**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





(Mark
      One)


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





**For
      the Quarterly Period Ended July 31, 2008**





** ̈** **TRANSITION REPORT PURSUANT TO 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**


(Exact
      name of registrant as specified 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  ̈





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




Large
                accelerated filero
            Accelerated
                fileroNon-accelerated
                filero
            Smaller
                reporting companyx(Do
                not check if a smaller reporting company)





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





As
      of
      September 2, 2008, there were 67,426,043 shares of registrant’s common stock
      outstanding.





**TRIANGLE
      PETROLEUM CORPORATION AND SUBSIDIARIES**





**INDEX**PART
                I.
            FINANCIAL
                INFORMATIONITEM
                1.
            Financial
                Statements
            3Consolidated
                balance sheets at July 31, 2008 and January 31, 2008
                (unaudited)
            3Consolidated
                statements of operations for the three and six months ended July
                31, 2008
                and 2007 (unaudited)
            4Consolidated
                statements of stockholder's equity for the six months ended July
                31, 2008
                and 2007 (unaudited)
            5Consolidated
                statements of cash flows for the three and six months ended July
                31, 2008
                and 2007 (unaudited)
            6Notes
                to unaudited consolidated financial statements
            7 –
                13ITEM
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            14-24ITEM
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            25ITEM 4T.
            Controls
                and Procedures
            25PART II.
            OTHER
                INFORMATIONITEM
                1
            Legal
                proceedings
            27ITEM 1A
            Risk
                factors
            27ITEM
                2
            Unregistered
                sales of equity securities and use of proceeds
            27ITEM
                3
            Defaults
                upon senior securities
            27ITEM
                4
            Submission
                of matters to a vote of security holders
            27ITEM
                5
            Other
                information
            27ITEM
                6
            Exhibits
            27SIGNATURES
            28


2


Triangle
      Petroleum Corporation


Consolidated
      Balance Sheets


(Expressed
      in U.S. dollars)





July 31,
              2008
              $
              (Unaudited)
            
            January 31,
              2008
              $ASSETSCurrent
                AssetsCash
                and cash equivalents
            
            
            23,493,562
            
            
            4,581,589Prepaid
                expenses
            
            
            488,063
            
            
            797,307Other
                receivables
            
            
            488,971
            
            
            1,689,391Total
                Current Assets
            
            
            24,470,596
            
            
            7,068,287Debt
                Issue Costs, net
            
            
            -
            
            
            465,833Property
                and Equipment
            
            
            50,315
            
            
            66,121Oil
                and Gas Properties (Note 4)
            
            
            22,773,219
            
            
            24,978,949Total
                Assets
            
            
            47,294,130
            
            
            32,579,190LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                LiabilitiesAccounts
                payable
            
            
            3,549,024
            
            
            3,533,833Accrued
                interest on convertible debentures
            
            
            1,917,122
            
            
            2,751,096Accrued
                liabilities
            
            
            419,206
            
            
            420,384Derivative
                liabilities (Note 7)
            
            
            -
            
            
            3,262,846Convertible
                debentures less unamortized discount of $2,037,931 and $1,321,869,
                respectively (Note 6)
            
            
            7,962,069
            
            
            4,778,271Total
                Current Liabilities
            
            
            13,847,421
            
            
            14,746,430Asset
                Retirement Obligations (Note 5)
            
            
            582,276
            
            
            1,003,353Convertible
                Debentures, less unamortized discount of $nil and $3,229,279, respectively
                (Note 6)
            
            
            -
            
            
            6,770,721Total
                Liabilities
            
            
            14,429,697
            
            
            22,520,504Going
                Concern (Note 2)Contingency
                (Note 8)Stockholders’
                EquityCommon
                Stock (Note 8)Authorized:
                100,000,000 shares, par value $0.00001Issued:
                67,426,043 shares (2008 – 46,794,530 shares)
            
            
            674
            
            
            468Additional
                Paid-In Capital (Note 8)
            
            
            80,633,966
            
            
            57,852,277Warrants
                (Note 9)
            
            
            4,237,100
            
            
            -Deficit
            
            
            (52,007,307
            )
            
            (47,794,059
            )Total
                Stockholders’ Equity
            
            
            32,864,433
            
            
            10,058,686Total
                Liabilities and Stockholders’ Equity
            
            
            47,294,130
            
            
            32,579,190


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


3


Triangle
      Petroleum Corporation


Consolidated
      Statements of Operations


(Expressed
      in U.S. dollars)


(Unaudited)





Three
              Months
              Ended
              July 31,
            
            Three
              Months
              Ended
              July 31,
            
            Six
              Months
              Ended
              July 31,
            
            Six
              Months
              Ended
              July 31,2008
            
            2007
            
            2008
            
            2007$
            
            $
            
            $
            
            $Revenue,
                net of royalties
            
            
            107,831
            
            
            124,636
            
            
            259,950
            
            
            193,226Operating
                ExpensesOil
                and gas production
            
            
            4,154
            
            
            71,493
            
            
            63,381
            
            
            73,802Depletion,
                depreciation and accretion
            
            
            23,268
            
            
            135,721
            
            
            93,567
            
            
            211,189Depreciation –
                property and equipment
            
            
            9,988
            
            
            14,834
            
            
            19,747
            
            
            21,614General
                and administrative
            
            
            1,142,684
            
            
            1,331,407
            
            
            2,343,402
            
            
            3,563,901Impairment
                of oil and gas properties
            
            
            -
            
            
            3,891,403
            
            
            -
            
            
            3,891,403Gain
                on sale of assets
            
            
            (10,705
            )
            
            -
            
            
            (10,705
            )
            
            -Foreign
                exchange loss
            
            
            28,595
            
            
            163,752
            
            
            24,589
            
            
            159,7461,197,984
            
            
            5,608,610
            
            
            2,533,981
            
            
            7,921,655Loss
                from Operations
            
            
            (1,090,153
            )
            
            (5,483,974
            )
            
            (2,274,031
            )
            
            (7,728,429
            )Other
                Income (Expenses)Accretion
                of discounts on convertible debentures
            
            
            (791,042
            )
            
            (2,267,808
            )
            
            (2,006,400
            )
            
            (4,608,534
            )Amortization
                of debt issue costs
            
            
            (73,056
            )
            
            (113,645
            )
            
            (182,640
            )
            
            (231,353
            )Loss
                on debt extinguishment
            
            
            (160,662
            )
            
            -
            
            
            (160,662
            )
            
            -Interest
                expense
            
            
            (211,353
            )
            
            (306,397
            )
            
            (465,333
            )
            
            (688,748
            )Interest
                income
            
            
            65,014
            
            
            203,243
            
            
            82,229
            
            
            395,666Unrealized
                gain (loss) on fair value of derivatives
            
            
            (125,741
            )
            
            2,087,874
            
            
            793,589
            
            
            3,555,414Total
                Other Expenses
            
            
            (1,296,840
            )
            
            (396,733
            )
            
            (1,939,217
            )
            
            (1,577,555
            )Net
                Loss for the Period
            
            
            (2,386,993
            )
            
            (5,880,707
            )
            
            (4,213,248
            )
            
            (9,305,984
            )Net
                Loss Per Share – Basic and Diluted
            
            
            (0.04
            )
            
            (0.16
            )
            
            (0.08
            )
            
            (0.28
            )Weighted
                Average Number of Shares Outstanding – Basic and
                Diluted
            
            
            60,673,000
            
            
            36,019,000
            
            
            54,126,000
            
            
            33,344,000




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




4


Triangle
      Petroleum Corporation


Statement
      of Stockholders’ Equity


Period
      from January 31, 2008 to July 31, 2008


(Expressed
      in U.S. dollars)


(Unaudited)


AdditionalCommon
                  Stock
              
              Paid-inShares
              
              Amount
              
              Capital
              
              Warrants
              
              Deficit
              
              Total#
              
              $
              
              $
              
              $
              
              $
              
              $Balance –
                  January 31, 2008
              
              
              46,794,530
              
              
              468
              
              
              57,852,277
              
              
              -
              
              
              (47,794,059
              )
              
              10,058,686Issuance
                  of common stock for cash pursuant to private placement at $1.40
                  per unit
                  in June 2008
              
              
              18,257,500
              
              
              183
              
              
              21,323,217
              
              
              4,237,100
              
              
              -
              
              
              25,560,500Share
                  issuance costs
              
              
              -
              
              
              -
              
              
              (2,022,587
              )
              
              -
              
              
              -
              
              
              (2,022,587
              )Issuance
                  of common stock on conversion of convertible debentures at a weighted
                  average price of $0.88 per share
              
              
              2,374,013
              
              
              23
              
              
              2,100,117
              
              
              -
              
              
              -
              
              
              2,100,140Fair
                  value of conversion features of convertible debentures
                  converted
              
              
              -
              
              
              -
              
              
              1,039,906
              
              
              -
              
              
              -
              
              
              1,039,906Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              341,036
              
              
              -
              
              
              -
              
              
              341,036Net
                  loss for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,213,248
              )
              
              (4,213,248
              )Balance –
                  July 31, 2008
              
              
              67,426,043
              
              
              674
              
              
              80,633,966
              
              
              4,237,100
              
              
              (52,007,307
              )
              
              32,864,433





Triangle
      Petroleum Corporation


Statement
      of Stockholders’ Equity


Period
      from January 31, 2007 to July 31, 2007


(Expressed
      in U.S. dollars)


(Unaudited)


