrants**





The
      following table summarizes the continuity of the Company’s share purchase
      warrants:





Number of
              Warrants
            
            Weighted average
              exercise price
              $Balance,
                January 31, 2007 and October 31, 2007
            
            
            6,000,000
            
            
            
            
            
            1.00





As
      at
      October 31, 2007, the following share purchase warrants were
      outstanding:





Number
                of
              Warrants
            
            Exercise Price
            
            Expiry Date6,000,000
            
            $
            1.00
            
            
            June 15, 2008





**13.**
            **Commitments**





On
      February 28, 2007, the Company entered into a lease agreement commencing May
      1,
      2007 for office premises for a 6 year term expiring May 1, 2013. Annual rent
      under the new lease is payable at $219,829 (Cdn$207,680) for the first three
      years and $228,073 (Cdn$215,468) for the remaining three years. The Company
      must
      also pay its share of building operating costs and taxes. During the nine months
      ended October 31, 2007, the Company paid rent expense of $139,304 (2006 -
      $39,680). Future minimum lease payments over the next five fiscal years are
      as
      follows:





2008
            
            $
            55,0002009
            
            
            220,0002010
            
            
            220,0002011
            
            
            220,0002012
            
            
            220,000$
            935,000





**14.**
            **Segment
                Disclosures**





The
      Company operates as one operating segment which is the acquisition, exploration
      and development of oil and gas resource properties. The Chief Executive Officer
      is the Company’s Chief Operating Decision Maker (CODM) as defined by SFAS 131,
“ *Disclosure
      about Segments of an Enterprise and Related Information.”* The
      CODM
      allocates resources and assesses the performance of the Company based on the
      results of operations.





**15.**
            **Subsequent
                Events**





a)
            Subsequent
                to October 31, 2007, the Company received notices of conversion to
                issue
                3,039,725 shares of common stock for the conversion of convertible
                debentures with an aggregate principal amount of
                $3,649,860.





b)
            Subsequent
                to October 31, 2007, the Company received proceeds of $6,000,000
                related
                to the exercise of all 6,000,000 share purchase warrants which resulted
                in
                the issuance of 6,000,000 shares of common
                stock.





**16.**
            **Restatement**




The
      Company has restated its consolidated financial statements for the fiscal period
      ended April 30, 2007 to reflect additional non-operating gains and losses
      related to the classification of and accounting for convertible debentures
      issued in fiscal 2006. Upon conversion of the December 8, 2005 5% convertible
      debentures, the Company reduced the amount recorded as a derivative liability
      pertaining to the embedded conversion feature with the offsetting amount
      recorded as a decrease to the loss for the period. Upon further review, the
      Company has determined that upon conversion of the convertible debenture two
      entries were required. First, the derivative liability associated with the
      embedded conversion feature should be adjusted to its fair value immediately
      prior to the conversion with the change in fair value included in the statement
      of operations. Second, the re-valued derivative liability should be transferred
      to additional paid in capital.




The
      accompanying consolidated financial statements for the period ended October
      31,
      2007 have been restated to effect the changes described above as
      follows:




21




Triangle
      Petroleum Corporation


(An
      Exploration Stage Company)


Notes
      to
      the Consolidated Financial Statements


(Expressed
      in U.S. dollars, except as noted)


(Unaudited)




**16.**
            **Restatement
                (continued)**





October 31, 2007
              As Reported
              $
            
            Adjustment
              $
            
            October 31, 2007
              As Restated
              $Consolidated
                Balance SheetStockholders’
                DeficitAdditional
                Paid-In Capital
            
            
            41,713,628
            
            
            1,802,063
            
            
            43,515,691Deficit
                Accumulated During the Exploration Stage
            
            
            (31,661,392
            )
            
            (1,802,063
            )
            
            (33,463,455
            )




Three Month
              Period Ended
              October 31, 2007
              As Reported
              $
            
            Adjustment
              $
            
            Three Month
              Period Ended
              October 31, 2007
              As Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            3,237,972
            
            
            (311,881
            )
            
            2,926,091Net
                loss for the period
            
            
            (5,652,278
            )
            
            (311,881
            )
            
            5,961,159Net
                loss for the period
            
            
            (0.15
            )
            
            
            
            
            (0.16
            )





Nine Months
              Ended
              October 31, 2007
              As Reported
              $
            
            Adjustment
              $
            
            Nine Months
              Ended
              October 31, 2007
              As Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            8,283,568
            
            
            (1,802,063
            )
            
            6,481,505Net
                loss for the period
            
            
            (13,468,080
            )
            
            (1,802,063
            )
            
            (15,270,143
            )Net
                Loss Per Share –
                Basic and
                Diluted
            
            
            (0.39
            )
            
            
            
            
            (0.44
            )





Accumulated from
              December 11, 2003
              (Date of Inception) to
              October 31, 2007
              As Reported
              $
            
            Adjustment
              $
            
            Accumulated from
              December 11, 2003
              (Date of Inception) to
              October 31, 2007
              As Restated
              $Consolidated
                Statement of OperationsUnrealized
                gain on fair value of derivatives
            
            
            37,088,679
            
            
            (1,802,063
            )
            
            35,286,616Net
                loss for the period
            
            
            (14,442,598
            )
            
            (1,802,063
            )
            
            (16,244,661
            )




(a)
            Adjustments
                related to the accounting for the convertible debentures and derivative
                liabilities for the period ended October 31, 2007 did not have an
                effect
                on the Consolidated Statements of Cash Flows. Although some line
                items
                within the net cash used in operating activities changed, the net
                cash
                used in operating activities did not
                change.




22




**ITEM
        2. MANAGEMENT'S DISCUSSION AND ANALYSIS** **OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
 
 *This
        report includes certain forward-looking statements. Forward-looking statements
        are statements that predict the occurrence of future events and are not based
        on
        historical fact. Forward-looking statements may be identified by the use
        of
        forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”,
“estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”,
“continue”, or similar terms, variations of those terms or the negative of those
        terms. We have written the forward-looking statements specified in the following
        information on the basis of assumptions we consider to be reasonable. However,
        we cannot predict our future operating results. Any representation, guarantee,
        or warranty should not be inferred from those forward-looking statements.*
  *The
        assumptions we used for purposes of the forward-looking statements specified
        in
        the following information represent estimates of future events and are subject
        to uncertainty in economic, legislative, industry, and other circumstances.
        As a
        result, judgment must be exercised in the identification and interpretation
        of
        data and other information and in their use in developing and selecting
        assumptions from and among reasonable alternatives. To the extent that the
        assumed events do not occur, the outcome may vary substantially from anticipated
        or projected results. Accordingly we express no opinion on the achievability
        of
        those forward-looking statements. We cannot guarantee that any of the
        assumptions relating to the forward-looking statements specified in the
        following information are accurate. We assume no obligation to update any
        such
        forward-looking statements.*
  **Overview**
 
 Prior
        to
        May 2005, we were known as Peloton Resources Inc., a mining exploration company.
        Peloton was actively searching for ore bodies containing gold in British
        Columbia. A consultant was hired to assess the economic viability of exploring
        for and developing gold reserves on Peloton’s properties. Based upon his report,
        Peloton decided to abandon all mining activities and to commence shifting
        towards an oil and gas exploration company. In connection with the shift
        in
        operational focus, we changed our name to Triangle Petroleum
        Corporation.
 
 The
        changeover from a mining to an oil and gas exploration company has taken
        place
        over the past two years, during one of the strongest markets for oil and
        natural
        gas. The average monthly price for West Texas Intermediate (WTI) crude oil
        and
        natural gas (Henry Hub Nymex), currently, as compared to the past, is as
        follows:
  
  23
  
  Although
        these strong commodity prices have resulted in extremely competitive conditions
        for the supply of products and services for exploration companies, our outlook
        remains positive. Despite these strong fundamentals, it should be noted that
        significant short term fluctuations in North American natural gas prices
        have
        occurred based upon seasonal weather patterns and gas storage levels. It
        should
        also be noted that actual prices received for oil and gas are typically less
        than the WTI and Henry Hub prices, respectively. This discount varies from
        time
        to time and is based on location, quality and other factors.
  **Plan
        of Operations**
 
 Since
        our
        inception, we have had the opportunity to screen various projects in a variety
        of geographic locations with numerous potential joint venture partners. The
        project areas outlined below were carefully selected based on our belief
        in
        balancing overall project risk against potential project returns and the
        anticipated time horizons required to achieve such returns. The three core
        project areas (Canadian Shale, Fayetteville Shale and Rocky Mountain
        Conventional Programs) represent distinctive exploration opportunities. In
        conjunction with our joint venture partners, we intend to execute our operating
        plan in order to realize the full value of the initial land base that has
        been
        established. The remaining two project areas (Barnett Shale and Western Canadian
        Programs) are currently designated as non-core due to existing market conditions
        related to land acquisition costs, drilling costs and completion
        costs.
 