AdditionalCommon Stock
              
              Paid-inShares
              
              Amount
              
              Capital
              
              Deficit
              
              Total#
              
              $
              
              $
              
              $
              
              $Balance –
                  January 31, 2007
              
              
              22,475,866
              
              
              225
              
              
              13,088,795
              
              
              (18,193,312
              )
              
              (5,104,292
              )Issuance
                  of common stock for cash pursuant to private placement at $1.40
                  per unit
                  in June 2008
              
              
              10,412,000
              
              
              104
              
              
              20,823,896
              
              
              -
              
              
              20,824,000Share
                  issuance costs
              
              
              -
              
              
              -
              
              
              (1,515,994
              )
              
              -
              
              
              (1,515,994
              )Issuance
                  of common stock on conversion of convertible debentures at a weighted
                  average price of $1.31 per share
              
              
              4,175,736
              
              
              41
              
              
              5,499,959
              
              
              -
              
              
              5,500,000Fair
                  value of conversion features of convertible debentures
                  converted
              
              
              -
              
              
              -
              
              
              1,490,181
              
              
              -
              
              
              1,490,181Investor
                  relation services
              
              
              50,000
              
              
              1
              
              
              108,499
              
              
              -
              
              
              108,500Stock
                  based compensation
              
              
              -
              
              
              -
              
              
              2,045,114
              
              
              -
              
              
              2,045,114Net
                  loss for the period
              
              
              -
              
              
              -
              
              
              -
              
              
              (9,305,984
              )
              
              (9,305,984
              )Balance –
                  July 31, 2007
              
              
              37,113,602
              
              
              371
              
              
              41,540,450
              
              
              (27,499,296
              )
              
              14,041,525




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




5


Triangle
      Petroleum Corporation


Consolidated
      Statements of Cash Flows


(Expressed
      in U.S. dollars)


(Unaudited)


Three Months
                Ended
                July 31,
              
              Three Months
                Ended
                July 31,
              
              Six Months
                Ended
                July 31,
              
              Six Months
                Ended
                July 31,2008
              
              2007
              
              2008
              
              2007$
              
              $
              
              $
              
              $Operating
                  ActivitiesNet
                  loss
              
              
              (2,386,993
              )
              
              (5,880,707
              )
              
              (4,213,248
              )
              
              (9,305,984
              )Adjustments
                  to reconcile net loss to net cash provided by (used in) operating
                  activities:Accretion
                  of discounts on convertible debentures
              
              
              791,042
              
              
              2,267,808
              
              
              2,006,400
              
              
              4,608,534Amortization
                  of debt issue costs
              
              
              73,056
              
              
              113,645
              
              
              182,640
              
              
              231,353Depletion,
                  depreciation and accretion
              
              
              23,268
              
              
              135,721
              
              
              93,567
              
              
              211,189Depreciation –
                  property and equipment
              
              
              9,988
              
              
              14,834
              
              
              19,747
              
              
              21,614Impairment
                  of oil and gas properties
              
              
              -
              
              
              3,891,403
              
              
              -
              
              
              3,891,403Stock-based
                  compensation
              
              
              227,756
              
              
              528,078
              
              
              341,036
              
              
              2,153,614Gain
                  on sale of assets
              
              
              (10,705
              )
              
              -
              
              
              (10,705
              )
              
              -Loss
                  on debt extinguishment
              
              
              160,662
              
              
              -
              
              
              160,662
              
              
              -Unrealized
                  loss (gain) on fair value of derivatives
              
              
              125,741
              
              
              (2,087,874
              )
              
              (793,589
              )
              
              (3,555,414
              )Asset
                  retirement costs
              
              
              (200,937
              )
              
              -
              
              
              (371,637
              )
              
              -Changes
                  in operating assets and liabilitiesPrepaid
                  expenses
              
              
              102,925
              
              
              (1,793,853
              )
              
              54,639
              
              
              (49,853
              )Other
                  receivables
              
              
              1,221,540
              
              
              553,078
              
              
              1,130,437
              
              
              (45,633
              )Accounts
                  payable
              
              
              (502,391
              )
              
              2,348,267
              
              
              (297,740
              )
              
              209,412Accrued
                  interest on convertible debentures
              
              
              (1,087,957
              )
              
              (321,663
              )
              
              (833,977
              )
              
              60,688Accrued
                  liabilities
              
              
              (77,896
              )
              
              690,346
              
              
              (30,404
              )
              
              224,234Cash
                  Provided by (Used in) Operating Activities
              
              
              (1,530,901
              )
              
              459,083
              
              
              (2,562,172
              )
              
              (1,344,843
              )Investing
                  ActivitiesPurchase
                  of property and equipment
              
              
              (2,216
              )
              
              (23,021
              )
              
              (3,941
              )
              
              (31,676
              )Oil
                  and gas property expenditures
              
              
              (1,382,851
              )
              
              (4,791,854
              )
              
              (3,735,909
              )
              
              (7,426,729
              )Cash
                  advances from partners, net
              
              
              2,567,084
              
              
              -
              
              
              2,567,084
              
              
              -Proceeds
                  received from sale of oil and pas properties
              
              
              3,908,998
              
              
              983,902
              
              
              3,908,998
              
              
              983,902Cash
                  Provided by (Used in) Investing Activities
              
              
              5,091,015
              
              
              (3,830,973
              )
              
              2,736,232
              
              
              (6,474,503
              )Financing
                  ActivitiesProceeds
                  from issuance of common stock
              
              
              25,560,500
              
              
              -
              
              
              25,560,500
              
              
              20,824,000Share
                  issuance costs
              
              
              (2,022,587
              )
              
              -
              
              
              (2,022,587
              )
              
              (1,515,994
              )Convertible
                  debenture repayment
              
              
              (4,800,000
              )
              
              -
              
              
              (4,800,000
              )
              
              -Cash
                  Provided by Financing Activities
              
              
              18,737,913
              
              
              -
              
              
              18,737,913
              
              
              19,308,006Increase
                  (Decrease) in Cash and Cash Equivalents
              
              
              22,298,027
              
              
              (3,371,890
              )
              
              18,911,973
              
              
              11,488,660Cash
                  and Cash Equivalents – Beginning of Period
              
              
              1,195,535
              
              
              20,659,532
              
              
              4,581,589
              
              
              5,798,982Cash
                  and Cash Equivalents – End of Period
              
              
              23,493,562
              
              
              17,287,642
              
              
              23,493,562
              
              
              17,287,642Cash
              
              
              
              
              
              
              
              
              110,315
              
              
              505,157Cash
                  equivalents
              
              
              
              
              
              
              
              
              23,383,247
              
              
              16,782,485Non-cash
                  Investing and Financing ActivitiesCommon
                  stock issued for conversion of debentures
              
              
              625,000
              
              
              3,600,000
              
              
              2,100,140
              
              
              5,500,000


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


6


Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)




Triangle
      Petroleum Corporation, together with its consolidated subsidiaries (“Triangle”
or the “Company”), is an independent oil and gas company focused primarily on
      the acquisition, exploration and development of resource properties consisting
      mainly of shale gas reserves. Our primary exploration and development acreage
      is
      located in the Horton Bluff formation of the Maritimes Basin in Canada and
      in
      the Fayetteville Shale of the Arkoma Basin in the United States. We have
      producing properties in the Fort Worth Basin and in the Alberta Deep Basin.





**1.**
            **Basis
                of Presentation**





The
      accompanying consolidated financial statements of Triangle have been prepared
      in
      accordance with generally accepted accounting principals ("GAAP") in the U.S.
      In
      the opinion of management, the accompanying financial statements reflect all
      adjustments necessary to present fairly our financial position at July 31,
      2008
      and our operations and cash flows for the three and six month periods ended
      July
      31, 2008 and 2007. In preparing the accompanying financial statements,
      management has made certain estimates and assumptions that affect reported
      amounts in the financial statements and disclosures of contingencies. Actual
      results may differ from those estimates. Certain amounts presented in prior
      period financial statements have been reclassified for consistency with current
      period presentation. The results for interim periods are not necessarily
      indicative of annual results.




Certain
      disclosures have been condensed or omitted from these financial statements.
      Accordingly, they should be read along with the consolidated financial
      statements and notes thereto included in our Annual Report on Form 10-K for
      the
      year ended January 31, 2008. In the prior year, the Company was accounted for
      as
      an exploration stage entity. Starting in the fourth quarter of fiscal 2008,
      the
      Company was no longer accounted for as an exploration stage entity.




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





**2.**
            **Going
                Concern**





The
      Company is primarily engaged in the acquisition, exploration and development
      of
      oil and gas resource properties. The Company will have to raise additional
      funds
      through equity or debt offerings, dispositions of assets or other means to
      finance the repayment of the convertible debentures (if the holders do not
      elect
      to convert), to finance commitments to continue to earn lands related to
      farm-out agreements, to fund general and administrative expenses and to complete
      the exploration and development phase of its programs. While the Company has
      been successful in raising funds 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 is dependent upon its ability 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.




Failure
      to obtain additional financing will result in the going concern assumption
      being
      inappropriate and adjustments would be required to the carrying values of assets
      and liabilities, the reported revenues and expenses, and the balance sheet
      classifications used.





**3.**
            **Accounting
                Policies**





(a)  Recently
      Adopted Accounting Pronouncements





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
      Measurements” ("SFAS 157"). SFAS 157 defines fair value, establishes a framework
      for measuring fair value in generally accepted accounting principles, and
      expands disclosures about fair value measurements. On February 12, 2008, the
      FASB issued Staff Position No. FAS 157-2 ("FSP 157-2") which proposed a one
      year
      deferral for the implementation of SFAS 157 for non-financial assets and
      liabilities that are recognized or disclosed at fair value on a nonrecurring
      basis (less frequent than annually).