 **Eastern
        Canada - Canadian Shale Gas Program**
 
 Over
        the
        last 21 months, a multi-disciplined geoscience team has screened prospective
        basins in Eastern Canada. The screening process includes an assessment of
        the
        geologic history for a given area, estimates of pressure and temperature
        profiles and a determination of the ability to fracture stimulate a prospective
        shale package. As a direct result of implementing this strategy, we have
        executed two farm-in agreements with a Canadian company to pursue two shale
        gas
        opportunities in Eastern Canada.
  24
  The
        first
        project covers approximately 68,000 gross acres in the Moncton sub-basin
        of New
        Brunswick, Canada. We are entitled to earn a 70% working interest in the
        block
        subsequent to the acquisition and evaluation of a seismic program and then
        electing to drill a test well no later than December 31, 2008. We believe
        this
        acreage to be located in a favorable geological setting based on technical
        work
        performed to date and drilling activity in the area. Additional laboratory
        measurements will be taken on core samples and drill cuttings, which are
        available from previously drilled conventional wells, to select our first
        drilling location.
 
 The
        second agreement covers approximately 516,000 gross acres in the Windsor
        Area of
        Nova Scotia, Canada. We are entitled to earn a 70% working interest in the
        block
        subsequent to drilling and completing a test well no later than September
        15,
        2008. Based on an extensive screening process and technical work performed
        to
        date, this area is also believed to be located in a highly favorable geological
        setting. Our current Windsor Basin exploration program is estimated to cost
        approximately $11 million. Laboratory measurements were taken on core samples
        and drill cuttings which are available from previously drilled conventional
        wells and two drilling locations were selected. The following is a summary
        of
        the two wells drilled in the Company's Windsor Basin land block.
 
 The
        first
        well, Kennetcook #1, reached a total depth of 4,390 feet and was rig released
        on
        September 15, 2007 after running casing to total depth. Kennetcook #1 is
        located
        25 miles west of the community of Truro, Nova Scotia. This well was extensively
        cored over an interval of 1,150 feet. Based upon the preliminary log analysis
        and lab work, the primary zone of interest is approximately 350 feet thick
        and
        the secondary zone of interest is approximately 260 feet thick. Advanced
        well
        log data was acquired on this well and the data was integrated with the special
        core measurements performed by service companies with extensive unconventional
        shale gas expertise.
 
 The
        second well, Kennetcook #2, reached a total depth of 6,350 feet and was rig
        released on October 13, 2007 after running casing to total depth. Kennetcook
        #2
        is located approximately two miles north-west of Kennetcook #1 and was cored
        over an interval of 430 feet. Similar logging programs to Kennetcook #1 were
        performed and the integration with shale gas laboratory measurements was
        performed. Based upon preliminary log analysis, the primary shale zone in
        Kennetcook # 2 is approximately 500 feet thick.
 
 We
        have
        concluded that a comprehensive hydraulic fracture stimulation program is
        warranted to assess the Horton Bluff deliverability. As such, a stimulation
        program design moved forward in October based on favorable laboratory
        measurements of rock properties, gas content and fluid compatibility. The
        design
        required two frac water holding ponds to be constructed, each with the capacity
        to hold up to 2.5 million gallons of fluid, and the Kennetcook #1 well to
        be
        completed first with the results of this operation used to guide the completion
        planning for Kennetcook #2.
 
 A
        large,
        slick water fracture stimulation program was performed in two stages on each
        well during the later part of November and early December 2007. The Kennetcook
        #1 first stage frac used 850,000 gallons of slick water with 560,000 pounds
        of
        sand proppant volumes, and the second stage frac used 660,000 gallons of
        water
        and 386,000 pounds of sand. The Kennetcook #2 first stage frac used 641,000
        gallons of slick water with 176,000 pounds of sand, and the second stage
        frac
        used 653,000 gallons of water 366,000 pounds of sand. Stimulations of this
        magnitude are in line with the current stimulations in the Barnett Shale
        of the
        Fort Worth Basin and the Fayetteville Shale of the Arkoma Basin.
 
 An
        aggressive seismic program was acquired during October 2007: the 25 square
        mile
        3-D program covers our initial target area over the Kennetcook wells and
        the 30
        mile 2-D program extends to another favorable area of the land block. Shot
        hole
        drilling for both the 3-D and the 2-D programs has been completed and all
        the
        data was recorded. The processing phase of the seismic program was finished
        in
        early December. Interpretation of this data is expected to occur over the
        next
        60-90 days. The first priority of the interpreted 3-D seismic program will
        be to
        select future well locations.
 
 The
        development of on-shore gas production in Nova Scotia is in a very early
        phase.
        We are currently in discussions with various marketing groups to communicate
        our
        aggressive exploration program initiatives that are in progress for the Windsor
        Basin of Nova Scotia. The gas currently marketed into the northeastern U.S.
        markets is being sold at a premium to other North American producing
        areas.
 
 **Arkoma
        Basin Arkansas - Fayetteville Shale Program**
 
 We
        have
        entered into a new joint venture agreement with our operating partner, Kerogen
        Resources, Inc. ("Kerogen") of Houston, Texas in October 2007. The expanded
        joint-venture will build on the 20,000 net acres (34,000 gross acres) currently
        held in Conway, Pope and Faulkner Counties, Arkansas where both companies
        now
        hold an equal 50% working interest. The new joint venture includes a 52 township
        Area of Mutual Interest ("AMI") in Conway, Faulkner, Pope and Van Buren
        Counties, which covers a significant portion of the core producing areas
        of the
        Fayetteville. The term of this agreement is for three years during which
        time
        both companies expect to initiate an aggressive drilling program.
  25
  Under
        the
        terms of this new joint venture agreement, we are obligated to drill and
        complete one new net horizontal well. We will pay 67% of the capped capital
        costs to earn a 50% interest. All future operations under the joint venture
        will
        be shared on an equal basis. The noted drilling commitment is a replacement
        for
        a previous drilling commitment on the acreage originally acquired by both
        companies. We reimbursed Kerogen for actual land costs which totaled
        $458,000.
 
 Currently,
        one vertical test Fayetteville well has been drilled in Conway County, on
        a
        location covered by a recently acquired 12 square mile proprietary 3-D seismic
        survey. An adjacent second 12 square mile proprietary 3-D seismic survey
        has
        been shot and is currently being processed and merged with the first survey.
        Kerogen, the operator, advises that completion of this vertical test well
        remains a high priority. This completion will be beneficial for providing
        key
        reservoir parameters needed to assist both Kerogen and us in horizontal drilling
        programs in the AMI.
 
 **States
        of Colorado, Montana and Wyoming - Rocky Mountain Program**
 
 We
        have
        embarked on a joint venture with Hunter Energy LLC of Denver, Colorado. We
        made
        an initial commitment to participate in the drilling of three projects. We
        have
        a 25% working interest in the three Hunter Energy projects. The project areas
        are geographically located in northwestern Colorado, southwestern Wyoming,
        and
        northern Montana. The gross acreage position in the three areas is approximately
        77,000 acres. We have advanced approximately $3.8 million dollars in land,
        prospect fees and drilling costs relating to this project.
 
 Although
        the initial test well in Colorado was not successful, plans for this project
        include working with area operators to continue the exploration program.
        We
        commenced a oil exploration program in southwestern Wyoming in September
        2007.
        We pay 33% of the costs for a 25% working interest. We drilled a 2,000 foot
        test
        well into the Nugget Sandstone formation. We were targeting a conventional
        oil
        reservoir on this 17,000 gross acre prospect in Lincoln County, Wyoming.
        Based
        on the data collected to date, the well will not be commercially viable.
        Drilling on the Montana project is anticipated to commence in early to mid
        2008
        with consideration being given to service industry equipment availability
        and
        prevailing short-term winter weather conditions. It is anticipated that our
        share of costs to drill these two wells will be approximately $1.9
        million.
 
 **Greater
        Fort Worth Basin Texas - Barnett Shale Program (non-core
        project)**
 
 We
        participated in a five-county joint venture program with Kerogen where we
        earned
        working interests ranging between 6% and 27%. Approximately 12,400 gross
        acres
        have been leased. As of October 31, 2007, we have expended approximately
        $2.5
        million in prospect fees, land costs and, geological and geophysical
        expenditures. In July 2007, we sold our working interest position (27%) of
        approximately of 12,100 gross acres of undeveloped acreage and received proceeds
        of $984,000. Our investment in this land position was approximately $1.9
        million. The remaining unsold acreage contains our four producing wells which
        we
        participated in at a lower working interest (approximately 6%). The four
        wells
        are currently producing at various rates. The operator of these wells has
        commenced voluntary bankruptcy proceedings. As a result, we have not received
        our monthly production revenue since January 2007; however the amounts owing
        to
        us have been set aside by the bankruptcy trustee in a separate bank account.
        In
        addition, we continue to receive monthly statements detailing our share of
        production revenue and related production royalties and operating expenses.
        We
        spent approximately $1.2 million drilling and completing these four wells.
 
 In
        late
        2006, we participated in four Barnett Shale gas wells with another joint
        venture
        at working interests ranging between 11% and 15%. We have commenced production
        from two of the first four horizontal wells (Hood County) and the other two
        wells (Parker County) have been drilled and were completed and placed on
        production in late November 2007. We have spent approximately $1.6 million
        on
        these four wells to date.
 
 **Alberta
        Canada Deep Basin - Western Canadian Program (non-core
        project)**
 
 We
        originally licensed a 120 square mile seismic data set, at a cost of
        approximately $1.3 million, to assist in the generation of the most prospective
        drilling sites. To date, we have participated in drilling and/or completing
        eight Deep Basin wells at a total cost of approximately $7.0 million net
        to us.
        These eight wells were drilled as part of four different joint ventures with
        varying working interests.
  26
  We
        have
        commenced production from two of eight wells. The first well located in the
        Kakwa Area has been tested at an initial rate of 3.6 mmcfpd or 600 BOED (barrels
        of oil equivalent per day) and it is expected to produce at 2.2 mmcfd starting
        in the fourth quarter of calendar 2007. We paid 20% of the well costs for
        an 18%
        interest before payout (and 12% after payout). The second well is located
        in the
        Wapiti Area and we have an approximate 35% working interest in this well.
        Subsequent to completion, the well was connected to a nearby pipeline and
        initial production rates ranged from 0.4 to 0.6 mmcfpd or 60 to 100 BOED.
        The
        third well was also drilled in the Wapiti Area and we have a 50% interest
        in
        this well that was testing the Cadomin and Falher zones. The Cadomin zone
        was
        completed but tested wet and the Falher zone tested gas but at rates that
        were
        uneconomic to tie-in this past winter season.
 
 Of
        the
        remaining six wells drilled by us, one of the wells tested fresh water, with
        no
        natural gas present. Two other wells tested gas but at rates that that were
        uneconomic to warrant a pipeline tie-in based on today’s natural gas pricing
        environment. The final three wells were taken over by a new operator during
        mid
        2006 and we are waiting for the new operator to propose a potential completion
        strategy for these wells.
 
 **Results
        of Operations for the three and nine months ended October 31, 2007 compared
        to
        the three and nine months ended October 31, 2006**
 
 ***Daily
        Sales Volumes, Working Interest before royalties***
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,2007
              
              2006
              
              2007
              
              2006Barnett
                  Shale in Texas, USA
              
              
              Mcfpd
              
              
              333
              
              
              60
              
              
              193
              
              
              20Deep
                  Basin in Alberta, Canada
              
              
              Mcfpd
              
              
              247
              
              
              -
              
              
              127
              
              
              -Total
                  Company
              
              
              Mcfpd
              
              
              580
              
              
              60
              
              
              320
              
              
              20Total
                  Company
              
              
              Boepd
              
              
              97
              
              
              10
              
              
              53
              
              
              3
 
 ***Net
        Operating Results***
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,2007
              
              2006
              
              2007
              
              2006Volumes
              
              
              Mcf
              
              
              53,516
              
              
              5,481
              
              
              87,492
              
              
              5,481Price
              
              
              $/Mcf
              
              
              5.77
              
              
              4.48
              
              
              6.28
              
              
              4.47Revenue
              
              
              
              
              $
              308,613
              
              $
              24,540
              
              $
              549,554
              
              $
              24,540Royalties
              
              
              
              
              
              116,981
              
              
              -
              
              
              164,695
              
              
              -Revenue,
                  net of royalties
              
              
              
              
              
              191,632
              
              
              24,540
              
              
              384,859
              
              
              24,540Production
                  expenses
              
              
              
              
              
              146,396
              
              
              -
              
              
              220,199
              
              
              -Net
              
              
              
              
              $
              45,236
              
              $
              24,540
              
              $
              164,660
              
              $
              24,540
 
 For
        the
        three and nine month periods ended October 31, 2007, we realized $308,613
        and
        $549,554, respectively, in revenue from sales of natural gas and natural
        gas
        liquids, as compared to $24,540 for the comparable periods in 2006. This
        revenue
        was the result of production from six small working interest wells located
        in
        the Barnett Shale in Texas that came on production in the three months ended
        October 31, 2006 and two wells located in the Deep Basin of Alberta that
        came on
        production in the three months ended July 31, 2007. Royalties related to
        this
        revenue totaled $116,981 and $164,695 (38% and 30% of revenue) for the three
        and
        nine month periods ended October 31, 2007, respectively, as compared to $nil
        for
        the comparable periods in 2006. Production expenses related to this revenue
        totaled $146,396 and $220,199 ($16.42/Boe and $15.11/Boe) for the three and
        nine
        month periods ended October 31, 2007, respectively, as compared to $nil for
        the
        comparable periods in 2006.
 
 27
  ***Depletion,
        Depreciation and Accretion (“DD&A”)***
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,2007
              
              2006
              
              2007
              
              2006DD&A
                  – oil and gas properties
              
              $
              151,327
              
              $
              7,590
              
              $
              391,884
              
              $
              19,828Depreciation
                  – property and equipment
              
              
              9,178
              
              
              24,375
              
              
              30,792
              
              
              24,375Total
              
              $
              160,505
              
              $
              31,965
              
              $
              422,676
              
              $
              44,203Total
                  per BOE
              
              $
              18.00
              
              $
              34.99
              
              $
              28.99
              
              $
              48.39
 
 Due
        to
        the startup of production in the three months ended October 31, 2006, depletion
        on the proven oil and gas properties was calculated and expensed at $34.99/BOE
        in the three months ended October 31, 2006 compared to $18.00 for the comparable
        period of 2007. The decrease in the depletion rate was due to a $2,946,000
        non-cash “ceiling test” impairment loss that was booked against proved
        properties under “full cost” accounting method in the three months ended July
        31, 2007, as discussed next.
 
 Unproven
        property costs of $25,567,059 were excluded from costs subject to depletion
        in
        the current three and nine month periods.
 
 ***Impairment
        costs***
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,2007
              
              2006
              
              2007
              
              2006Unproven
                  property cost impairment:Alberta
                  Deep Basin
              
              $
              4,604,726
              
              $
              1,041,852
              
              $
              4,604,726
              
              $
              1,086,789Texas
                  Barnett shale
              
              
              -
              
              
              -
              
              
              945,403
              
              
              -Proved
                  property cost impairmentAlberta
                  Deep Basin
              
              
              -
              
              
              -
              
              
              1,208,000
              
              
              -Texas
                  Barnett shale
              
              
              -
              
              
              -
              
              
              1,738,000
              
              
              -Total
              
              $
              4,604,726
              
              $
              1,041,852
              
              $
              8,496,129
              
              $
              1,086,789
 
 We
        recognized unproven property cost impairments of $4,604,726 in the three
        months
        ended October 31, 2007 and $1,041,852 in the three months ended October 31,
        2006
        related mainly to seismic purchase and drilling costs in the Alberta Deep
        Basin
        that management now considers a non-core asset. Also in the current year,
        we
        recognized an unproven property cost impairment loss of $945,403 related
        to land
        and geological and geophysical costs of $1,929,305 spent on 12,100 gross
        acres
        (27% working interest) in northeast Hill County of Texas that was sold for
        gross
        proceeds of $983,902 on July 18, 2007.
 