On
      February 1, 2008 Triangle elected to implement SFAS 157 with the one-year
      deferral for certain non-financial assets and liabilities. Beginning February
      1,
      2009, the Company will adopt the provisions for non-financial assets and
      non-financial liabilities that are not required or permitted to be measured
      at
      fair value on a recurring basis. We are in the process of evaluating this
      portion of the standard and have not yet determined the impact that it will
      have
      on our financial statements upon adoption in 2009.





SFAS
      157
      (as amended), defines fair value, establishes a framework for measuring fair
      value, outlines a fair value hierarchy based on inputs used to measure fair
      value and enhances disclosure requirements for fair value measurements. Fair
      value is defined as the price at which an asset could be exchanged in a current
      transaction between knowledgeable, willing parties. A liability’s fair value is
      defined as the amount that would be paid to transfer the liability to a new
      obligor, not the amount that would be paid to settle the liability with the
      creditor. Where available, fair value is based on observable market prices
      or
      parameters or derived from such prices or parameters. Where observable prices
      or
      inputs are not available, use of unobservable prices or inputs are used to
      estimate the current fair value, often using an internal valuation model. These
      valuation techniques involve some level of management estimation and judgment,
      the degree of which is dependent on the item being valued.


7




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)




**3.**
            **Accounting
                Policies (continued)**





Beginning
      February 1, 2008, assets and liabilities recorded at fair value in the
      consolidated balance sheets are categorized based upon the level of judgment
      associated with the inputs used to measure their fair value. Hierarchical
      levels—defined by SFAS 157 and directly related to the amount of subjectivity
      associated with the inputs to fair valuation of these assets and liabilities—are
      as follows:





Level
                I—Inputs are unadjusted, quoted prices in active markets for identical
                assets or liabilities at the measurement
                date.




Level
                II—Inputs (other than quoted prices included in Level I) are either
                directly or indirectly observable for the asset or liability through
                correlation with market data at the measurement date and for the
                duration
                of the instrument’s anticipated
                life.




Level
                III—Inputs reflect management’s best estimate of what market participants
                would use in pricing the asset or liability at the measurement date.
                Consideration is given to the risk inherent in the valuation technique
                and
                the risk inherent in the inputs to the
                model.




The
      fair
      value of the Company’s derivative liabilities were measured using Level III
      inputs. The significant unobservable inputs to the fair value measurement
      include estimates of volatility of the share price and term of the contract.
      The
      inputs are calculated based on historical data as well as current estimated
      costs. See Note 7.




The
      estimated fair values of derivative liabilities, being the conversion feature
      of
      the December 8, 2005 convertible debenture, included in the consolidated balance
      sheets at July 31, 2008 and January 31, 2008 are summarized below. The decrease
      in the derivative liability from January 31, 2008 to July 31, 2008 is primarily
      attributable to the settlement of derivatives as a result of the repayment
      of
      the underlying debentures.





July 31, 2008
              $
            
            January 31, 2008
              $Significant
              Unobservable
              Inputs
              (Level III)
            
            Significant
              Unobservable
              Inputs
              (Level III)Derivative
                liability – conversion feature
            
            
            -
            
            
            3,262,846




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. Effective February 1, 2008, the
      Company adopted SFAS No. 159. The adoption of this statement did not have a
      material effect on the Company's current financial statements.





(b)  Recently
      Issued Accounting Pronouncements





In
      December 2007, the Financial Accounting Standard Board (FASB) revised the
      Statement of Financial Accounting Standard (SFAS) No. 141, “Business
      Combinations”. SFAS No. 141R requires an acquirer to be identified for all
      business combinations and applies the same method of accounting for business
      combinations – the acquisition method – to all transactions. In addition,
      transaction costs associated with acquisitions are required to be expensed.
      The
      revised statement is effective to business combinations in years beginning
      on or
      after December 31, 2008. The adoption of this statement will impact business
      combinations, if any, after the effective date.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements”. SFAS no. 160 requires the Company to report
      non-controlling interest in subsidiaries as equity in the consolidated financial
      statements; and all transactions between equity and non controlling interests
      as
      equity. SFAS No. 160 is effective for the Company commencing on February 1,
      2009
      and it will not impact the Company's current financial
      statements.


8




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)





**3.**
            **Accounting
                Policies (continued)**





In
      March
      2008, the FASB has issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities”, which requires disclosures about how and
      why an entity uses derivative instruments, how derivative instruments and
      related hedged items are accounted for under SFAS No. 133, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance and cash flows. SFAS No. 161 is effective on February
      1,
      2009 and is not anticipated to significantly effect the Company's financial
      statements.





In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles. SFAS No. 162 identifies the sources of accounting
      principles and the framework for selecting the principles to be used in the
      preparation of financial statements of nongovernmental entities that are
      presented in conformity with GAAP. SFAS No. 162 directs the GAAP hierarchy
      to
      the entity, not the independent auditors, as the entity is responsible for
      selecting accounting principles for financial statements that are presented
      in
      conformity with GAAP. SFAS No. 162 is effective 60 days following the SEC’s
      approval of the Public Company Accounting Oversight Board amendments to remove
      the GAAP hierarchy from the auditing standards. SFAS No. 162 is not expected
      to
      have a material impact on the Company’s financial statements.





In
      May
      2008, the FASB directed the FASB Staff to issue FSP APB 14-1, Accounting for
      Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB 14-1 applies to
      convertible debt instruments that, by their stated terms, may be settled in
      cash
      (or other assets) upon conversion, including partial cash settlement of the
      conversion option. FSP APB 14-1 requires bifurcation of the instrument into
      a
      debt component that is initially recorded at fair value and an equity component.
      The difference between the fair value of the debt component and the initial
      proceeds from issuance of the instrument is recorded as a component of equity.
      The liability component of the debt instrument is accreted to par using the
      effective yield method; accretion is reported as a component of interest
      expense. The equity component is not subsequently re-valued as long as it
      continues to qualify for equity treatment. FSP APB 14-1 is effective for the
      Company on February 1, 2009. Early adoption is not permitted. The Company is
      evaluating the impact of adopting FSP APB 14-1 on the Company’s financial
      statements.





**4.**
            **Oil
                and Gas Properties**





The
      Company follows the full cost method of accounting for oil and gas operations
      whereby all costs of exploring for and developing oil and gas reserves are
      initially capitalized on a country-by-country (cost center) basis. Capitalized
      costs, less estimated salvage value, are depleted using the units-of-production
      method whereby historical costs and future development costs are amortized
      over
      the total estimated proved reserves. Costs of acquiring and evaluating unproven
      properties and major development projects are initially excluded from the
      depletion and depreciation calculation until it is determined whether or not
      proved reserves can be assigned to such properties. These costs are assessed
      periodically to ascertain whether impairment has occurred (i.e., "impairment
      tests”). There were no impairment charges in either the first or second quarter
      of fiscal 2009. All of the Company’s oil and gas properties are located in the
      United States and Canada. The following table summarizes information regarding
      the Company's oil and gas acquisition, exploration and development activities:





Costs
            
            Accumulated Depletion
            
            Net BookOpening
            
            Additions
            
            Dispositions
            
            Closing
            
            Opening
            
            Depletion
            
            Loss (Gain)
            
            Closing
            
            Value$
            
            $
            
            $
            
            $
            
            $
            
            $
            
            
            
            $
            
            $**Proved
                Properties**
            
            
            12,886,510
            
            
            51,625
            
            
            (164,985
            )
            
            12,773,150
            
            
            12,472,601
            
            
            51,028
            
            
            (40,710
            )
            
            12,482,919
            
            
            290,231Unproven
                Properties
            
            
            34,397,768
            
            
            1,691,966
            
            
            (3,744,013
            )
            
            32,345,721
            
            
            9,832,728
            
            
            -
            
            
            30,005
            
            
            9,862,733
            
            
            22,482,988Total
            
            
            47,284,278
            
            
            1,743,591
            
            
            (3,908,998
            )
            
            45,118,871
            
            
            22,305,329
            
            
            51,028
            
            
            (10,705
            )
            
            22,345,652
            
            
            22,773,219





Proved
      Properties





The
      Company's proved acquisition and exploration costs were distributed in the
      following geographic areas:





July 31, 2008
              $
            
            January 31, 2008
              $Alberta –
                Canada
            
            
            290,231
            
            
            324,162Barnett
                Shale (Texas) – United States
            
            
            -
            
            
            89,747Total
                proved acquisition and exploration costs
            
            
            290,231
            
            
            413,909





In
      Canada, depletion and depreciation expense for the three and six month periods
      ended July 31, 2008 was $18,200 and $45,106 (2007 - $47,224 and $59,753),
      respectively.


9




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)





**4.**
            **Oil
                and Gas Properties
                (Continued)**





In
      the
      U.S., depletion and depreciation expense for the three and six month periods
      ended July 31, 2008 was $nil and $5,922 (2007 - $89,822 and $151,435),
      respectively. In June 2008, the Company sold its interests in two Barnett shale
      wells for gross proceeds of $164,985. The net book value of the US proven
      property costs at the time of the sale was $131,820 and the related properties
      had an asset retirement obligation of $7,545. As such the Company recorded
      a
      gain on the sale of assets of $40,710.