 In
        the
        current year, we recognized proved property impairments (“ceiling test”
write-down) of $1,208,000 and $1,738,000 related to the Alberta Deep Basin
        and
        Barnett Shale projects, respectively, that management now considers non-core
        assets. These were mainly the result of low gas prices, higher costs to drill
        and complete the wells than anticipated and lower production and reserves
        than
        forecasted. .
 
 ***General
        and Administrative (“G&A”)***
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,2007
              
              2006
              
              2007
              
              2006Salaries,
                  wages and consulting fees
              
              $
              412,276
              
              $
              375,105
              
              $
              1,035,518
              
              $
              802,191Other
                  travel and office expense
              
              
              392,296
              
              
              151,331
              
              
              1,149,942
              
              
              797,480Stock-based
                  compensation
              
              
              913,335
              
              
              1,108,336
              
              
              3,066,979
              
              
              4,670,481G&A
              
              $
              1,717,907
              
              $
              1,634,772
              
              $
              5,252,439
              
              $
              6,270,152
  28
  General
        and administrative expenses have decreased significantly in the nine months
        ended October 31, 2007 compared to the same period of 2006 primarily due
        to
        decreased stock-based compensation expense mainly as a result of shares issued
        to our executives that have now been fully recognized.
 
 ***Convertible
        debentures***
 
 Carrying
        value of convertible debentures :
 
 October 31, 2007
              
              January 31, 2007Issuance Date
              
              Face Value
              
              Discount
              
              Carrying
                Value
              
              Face Value
              
              Discount
              
              Carrying
                ValueJune
                  14, 2005
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              2,750,000
              
              $
              515,626
              
              $
              2,234,374December
                  8, 2005
              
              
              9,750,000
              
              
              2,790,
                  644
              
              
              6,959,366
              
              
              13,250,000
              
              
              6,095,191
              
              
              7,154,808December
                  28, 2005
              
              
              10,000,000
              
              
              3,890,297
              
              
              6,109,703
              
              
              10,000,000
              
              
              6,383,450
              
              
              3,616,550Total
                  convertible debentures
              
              $
              19,750,000
              
              $
              6,680,931
              
              $
              13,069,069
              
              $
              26,000,000
              
              $
              12,994,268
              
              $
              13,005,732
 
 Accretion
        of discounts on convertible debentures :
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,Issuance
                  Date
              
              2007
              
              2006
              
              2007
              
              2006June
                  14, 2005
              
              $
              -
              
              $
              837,500
              
              $
              515,626
              
              $
              2,506,250December
                  8, 2005
              
              
              864,619
              
              
              1,088,646
              
              
              3,304,559
              
              
              2,464,558December
                  28, 2005
              
              
              840,183
              
              
              840,183
              
              
              2,493,151
              
              
              2,493,151Total
                  accretion of discounts
              
              $
              1,704,802
              
              $
              2,766,329
              
              $
              6,313,336
              
              $
              7,463,959
 
 Accretion
        of discounts on convertible debentures deceased in the three and nine months
        periods ended October 31, 2007 compared to the comparable periods of 2006
        due
        primarily to the June 14, 2005 debenture discounts being fully converted
        as at
        June 2007.
 
 Interest
        expense :
 
 Three Months Ended October 31,
              
              Nine Months Ended October 31,Issuance Date
              
              2007
              
              2006
              
              2007
              
              2006June
                  14, 2005
              
              $
              -
              
              $
              73,556
              
              $
              18,918
              
              $
              251,486December
                  8, 2005
              
              
              128,629
              
              
              185,650
              
              
              426,542
              
              
              474,690December
                  28, 2005
              
              
              189,041
              
              
              189,042
              
              
              560,959
              
              
              560,960Total
                  interest expense
              
              $
              317,670
              
              $
              448,248
              
              $
              1,006,419
              
              $
              1,287,136
 
 Interest
        expense deceased in the three and nine months periods ended October 31, 2007
        compared to the comparable periods of 2006 due primarily to the June 14,
        2005
        convertible debentures being fully converted as at June 2007.
  29
  ***Oil
        and gas property expenditures***
 
 Three Months
                Ended
                October 31,
              
              Nine Months
                Ended
                October 31,2007
              
              2007Alberta
              
              
              106,807
              
              $
              1,263,946Arkansas
              
              
              1,260,572
              
              
              6,728,589East
                  Coast (Nova Scotia and New Brunswick)
              
              
              7,282,495
              
              
              7,364,209Rocky
                  Mountains (Colorado, Montana, Wyoming)
              
              
              313,477
              
              
              398,275Texas
              
              
              (670,404
              )
              
              732,717Total
                  oil and gas expenditures
              
              $
              8,292,947
              
              $
              16,487,736
 
 During
        the three months ended October 31, 2007, we spent $1,260,572 on the Fayetteville
        project in Arkansas mainly for land brokerage fees ($0.5 million) and seismic
        acquisition ($0.6 million) and $7,282,495 on the Nova Scotia shale gas project
        in the East Coast mainly for Kennetcook #1 and #2 drilling ($3.9 million),
        preliminary Kennetcook #1 and #2 completions ($0.5 million) plus 2D and 3D
        seismic acquisition ($2.8 million).
  ***Liquidity
        and Capital Resources***
 
 As
        at
        October 31, 2007, we had a working capital deficit of $5,152,430 resulting
        primarily from the non-cash derivative liability of $7,709,289, accrued interest
        of $2,474,348 and payables of $6,224,484 offset by our cash and cash equivalents
        of $9,343,940. For the nine months ended October 31, 2007, we had net cash
        outflow from operating activities of $3,187,993. Cash used in investing
        activities totaled $12,575,055 for the nine months ended October 31, 2007,
        which
        was used to fund our share of costs relating to the first two wells drilled
        in
        Nova Scotia, acquiring 2D and 3-D seismic in Nova Scotia, the first vertical
        well drilled in Fayetteville Shale Project in the Arkoma Basin, acquiring
        additional land and 3-D seismic in Fayetteville Shale Project, as well as
        the
        remaining capital commitments for the three Deep Basin gas wells drilled
        in
        Alberta during the winter of the prior year. Cash provided by financing
        activities totaled $19,308,006 for the nine months ended October 31, 2007.
        On
        February 26, 2007, we sold an aggregate of 10,412,000 shares of our common
        stock
        at $2.00 per share to 24 accredited investors in a private placement transaction
        for aggregate proceeds of $20,824,000. Subsequent to October 31, 2007, we
        received proceeds of $6,000,000 related to the exercise of all share purchase
        warrants issued in connection with our June 14, 2005 private placement which
        resulted in the issuance of 6,000,000 shares of common stock.
 
 We
        expect
        significant capital expenditures during the next 12 months for seismic data
        acquisitions, land and drilling rights acquisitions, drilling programs, overhead
        and working capital purposes. We believe we have sufficient funds to conduct
        our
        operations for the balance of fiscal 2008. If additional financing is required,
        there can be no assurance that it will be available in amounts or on terms
        acceptable to us, if at all.
 
 By
        adjusting our operations to the level of capitalization, we believe we have
        sufficient capital resources to meet projected cash flow deficits in the
        near
        term. However, if during that period, or thereafter, we are not successful
        in
        generating sufficient liquidity from operations or in raising sufficient
        capital
        resources, on terms acceptable to us, this could have a material adverse
        effect
        on our business, results of operations, liquidity and financial
        condition.
 
 We
        presently do not have any available credit, bank financing or other external
        sources of liquidity. Due to our brief history and historical operating losses,
        our operations have not been a source of liquidity. We will need to obtain
        additional capital in order to expand operations and become profitable. In
        order
        to obtain capital, we may need to sell additional shares of our common stock
        or
        borrow funds from private lenders. There can be no assurance that we will
        be
        successful in obtaining additional funding.
 