Unproven
      Properties





All
      of
      the Company’s unproven properties are not subject to depletion. The Company's
      unproven acquisition and exploration costs were distributed in the following
      geographic areas:





July 31, 2008
              $
            
            January 31, 2008
              $Windsor
                Block of Maritimes Basin (Nova Scotia)
            
            
            14,083,421
            
            
            15,441,144Beech
                Hill Block of Maritimes Basin (New Brunswick)
            
            
            63,309
            
            
            21,975Western
                Canadian Shale (Alberta and B.C.)
            
            
            25,387
            
            
            -Canada
            
            
            14,172,117
            
            
            15,463,119Fayetteville
                Shale (Arkansas)
            
            
            8,310,871
            
            
            8,289,901Rocky
                Mountains (Colorado, Montana, Wyoming)
            
            
            -
            
            
            812,020United
                States
            
            
            8,310,871
            
            
            9,101,921Total
                unproven acquisition and exploration costs
            
            
            22,482,988
            
            
            24,565,040





o
            In
                Canada, $14,172,117 of unproven property costs were excluded from
                costs
                subject to depletion which relate to Canadian shale gas exploration
                costs
                mainly in the Windsor Block of the Maritimes Basin. The Company
                anticipates that these costs will be subject to depletion in fiscal
                2011,
                when the Company anticipates having pipelines built and commissioned
                to
                market potential gas from the Windsor Block.


o
            In
                July 2008, the Company received cash of $2,943,510 for a partner’s share
                of its 30% working interest in exploration costs associated with
                the
                Windsor Block of Nova Scotia. Also, the related properties had an
                asset
                retirement obligation that was reduced by $129,884 for the partners
                share
                of its 30% working interest.


o
            In
                the U.S., $8,310,871 of unproven property costs were excluded from
                costs
                subject to depletion which relate to Fayetteville Shale gas acquisition
                costs. The Company anticipates selling its acreage position related
                to
                these costs in fiscal 2009.


o
            In
                June 2008, the company sold its 25% working interest in 9,692 acres
                in the
                Phat City area of Montana (Rocky Mountains project) for cash of $800,503.
                The net book value of the Rocky Mountains project at the time of
                the sale
                was $830,508, which related to U.S. Rocky Mountain leasehold acquisition
                costs. As such the Company recorded a loss on the sale of assets
                of
                $30,005.





**5.**
            **Asset
                Retirement Obligations**





The
      estimated fair value of the future costs associated with dismantlement,
      abandonment and restoration of oil and natural gas properties is recorded when
      a
      liability is incurred, generally through a lease construction or acquisition
      or
      completion of a well. The current estimated costs are escalated at an inflation
      rate and discounted to present value at a credit adjusted risk-free rate over
      the estimated economic life of the properties. Such costs are capitalized as
      part of the basis of the related asset and are depleted as part of the
      applicable full cost pool. The associated liability is recorded initially as
      a
      long-term liability. Subsequent adjustments to the initial asset and liability
      are recorded to reflect revisions to estimated future cash flow requirements.
      In
      addition, the liability is adjusted to reflect accretion expense as well as
      settlements during the period.




A
      reconciliation of the changes in the asset retirement obligations is as
      follows:





Six Months
              July 31, 2008
              $
            
            Six Months
              July 31, 2007
              $Balance,
                beginning of period
            
            
            1,003,353
            
            
            90,913Liabilities
                incurred
            
            
            45,450
            
            
            153,264Liabilities
                settled as part of dispositions
            
            
            (137,429
            )
            
            -Liabilities
                settled in cash
            
            
            (371,637
            )
            
            -Accretion
            
            
            42,539
            
            
            30,837Balance,
                end of period
            
            
            582,276
            
            
            275,014


10




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)




**6.**
            **Convertible
                Debentures**





Agreement
                Date
            
            December 8,
              2005
              $
            
            December 28,
              2005
              $
            
            Total
              $Balance,
                January 31, 2008
            
            
            4,778,271
            
            
            6,770,721
            
            
            11,548,992Converted
            
            
            (2,100,140
            )
            
            -
            
            
            (2,100,140
            )Repaid
            
            
            (4,000,000
            )
            
            -
            
            
            (4,000,000
            )Accretion
                - expensed
            
            
            815,052
            
            
            1,191,348
            
            
            2,006,400Accretion
                - settled
            
            
            506,817
            
            
            -
            
            
            506,817Balance,
                July 31, 2008
            
            
            -
            
            
            7,962,069
            
            
            7,962,069Amount
                classified as current
            
            
            -
            
            
            7,962,069
            
            
            7,962,069Face
                value at July 31, 2008
            
            
            -
            
            
            10,000,000
            
            
            10,000,000Interest
                rate
            
            
            5.0
            %
            
            7.5
            %





On
      June
      5, 2008, the Company repaid $4,000,000 of convertible debentures that were
      due
      to mature on December 8, 2008 plus an early redemption fee of $800,000 and
      accrued interest of $1,299,860. The carrying value of the debentures at the
      time
      of repayment, including the conversion feature of the debenture that was
      accounted for as a derivative, was $4,639,338, which is equal to the face value
      of $4,000,000, less unamortized discounts of $506,817 and deferred financing
      costs of $283,196, plus the derivative liability of $1,429,351. The Company
      paid
      $4,800,000 on settlement ($4,000,000 face value plus a 20% early redemption
      fee
      of $800,000); therefore a $160,662 loss was recorded on the extinguishment
      of
      the debenture.





**7.**
            **Derivative
                Liabilities**





The
      Company was required to bifurcate and separately account for the embedded
      conversion feature contained in the December 8, 2005 convertible debenture
      as a
      derivative. The Company was required to record the derivative at the estimated
      fair value on each balance sheet date with changes in fair values reflected
      in
      the statement of operations.





Conversion
              Feature
              Fair Value$January
                31, 2008
            
            
            3,262,846Conversion
                features settled on conversion
            
            
            (1,039,906
            )Change
                in fair value
            
            
            (793,589
            )Conversion
                features settled on repayment
            
            
            (1,429,351
            )July
                31, 2008
            
            
            -





The
      Company used 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 conversion feature in the December 8, 2005 convertible
      debenture.





Strike Price
            
            Volatility
            
            Risk Free
              Rate
            
            Dividend
              Yield
            
            Term in
              YearsWeighted
                Average Assumptions at: June 3, 2008 (repayment date)
            
            $
            1.34
            
            
            110.50
            %
            
            1.99
            %
            
            –
            
            
            0.51





**8.**
            **Common
                Stock**





Shares
            
            Common Stock
            
            Additional Paid-
              In Capital$
            
            $January
                31, 2008
            
            
            46,794,530
            
            
            468
            
            
            57,852,277Private
                Placement, net of share issuance costs of $2,022,587
            
            
            18,257,500
            
            
            183
            
            
            19,300,630Conversion
                of debentures
            
            
            2,374,013
            
            
            23
            
            
            3,140,023Stock
                based compensation
            
            
            
            
            
            
            
            
            341,036July
                31, 2008
            
            
            67,426,043
            
            
            674
            
            
            80,633,966


11




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)




**8.**
            **Common
                Stock (Continued)**





During
      the six month period ended July 31, 2008, 2,374,013 shares were issued upon
      the
      conversion of convertible debentures in the amount of $2,100,140. The fair
      value
      of the conversion feature related to the converted debentures was $1,039,906,
      which was transferred from the derivative liability to additional paid-in
      capital upon conversion.





On
      June
      3, 2008, 18,257,500 units were issued in a private placement for gross proceeds
      of $25,560,500. The net proceeds after deducting expenses was $23,537,913.
      The
      Company paid the placement agents of the offering a cash fee of 7% of the gross
      proceeds of the offering. Each unit was priced at $1.40 per unit and consists
      of
      one common stock (relative fair value of $19,300,630 or $1.168 per share) and
      one-half share purchase warrant (relative fair value of $4,237,100 or $0.232
      per
      unit – see Note 9). One full warrant can be exercised into one share of
      common stock for a period of two years at a price of $2.25 per share. Pursuant
      to the terms of the sale, the Company was required, on a best efforts basis,
      to
      file a registration statement with the SEC, and to cause such registration
      statement to be declared effective by the SEC, within 150 days after closing,
      to
      permit the public resale of the shares underlying the warrants. The registration
      statement was declared effective by the SEC on July 14, 2008. Also, pursuant
      to
      the terms of the sale, the Company is required, on a best efforts basis, to
      list
      the Company’s shares on the Toronto Stock Exchange (which includes the TSX
      Venture Exchange) on or before December 31, 2008. Failure to list the shares
      for
      trading by such date results in a payment by the Company, pro rata to the
      purchasers, of a penalty equal to 2% of the gross proceeds of the offering
      for
      each month or partial month until the shares are listed for trading on the
      Toronto Stock Exchange (which includes the TSX Venture Exchange), not to exceed
      10% in the aggregate.





**9.**
            **Warrants**





As
      at
      July 31, 2008, the Company had 9,128,750 warrants outstanding that can be
      exercised into 4,564,375 of common stock at a price of $2.25 per share, which
      expire on June 3, 2010. The warrants were granted on June 3, 2008, at which
      time
      they had a relative fair value compared to the common stock issued of
      $4,237,100.