 We
        will
        still need additional investments in order to continue operations until we
        are
        able to achieve positive operating cash flow. Additional investments are
        being
        sought, but we cannot guarantee that we will be able to obtain such investments.
        Financing transactions may include the issuance of equity or debt securities,
        obtaining credit facilities, or other financing mechanisms. However, the
        trading
        price of our common stock and a downturn in the U.S. stock and debt markets
        could make it more difficult to obtain financing through the issuance of
        equity
        or debt securities. Even if we are able to raise the funds required, it is
        possible that we could incur unexpected costs and expenses, fail to collect
        significant amounts owed to us, or experience unexpected cash requirements
        that
        would force us to seek alternative financing. Furthermore, if we issue
        additional equity or debt securities, stockholders may experience additional
        dilution or the new equity securities may have rights, preferences or privileges
        senior to those of existing holders of our common stock. If additional financing
        is not available or is not available on acceptable terms, we will have to
        curtail our operations.
  30
  To
        date,
        we have generated minimal revenues and have incurred operating losses in
        every
        quarter. Our registered independent auditors have stated in their report
        dated
        April 2, 2007, that we are an early exploration company, have not generated
        significant revenues from operations and have incurred significant losses
        since
        inception. These factors among others raise substantial doubt about our ability
        to continue as a going concern.
 
 ***December
        8, 2005 Secured Convertible Debenture Financing***
 
 To
        obtain
        funding for our ongoing operations, we entered into a Securities Purchase
        Agreement with YA
        Global
        Investments, L.P. (formerly, Cornell Capital Partners, L.P.),
        an
        accredited investor, on December 8, 2005 for the sale of $15,000,000 in secured
        convertible debentures. They provided us with an aggregate of $15,000,000
        as
        follows:
 ·
                $5,000,000
                    was disbursed on December 8, 2005;
 
 ·
                $5,000,000
                    was disbursed on January 17, 2006;
                    and
 
 ·
                $5,000,000
                    was disbursed on June 1,
                    2006.
 
 The
        secured convertible debentures bear interest at 5%, mature three years from
        the
        date of issuance, and are convertible into our common stock, at the selling
        stockholders' option, at the lower of (i) $5.00 or (ii) 90% of the average
        of
        the three lowest daily volume weighted average prices of our common stock,
        as
        quoted by Bloomberg, LP, of the 10 trading days immediately preceding the
        date
        of conversion. Accordingly, there is in fact no limit on the number of shares
        into which the secured convertible debentures may be converted. As of December
        6, 2007, the average of the three lowest intraday trading prices for our
        common
        stock during the preceding 10 trading days as quoted by Bloomberg, LP was
        $1.37
        and, therefore, the conversion price for the secured convertible notes was
        $1.233. Based on this conversion price, the $6,100,140 in secured convertible
        debentures remaining outstanding, excluding interest, were convertible into
        4,947,397 shares of our common stock. The sale of such a large number of
        shares
        of common stock could significantly deflate the market price of our common
        stock, which would have the further effect of requiring us to issue additional
        shares upon conversion of the secured convertible debentures. Depending on
        our
        stock price, the conversion of the secured convertible debentures could lead
        to
        the sale of potentially controlling amounts of shares of common stock. As
        of
        December 6, 2007, $8,899,860 of the debenture had been converted into 6,000,000
        shares of common stock and $6,100,140 remained outstanding. As of October
        31,
        2007, $9,750,000 (January 31, 2007 - $13,250,000) of the issued debentures
        were
        outstanding and $5,250,000 (January 31, 2007 - $1,750,000) had been converted.
        Since the conversion feature had a fair value of $10,151,918 at the time
        the
        convertible debentures were issued, we recognized a discount of $10,151,918
        against the convertible debenture liability and recorded an equivalent amount
        to
        derivative liabilities on the balance sheet. The carrying value of the
        convertible debentures liability on the balance sheet as at October 31, 2007
        has
        been accreted to $6,969,366 (January 31, 2007 - $7,154,808). As of October
        31,
        2007, the conversion features were marked to market with a fair value of
        $4,926,489 (January 31, 2007 - $5,541,457), which was recorded as a non-cash
        derivative liability on the balance sheet under current
        liabilities.
  The
        investor has contractually agreed to restrict its ability to convert the
        debentures and receive shares of our common stock such that the number of
        shares
        of common stock held by it and its affiliates after such conversion does
        not
        exceed 4.9% of the then issued and outstanding shares of common
        stock. **** In
        addition, the investor is restricted from converting more than $1,500,000
        in
        principle amount of the debenture in any thirty day period, with no more
        than
        $1,000,000 of such amount at the variable market conversion price.
 
 We
        have
        the right, at our option, with three business days advance written notice,
        to
        redeem a portion or all amounts outstanding under the secured convertible
        debentures prior to the maturity date provided that the closing bid price
        of our
        common stock, is less than $5.00 at the time of the redemption. In the event
        of
        a redemption, we are obligated to pay an amount equal to the principal amount
        being redeemed plus a 20% redemption premium, and accrued interest.
  31
  In
        connection with the Securities Purchase Agreement dated December 8, 2005,
        we
        granted the investor registration rights. We were obligated to use our best
        efforts to cause the registration statement to be declared effective no later
        than June 30, 2006 and to insure that the registration statement remains
        in
        effect until all of the shares of common stock issuable upon conversion of
        the
        secured convertible debentures have been sold. In the event of a default
        of our
        obligations under the Registration Rights Agreement, including if the
        registration statement is not declared effective by June 30, 2006, we are
        required pay to YA Global Investments, as liquidated damages, for each month
        that the registration statement has not been filed or declared effective,
        as the
        case may be, either a cash amount or shares of our common stock equal to
        2% of
        the liquidated value of the secured convertible debentures. The registration
        statement was declared effective on May 25, 2006.
 
 In
        connection with the Securities Purchase Agreement dated December 8, 2005,
        we and
        each of our subsidiaries executed security agreements in favor of the investor
        granting them a first priority security interest in all of our goods, inventory,
        contractual rights and general intangibles, receivables, documents, instruments,
        chattel paper, and intellectual property. The security agreements state that
        if
        an event of default occurs under the secured convertible debentures or security
        agreements, the investors have the right to take possession of the collateral,
        to operate our business using the collateral, and have the right to assign,
        sell, lease or otherwise dispose of and deliver all or any part of the
        collateral, at public or private sale or otherwise to satisfy our obligations
        under these agreements.
 
 ***December
        28, 2005 Convertible Debenture and Warrants
        Financing***
 
 To
        obtain
        funding for our ongoing operations, we entered into Securities Purchase
        Agreements with two accredited investors on December 28, 2005 for the sale
        of
        (i) $10,000,000 in convertible debentures and (ii) warrants to purchase
        1,250,000 shares of our common stock. The two accredited investors, Bank
        Sal.
        Oppenheim Jr. & Cie., (Schweiz) AG and Centrum Bank each subscribed for 50%
        of the total offering.
 
 The
        investors provided us with an aggregate of $10,000,000 as follows:
 ·
                $5,000,000
                    was disbursed on December 28, 2005;
                    and
 
 ·
                $5,000,000
                    was disbursed on January 23,
                    2006.
 
 Pursuant
        to the Securities Purchase Agreements, we issued to each investor 625,000
        warrants to purchase shares of common stock on December 28, 2005 and January
        23,
        2006 exercisable at a price of $5.00 per share. Accordingly, we issued a
        total
        of 1,250,000 warrants. As of January 31, 2007, all of the warrants had expired.
 
 The
        convertible debentures bear interest at 7.5%, mature three years from the
        date
        of issuance, and are convertible into our common stock, at the selling
        stockholders' option, at a rate of $4.00 per share. The investors have
        contractually agreed to restrict their ability to convert its debentures
        or
        exercise its warrants and receive shares of our common stock such that the
        number of shares of common stock held by it and its affiliates after such
        conversion or exercise does not exceed 4.99% of the then issued and outstanding
        shares of common stock. **** As
        of
        October 31 and December 6, 2007, all $10,000,000 of the issued debentures
        were
        outstanding and none had been converted. Due to the embedded beneficial
        conversion feature and detachable warrants issued, we recognized a discount
        of
        $10,000,000 against the convertible debenture liability on the balance sheet,
        with $6,738,750 being recorded to additional paid in capital and $3,261,250
        being recorded to derivative liabilities. The carrying value of the convertible
        debentures liability on the balance sheet as at October 31, 2007 has been
        accreted to $6,109, 703 (January 31, 2007 - $3,616,550).
  In
        connection with the Securities Purchase Agreement dated December 28, 2005,
        we
        granted the investors registration rights. Pursuant to the registration rights
        agreement, if we did not have the registration statement declared effective
        on
        or before May 27, 2006, we were obligated to pay liquidated damages in the
        amount of 1.0% for each 30-day period or pro rata for any portion thereof
        following the date by which such registration statement should have been
        filed
        for which no registration statement is filed or should have been declared
        effective. The registration statement was declared effective on May 25,
        2006.
 
 32
  ***February
        26, 2007 Private Placement***
 
 On
        February 26, 2007, we sold an aggregate of 10,412,000 shares of our common
        stock
        at $2.00 per share to 24 accredited investors in a private placement transaction
        for aggregate proceeds of $20,824,000. Pursuant to the terms of sale, we
        agreed
        to cause a resale registration statement covering the common stock to be
        filed
        no later than 30 days after the closing and declared effective no later than
        120
        days after the closing. If we fail to comply with the registration statement
        filing or effective date requirements, we will be required to pay the investors
        a fee equal to 1% of the aggregate amount invested by the purchasers per
        each 30
        day period of delay, not to exceed 10%. We paid the placement agents of the
        offering a cash fee of 6.5% of the proceeds of the offering. The registration
        statement was declared effective on March 14, 2007.
 
 **Critical
        Accounting Policies**
 
 *Use
        of Estimates*
 
 The
        preparation of financial statements in conformity with U.S. generally accepted
        accounting principles requires us to make estimates and assumptions that
        affect
        the reported amounts of assets and liabilities and disclosure of contingent
        assets and liabilities at the date of the financial statements and the reported
        amounts of revenues and expenses during the reporting period. Actual results
        could differ from those estimates. We regularly evaluate estimates and
        assumptions related to useful life and recoverability of long-lived assets,
        asset retirement obligations, stock-based compensation and deferred income
        tax
        asset valuation allowances. We base our estimates and assumptions on current
        facts, historical experience and various other factors that we believe to
        be
        reasonable under the circumstances, the results of which form the basis for
        making judgments about the carrying values of assets and liabilities and
        the
        accrual of costs and expenses that are not readily apparent from other sources.
        The actual results experienced by us may differ materially and adversely
        from
        our estimates. To the extent there are material differences between the
        estimates and the actual results, future results of operations will be
        affected.
 
 *Investment
        in Oil and Gas Properties*
 
 We
        utilize the full cost method to account for our investment in oil and gas
        properties. Accordingly, all costs associated with acquisition and exploration
        of oil and gas reserves, including such costs as leasehold acquisition costs,
        interest costs relating to unproved properties, geological expenditures and
        direct internal costs are capitalized into the full cost pool. As of October
        31,
        2007, we had two countries with proven reserves. For our proven oil and gas
        reserves, capitalized costs, including estimated future costs to develop
        the
        reserves and estimated abandonment costs, net of salvage, will be depleted
        on
        the units-of-production method using estimates of proved reserves. Investments
        in unproved properties and major development projects including capitalized
        interest, if any, are not amortized until proved reserves associated with
        the
        projects can be determined. If the future exploration of unproved properties
        is
        determined uneconomical, the amounts of such properties are added to the
        capitalized cost to be amortized.
  The
        capitalized costs included in the full cost pool are subject to a “ceiling
        test”, which limits such costs to the aggregate of the estimated present value,
        discounted at 10%, of the future net revenues from proved reserves, based
        on
        current economic and operating conditions and the estimated value of unproven
        properties (adjusted for related income tax effects).
 
 *Long-lived
        Assets*
 
 In
        accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of
        Long-Lived Assets”, we test long-lived assets or asset groups for recoverability
        when events or changes in circumstances indicate that their carrying amount
        may
        not be recoverable. Circumstances which could trigger a review include, but
        are
        not limited to: significant decreases in the market price of the asset;
        significant adverse changes in the business climate or legal factors;
        accumulation of costs significantly in excess of the amount originally expected
        for the acquisition or construction of the asset; current period cash flow
        or
        operating losses combined with a history of losses or a forecast of continuing
        losses associated with the use of the asset; and current expectation that
        the
        asset will more likely than not be sold or disposed significantly before
        the end
        of its estimated useful life.
 
 Recoverability
        is assessed based on the carrying amount of the asset and its fair value
        which
        is generally determined based on the sum of the undiscounted cash flows expected
        to result from the use and the eventual disposal of the asset, as well as
        specific appraisal in certain instances. An impairment loss is recognized
        when
        the carrying amount is not recoverable and exceeds fair value.
  33
  *Asset
        Retirement Obligations*
  We
        recognize a liability for future retirement obligations associated with our
        oil
        and gas properties. The estimated fair value of the asset retirement obligation
        is based on the current cost escalated at an inflation rate and discounted
        at a
        credit adjusted risk-free rate. This liability is capitalized as part of
        the
        cost of the related asset and amortized over its useful life. The liability
        accretes until we settle the obligation.
  *Revenue
        Recognition*
  We
        recognize oil and gas revenue when production is sold to a purchaser at a
        fixed
        or determinable price, when delivery has occurred and title has transferred,
        and
        if collectibility of the revenue is probable.
  *Stock-Based
        Compensation*
 
 Prior
        to
        February 1, 2006, we accounted for stock-based awards under the recognition
        and
        measurement provisions of Accounting Principles Board Opinion (“APB”) No. 25,
“Accounting for Stock Issued to Employees” using the intrinsic value method of
        accounting. Effective February 1, 2006, we adopted the fair value recognition
        provisions of SFAS No. 123R “Share Based Payments”, using the modified
        prospective transition method. Under that transition method, compensation
        cost
        is recognized for all share-based payments granted prior to, but not yet
        vested
        as of February 1, 2006, based on the grant date fair value estimated in
        accordance with the original provisions of SFAS No. 123, and compensation
        cost
        for all share-based payments granted subsequent to February 1, 2006, based
        on
        the grant date fair value estimated in accordance with the provisions of
        SFAS
        123R. Results for prior periods have not been restated.
  *Derivative
        Liabilities*
  We
        record
        derivatives at their fair values on the date that they meet the requirements
        of
        a derivative instrument and at each subsequent balance sheet date. Any change
        in
        fair value will be recorded as non-operating, non-cash income or expense
        at each
        reporting date.
 
 **Recently
        Issued Accounting Pronouncements**
 
 In
        February 2007, the FASB issued SFAS No. 159, *“The
        Fair Value Option for Financial Assets and Financial Liabilities – Including an
        Amendment of FASB Statement No. 115”* .
        This
        statement permits entities to choose to measure many financial instruments
        and
        certain other items at fair value. Most of the provisions of SFAS No. 159
        apply
        only to entities that elect the fair value option. However, the amendment
        to
        SFAS No. 115 *“Accounting
        for Certain Investments in Debt and Equity Securities”* applies
        to all entities with available-for-sale and trading securities. SFAS No.
        159 is
        effective as of the beginning of an entity’s first fiscal year that begins after
        November 15, 2007. Early adoption is permitted as of the beginning of a fiscal
        year that begins on or before November 15, 2007, provided the entity also
        elects
        to apply the provision of SFAS No. 157, *“Fair
        Value Measurements”* .
        The
        adoption of this statement is not expected to have a material effect on our
        future reported financial position or results of operations.
 
 In
        September 2006, the FASB issued SFAS No. 158, *“Employers’
        Accounting for Defined Benefit Pension and Other Postretirement Plans – an
        amendment of FASB Statements No. 87, 88, 106, and 132(R)”* .
        This
        statement requires employers to recognize the overfunded or underfunded status
        of a defined benefit postretirement plan (other than a multiemployer plan)
        as an
        asset or liability in its statement of financial position and to recognize
        changes in that funded status in the year in which the changes occur through
        comprehensive income of a business entity or changes in unrestricted net
        assets
        of a not-for-profit organization. This statement also requires an employer
        to
        measure the funded status of a plan as of the date of its year-end statement
        of
        financial position, with limited exceptions. The provisions of SFAS No. 158
        are
        effective for employers with publicly traded equity securities as of the
        end of
        the fiscal year ending after December 15, 2006. The adoption of this statement
        did not have a material effect on our financial statements.
  34
  In
        September 2006, the FASB issued SFAS No. 157, *“Fair
        Value Measurements”* .
        The
        objective of SFAS No. 157 is to increase consistency and comparability in
        fair
        value measurements and to expand disclosures about fair value measurements.
        SFAS
        No. 157 defines fair value, establishes a framework for measuring fair value
        in
        generally accepted accounting principles, and expands disclosures about fair
        value measurements. SFAS No. 157 applies under other accounting pronouncements
        that require or permit fair value measurements and does not require any new
        fair
        value measurements. The provisions of SFAS No. 157 are effective for fair
        value
        measurements made in fiscal years beginning after November 15, 2007. The
        adoption of this statement is not expected to have a material effect on our
        future reported financial position or results of operations.
 