**10.**
            **Stock
                Options**





The
      weighted average grant date fair value of stock options granted during the
      three
      and six month periods ended July 31, 2008 was $0.4618 and $0.7018, respectively.
      No stock options were exercised during the three and six month periods ended
      July 31, 2008. During the three and six month periods ended July 31, 2008,
      the
      Company recorded stock-based compensation of $227,756 and $341,036,
      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
              $
            
            Aggregate Intrinsic
              Value
              $Outstanding,
                January 31, 2008
            
            
            2,580,000
            
            
            2.54Granted
            
            
            1,225,000
            
            
            1.55Forfeited
            
            
            (220,000
            )
            
            3.33Outstanding,
                July 31, 2008
            
            
            3,585,000
            
            
            2.15
            
            
            –Exercisable,
                July 31, 2008
            
            
            1,725,000
            
            
            2.56
            
            
            –





The
      weighted average remaining contractual life of stock options outstanding as
      of
      July 31, 2008 was 3.89 years.





The
      fair
      value of the options granted during the quarter was estimated on the date of
      grant using the Black-Scholes option pricing model with the following weighted
      average assumptions:




Three
                Months
              Ended
              July
                31, 2008
            
            Six
                Months
              Ended
              July
                31, 2008Expected
                dividend yield
            
            
            0
            %
            
            0
            %Expected
                volatility
            
            
            80
            %
            
            79
            %Expected
                life (in years)
            
            
            3.5
            
            
            3.5Risk-free
                interest rate
            
            
            2.87
            %
            
            2.71
            %Estimated
                Forfeiture rate
            
            
            30
            %
            
            30
            %





As
      at
      July 31, 2008, there was $1,363,008 of total unrecognized compensation costs
      related to non-vested share-based compensation arrangements which are expected
      to be recognized over a weighted-average period of 18 months.


12




Triangle
      Petroleum Corporation


Notes
      to
      the Consolidated Financial Statements


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


(Unaudited)




**10.**
            **Stock
                Options (Continued)**





A
      summary
      of the status of the Company’s non-vested share options as of July 31, 2008, and
      changes during the six month period ended July 31, 2008, is presented
      below:





Non-vested
                share options
            
            Number of
              Options
            
            Weighted-Average
              Grant-Date Fair Value
              $Non-vested
                at January 31, 2008
            
            
            1,250,000
            
            
            0.93Granted
            
            
            1,225,000
            
            
            0.70Vested
            
            
            (615,000
            )
            
            1.08Non-vested
                at July 31, 2008
            
            
            1,860,000
            
            
            0.73


13


**ITEM
      2. MANAGEMENT'S DISCUSSION AND ANALYSIS** **OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





*This
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations includes a number of forward-looking statements that reflect
      Management's current views with respect to future events and financial
      performance. You can identify these statements by forward-looking words such
      as
“may,” “will,” “expect,” “anticipate,” “believe,” “estimate” and “continue,” or
      similar words. Those statements include statements regarding the intent, belief
      or current expectations of us and members of our management team as well as
      the
      assumptions on which such statements are based. Prospective investors are
      cautioned that any such forward-looking statements are not guarantees of future
      performance and involve risk and uncertainties, and that actual results may
      differ materially from those contemplated by such forward-looking
      statements.*





*Readers
      are urged to carefully review and consider the various disclosures made by
      us in
      this report and in our other reports filed with the Securities and Exchange
      Commission. The following Management’s Discussion and Analysis of Financial
      Condition and Results of Operations of the Company should be read in conjunction
      with the Consolidated Financial Statements and notes related thereto included
      in
      this Quarterly Report on Form 10-Q. Important factors currently known to
      Management could cause actual results to differ materially from those in
      forward-looking statements. We undertake no obligation to update or revise
      forward-looking statements to reflect changed assumptions, the occurrence of
      unanticipated events or changes in the future operating results over time.
      We
      believe that our assumptions are based upon reasonable data derived from and
      known about our business and operations. No assurances are made that actual
      results of operations or the results of our future activities will not differ
      materially from our assumptions. Factors that could cause differences include,
      but are not limited to, expected market demand for our products, fluctuations
      in
      pricing for materials, and competition.*





**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 three 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:








14









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.




**Plan
      of Operations**





Our
      corporate strategy is to utilize our US shale gas experience to secure early
      stage shale gas projects in Canada. In conjunction with this strategy, we have
      screened and participated in various projects in North America with numerous
      potential joint venture partners. Based on activity to date, we have carefully
      selected and designated one project as core from our portfolio of projects
      based
      on our belief that it provides the best prospect for exploring for commercial
      quantities of gas. This core project is focused on a shale gas opportunity
      located in the Maritimes Basin of Eastern Canada. We intend to execute our
      operating plan in order to realize the full value of the land base that has
      been
      established in the Maritimes Basin. We are also in the process of evaluating
      a
      secondary shale gas project in Western Canada. Our remaining four project areas
      (Fayetteville Shale, Rocky Mountain Program, Barnett Shale and Alberta Deep
      Basin) are currently designated as non-core due to our desire to focus our
      limited manpower resources on one core and one secondary project.





**Maritimes
      Basin – Eastern Canadian Shale Gas Project**




During
      fiscal 2007 and early fiscal 2008, a multi-disciplined geoscience team screened
      prospective basins in Eastern Canada. The screening process included an
      assessment of the geological 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
      executed two farm-in agreements with a Canadian company to pursue two shale
      gas
      opportunities in the Maritimes Basin in March and May of 2007.





*Beech
      Hill Block (operated)*





The
      first
      farm-in agreement was entered into in March 2007 and covers approximately 68,000
      gross acres in the Moncton Sub-Basin of the Maritimes Basin located in the
      province of New Brunswick, Canada. We are entitled to earn a 70% working
      interest in the block subsequent to the acquisition and evaluation of a minimum
      $250,000 seismic program and then electing no later than December 31, 2008
      to
      drill a test well by mid-2009. In June 2008, we entered into a partnership
      with
      Zodiac Exploration Corp. (“Zodiac”), a private Calgary-based exploration
      company. Zodiac agreed to incur the first $250,000 of costs for the seismic
      program for the option to earn a 25% working interest in the Beech Hill Block
      after paying 50% of the test well costs. Based upon Zodiac participating in
      the
      test well, we would retain a 45% working interest and would continue as
      operator.





15




During
      June and July 2008, approximately $280,000 gross ($30,000 net) expenditures
      were
      incurred to complete the acquisition phase of approximately 30 kilometers (18
      miles) of 2-D seismic on the Beech Hill Block. We now have until the end of
      this
      year to interpret this data and decide whether or not to drill a well by
      mid-2009 in order to earn our 70% working interest (net 45% should Zodiac elect
      to participate). Zodiac has paid $250,000 towards the seismic program,
      thereby earning the option to participate in the drilling of the first
      potential well. The Beech Hill Block is covered by leases and licenses to search
      for oil and natural gas with the New Brunswick government which expire between
      February 2009 and June 2011.





*Windsor
      Block (operated)*





The
      second farm-in agreement was entered into in May 2007 and covers approximately
      516,000 gross acres in the Windsor Sub-Basin of the Maritimes Basin located
      in
      the province of Nova Scotia, Canada. During fiscal 2008, we earned a 70% working
      interest in the block by drilling and completing a test well. In July 2008,
      our
      partner, Contact Exploration Inc. (“Contact”), elected to maintain their 30%
      working interest instead of converting to a 5% gross overriding royalty. Also
      in
      July 2008, we entered into a partnership with Zodiac to drill as many as six
      new
      delineation wells on the Windsor Block. The joint venture provides for an
      initial commitment by Zodiac to pay 50% of drilling costs, up to $7.5 million
      ($15 million gross), to earn a 12.5% working interest in the entire Windsor
      Block. Within thirty days of fulfilling this expenditure commitment, Zodiac
      has
      the option to commit another $7.5 million ($15 million gross) for an additional
      12.5% working interest. Based upon Zodiac spending the entire $15 million,
      we
      would retain a 45% working interest and would continue as operator, and Zodiac
      would earn a 25% working interest in the Windsor Block.





From
      May
      2007 to June 2008, we spent approximately gross $17.5 million (net $14.6
      million) on the first stage of the Windsor Block exploration program, consisting
      of drilling and completing two vertical test wells (Kennetcook #1 and Kennetcook
      #2), a 2D and 3D seismic program and geological studies. Both of the vertical
      test wells, the seismic and geological studies have provided us with sufficient
      valuable technical information for us to believe that this is a significant
      shale gas resource project. In conjunction with Contact electing to maintain
      their 30% working interest instead of converting to a gross over-riding royalty
      in July 2008, Contact paid us 30% of the costs ($2.9 million) for the second
      well and seismic program that was expended in this first stage of the drilling
      program that was not a part of the earning parameter.





The
      Windsor Block is covered by an exploration agreement originally issued in 1999
      with the Nova Scotia government which was due to expire on September 15, 2008.
      We are working with the Nova Scotia government to convert the exploration
      agreement into a production agreement. We submitted a development plan
      application in mid June 2008 which triggered an automatic six month extension
      of
      the exploration agreement while the Nova Scotia government reviews the
      application. If a production agreement is not granted, our right to explore
      for
      and develop oil and gas on this block would be forfeited.