 In
        March
        2006, the FASB issued SFAS No. 156, *"Accounting
        for Servicing of Financial Assets, an amendment of FASB Statement No. 140,
        Accounting for Transfers and Servicing of Financial Assets and Extinguishments
        of Liabilities"* .
        This
        statement requires all separately recognized servicing assets and servicing
        liabilities be initially measured at fair value, if practicable, and permits
        for
        subsequent measurement using either fair value measurement with changes in
        fair
        value reflected in earnings or the amortization and impairment requirements
        of
        Statement No. 140. The subsequent measurement of separately recognized servicing
        assets and servicing liabilities at fair value eliminates the necessity for
        entities that manage the risks inherent in servicing assets and servicing
        liabilities with derivatives to qualify for hedge accounting treatment and
        eliminates the characterization of declines in fair value as impairments
        or
        direct write-downs. SFAS No. 156 is effective for an entity's first fiscal
        year
        beginning after September 15, 2006. The adoption of this statement did not
        have
        a material effect on our financial statements.
 
 In
        February 2006, the FASB issued SFAS No. 155, *"Accounting
        for Certain Hybrid Financial Instruments-an amendment of FASB Statements
        No. 133
        and 140"* ,
        to
        simplify and make more consistent the accounting for certain financial
        instruments. SFAS No. 155 amends SFAS No. 133, *"Accounting
        for Derivative Instruments and Hedging Activities"* ,
        to
        permit fair value re-measurement for any hybrid financial instrument with
        an
        embedded derivative that otherwise would require bifurcation, provided that
        the
        whole instrument is accounted for on a fair value basis. SFAS No. 155 amends
        SFAS No. 140, *"Accounting
        for the Impairment or Disposal of Long-Lived Assets"* ,
        to
        allow a qualifying special-purpose entity to hold a derivative financial
        instrument that pertains to a beneficial interest other than another derivative
        financial instrument. SFAS No. 155 applies to all financial instruments acquired
        or issued after the beginning of an entity's first fiscal year that begins
        after
        September 15, 2006, with earlier application allowed. The adoption of this
        statement did not have a material effect on our future reported financial
        position or results of operations.
 
 35
  **ITEM
        3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK**
 
 **Commodity
        Price Risk**
 
 Because
        of our relatively low level of current oil and gas production, we are not
        exposed to a great degree of market risk relating to the pricing applicable
        to
        our oil and natural gas production. However, our ability to raise additional
        capital at attractive pricing, our future revenues from oil and gas operations,
        our future profitability and future rate of growth depend substantially upon
        the
        market prices of oil and natural gas, which fluctuate widely. We expect
        commodity price volatility to continue. We do not currently utilize hedging
        contracts to protect against commodity price risk. As our oil and gas production
        grows, we may manage our exposure to oil and natural gas price declines by
        entering into oil and natural gas price hedging arrangements to secure a
        price
        for a portion of our expected future oil and natural gas production.
 
 **Operating
        Cost Risk**
 
 We
        have
        experienced rising operating costs which impacts our cash flow from operating
        activities and profitability. We recognize that rising operating costs could
        continue and continued rising operating costs would negatively impact our
        oil
        and gas operations.
  **Interest
        Rate Risk**
 
 All
        of
        our debt has fixed interest rates, so consequently we are not exposed to
        cash
        flow or fair value risk from market interest rate changes on this debt.
 
 **Financial
        Instruments**
 
 The
        fair
        values of financial instruments, which include cash and cash equivalents,
        other
        receivables, accounts payable, accrued interest on convertible debentures
        and
        accrued liabilities approximate their carrying values due to the relatively
        short maturity of these instruments. The fair value of convertible debentures
        are estimated to approximate their carrying values based on borrowing rates
        currently available to us for debt with similar terms.
 
 **Inflation
        and Changes in Prices**
 
 The
        general level of inflation affects our costs. Salaries and other general
        and
        administrative expenses are impacted by inflationary trends and the supply
        and
        demand of qualified professionals and professional services. Inflation and
        price
        fluctuations affect the costs associated with exploring for and producing
        oil
        and natural gas, which has a material impact on our financial performance.
 
 **Exchange
        Rate Risk**
 
 The
        Canadian to U.S. dollar exchange rate has strengthened and may fluctuate
        over
        time. As product prices are generally U.S. dollar based, our exposure to
        currency exchange rate risks are primarily limited to Canadian capital
        expenditures, Canadian operating costs and the majority of our general and
        administrative expenses which are paid for in Canadian dollars.
 
 36
  **ITEM
        4. CONTROLS AND PROCEDURES**
 
 *(a)
        Evaluation of disclosure controls and procedures.*
 
 The
        Company, under the supervision and with the participation of its management,
        including the principal executive officer and recently appointed principal
        financial officer, has evaluated the effectiveness of the design and operation
        of its disclosure controls and procedures as defined in Rule 13a-15(e) of
        the
        Securities Exchange Act of 1934, as amended (the “Act”) as of the end of the
        period covered by this report (the “Disclosure Controls”). Based upon the
        Disclosure Controls evaluation, the principal executive officer and principal
        financial officer have concluded that the Company’s disclosure controls and
        procedures were not effective in connection with preparing this Quarterly
        Report
        on Form 10-Q due to a material weakness in the Company’s internal control over
        financial reporting, mainly its financial closing, review and analysis process.
        The Company determined that a restatement of its financial statements was
        necessary due to the issuance of convertible debentures and warrants
        (collectively, the “Securities”) in various private placements over the last two
        years. This restatement is required to properly reflect the Company’s financial
        results for certain non-cash, and non-operational related charges or credits
        to
        earnings associated with both embedded and freestanding derivative liabilities,
        and the accounting for certain derivatives under the control of the issuer
        due
        to the revised interpretation and implementation under Statement of Financial
        Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
        Activities, the Emerging Issues Task Force issued EITF Issue No. 00-19,
        Accounting for Derivative Financial Instruments Indexed to, and Potentially
        Settled in, a Company’s Own Stock, and FASB Staff Position
        No. EITF 00-19-2, “Accounting for Registration Payment Arrangements.”
 
 The
        Company believes that the issues surrounding the restatement of this report,
        mainly the internal controls related to the financial closing, review, and
        analysis process has been addressed and the Company has taken additional
        steps
        to avoid the reoccurrence of this condition by adding an additional qualified
        person with SEC experience in the financial reporting and analysis area.
        The
        Company has instituted a policy requiring the Chief Financial Officer, at
        the
        end of each quarter, to reconcile the accounting records to the securities
        issuance report prepared and maintained by the corporate secretary to ensure
        that all issuances have been properly recorded and that appropriate adjustments
        to previously issued securities are recorded, if necessary. The Company believes
        that these additional efforts taken by new management since the end of fiscal
        2008 to strengthen the Company’s internal controls will be effective in future
        periods.
 
 A
        control
        system, no matter how well conceived and operated, can provide only reasonable,
        not absolute, assurance that the objectives of the control system are met.
        Further, the design of a control system must reflect the fact that there
        are
        resource constraints, and the benefits of controls must be considered relative
        to their costs. Because of the inherent limitations in all control systems,
        no
        evaluation of controls can provide absolute assurance that all control issues
        and instances of fraud, if any, within the Company have been detected. Because
        of the inherent limitations in a cost-effective control system, misstatements
        due to error or fraud may occur and not be detected.
 