In
      July
      2008, we started the second stage of our Windsor Block program. We have
      contracted for Nabors rig #4, which has a depth rating of 3,600 meters (12,000
      feet), for the balance of 2008 to drill the second stage wells that are expected
      to test the gas content and productivity of the Horton Bluff shales in various
      locations across the Windsor Block, and also to evaluate potential overlying
      conventional oil and gas reservoirs. The first vertical exploration well of
      this
      second stage, N-14-A, spud in mid July 2008. N-14-A is located approximately
      5
      miles north of our two original vertical test wells, Kennetcook #1 and
      Kennetcook #2. N-14-A has been drilled to a depth of 8,500 feet (2,600 meters).
      The well encountered Horton Bluff shale at a depth of 3,600 feet (1,100 meters),
      and drilled through a total of 4,900 feet (1,500 meters) of shale and
      interbedded sands before drilling was terminated in the lower Horton Bluff.
      An
      extensive suite of open hole logs has been obtained over the entire shale
      interval. Core was taken in the shale over a 60 foot (18 meter) interval at
      a
      depth of 5,800 feet (1,700 meters), and cuttings samples were retrieved
      throughout the drilling operation. Log and lab analyses are currently underway
      in Calgary and Houston. The highest gas response was observed while drilling
      the
      interval between 4,200 and 8,200 feet (1,300 to 2,500 meters). Preliminary
      analysis of the shales below 8,200 feet (2,500 meters) indicate higher thermal
      maturity and diminished gas response, so the decision was made to suspend
      drilling at 8,500 feet (2,600 meters) and to set 7-inch intermediate casing.
      By
      setting the large intermediate casing, we retain the option to either deepen
      or
      drill out horizontally, depending on formation evaluation and completion results
      in the vertical well.





16




Our
      second vertical exploration well in 2008, O-61-C, was spudded in late August
      2008. This well is located approximately 14 miles (22 kilometers) west of
      N-14-A, and is located in a separate fault block from N-14-A, extending the
      trend from the two Kennetcook test wells we drilled in 2007. Planned total
      depth
      is 9,900 feet (3,000 meters). This well has been positioned using seismic to
      test the Horton Bluff shales and to evaluate potential conventional reservoirs
      in the uphole Windsor group.





**Western
      Canadian Shale Program**





We
      continue to actively evaluate various shale packages in Alberta and British
      Columbia. Our objective is to potentially secure an initial land position and
      to
      commence an exploration program next year. To date, we have participated in
      a
      multi-company geological study of the West Canadian Sedimentary Basin, reviewed
      this study, identified our own key technical indicators, correlated these key
      indicators back to the study and identified prospective shale areas. This
      follows the corporate strategy in the Maritimes Basin of utilizing our US shale
      gas experience to secure early stage shale gas projects in Canada.





**Arkoma
      Basin Arkansas - Fayetteville Shale Program (non-core non-operated
      project)**





Based
      upon escalating land prices in this basin and due to the lack of progress in
      accelerating the exploration program, we decided in late March 2008 to sell
      our
      10,400 non-operated net acres. We are planning to sell this acreage in the
      most
      effective manner by assessing new industry activity and overall direct acreage
      sales. In June 2008, we and the operator of the lands entered into agreements
      with Tristone Capital to market the lands. The sale of this acreage is expected
      to be concluded before the end of 2008.





**States
      of Colorado, Montana and Wyoming - Rocky Mountain Program (non-core non-operated
      project)**





We
      drilled initial test wells in Colorado and Wyoming in 2006 and 2007 that were
      not successful in the primary targets. In June 2008, we sold our third prospect
      in this project, located in Northern Montana, consisting of 9,692 net acres
      of
      land, for proceeds of approximately $800,000.





**Greater
      Fort Worth Basin Texas - Barnett Shale Program (non-core non-operated
      project)**





In
      fiscal
      2009, there is no exploration activity planned on this project. At the beginning
      of the year, we had six low working interest shale gas wells pipeline connected
      (5.75%-15% working interest), of which four were producing. The operator of
      two
      of the six wells commenced voluntary bankruptcy proceedings in the prior year.
      During 2008, through the trustee, we sold our interest in the two wells in
      an
      auction of the operator’s assets for proceeds of approximately $165,000. As
      such, we currently have four low working interest shale gas wells pipeline
      connected (11%-15% working interest), of which one well is currently
      producing.





**Alberta
      Deep Basin - Western Canadian Conventional Program (non-core
      project)**





In
      fiscal
      2009, there is no exploration activity planned on this project. We are producing
      from two wells. The first well is located in the Kakwa Area and we have an
      18%
      interest before payout (12% after payout). The second well is located in the
      Wapiti Area and we have an approximate 35% working interest.





17





**Results
      of operations for the three and six months ended July 31, 2008 compared to
      the
      three and six months ended July 31, 2007**





***Daily
      Sales Volumes, Working Interest before royalties***





Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007Barnett Shale in Texas, USA
            
            
            Mcfpd
            
            
            35
            
            
            148
            
            
            70
            
            
            130Deep Basin
                in Alberta, Canada
            
            
            Mcfpd
            
            
            100
            
            
            136
            
            
            122
            
            
            86Total
                Company
            
            
            Mcfpd
            
            
            135
            
            
            284
            
            
            192
            
            
            216Total
                Company
            
            
            Boepd*
            
            
            23
            
            
            47
            
            
            32
            
            
            36


*
      Mcf
      converted into BOE on a basis of 6:1





***Net
      Operating Results***





Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31, 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007Volumes
            
            
            Mcf
            
            
            12,250
            
            
            26,025
            
            
            34,905
            
            
            39,090Price
            
            
            $/Mcf
            
            
            10.53
            
            
            5.54
            
            
            9.05
            
            
            6.16Revenue
            
            
            
            
            $
            128,939
            
            $
            144,297
            
            $
            315,962
            
            $
            240,941Royalties
            
            
            
            
            
            21,108
            
            
            19,661
            
            
            56,012
            
            
            47,715Revenue,
                net of royalties
            
            
            
            
            
            107,831
            
            
            124,636
            
            
            259,950
            
            
            193,226Production
                expenses
            
            
            
            
            
            4,154
            
            
            71,493
            
            
            63,381
            
            
            73,802Net
            
            
            
            
            $
            103,677
            
            $
            53,143
            
            $
            196,569
            
            $
            119,424





For
      the
      three and six month periods ended July 31, 2008, we realized $128,939 and
      $315,962, respectively, in revenue from sales of natural gas and natural gas
      liquids, as compared to $144,297 and $240,941 in the same periods in 2007.
      Revenue increased mainly due to higher prices, offset by reduced production
      volumes since we sold two Barnett Shale wells. Royalties related to this revenue
      totaled $21,108 and $56,012 (16% and 18% of revenue) for the three month and
      six
      month periods ended July 31, 2008, respectively, compared to 14% and 20% in
      the
      same periods in 2007. Production expenses related to this revenue totaled $4,154
      and $63,381 ($2.03/Boe and $10.89/Boe) for the three and six month periods
      ended
      July 31, 2008, respectively, compared to $16.48 and $11.32 in the same periods
      in 2007.





***Depletion,
      Depreciation and Accretion (“DD&A”)***





Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31, 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007Depletion – oil and gas properties
            
            $
            13,557
            
            $
            107,678
            
            $
            51,028
            
            $
            181,822Accretion
            
            
            9,711
            
            
            28,043
            
            
            42,539
            
            
            29,367Depletion
                and Accretion
            
            
            23,268
            
            
            135,721
            
            
            93,567
            
            
            211,189Depreciation
                – property and equipment
            
            
            9,988
            
            
            14,834
            
            
            19,747
            
            
            21,614Total
            
            $
            33,256
            
            $
            150,555
            
            $
            113,314
            
            $
            232,803Depletion
                per BOE
            
            $
            6.64
            
            $
            24.82
            
            $
            8.77
            
            $
            27.91





Unproven
      property costs of $22,482,988 were excluded from costs subject to depletion
      at
      July 31, 2008. Depletion expense related to oil and as properties decreased
      in
      the three and six months periods ended July 31, 2008 compared to the same
      periods in 2007 primarily as a result of the U.S. properties having no depletion
      starting in the second quarter of fiscal 2009 as proved property costs were
      nil.





18




***General
      and Administrative (“G&A”)***





Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31, 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007Salaries, wages and consulting fees
            
            $
            548,143
            
            $
            349,417
            
            
            941,005
            
            $
            623,242Other,
                travel and office expense
            
            
            366,785
            
            
            453,912
            
            
            1,061,361
            
            
            787,045Stock-based
                compensation
            
            
            227,756
            
            
            528,078
            
            
            341,036
            
            
            2,153,614G&A
            
            $
            1,142,684
            
            $
            1,331,407
            
            
            2,343,402
            
            $
            3,563,901





General
      and administrative expenses have decreased in the three and six month periods
      ended July 31, 2008 compared to the same periods in 2007 primarily due to
      decreased stock-based compensation expense mainly as a result of shares issued
      to our executives that have now been fully expensed. Salaries, wages and
      consulting fees increased in the three and six month periods ended July 31,
      2008
      compared to the same periods in 2007 due to increased staff and the payment
      of
      bonuses to employees in July 2008. Other, travel and office expenses increased
      in the six month period ended July 31, 2008 compared to the same period in
      2007
      due to increased year-end audit and reserve evaluation fees, increased audit
      and
      accounting fees for the restatements of the 10-K’s and 10-Q’s, increased office
      rent and increased investor relations expenses. Other, travel and office
      expenses decreased in the three month period ended July 31, 2008 compared to
      the
      same period in 2007 due to professional fees associated with year-end costs
      that
      were paid in the first quarter in fiscal 2009 compared the second quarter of
      fiscal 2008.