 The
        Company’s internal control over financial reporting has been modified during the
        Company’s most recent fiscal quarter by adding additional resources to address
        deficiencies in the financial closing, review and analysis process, which
        has
        materially improved the Company’s internal control over financial
        reporting.
  *(b)
        Changes in internal control over financial reporting.*
 
 We regularly
        review our system of internal control over financial reporting and make changes
        to our processes and systems to improve controls and increase efficiency,
        while
        ensuring that we maintain an effective internal control environment. Changes
        may
        include such activities as implementing new, more efficient systems,
        consolidating activities, and migrating processes.
 
 We
        made
        the changes as specified above in our internal control over financial reporting
        that occurred during the period covered by this Quarterly Report on Form
        10-Q
        that have materially affected, or are reasonably likely to
        materially affect, our internal control over financial
        reporting.
 
 37
  **PART
        II - OTHER INFORMATION**
 **Item
        1. Legal Proceedings.**
 
 From
        time
        to time, we may become involved in various lawsuits and legal proceedings
        which
        arise in the ordinary course of business. However, litigation is subject
        to
        inherent uncertainties, and an adverse result in these or other matters may
        arise from time to time that may harm our business. We are currently not
        aware
        of any such legal proceedings or claims that we believe will have, individually
        or in the aggregate, a material adverse affect on our business, financial
        condition or operating results.
 
 **Item
        1A. Risk Factors.**
 
 There
        have been no material changes from the risk factors previously disclosed
        in
        Part I, “Risk Factors,” of the Company’s Annual Report on Form 10-KSB for
        the year ended January 31, 2007, other than to update certain financial
        information as of and for the three and/or nine months ended October 31,
        2007
        regarding the following risk factors.
 
 **We
        Have a History Of Losses Which May Continue, Which May Negatively Impact
        Our
        Ability to Achieve Our Business Objectives.**
 
 We
        incurred a net loss of $4,281,969 for the year ended January 31, 2007. For
        the
        nine months ended October 31, 2007, we incurred a net loss of $15,270,143.
        We
        cannot assure you that we can achieve or sustain profitability on a quarterly
        or
        annual basis in the future. Our operations are subject to the risks and
        competition inherent in the establishment of a business enterprise. There
        can be
        no assurance that future operations will be profitable. Revenues and profits,
        if
        any, will depend upon various factors, including whether we will be able
        to
        continue expansion of our revenue. We may not achieve our business objectives
        and the failure to achieve such goals would have an adverse impact on
        us.
 
 **There
        Are a Large Number of Shares Underlying Our Convertible Debentures and Warrants
        That May be Available for Future Sale and the Sale of These Shares May Depress
        the Market Price of Our Common Stock.**
 
 As
        of
        December 6, 2007, we had 46,744,530  shares
        of
        common stock issued and outstanding, secured convertible debentures issued
        on
        December 8, 2005, January 17, 2006 and June 1, 2006 outstanding that may
        be
        converted into 4,876,211 shares of common stock based on current market prices
        and convertible debentures issued on December 28, 2005 and January 23, 2006
        outstanding that may be converted into 2,500,000 shares of common stock.
        All of
        the shares, including all of the shares issuable upon conversion of the
        convertible debentures, may be sold without restriction. The sale of these
        shares may adversely affect the market price of our common stock.
 
 **The
        Continuously Adjustable Conversion Price Feature of Our Secured Convertible
        Debentures Could Require Us to Issue a Substantially Greater Number of Shares,
        Which Will Cause Dilution to Our Existing
        Stockholders.**
 
 Our
        obligation to issue shares upon conversion of our secured convertible debentures
        issued to YA Global Investments on December 8, 2005, January 17, 2006 and
        June
        1, 2006 is essentially limitless. The following is an example of the number
        of
        shares of our common stock that are issuable, upon conversion of our $6,100,140
        remaining face amount of secured convertible debentures (excluding accrued
        interest), based on market prices 25%, 50% and 75% below the market price,
        as of
        December 6, 2007 of $1.53.
 
 With
              
              Number
              
              % of% Below
              
              Price Per
              
              Discount
              
              of Shares
              
              OutstandingMarket
              
              Share
              
              at 10%
              
              Issuable
              
              Stock25%
              
              $
              1.1475
              
              $
              1.03275
              
              
              5,906,696
              
              
              11.22
              %50%
              
              $
              0.765
              
              $
              0.6885
              
              
              8,860,044
              
              
              15.93
              %75%
              
              $
              0.3825
              
              $
              0.34425
              
              
              17,720,088
              
              
              27.49
              %
 
 As
        illustrated, the number of shares of common stock issuable upon conversion
        of
        our secured convertible debentures will increase if the market price of our
        stock declines, which will cause dilution to our existing stockholders.
  38
  **If
        We Are Required for any Reason to Repay Our Outstanding Convertible Debentures,
        We Would Be Required to Deplete Our Working Capital, If Available, Or Raise
        Additional Funds. Our Failure to Repay the Convertible Debentures, If Required,
        Could Result in Legal Action Against Us, Which Could Require the Sale of
        Substantial Assets.**
 
 In
        December 2005, we entered into three securities purchase agreements for the
        sale
        of an aggregate of $25,000,000 principal amount of convertible debentures,
        secured and unsecured. The $15,000,000 in secured convertible debentures,
        of
        which $6,100,140 remained outstanding as of December 6, 2007, are due and
        payable, with 5% interest, three years from the date of issuance, unless
        sooner
        converted into shares of our common stock. Additionally, the $10,000,000
        in
        convertible debentures, which all remained outstanding as of December 6,
        2007,
        are due and payable, with 7.5% interest, three years from the date of issuance,
        unless sooner converted into shares of our common stock. In addition, any
        event
        of default such as our failure to repay the principal or interest when due,
        our
        failure to issue shares of common stock upon conversion by the holder, our
        failure to timely file a registration statement or have such registration
        statement declared effective, breach of any covenant, representation or warranty
        in the Securities Purchase Agreements or related convertible debentures,
        the
        assignment or appointment of a receiver to control a substantial part of
        our
        property or business, the filing of a money judgment, writ or similar process
        against our company in excess of $50,000, the commencement of a bankruptcy,
        insolvency, reorganization or liquidation proceeding against our company
        and the
        delisting of our common stock could require the early repayment of the
        convertible debentures, secured and unsecured, including default interest
        rate
        on the outstanding principal balance of the debentures if the default is
        not
        cured with the specified grace period. We anticipate that the full amount
        of the
        convertible debentures, secured and unsecured, will be converted into shares
        of
        our common stock, in accordance with the terms of the convertible debentures.
        If
        we were required to repay the convertible debentures, secured and unsecured,
        we
        would be required to use our limited working capital and raise additional
        funds.
        If we were unable to repay the debentures when required, the debenture holders
        could commence legal action against us and foreclose on all of our assets
        to
        recover the amounts due. Any such action would require us to curtail or cease
        operations.
 
 **Item
        2. Unregistered Sales of Equity Securities and Use of
        Proceeds.**
  On
        September 25, 2007, we issued 591,203 shares of common stock upon conversion
        of
        $750,000 of a previously issued convertible debenture. The shares were issued
        pursuant to an exemption under Section 4(2) of the Securities Act of
        1933.
 
 **Item
        3. Defaults Upon Senior Securities.**
 
 None.
  **Item
        4. Submission of Matters to a Vote of Security Holders.**
 
 None.
 
 **Item
        5. Other Information.**
 
 None.
  **Item
        6. Exhibits**
 
 31.1
              Certification
                  of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
                  promulgated under the Securities and Exchange Act of 1934, as
                  amended
 
 31.2
              Certification
                  of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d
                  14(a),
                  promulgated under the Securities and Exchange Act of 1934, as
                  amended
 
 32.1
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002 (Chief Executive
                  Officer)
 
 32.2
              Certification
                  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of 2002 (Chief Financial
                  Officer)
 
 39
  **SIGNATURES**
  In
        accordance with requirements of the Exchange Act, the registrant caused this
        report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
  **TRIANGLE
                  PETROLEUM CORPORATION**Date:
                  April 30, 2008
              By:
              /s/
                  MARK GUSTAFSONMark
                  GustafsonPresident
                  (Principal Executive Officer)Date:
                  April 30, 2008
              By:
              /s/
                  SHAUN TOKERShaun
                  TokerChief
                  Financial Officer (Principal Financial Officer andPrincipal Accounting
                  Officer)
  40