***Accretion
      of Discounts on Convertible Debentures***





Agreement Date
            
            Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31, 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007June 14, 2005
            
            $
            -
            
            $
            115,626
            
            $
            -
            
            $
            515,626December 8, 2005
            
            
            186,764
            
            
            1,311,999
            
            
            813,337
            
            
            2,439,940December
                28, 2005
            
            
            604,278
            
            
            840,183
            
            
            1,193,063
            
            
            1,652,968Total
                accretion of discounts
            
            $
            791,042
            
            $
            2,267,808
            
            $
            2,006,400
            
            $
            4,608,534





Accretion
      of discounts on convertible debentures decreased in the three and six month
      periods ended July 31, 2008 compared to the same periods in 2007 due primarily
      to the June 14, 2005 debenture discounts being realized prior to fiscal 2009,
      the conversion of December 8, 2005 debentures throughout fiscal 2008 and fiscal
      2009 which reduced the accretion base, the repayment of the December 8, 2005
      debentures on June 5, 2008, and the reduction of the December 28, 2005 accretion
      since the maturity date was extended.





***Interest
      Expense***


Agreement Date
            
            Three Months
              Ended
              July 31, 2008
            
            Three Months
              Ended
              July 31, 2007
            
            Six Months
              Ended
              July 31, 2008
            
            Six Months
              Ended
              July 31, 2007June 14, 2005
            
            $
            -
            
            $
            (23,878
            )
            $
            -
            
            $
            18,919December
                8, 2005
            
            
            22,312
            
            
            141,234
            
            
            91,360
            
            
            297,911December
                28, 2005
            
            
            189,041
            
            
            189,041
            
            
            373,973
            
            
            371,918Total
                interest expense
            
            $
            211,353
            
            $
            306,397
            
            $
            465,333
            
            $
            688,748





Interest
      expense decreased for the three and six month periods ended July 31, 2008
      compared to the same periods in 2007 due primarily to the conversion and
      repayment of the December 8, 2005 convertible debentures.





19




***Oil
      and Gas Properties***




Net Book Value
              January 31,
              2008
            
            Additions
            
            Depletion
            
            Disposition
            
            Gain
              (Loss)
            
            Net Book
              Value
              July 31, 2008***Unproven***Windsor
                Block Maritimes Shale –Nova
                Scotia, Canada
            
            $
            15,441,144
            
            $
            1,585,787
            
            $
            -
            
            $
            (2,943,510
            )
            $
            -
            
            $
            14,083,421Beech
                Hill Block Maritimes Shale –New
                Brunswick, Canada
            
            
            21,975
            
            
            41,334
            
            
            -
            
            
            -
            
            
            -
            
            
            63,309Western
                Canadian Shale –Alberta
                and B.C., Canada
            
            
            -
            
            
            25,387
            
            
            -
            
            
            -
            
            
            -
            
            
            25,387Arkoma
                Basin, Arkansas –Fayetteville
                Shale
            
            
            8,289,901
            
            
            20,970
            
            
            -
            
            
            -
            
            
            -
            
            
            8,310,871U.S.
                Rocky Mountains –Colorado,
                Montana, Wyoming
            
            
            812,020
            
            
            18,488
            
            
            -
            
            
            (800,503
            )
            
            (30,005
            )
            
            -***Proved***Alberta
                Deep Basin –Western
                Canada
            
            
            324,162
            
            
            11,175
            
            
            (45,106
            )
            
            -
            
            
            -
            
            
            290,231Greater
                Fort Worth Basin, Texas –Barnett
                Shale
            
            
            89,747
            
            
            40,450
            
            
            (5,922
            )
            
            (164,985
            )
            
            40,710
            
            
            -Net
            
            $
            24,978,949
            
            $
            1,743,591
            
            $
            (51,028
            )
            $
            (3,908,998
            )
            $
            10,705
            
            $
            22,773,219





During
      the six month period ended July 31, 2008, we spent $1,585,787 on the Windsor
      Block mainly for testing of Kennetcook #1 and #2 ($616,000), installation of
      an
      electric submersible pump at Kennetcook #2 ($456,000) and drilling costs for
      first well of the second phase of the project that spud in mid-July and was
      drilling over quarter-end ($387,000).





In
      July
      2008, we received $2,943,510 in cash for a partner’s share of its 30% working
      interest in exploration costs associated with the Windsor Block of Nova
      Scotia.





In
      June
      2008, we sold our 25% working interest in 9,692 acres in the Phat City area
      of
      Montana (Rocky Mountains project) for gross cash proceeds of $800,503. The
      net
      book value of the Rocky Mountains project at the time of the sale was $830,508,
      which related to U.S. Rocky Mountain leasehold acquisition costs. As such we
      recorded a loss on the sale of assets of $30,005.





In
      June
      2008, we sold our interest in two Barnett shale wells for gross proceeds of
      $164,985. The net book value of the U.S. proved property costs at the time
      of
      the sale was $131,820 and the related properties had an asset retirement
      obligation on the books of $7,545. As such we recorded a gain on the sale of
      assets of $40,710.





Net
      Cash
      Oil and Gas Additions:




Six Months
              Ended
              July 31, 2008Net additions, per above table
            
            $
            1,743,591Non-cash
                ARO additions
            
            
            (45,450
            )Non-cash
                ARO dispositions
            
            
            137,429Changes
                in investing working capital
            
            
            1,900,339Net
                oil and gas additions, per Statement of Cash Flows
            
            $
            3,735,909





20




**Liquidity
      and Capital Resources**





To
      date,
      we have generated minimal revenues and have incurred operating losses in every
      quarter. We are an early stage production 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.





As
      at
      July 31, 2008, we had working capital of $10,623,175, resulting primarily from
      our cash and cash equivalents of $23,493,562 offset by payables of $3,549,024,
      $7,962,069 of convertible debentures and $1,917,122 of associated accrued
      interest. We have a cash equivalents balance of $23,383,247 at July 31, 2008,
      which are held on deposit at a Schedule “1” Canadian Chartered Bank in U.S. term
      deposits and non-redeemable Guaranteed Investment Certificates (“GIC”) that
      mature in less than 90 days. For the six month period ended July 31, 2008,
      we
      had net cash outflow from operating activities of $2,562,172, mainly related
      to
      cash general and administrative expenses.





July 31, 2008
            
            January 31, 2008Agreement Date
            
            Face Value
            
            Discount
            
            Carrying
              Value
            
            Face Value
            
            Discount
            
            Carrying
              ValueDecember 8, 2005
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            6,100,140
            
            $
            1,321,869
            
            $
            4,778,271December
                28, 2005
            
            
            10,000,000
            
            
            2,037,931
            
            
            7,962,069
            
            
            10,000,000
            
            
            3,229,279
            
            
            6,770,721Total
                convertible debentures
            
            $
            10,000,000
            
            $
            2,037,931
            
            $
            7,962,069
            
            $
            16,100,140
            
            $
            4,551,148
            
            $
            11,548,992





We
      have
      $10,000,000 of convertible debentures outstanding as at July 31, 2008. The
      December 8, 2005 debentures were convertible 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 of the 10 trading days immediately preceding the date of
      conversion. During the six month period ended July 31, 2008, $2,100,140 of
      convertible debentures were converted into 2,374,013 shares of common stock
      and
      the remaining $4,000,000 of these convertible debentures were repaid, subject
      to
      a 20% early redemption fee ($800,000). The December 28, 2005 debentures mature
      on June 1, 2009, whereby $10,000,000 plus accrued interest is payable or
      convertible at $4.00. Based on the current share price, conversion is not likely
      and we will either be required to repay or refinance these debentures.





We
      were
      committed to pay 66% of the drilling and completion costs for one well in our
      Fayetteville project to earn a 50% working interest. The operator had to spud
      this well before July 31, 2008 or we automatically earn our 50%. The operator
      did not spud this well; therefore, we earned our 50% working interest. We were
      also committed to pay 33% of the costs to drill one well in our Rocky Mountains
      project to earn 25%. On June 30, 2008, we sold our Montana acreage position
      along with this commitment.





We
      expect
      significant capital expenditures during the next 12 months for drilling programs
      on our Canadian shale program, overhead and working capital purposes. To
      partially fund these expenditures, we closed a private placement on June 3,
      2008
      for aggregate gross proceeds of $25,560,500. Also, to fund the remaining
      expenditures, we entered into a joint venture partnership in June 2008, whereby
      the Zodiac Exploration Corp. may pay 50% of the next $30,000,000 in gross costs
      for the next 6 wells in the Windsor Block of Nova Scotia to earn up to 25%
      in
      the Block. We will have to raise additional funds to complete the exploration
      and development phase of our programs and, while we have been successful in
      doing so in the past, there can be no assurance that we will be able to do
      so in
      the future. Our continuation as a going concern for a period longer than the
      current fiscal year is dependent upon our ability to obtain necessary additional
      funds to continue operations and to determine the existence, discovery and
      successful exploitation of economically recoverable reserves in our resource
      properties, earning of our interests in the underlying properties, and the
      attainment of profitable operations.





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.





21




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 capital in order to continue operations until we are
      able
      to achieve positive operating cash flow. Additional capital is 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.





***June
      2008 Private Placement***





On
      June
      3, 2008, we sold an aggregate of 18,257,500 units in a private placement
      transaction for gross proceeds of $25,560,500. The net proceeds after deducting
      expenses were $23,641,913. Each unit was priced at $1.40 per unit and consists
      of one share of common stock and one-half of a warrant. One full warrant can
      be
      exercised into one share of common stock for a period of two years at a price
      of
      $2.25 per share. Pursuant to the terms of the sale, we were required, on a
      best
      efforts basis, to file a registration statement with the SEC, and to cause
      such
      registration statement to be declared effective by the SEC, within 150 days
      after closing, to permit the public resale of the shares underlying the
      warrants. The registration statement was declared effective by the SEC on July
      14, 2008. Also, pursuant to the terms of the sale, we are required, on a best
      efforts basis, to list our shares of common stock on the Toronto Stock Exchange
      (which includes the TSX Venture Exchange) on or before December 31, 2008.
      Failure to list the shares for trading by such date shall result in us paying,
      pro rata to the purchasers, of a penalty equal to 2% of the gross proceeds
      of
      the offering for each month or partial month until the shares are listed for
      trading on the Toronto Stock Exchange (which includes the TSX Venture Exchange),
      not to exceed 10% in the aggregate. We paid the placement agents of the offering
      a cash fee of 7% of the gross proceeds of the offering.





**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 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.





22





***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 unproven properties, geological expenditures and
      direct internal costs are capitalized into the full cost pool. We had two
      countries with proved reserves. For our proved 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 unproven 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 unproven 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.





***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 estimated 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. The costs are estimated
      by
      management based on its knowledge of industry practices, current laws and past
      experiences. The costs could increase significantly from management’s current
      estimate.




***Stock-Based
      Compensation***





We
      record
      compensation expense in the consolidated financial statements for stock options
      granted to employees, consultants and directors using the fair value method.
      Fair values are determined using the Black Scholes option pricing model, which
      is sensitive to the estimate of the Company’s stock price volatility and the
      options expected life. Compensation costs are recognized over the vesting
      period.





***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. Fair values
      are determined using the Black Scholes option pricing model, which requires
      and
      is very sensitive to an estimate of the Company’s stock price volatility and
      term. 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
      December 2007, the Financial Accounting Standard Board (FASB) revised the
      Statement of Financial Accounting Standard (SFAS) No. 141, “Business
      Combinations”. SFAS No. 141R requires an acquirer to be identified for all
      business combinations and applies the same method of accounting for business
      combinations - the acquisition method - to all transactions. In addition,
      transaction costs associated with acquisitions are required to be expensed.
      The
      revised statement is effective to business combinations in years beginning
      on or
      after December 31, 2008. The adoption of this statement will impact business
      combinations, if any, after the effective date.





In
      December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
      Consolidated Financial Statements”. SFAS no. 160 requires the Company to report
      non-controlling interest in subsidiaries as equity in the consolidated financial
      statements; and all transactions between equity and non controlling interests
      as
      equity. SFAS No. 160 is effective for us commencing on February 1, 2009 and
      it
      will not impact our current financial statements.





In
      March
      2008, the FASB has issued SFAS No. 161, “Disclosures about Derivative
      Instruments and Hedging Activities”, which requires disclosures about how and
      why an entity uses derivative instruments, how derivative instruments and
      related hedged items are accounted for under SFAS No. 133, and how derivative
      instruments and related hedged items affect an entity’s financial position,
      financial performance and cash flows. SFAS No. 161 is effective on February
      1,
      2009 and is not anticipated to significantly affect our financial
      statements.





23




In
      May
      2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
      Accounting Principles. SFAS No. 162 identifies the sources of accounting
      principles and the framework for selecting the principles to be used in the
      preparation of financial statements of nongovernmental entities that are
      presented in conformity with GAAP. SFAS No. 162 directs the GAAP hierarchy
      to
      the entity, not the independent auditors, as the entity is responsible for
      selecting accounting principles for financial statements that are presented
      in
      conformity with GAAP. SFAS No. 162 is effective 60 days following the SEC’s
      approval of the Public Company Accounting Oversight Board amendments to remove
      the GAAP hierarchy from the auditing standards. SFAS No. 162 is not expected
      to
      have a material impact on our financial statements.





In
      May
      2008, the FASB directed the FASB Staff to issue FSP APB 14-1, Accounting for
      Convertible Debt Instruments That May Be Settled in Cash upon Conversion
      (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB 14-1 applies to
      convertible debt instruments that, by their stated terms, may be settled in
      cash
      (or other assets) upon conversion, including partial cash settlement of the
      conversion option. FSP APB 14-1 requires bifurcation of the instrument into
      a
      debt component that is initially recorded at fair value and an equity component.
      The difference between the fair value of the debt component and the initial
      proceeds from issuance of the instrument is recorded as a component of equity.
      The liability component of the debt instrument is accreted to par using the
      effective yield method; accretion is reported as a component of interest
      expense. The equity component is not subsequently re-valued as long as it
      continues to qualify for equity treatment. FSP APB 14-1 is effective for the
      Company on February 1, 2009. Early adoption is not permitted. We are evaluating
      the impact of adopting FSP APB 14-1 will have on our financial
      statements.


24


**ITEM
      3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





Not
      required under Regulation S-K for “smaller reporting companies.”





**ITEM
      4T - CONTROLS AND PROCEDURES**





*(a)
      Evaluation of disclosure controls and procedures.*





Our
      management, with the participation of our Chief Executive Officer and Chief
      Financial Officer, evaluated the effectiveness of our disclosure controls and
      procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934
      as
      of July 31, 2008. In designing and evaluating the disclosure controls and
      procedures, management recognizes that any controls and procedures, no matter
      how well designed and operated, can provide only reasonable assurance of
      achieving the desired control objectives. In addition, the design of disclosure
      controls and procedures must reflect the fact that there are resource
      constraints and that management is required to apply its judgment in evaluating
      the benefits of possible controls and procedures relative to their costs.





Based
      on our evaluation, our Chief Executive Officer and Chief Financial Officer
      concluded that, as a result of the material weaknesses described below, our
      disclosure controls and procedures are not designed at a reasonable assurance
      level and are ineffective to provide reasonable assurance that information
      we
      are required to disclose in reports that we file or submit under the Exchange
      Act is recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission rules and forms, and that such
      information is not accumulated nor communicated to our management, including
      our
      Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
      timely decisions regarding required disclosure. The material weaknesses, which
      relate to internal control over financial reporting, that were identified are:





a)
            We
                did not have sufficient personnel in our accounting and financial
                reporting functions. As a result, we were not able to achieve adequate
                segregation of duties and were not able to provide for adequate reviewing
                of the financial statements. This control deficiency, which is pervasive
                in nature, results in a reasonable possibility that material misstatements
                of the financial statements will not be prevented or detected on
                a timely
                basis; and





b)
            We
                did not maintain sufficient personnel with an appropriate level of
                technical accounting knowledge, experience, and training in the
                application of US GAAP commensurate with our complexity and our financial
                accounting and reporting requirements. This control deficiency is
                pervasive in nature and specifically resulted in us restating previously
                filed annual and quarterly financial statements as a result of errors
                in
                the accounting for convertible debentures and warrants. Further,
                there is
                a reasonable possibility that material misstatements of the consolidated
                financial statements including disclosures will not be prevented
                or
                detected on a timely basis as a
                result.





We
      are
      committed to improving our financial organization. As part of this commitment,
      we will create a segregation of duties consistent with control objectives and
      will look to increase our personnel resources and technical accounting expertise
      within the accounting function by the end of fiscal 2010 to resolve non-routine
      or complex accounting matters. In addition, when funds are available to the
      Company, which we expect to occur by the end of fiscal 2010, we will take the
      following action to enhance our internal controls: Hiring additional
      knowledgeable personnel with technical accounting expertise to further support
      the current accounting personnel at the Company, which management estimates
      will
      cost approximately $100,000 per annum. In January 2008, the Company engaged
      an
      outside consultant that specializes in the accounting for derivative instruments
      that are embedded within the Company's financing transactions. The Company
      will
      continue to engage consultants in the future as necessary in order to ensure
      proper treatment.





Management
      believes that hiring additional knowledgeable personnel with technical
      accounting expertise will remedy the following material weaknesses: (A) lack
      of
      sufficient personnel in our accounting and financial reporting functions to
      achieve adequate segregation of duties; and (B) insufficient personnel with
      an
      appropriate level of technical accounting knowledge, experience, and training
      in
      the application of US GAAP commensurate with our complexity and our financial
      accounting and reporting requirements.





25




Management
      believes that the hiring of additional personnel who have the technical
      expertise and knowledge with the non-routine or technical issues we have
      encountered in the past will result in both proper recording of these
      transactions and a much more knowledgeable finance department as a whole. Due
      to
      the fact that our accounting staff consists of a Chief Financial Officer,
      accounting manager and accounting clerk, additional personnel will also ensure
      the proper segregation of duties and provide more checks and balances within
      the
      department. Additional personnel will also provide the cross training needed
      to
      support us if personnel turn over issues within the department occur. We believe
      this will greatly decrease any control and procedure issues we may encounter
      in
      the future.





We
      will
      continue to monitor and evaluate the effectiveness of our disclosure controls
      and procedures and our internal controls over financial reporting on an ongoing
      basis and are committed to taking further action and implementing additional
      enhancements or improvements, as necessary and as funds allow.





*(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.





There
      were no changes 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.


26


**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.**





Not
      required under Regulation S-K for “smaller reporting companies.”





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




On
      June
      3, 2008, we sold an aggregate of 18,257,500 units to 31 accredited investors
      for
      aggregate proceeds of $25,560,500. Each unit consists of one share of our common
      stock and one-half of a warrant, each whole warrant entitling the holder to
      purchase one share of our common stock exercisable at a price of $2.25 for
      a
      period of two years. The securities were issued in a private placement
      transaction pursuant to Section 4(2) under 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)




27




**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:
                  September 3, 2008
              By:
              /s/
                  MARK GUSTAFSONMark
                  GustafsonChief
                  Executive Officer (Principal Executive Officer)Date:
                  September 3, 2008
              By:
              /s/
                  SHAUN TOKERShaun
                  TokerChief
                  Financial Officer (Principal Financial Officer and
                Principal
                  Accounting Officer)




28